- December 15, 2018
- Posted by: CSR-in-Action
- Category: Insights
…..A critical look into putting measures in place for effective succession planning.
The economic sector is one of the yardsticks for measuring development of a nation. It comprises the whole length and breadth of the value chain of production, distribution, and trade. At its best, it is a social domain that emphasises the practices, discourses, and material expressions associated with the production, use, and management of resources.
One of the agents of economic growth besides government, individuals and organisations are businesses. Businesses, as a matter of fact, are extremely important to a country’s economy because they provide both goods and services and jobs. A dearth, therefore in the business sector of a nation is directly proportional to the increase in poverty level of that nation. This is one of the major reasons why the poverty level in Nigeria is astronomically high. Businesses in Nigeria exist only for a ‘short while’ and pack up due to several factors including harsh economic climate. Besides government parastatals, banks, multinationals and a few indigenous firms, many private organisations in Nigeria are indeed struggling.
It might interest you to know that the oldest existing business in England is a pub that dates back to 951AD known as the Bingley Arm. This was the year when Paris was founded, the world population was 250 million, and the decade when Edred became first King of all England. The over 1,000 year old company is followed by another company – John Brookes & Sons which is currently run by its 15th generation. A fabrics business founded in 1541, it can boast of having made fabrics for soldiers fighting in the Battle of Trafalgar. John Brookes & Sons is a typical example of a business outliving its founder which is very rare to find in Nigeria. In many western nations including South Africa, businesses exist that are over decades or centuries old and that have grown and expanded beyond what their founders ever envisaged, unfortunately many of such businesses are not owned by ‘black’ people. Check out brands like Coca-cola, Disney, Ford motors, GE, Wal-Mart and even ShopRite, just to mention a few.
Certain factors are responsible for an organisation’s longevity or the lack of it. One of such succession planning. Succession planning for organisations with an eye for strategic development is the process of identifying and preparing strong employees through mentoring, training and development to move into their next role. It is the management of future talent in an organisation, grooming of individuals to take on bigger, more important roles to ensure continuity of the company.
Presently, there is little evidence to show that even leading Nigerian indigenous organisations undertake succession planning. It is even worse with family businesses or sole proprietors. Research has shown that many of the world-renowned businesses and corporations with the most longevity have their successes rooted in effective succession planning. Often, most of the founders and CEOs of these great companies begin planning their exit strategies right at the start of their appointment.
Unfortunately, in the case of Nigerian-owned companies, many of the founders have difficult time planning their exit or succession. A major reason for this is the reluctance to relinquish power because of fear of poor performance and disloyalty. Also, succession planning appears to be left to chance by some businesses. Some researchers attribute apparent neglect of succession planning to the emotion generated by the process; it forces incumbents to face their mortality and makes other small business members contend the need for change (Beckhard and Dyer, 1983, Stern, 2004). As a result, transitions are marred with bottlenecks, never smooth.
The succession problems we have in Nigeria are similar with those in other African countries. Nigeria is an emerging economy with a very complex business environment. The following are some of the succession challenges typical in the Nigerian business environment.
Lack of succession planning
As a matter of fact, lack of effective succession planning has been a worldwide challenge. More than half of the companies operating today cannot name a successor to the CEO should the need suddenly arise. This lack of planning could be very problematic for the person leaving as well as the person expected to take over. But in Nigeria, the situation is worse as many of the organisations lack the skills to effect a smooth transition of leadership. If the truth must be told, many of the organisations in Nigeria do not have any succession document in place. It is hardly contemplated and only becomes an issue when the current occupant retires, is forced out or suddenly dies.
Research has established the fact that the major difference between organisations that manage success well and those that don’t is the understanding that succession is a process, not an event. Transition in leadership is crisis-laden in Nigeria mostly because of this. There is no process. Mostly succession is treated ad hoc and that partly explains why many indigenous companies seldom survive two generations as they wait till the forced or sudden exit of the founder before a new one is appointed and often without measurable criteria. Frequently, this ends in prolonged crisis that could undermine the survival of the business. The process of succession at all levels of the organisations, but more so at the CEO level, must start several years before the founder or current CEO is due to retire. The identified candidates must be systematically chosen and groomed.
In the recent past, a typical successful African entrepreneur will often acquire more wives. Unfortunately, this often creates huge succession problems, especially when he dies. The rivalry between the siblings and spouses that follows the demise of polygamous entrepreneurs, coupled with a variety of cultural laws guiding inheritance in Nigeria, often does not make room for the objective selection of the best material as successor. This creates succession crisis accentuated by the different wives who want their own children to take up the reins of leadership without any objective consideration of suitability.
The law of nature dictates that everyone must die someday. But it has been shown that many Nigerian businessmen are reluctant to make a will. Some think that making a will at mid-age is like inviting death. Many therefore postpone acting until it gets late. Then a succession tussle begins which can last for many years. In the interim, the business suffers and could fail. Examples abound in our country both in manufacturing, service and professional practices. Another variant that has been common in our jurisdiction is the contention of the validity of written wills. We have seen where contending parties go to court to contest what was otherwise a properly-written will. This leads to a delay in the execution of the will while the legal dispute persists, often with disastrous consequences to the continuity of such businesses. Therefore, it becomes mandatory that founders and business owners should write their wills at the earliest opportunity and ensure that such wills are properly filed to minimise legal disputations at execution.
Misfit in choosing successor
Making the choice of a successor is not generally easy. Often founders or departing CEOs would rather appoint successors who share similarities with them or who would remain loyal. In many instances that leads to wrong choices and the future of the company is compromised. Choice of successors should be based on the future direction of the company or anticipated needs of the company. When the company is innovating, a creative or research-inclined successor is appropriate; when the company plans to expand, then a man with marketing skills may be best; whereas when the company is consolidating, a successor candidate with finance skills may be considered. It is fully recommended that mundane considerations should never play any role in choosing successors. What must be uppermost in the mind of the company is the survival and future growth of the organisation. But the minimum consideration is that every company must choose a man or woman of integrity. This cannot be compromised.
Other challenges often encountered in succession planning in Nigeria include the influence of the extended family system where unnecessary interventions of relations in the choice of a successor can precipitate crisis, founder’s children or recommended successor not having adequate interest or passion for the business, and the impact of government policies. It has been shown that government policies can affect succession and create challenges. Bank consolidation which took place some years ago, for example, disrupted succession plans in the legacy companies. Another critical challenge arises from the corporate governance structure and practice of the organisation. For companies that have functioning boards where corporate governance and strategic planning are taken seriously, the issue of succession planning is better handled, as against companies with poor or non-existent good corporate governance practices where the choice of successor is made at the whims and caprices of one man.
In conclusion, it is recommended that Nigerian companies must ensure they introduce succession planning as a matter of deliberate policy and build it into their strategic plan, which must be reviewed regularly. There should be no procrastination, so that the longevity and sustainability of the businesses can be better assured in line with global best practices. It should be noted that, no company is too small or too young to plan succession. Of equal importance is that such plans must be implemented in a deliberate and disciplined manner as making plans without implementing them is a waste of time.
- Mazi Sam Ohuabunwa: The challenge of succession planning in Nigeria (2015) https://www.businessdayonline.com/columnist/article/the-challenge-of-succession-planning-in-nigeria/
- Carter Baldwin: (2014) Sustainability through succession planning. CBWP Sustainability