Third World Family Businesses:

Many other entrepreneurs as a result of the problems outlined earlier go the other extreme and disregard the prestige associated with their success among village and extended family members and would never involve them. Typically they take every decision and fail to delegate functions in an effort to secure and safeguard the business assets from fraud by employees of unknown pedigree.

In this case also, succession becomes a problem, as an extensive reorganization will have to take place after the demise to ensure proper delegation of managerial functions and internal control in the activities of the business practically managed by only one person.

Nigeria's rural landscape is dotted by massive complexes of abandoned factories. The premises are very easy to recognize as unkempt and overgrown giant weeds with abandoned and rusty vehicles occupying the parking spaces.
These cannot go unnoticed in a third world environment, where viable employment and production capabilities are in short supply.

While some other causes may be disputes among partners, and an expectation of a court decision, the overwhelming cause is death or a tragedy in the ownership of the business.

1. Failure of a founding entrepreneur to make a plan. This in turn may be for the following reasons:-

1. A lack of interest by immediate family members.

1. For businesses which have their operating bases in a third world rural setting, a desire to work and live in the city by the founder’s offspring may be overwhelming. This is more so as development efforts rarely trickle down to those areas, where ordinary rural folk always seek to migrate to the urban centers in search of a better life.

2. Some small businesses might have sustained rural families in a third world environment, but not their more educated and sophisticated offspring.

3. For all, the attitude of the founder goes a long way in attracting the offspring.

1. A founder who spends considerable time reminding the children how his/her hard work has brought success usually alienates them. By the time he/she now desperately needs a successor, they would have been established their own careers

   .
2. Some others are so distant from their children and hardly know them. They demand respect from them just because they provide what they need or ask for.

2. A desire to remain active in old age.
   It is desirable for senior citizens to engage themselves with something in old age. They then carry on their businesses where they meet customers, employees and associates on a regular basis. This keeps them active. However, when their health begins to fail and it becomes apparent they can no longer cope, it becomes too late to make the necessary changes.

3. Nostalgic feelings
   Some have grown to cherish some habits acquired while managing a business at a much younger age. They relish the attention they attract as a local champion. A graphic example was a founder, who, until his early eighties, walked a cobbled pathway to his office from his house in an expansive estate twice a week. It took him about twenty minutes to walk the ten meter well landscaped route, during which he would lecture the gardener on how he should have clipped the hedges and fed the roses with compost and then demand an explanation on why some of the shrubs were late to flower. He would then get into the office to be briefed on the correspondences by the secretary/personal assistant who would receive a five minute lecture or admonition for every lapse observed. He would then call for the financial statements and query every item of income and approve every item proposed for expenditure, with lectures and stories on why incomes must increase and expenditures reduce. He would then attend to appointments by those who would like to make business proposals. A five minute presentation may attract an hour long response, which would include stories on life experiences, lectures, and admonitions on virtues of diligence in business. It is very obvious that this founder would find it very difficult to adapt to life without being the chief executive.

4. Fear of Mismanagement and Failure.
   Many founding entrepreneurs find it very difficult to believe that someone else can manage the business they found better. The technical details aside, they are not able to verify their managers’ honesty and integrity. They then carry on the management themselves to prevent someone else destroying their labor and investment of many years.

5. Deception of an interest group (Sycophancy)
   There would be employees, creditors, and customers who would benefit from the declining mental alertness of the founder. They pump up the founder’s ego and encourage him/her to carry on the business by drumming up fears and anxiety over handing over to someone else, who in the course of restructuring, might end their fraud.

2. Failure to update a succession plan
   A visionary founder might have envisaged a succession problem and might have come up with a plan quite early enough. By the time the issue comes up, circumstances and reality of a current situation might render such plan unworkable. An alternative may be hastily worked out, which may eventually fail, thus making the failure of the business inevitable.

3. Failure to respond to a changing environment.
   Many of the older generation may not be able to cope with today’s breathtaking changes. The effect of the computer revolution and the internet are rendering the way businesses were conducted in their active years obsolete. Keeping abreast of these changes even by younger managers require a lot of hard work. Competing therefore with businesses managed by younger executives may become difficult, thereby taking its toll on the fortunes of the company. By the time the succession issue comes up, the effort needed to bring up the business may be so enormous that closing down may be the best option.

4. Government Policy Somersaults
   It is not unusual for third world governments to change a policy which had made a line of industry very profitable. Examples are protective tariffs. Governments usually change such policies under pressure from foreign trade partners in the name of “bilateral or trade agreements”, often in exchange for some favors

5. Conflicts, Natural Disasters and forced relocation
   Displaced people or refugees experience disruption in their businesses or occupations. The challenges faced in continuing the business in a new political or operating environment, without the abandoned land, customers, and possibly the supply chain, often eclipse the succession issue.

How then can we avoid succession problems?
The effects of business failure resulting from succession, goes beyond the estate of the deceased founder:

• Employment related to the business directly or otherwise is lost.

• For Governments which provide unemployment benefits, this amounts to extra expenditure (although not yet common in the third world)

• Income taxes payable to Government by employees and the business is lost.

• A reduction in economic activity in the host community.

1. The founder’s family or estate
2. Family or non family employees of the business
3. Creditors or suppliers and customers
4. Government/Authorities
5. The host community