“The 100 Club” is a 90-second clip shown on Cable News Network (CNN) as an interlude between regular programming. It showcases companies that have been in existence for a hundred years or more and how the founders’ dreams have been preserved through the years. These companies which were privately owned (most are now publicly quoted companies) were established and run effectively as family businesses and were handed down over generations. Some of these companies include General Electric (1892), Coca-Cola (1892), JC Penny (1892), Ford (1903) and Target (1902). Every time I am in front of the TV and the short clip comes on, I begin to ponder on family-owned businesses in Nigeria and how many of them are still in existence many years after.
Some of the oldest surviving companies in Africa are in Southern Africa and include Boschendal (1865), Woodheads (1867), Cape Argus (1857) and Standard Bank (1862). In Nigeria there are a few companies that are part of the Centenary Group and include FirstBank (1894), Union Bank (1917), and Royal Exchange Plc (1921).
READ: These companies will pay N127.2 million for delaying their financial reports
According to publicly available information, Kongo Gumi, established in 578 AD, is the oldest continually operating company in the world with its headquarters in Osaka, Japan. It is a construction company founded by an immigrant who was commissioned by Prince Shotuku to build the Shitenno-Ji Buddhist Temple.
Many businesses that were family-owned tend not to be able to withstand the vagaries of the operating environment, especially after the death of the founder. A study of family-owned businesses reveals a pattern of declining revenues and eventual demise once the founder passes on. Some of them changed their ownership structure from private to public in tune with the times, as a business strategy, and some, basically to wrest control from recalcitrant descendants who were running the company aground.
In Nigeria, some well-known family businesses established after Nigeria’s independence (including the 70s and 80s) are no longer in existence either as family-owned or publicly quoted companies. As of today, only companies owned by non-Nigerian families that have tethered their roots in Nigeria have been able to successfully outlive 3 generations; while the wholly Nigerian owned firms have either gone under or become a shadow of their old selves.
READ: FEC approves N9.2 billion for life insurance premium of public workers
The question becomes, why is it so hard for Nigerian family-owned businesses to transcend the generational gap? The answer might lie in an old Sicilian saying about the concept of wealth transfer.
The saying goes like this: “The first generation establishes the family business; the second generation consolidates it; while the third generation throws it all away.”
According to the saying, the first generation are mostly immigrants and have nothing so they work very hard to make a living and establish the family business. As they work and toil, they expose their children to the realities of what they do and inculcate the culture of hard work and diligence in them. The children make up the second generation and they grow the family’s wealth. These children watched their parents toil and some might have even been coopted to help out from a young age. They have learnt to appreciate labour and diligence and now, they are wealthy. This is when the disconnect begins.
The second-generation starts the decline process when they decide that their own kids would not suffer the same things they went through and in so doing, isolate them from the effort required to make and keep wealth. The children are so insulated from the realities of hard work and diligence that they only see the rewards and perks of wealth.
By the time the third generation takes over the business, they have no idea how it was built and they easily fast-track the downfall of the business until it is either liquidated or taken over by outside forces.
I feel this Sicilian saying aptly captures one of the issues of generational wealth transfer in relation to Nigerian-owned family. We are all witnesses to how some children of the rich in Nigeria just seem to be all about spending their family wealth. They are overindulged and spend every passing day trying to outdo each other in a brazen display of opulence. Apart from a few who have leveraged their family name and networks to create businesses and careers for themselves, most are representative of the ‘third generation’ as described in the saying.
Sometimes you visit a non – Nigerian owned family business and you meet the scion of the family working in the factory or warehouse with the other workers and getting a feel of the day-to-day operations of the business. His contemporary in a Nigerian-owned family business would not be seen on the shopfloor and if he is seen there, it’s mostly for PR purposes and not as an attempt to understand the process.
Invariably, a strong work ethic is something that has helped long-surviving companies bridge the generational gap when it comes to wealth transfer.
