The Role Of Succesion Planning In Family Enterprises Performance: A Case Study Of Bidco Oil Refineries Limited Kenya

Abstract

Globally, family-owned businesses support some 50 percent of the population, and during these difficult economic times, they put many of the unemployed back on the payroll thus playing a significant role in the economy. For most family enterprises succession phase is the biggest challenge. For effective succession to take place in an organization family enterprise need to practice succession planning. The objective of the study was to determine the role of succession planning in family enterprises. The study used the following theories to support the study; game theory of succession planning, leadership model succession theory and requisite organization theory. The research design which was used in the study is case study. During data collection an interview guide was used which was issued to 5 key managers at Bidco Oil Refineries Limited as the respondents. To analyze primary data content analysis was used. The study established that Bidco two levels of senior leadership. The senior level leaders and departmental managers. Currently Bidco oil refinery is run by a second generation of the Vimal Shah family. In addition to the members of the founder’s family, there are other relatives working in the business. On how Bidco has managed to succeed this far, the Vimal Shah family members decided amongst themselves and agreed to segregate the functions from shareholders, directors, management to operations. On the succession planning methods that should be adopted to propel the family owned businesses to the future generations, the study revealed the following method are the best for succession planning; Giving successor responsibilities that require real family business sustainability , training on managerial skills required to run the business after the departure of the owner manager , transfer entrepreneurial secrets to the successor during development , family's commitment to the business influences successor training and well-timed parenting and early mentoring. Generally, it can be concluded that owners or founders of family owned businesses perceive that succession planning is important for business continuity but do not seem to demonstrate that in the form of written succession plans. The perception of many founders or owners on the importance of succession planning in relation to business continuity is nuanced, in that, those with high level of formal education tend to have positive perception on the importance and need for succession planning and business continuity as compared with those with lower levels of formal education. The highly educated tend to believe that though business planning is tedious, possessing that skill is important since it enables succession planning. The study recommends that successor should be given responsibilities that require real family business sustainability. This should include Training on managerial skills required to run the business after the departure of the owner manager. Also Transfer of entrepreneurial secrets to the successor during development should be done to enhance business sustainability. It’s from these findings the study recommends that a careful planning process for ownership, leadership, and management should be done earlier in family business. This happens to be the backbone of family business success and survival through the second generation. Old generation and new generation should have frequent constructive dialogue. These dialogues help to mentor future leadership in family business and minimize chances of conflict in management of the family business. The study thus recommends that the owner-manager should become consultant as young successor take managerial role.