Global businesses, such as Ford, IBM, Nestle, Coca-Cola, PepsiCo, General Electric and so many others have been in existence for centuries. Year in year out, they churn out mouth-watering profits and employ thousands of workers. But in contrast, it has been difficult to replicate such in Nigeria with many businesses hitherto doing well barely outliving their founders. This, many industry experts have laid at the doorstep of poor corporate governance, lack of succession plans and some other salient factors. In this analysis, Babajide Okeowo takes a critical look at the issues, surrounding the drought of second-generation businesses and how to stop many founders from taking their businesses to the graves with them.
A few years ago, Diamond Bank Plc. was a retail banking giant destined for greatness. As at 2005, when Pascal Dozie, who founded the bank handed it over to Mr. Emeka Onwuka after 14 years of hard work, the bank recorded a profit of N5.445 billion, which may be about N25 billion equivalent now, given the exchange rate and level of inflation adjustments in comparison with the present.
From January 2006, Onwuka steered the bank with a mix of profit and losses – N3.97 billion in 2006; N7.09 billion in 2007; N12.8 billion in 2008; and N1.33 billion in 2009. It, however, posted losses in 2010 and 2011 worth N11.2 billion and N13.9 billion, respectively. The two-year losses left nothing significant out of the previous four-year cumulative gains.
Alex Otti succeeded Onwuka and in his first full year in 2012, the bank recorded a profit after tax of N22.1billion, followed by N32.5 billion in 2013; and left in 2014 with N28.4 billion profit. It was then that Diamond Bank hit a N1.18 trillion mark in total assets, from N564.9 billion as at February 2011.
Also, it was during Otti’s tenure that the bank expanded its network to about 265 branches, from 210 branches in 2011. Diamond Bank’s international subsidiary in the United Kingdom was also established, leading to the classification of the lender, as a systematically important bank in Nigeria.
READ ALSO: Feb. 23 election: Declare me President-elect – Atiku tells tribunal
In stark contrast, by the end of March 2019, when the current Chief Executive Officer of the bank, Uzoma Dozie, who incidentally is the son of the founder would be five years in office, the focus is no longer on profit or loss, but the demise of the brand. The recent approval of the shareholders of Access Bank Plc. and Diamond Bank Plc. for amerger of the two entities signifies the final nail in the coffin of Diamond Bank, as Access Bank will finally acquire a bank with 17 million retail customers and the most viable mobile payment platform. By the merger arrangement, Diamond Bank will cease to exist, as an independent entity by April 1, 2019.
In Dozie junior’s first year in office, the growth momentum left by his predecessor, lost steam, as profit after tax plummeted to N5.7 billion. It dipped to N3.5 billion in 2016 and a loss of N9.01 billion in 2017.
Unfortunately, for 2018, the focus shifted to the end of the brand. A persistent breach of governance rules, particularly manifested in avoidable exposure to the oil sector, leading to huge Non-Performing Loans (NPLs), and board disharmony, resulting in wrong decisions, brought Diamond Bank to its knees.
Besides, a recurring insistence to take final decisions on some issues of importance, rooted in “ownership” mentality, irrespective of assessed consequences, aggravated board politics and hastened the company’s collapse.
The sudden fall of the retail banking giant, with N1.55 trillion total assets as at September 2018 and lost value in share price now at N1.37, from N7 in about five years ago, alongside its offshore operations, surely attests to failed decisions and consequences of poor corporate governance.
Several years ago, the late Chief MKO Abiola was a behemoth in the business landscape of the country with business interests, spanning the media, aviation, oil and gas, telecommunications, sport, real estate, confectionary, agriculture, shipping, transportation and banking.
Subsidiaries of the Abiola business empire included companies, such as Abiola Farms, Abiola Bookshops, Radio Communications Nigeria Ltd., Wonder Bakeries, Concord Press, Concord Airlines, Summit Oil International Ltd., Africa Ocean Lines, Habib Bank, Decca W.A. Ltd., and Abiola football club.
