Sunday, 6 July 2014

Abiku businesses III

In the last post we examined how failing to grow or expand can kill a business. I also shared the example of my barber who finds it hard to leave the self-employment business model for the franchise model. The example actually got me thinking about our Igbo businessmen. As brilliant and dedicated as they are to the trade of trading, we don’t have any of their businesses equaling the feat of companies like Shoprite™ or Game™. In fact, Shoprite just opened its tenth Nigerian store in Ibadan and, guess what, it is their largest mall in West Africa! And they have four more stores in the pipeline for 2014. Those boys just keep popping up everywhere! We will examine one last reason why we tend to have a lot of abiku businesses in Nigeria.

Chief M.K.O Abiola was a business tycoon larger than his country of birth and even Africa itself. He had investments on several continents and in an array of industry sectors; from automobiles to agriculture, from publishing to banking, from aviation to shipping lines and so on. As a lad, I grew to know his vast business empire to include the likes of Concord newspaper, Concord Airlines, African Ocean Lines and Abiola Farms. But as I write this piece, sixteen years after his demise, they are no more. I also remember travelling from Ilorin to Ibadan in the late 80s and staring in wonder at the tin-clad factories of the Alata Flour Mills. Today the structures are still standing, but I can’t recall the last time that whitish smoke rose from its chimneys. The famous Odutola Tyres of the 1970s is also no more. The last time I drove past the production plant in Ibadan with my father, who speaks forlornly about their bicycle tyres, it was eerier than a cemetery. Need I say more?

A factor common to the three aforementioned family businesses is the passing on of the business owner. These were no small businesses back in the day, they were very popular and appeared very profitable. They employed hundreds, if not thousands, of workers and were regarded as the blue-chip companies of their time. In fact, I believe the owners would have scoffed at anyone who told them that under a decade, their empires would be described in the past tense. But, it’s painfully so and that must stop!

Let’s briefly consider another ginormous family business, possessing a few tricks, which our businesses could badly learn from to be free of the abiku syndrome. The lessons are quite apt because the business owner has also passed on. It is the Wal-Mart Stores Inc. founded by Sam Walton. This multinational retail company, ranked as the world’s largest public corporation in 2014, employs over 2 million people and interestingly still remains under the ownership of the Walton family. But more importantly, the business marked its Golden Jubilee in 2012, twenty years after the founder’s death. I will tell you what struck me the most as I read his autobiography, Sam Walton: Made in America. I believe it’s the most important factor that Nigerian businesses require to continue in existence, long after their founders’ death. The factor is to any business what a foundation is to any building.

Going back to the baby analogy (from my last post): At conception, a baby is no more than a cell (zygote). The cell grows and sub-divides into two cells, which grow and further sub-divide into more cells. Through this process of sub-division, the cells multiply and grow. Then at some point, the cells begin to specialize; they start to develop into tissues which will develop into organs and which in turn will form the systems of the baby’s body. Without the sub-division and specialization of cells into systems, the baby cannot exist as the complex, higher being that it is.

A start-up is like that single cell conceived by the founder. In the beginning, he could wear several hats and perform all the roles himself. But, as the business grows, it has more workers, more customers, more suppliers, more funds and even more regulations it has to adhere to. In short, it is more complex than a start-up and requires some level of specialization to function properly. And that is where the breakdown begins for most unlisted Nigerian businesses. Specifically, we find that the same ad-hocness that characterized the start-up days are still present in the growing business.

For instance, a friend who works at a very large Nigerian oil corporation came begging for some money in the first week of the month. Jokingly, I asked him how he managed to quickly spend all his last month’s salary. He replied that ‘Chairman’ was out of town and had to return before the payroll cheque could be signed! My shock wasn't small. If a simple mandatory process like workers’ pay-roll was not already formalized, I wonder what would be the fate of a one-off, unplanned expense that is badly needed to avert a threat or cash in on an opportunity when ‘Chairman’ is on vacation.

The company should have specialized units like HR and Accounts that should be in charge of the payroll, without waiting for ‘Chairman’. Other departments like R and D, operations, sales and procurement should be up and running regardless of the Chairman’s mood or availability. One man can sail a boat or even a ferry, but no matter how extraordinary the sailor, he needs a crew to sail a ship. It is often because we have one brilliant entrepreneur assiduously trying to sail the ship that we have all manners of business shipwrecks, especially when the sailors are dead. The presence and mentality of one-man business must be shed as your business grows.

My advice is this: Like Sam Walton, have corporate strategies, systems, structures and processes formally put in place for your growing business. Recruit trustworthy and tested hands to implement them and employ those who will monitor for compliance.

Some people argue that bureaucracy will set in, and it will stifle creativity and manoeuverability. But I tell them that the alternative, anarchy, is a worse condition. By delegating tactical and operational decision-making further down the chain of command you can reduce bureaucracy but I know no of other cure for anarchy and chaos than structure. I keenly watch large business corporations that have the one-man business model and mentality. My fear is that they do not go the way of the many moribund businesses we have around today.

One last thing. As your business is growing, have a management board of competent and experienced persons, which you will make yourself accountable to. This is one structure you need to have in place because, as they say, “In the multitude of counselors there is safety.” After all what we are seeking is safety from premature business death.

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