Only 26pc of Kenyan family firms plan CEO succession plan

Over half of Kenyan family-owned businesses are still not prepared for succession when their current management exit, exposing them to future survival risks in case of sudden changes in management, a new report shows.

The Deloitte Global Family Business Survey 2019 report released Tuesday in Nairobi shows only 26 percent of Kenyan family-owned companies have a formal succession plan for the CEO post and only 18 percent for senior management positions.

The report warns that a majority of Kenyan family founded and run businesses could go bust in case the influential founders and chairs of the companies suddenly fall ill or die.

According to the report which interviewed 791 executives from 58 countries, including Kenya, procrastination in creating a documented and discussed succession plan often leads to devastating consequences for the business including sudden collapse.

“Succession planning must start early,” said Deloitte East Africa chief executive Joe Eshun during the report’s launch.

Mr Eshun said among reasons that family founding CEOs avoid the topic of succession is that it coincides with thinking about their own mortality.

Because they are also owners, Mr Eshun added they often remain at the helm past the time where they are able to be strong contributors. The report also says many family run companies grapple with governance challenges.

Among Kenyan family owned businesses which have imploded under the weight of debt and governance related challenges include Nakumatt and ARM Cement both of which were the largest enterprises in their various sectors in their heyday.

According to Joseph Okello, the chairman of the Association of Family Business Enterprises a lobby that represents family enterprises in Kenya, planning for management and ownership succession are key in ensuring businesses continuity.

“(However) the preferred method for succession planning for many is to leave it to fate,” said Mr Okello.