Family businesses that last

When you decide to invest money in a business, it means you value your independence. “It’s my business,” you tell yourself… and the fun and challenge of operating it begins.

However, those running family businesses face, not only the usual challenges that those who head small companies do, but their task is further complicated as they try to balance family relations and a burning entrepreneurial spirit.

Mr Levi Talengo, who runs Seasons Restaurant and Hotels Ltd with his brothers and other family members, agrees that managing a family business is a challenging experience. But he insists that it is well worth the effort.

“I have one sister and two brothers. But it’s my sister Delishoi Talengo and me who are more engaged in our family business, she works in designing hotels and introducing new ideas.

One of my brothers works as a pilot but he also contributes in decision-making.

We all seek advice from our father who has enough experience on managing Restaurant and Hotel business.”

“A family business is an entity that maintains a delicate balance between happiness and efficiency, profitability and affection.

And because it is impossible to simultaneously achieve maximum profitability and maximum happiness, trust and commitment between those running it must always be there,” he explains.

Time schedule
His day begins at 5.00am when he starts planning ahead. He allows himself ample time to get to his appointments. To do this, he prepares a time schedule so that each business activity is allocated time.

“In business, it is important to be punctual. You should always remember how much time is available to complete a particular task and work accordingly. And that is exactly what we do in our family business — keeping time and working together as a team,” he says.

The businessman, who studied business management at Daystar University in Nairobi, says working as a family has expanded the business from a single restaurant to several others and hotels in Nairobi, Narok, Elementaita, and Maasai Mara.

“I don’t think there is any family business that has no challenges. However, I have learnt over the years that those involved should understand how to strike a balance between individual goals and family (business) goals,” says the hotelier who has managed the family business for the past 10 years.

But how does he know when individual agendas have gone too far? And does he ensure that the delicate balance is maintained?

“We have learnt not to be secretive about matters that affect our business. We also know that it is wrong for one to withhold financial information or refuse to disclose ownership or management succession plans for fear of losing individual power.”

Mr Talengo adds that demanding a job, a promotion, or a board seat because of ownership, refusing to acknowledge or consider others’ views, or taking unilateral action that others do not support could harm the business.

“Blaming others inappropriately for frustrations, failures, or lack of achievement — such as accusing the manager of not providing opportunities when, in fact, such opportunities were not earned, is wrong. This is what we try to avoid.”

For Ferdinard Kaptich and his brother Louis, who run an online company dealing in real estate, a family-operated business is not a bed of roses.

“We started in 2007 with a capital of about Sh700,000. Initially, most members of our family were against the idea, but the two of us decided to publish a real estate website called PropertyZote.Com, which is hosted in Australia with its main office here in Nairobi and which they later appreciated,” says Mr Kaptich.

He explains that the decision to host the site abroad was prompted by the low downtime in Australia compared to Kenya.

“Downtime is a major setback to most online businesses in Kenya and East Africa. I think this is the best decision we have ever made as a family, not only in terms of revenue but also as a way of simplifying real estate investment.”

Mr Kaptich says limited decision-making, payment of salaries, and explaining to other family members the kind of business they do has been difficult.

They frequently disagree on matters related to the business.

With about 350,000 hits a month, more than 490 real estate agents, and more than 1,300 properties valued at over Sh64 billion, PropertyZote is taking its place as one of Africa’s online businesses that shows how the internet has introduced a new way of e-commerce in Africa.

“My brother works in our Nairobi office and I do my part abroad. Agents and individuals can sign up on our website and list their property there.

Individuals can also list property directly on the website. We earn up to Sh400,000 a month and have been operating successfully in Kenya and Australia despite a few small differences we have on finances and general business operations,” he adds.

“We have learnt that growing a family business and maintaining healthy family relationships means being trustworthy, having strong family values and open communications. But handling finances has proved to be a big challenge and it sometimes causes conflicts between us.”

According to experts, entrepreneurs and those running a family business have one thing in common — both require a vision to strive for greater financial returns by following basic business ethics.

But it is common for family businesses to encounter peculiar threats and adversities.

Management of family-owned companies is conditioned not only by economic and organisational factors, but also emotional issues.

When your colleagues at work are also your brothers, sisters, and other close relatives, or your boss is your father or mother, then the appeal of a family holiday isn’t quite so attractive.

Family members can easily assert individual agendas in ways that are injurious to the business.

For instance, conflict may arise when the founder refuses to relinquish power to capable successors, or a member demands larger dividends without due consideration for the good of the business.

Mr Kevin Odongo, a Nairobi-based financial and investment adviser, says most family businesses fail because some members focus on their own needs and goals, thus bringing about conflict and potential abuse.

“In time, what may have been considered as ‘one for all and all for one’ becomes a culture of ‘every man for himself,’ particularly as the business begins to sink. In most family-owned businesses, some members will work in the company while others don’t.

The challenge is how to harmonise the interests of the two groups. One way is to help family members learn to appreciate the family business,” he says.

For members who own shares but live abroad, Mr Odongo adds, a feeling of emotional indifference may be generated if they do not get information about the company’s development.

“If no one provides the information, they eventually lose interest and may decide to dispose of their shares. So, provide information and be honest to them.”

Experts say the difference between harmonious family businesses and those in conflict is not the degree of agreement but whether those involved emphasise their differences or their common ground.

Where differences are given more weight, individual agendas and egos become the overwhelming motivators.

“When individuals pursue their own ends without due regard for the goals of others or the system itself, trust will be eroded and this will destroy the bond that holds a family business together,” adds Mr Odongo.

He explains that strong individuals are needed to provide leadership, stimulate healthy progress, and maintain accountability.

“But this strength must be used in a way that is consistent with the family’s shared values and goals that serve to sustain the growth of the business.”

Research by Strategic Consultants Limited shows that more than 70 per cent of business enterprises are family-owned, but that less than 10 per cent family enterprises survive to the third generation.

“Achieving commonality of personal and family business goals, complications in the management of human resources, issues of power and control, differing values between younger and older family members, and providing attractive career opportunities for family members are some of the major challenges that this type of business faces,” writes the company on its website, strategic-ke.com.