The companies had thousands of employees, who depended on them for their source of livelihood, but sadly, hardly had the man died that the business empire went burst and crashed irretrievably, throwing thousands of dependants into the labour market.
As it is with Chief MKO Abiola, so it is with Chief (Dr.) Gabriel Osawaru Igbinedion of the Okada Group of Companies fame.
In 1983 when the Aviation industry in Nigeria was under the monopoly of the National Carrier (Nigeria Airways) at the peak of Nigeria’s oil boom, Chief
Igbinedion saw the need for the active participation by the private sector in the industry. He boldly recorded the first private initiative in the fledgling industry when he established the Okada Airline that year.
This company grew by leaps and bounds and at a period had 32 aircraft in its fleet, including a Boeing 747.
The Okada Airline trained a number of pilots, engineers, and cabin crew both domestic and internationally from whose services other operators, who entered the industry in the latter years benefited immensely.
Chief Igbinedion also made his mark in the Automobile industry through the establishment of Mid-Motors Nig. Ltd. (1966); Soft Drinks and Beverages through Okada Bottling Company under the franchise of Canada Dry International, which built plants in Benin, Lagos, Jos and Kano (1970); housing and construction through the establishment of Crown Estate (Okada Wonderland Estate in his home town is a branch of Crown Estate); agriculture, through the establishment of many acres of palm estate and sprawling fields of citrus plants in Ovia North-East of Edo State.
He also owned oil mills and pineapple farms in Okada. Other business areas of the mogul were in salt production, through his New Nigeria Salt Company, trading as Ethiope Salt; banking, shipping and maritime, food and confectionery, road construction and quarrying, power and energy, crude oil exploration and medicare.
Though Igbinedion is alive, age has taken its toll on the man. However, the once vibrant and successful business empire is now a shadow of itself, as the various subsidiaries of the business dynasty can hardly spread its tentacles beyond the boundaries of Edo State.
READ ALSO: Yar’Adua Foundation, 29 others to lose property worth N4.8bn to FG -ICPC
The case of Ekene Dili Chukwu Transport Company and its patron, the late Chief Augustine Ejikeme Ilodibe, is another example of businesses that did not outlive their founder.
In its hey-days, it was the toast of travellers with its fleet of luxury buses and haulage trucks, becoming arguably, the most preferred by passengers and businessmen, especially those from the South-east.
The Nnewi, Anambra State-born transport mogul and billionaire businessman called the shots in the long-distance luxury passenger transit and road haulage sector. However, the company’s success, together with others in Ilodibe’s vast empire was cut short on July 1, 2007, following his death. From that moment, the fortunes of the business empire began to nose-dive.
Rather than build on his legacy, his heirs went for one another’s jugular in what has turned out to be one of the fiercest family legal battles ever over who gets the lion’s share of his inheritance.
The list is endless. Today, not much is heard of Mr. Henry Fajemirokun’s legendary Henry Stephens Group, which included more than 20 companies in his lifetime, Chief Israel Adebajo, who was synonymous with Stationery Stores Football Club in the late 1960s; and the Odutolas are some examples of business empires that went to the grave with their founder.
The Odutola business empire, for instance, was the fruit of the dreams and industry of two blood brothers, Alhaji Jimoh Odutola and Timothy Adeola Odutola. Although, the brothers were said to have laid the foundation for modern commerce and industry in Nigeria; their legacies did not endure because their children were not interested in their businesses, which started to decline, even before their death.
Blame it on poor corporate governance, lack of succession plans – Experts
According to Dr.Kayode Omoregie, Faculty Member, Lagos Business School, LBS: “There are just two major reasons for the non-existence of second-generation businesses in Nigeria. First is the lack of succession plans by most business owners. They don’t prepare those who will take over from them. So, once they are gone, that is the end of that business.
The second thing is the lack of corporate governance. Most Nigerian business owners don’t build an institution. They find it difficult to detach themselves from the business.
