Why deal cutting will not build lasting business

Whoever tills his soil will have a lot to eat, but anyone who pursues fantasies lacks sense… Whoever works his farmland will have abundant food, but whoever chases fantasies will become very poor.
Proverbs 12:21, 28:19 ISV

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On August 25, a former government minister was jailed for six months for failing to pay a debt of Sh625,000 incurred in 1994 when he contracted a businessperson to supply paper caps to the then ruling party.

Citing “a series of misfortunes” as the cause of his financial embarrassment, the retired politician pleaded for leniency from the court.

The court report does not show how he became personally liable for what should have been Kanu’s debt. The magistrate was unsympathetic and sentenced him to six months in civil jail.

While the details of this transaction are not clear, it has every making of a “deal”; a transaction that has immediate personal benefit for the parties involved at the expense of a hapless “beneficiary”, (in most cases a private or public corporate entity) who ultimately bears the cost.

Many a family business fantasises about the deal that will permanently transform their fortunes.

Deals are not confined to the public or political sectors. Safaricom has, within the last year, sacked 58 of its staff members for cutting corrupt deals with suppliers. This practice, while not widely acknowledged, is prevalent in numerous corporate enterprises.

On February 19, a sacco was launched in Eldoret with an offer of a “deal”; it would pay an eight per cent interest monthly on deposits. Those who invested received payments for two months before everything went quiet. Depositors are now anxious about their investment; reimbursement of the principle much less the interest is most uncertain.

One of the most serious challenges the government will continue to experience in its attempt to build entrepreneurial skills among its population is the “deal” and its place in people’s minds.

The perception has been created that all the youth/women/people with disability need to do is set up companies, apply for numerous tenders set aside for them in national or county governments and mint money for eternity.

While this may happen for a few fortunate individuals, it is by no means the norm in the world of business much less in family enterprise.

Businesses that last are built on hard, rigorous and often repetitive work that yields only incremental results. For a long time such ventures remain obscure or boring to the outsiders and only come to public attention when they either rebrand or move to premises that are more visible.

Few of the businesses that are set up on political patronage or short term deals in the private or public sectors can sustain themselves without the support of their connected principals. When these leave office, the businesses grind to a halt.

Any family business that is either based or dependent upon cutting public or private sector deals for its sustenance might flourish for a short while but is bound to collapse in ignominy.

Leaders of Family Business should not spend their days dreaming about a lucky break or pursuing investments that promise unrealistic returns. They should instead do the regular day-to-day activities, which, while not glamorous in themselves, lead to the steady and certain accumulation of wealth.

While the cutting of high-level deals is a glamorous lucrative business, it should not attract family ventures whose intention is to be in business for more than one generation.

Deals are by nature transient – with the deal makers moving swiftly along to the next big thing, fraught with short term thinking. Few deal makers think beyond their cut and because of the risk involved, players are willing to use drastic measures to secure their ends of the bargain.

Leaders of Family Business should not believe fables about the possibilities of making outstanding short term profits with little or no effort.

On the same note, high ranking private and public sector officials who use their offices to engage family members in enterprises should not delude themselves into thinking that they have created family businesses.

Successful ventures are built on regular, routine and increasingly detailed activities, which steadily build value. Pursuing this course of action takes care of the family’s daily needs, sustains incremental growth and allows the family to accumulate wealth for future expansion.

Mr Mutua is a Humphrey Fellow, leadership development consultant and author of the book “The African Prince” available on Amazon Kindle. His email address is [email protected]