Thanks for sharing this wonderful article,I would like to receive more of business newsletter. Thanks
Thanks for sharing.
The economy is nlt helping matters. Then our lower class who owned businesses and were entrepreneurs felt it was better not to allow their kids learn the business mostly because they felt that is how the big men behave and so they only bring in their kids after they have acquired their foreign degrees.By then, it would be late for the kids to learn the ropes. A combination of factors leads to the demise of the business.
Now that middle classed Nigerians who prior to this time were office workers, are now running their businesses, I sense things would change.
Jummy! But, the economy was also there when the first generation was busy building the business. The point here is, no time in history, when economy will be there to help matters. One adjusts as economy policies change.
Thanks for sharing. Your summerization is very correct sir.
This is a chronic problem in Nigeria. lack of continued upbuilding and progress are seeds of failure which are sown at the beginning of these family owned businesses even if the failure manifests years later. Sound ethics are at the core of all long surviving businesses. Here in Nigeria ethics are not considered important, we generally have anyhow anyhow approach across the entire social class.sucess and progress is not pure economic activity, it’s more of attitude of the mind towards constant drive to improve yourself and others around you not just your family or clan.continously improve everyone involved in the business and the business will stand forever.
The only reason for this is because they failed to sell the share to general public and most of the time ,children don’t have intrest in there father or family business .take for instant if okin biscuits can sell is share I am telling you it will leave long beyond the owner
Brilliant analogy of why succession is almost non existent in the current Nigerian family business scene. I feel also businesses are setup more for tummy infrastructure these days so there’s no proper business to pass on just go find government job or become a politician
This is a general problem with most family owned businesses world over . However ,in the Nigerian case ,there are some salient issues that needs to be highlighted:
1. Most family owned business are not structured in ways that it will surpass the founder long after he or she is gone .
2. The second main reason is our educational system is rigged against business succession,how?
When people send their children abroad for better quality education, life style changes follows and it’s almost difficult to get such people back to a place where almost nothing works .
3. Government Policies and other environmental issues might throw a major curve ball at such businesses and they eventually cease to exist.
4. Most family owned businesses don’t usually want to appoint an outside successor , this is one of the major challenges in our nation. If we look to the western world where we have companies lasting several generations, they have adopted this practice of having non family members run the affairs of their company while the family have a strong board representative or even lower level management.
Untill we treat business as entities that needs to survive without family holding back good management practices and let the business be run by sound management objectives , we might never have such generational companies in our land .
I watch this clip on cnn every night and ask myself same questions too. In the West it is succession in Nigeria it is difficult to define. The late Chief M. K. O. Abiola had Concord Newspaper, Abiola Babes FC, Wonder Loaf, Printing Press, in fact he had subsidiaries today non is existence. The man almost 50 children that he would groom to succeed him but non was involved in his business. Today the Chairman of Ford is Henry Ford greatgrand-son. Reason why we failed is that we don’t plan succession and usually don’t teach and involve our children in our businesses and teach them the importance of keeping it in the family. I must say that today non of late Chief Abiola’s children is one quarter as rich as their father or even known. Pls let’s involve our kids in our business not spoiling them with money, rather we give them canoe to go fishing with us not always giving them fish.
MKO Abiola whole a very kind Gentleman was not really a Businessman. The businesses that thrive for generations are Manufacturing/Industrial concerns not businesses that were propped up with our commonwealth through inflated contracts as MKO and Murtala Mohammed/OBJ and The Ibru’s and Okotie-Ebo/Indigenisation policy false take-overs.
This is a good article. In addition to what has been mentioned, the major problem in Nigeria system is the “deal’ kind of making money. I mean where most of the income int he organization is based on the connection of the founder to the power that be. Such clout can be continued.
Again, an average business mogul in Nigeria mostly deal with government not the people by real value added. Hence a change in government crumbles everything.
I think the problem here isn’t a ‘Believe system’ where by people do not believe that children should walk the same part they walked and such parts were not taught in school.