“You must run a business as a separate entity if you want it to outlive you. There is nothing that says your children must manage your business. If they are not ready to manage it, you can appoint an outsider and put in place a trust that would protect your interest in the business,” he said.
According to Dean of the Faculty of Business Management, University of Uyo, Prof. Leo Ukpong, the blame on the failures should be laid on the doorsteps of overbearing influence, poor corporate governance and lack of a good succession plan.
“A lot of Nigerian-owned big businesses have found it very difficult to divorce themselves from the influences of the immediate and extended families of its founder. Once a Nigerian develops a successful business, his family members begin to swarm around the business, looking for their own piece of the pie without bringing anything new to the table. But as it’s often the case, many children of Nigerian big business owners don’t necessarily possess the business acumen their parents have. Once the business is handed over to them upon the death of their parent(s), they run it down,” he said.
Similarly, Founder, Centre for Value in Leadership (CVL), Prof Pat Utomi, at a conference organised by CVL and Rome Business School posited that some of family business owners usually do not have a succession plan and a large number do not believe that their businesses may survive till the next generation.
A key challenge facing family businesses, he observed, was ensuring a successful transition from one generation to another, as many enterprises have ceased to exist and a large number of them failed to transit.
According to him, a successful business transition from one generation to another was critical to the long-term success of the business.
He noted, however, that succession disputes that trail those businesses can be devastating for those involved. To him, it was a critical subject for entrepreneurship studies. He said as more family businesses emerged, there was a need to protect the existing base of family businesses, and education, skills, and lifelong learning should be used to sustain the effort.
Utomi stressed the need for business owners to provide the knowledge, skills, and support needed by their businesses to build and protect their legacy for future generations.
On his part, National Coordinator, Management Systems Consultants Association of Nigeria (MSCAN), Mazi Coleman Obasi, was of the view that most businesses failed to transit from their founders to the next generations because they do not put policies and procedures in place on how things should be done.
“When you hear about creating or designing business processes and procedures, it means that you are designing a process that will now drive the business beyond the human beings because initially the business was built around the human beings, but you should create a process that human beings will now drive.
The central point is that you don’t structure a business around one person but around a business idea. Your business should not be structured around you, but around an idea, because a business should outlive its owner,” he said.
Corporate Governance, succession plans to the rescue
Segun Sowande, Lead Partner, Family Business, KPMG, Nigeria, called for the ‘Professionalising’ of the family business and drawing up a four-step succession plan if businesses are to outlive their founders.
“Professionalising a family business is a key step towards ensuring its longevity.Professionalising is about enhancing the family business. There is a need to develop a formal business plan, outlining a strategy plan and an operational plan and also to formalise business leadership bodies. For example, establishing a Board of Directors and an Executive Management Team,” he said.
According to Ukpong, in order to have a successful transition of a business empire and to forestall the dearth of second-generation businesses, stakeholders have called for the incorporation of viable corporate governance and the institutionalising of a succession plan.
“In more advanced societies, big business owners always have an eye out for people within the establishment, perhaps, among his/her managers, that have rare leadership skills and are not necessarily blood relations. They keep these people close, make their stay in the company a comfortable one and begin a systematic grooming process – even the employee in question will not know that he or she is being groomed,” he added.
Exceptions to the rule
To every rule, there is an exception. It hasn’t been totally cases of failure, as some businesses have been passed down from the founder to a successor and the business is doing fine.
The case of the Dafinone family is one that readily comes to mind. It is still baffling how the patriarch of the family, Senator David Omueya Dafinone, has been able to convince his children to toe his line of business. They recently went into the Guinness Book of Records for having the largest number of accountants in one family. His company, D.O Dafinone&Company, which he founded in 1966 and later merged to become Horwath Dafinone and Company, is run as a family business till date with his children, occupying key positions in the organisation.
As some big companies that most Nigerians have come to love still stand the test of time, it is expected that a time would come where businesses will be handed down from one generation to another. How soon this will happen is yet to be seen.