Family Business Paradox
MARKETING AFRICA
Family Business Paradox
Joe Okelo
How The Greatest Strengths Of A Family Business Can Become Its Greatest Vulnerability
I have always been fascinated by family businesses. Their origins are remarkably similar. They usually begin with a determined entrepreneur who seems almost oblivious to risk and failure, yet somehow manages to overcome both.
Whenever I ask founders how they started their businesses, their stories have a common theme. I started small, and I didn’ t really know what I was doing, or I was just trying to solve a problem, or even just trying to earn a living.
Most begin as a cottage industry, operating from a kitchen, a garage, or even a bedroom. They start as an idea, often from a slightly crazy visionary, who inevitably draws family members into the enterprise to comply with legal requirements, reduce costs, or simply share in the burden of turning an impossible dream into reality.
Then something remarkable happens. The business grows, often much faster than expected or prepared for. It becomes almost unrecognisable. Founders look back with nostalgia to the days when they knew every employee, every customer, and every supplier by name. Then, one day, they realise they no longer can. The business has evolved from a tiny enterprise into a significant family enterprise, employing hundreds or thousands of people and making an important contribution to its industry and community.
It is during this transition that the family business paradox begins to reveal itself.
The Origins of a Family Business
My wife started her business from our bedroom in Mombasa more than twenty-five years ago. We were newly married, and I had persuaded her to relocate from Nairobi, where she had been building a promising career. Rather than look for another job, she decided to start a business.
Having studied Fine Art at university, she 34 MAL73 / 26 ISSUE started a small design company. The only assets we had were Patricia ' s talent and a computer we bought with money I had saved through my SACCO. At the time, a computer cost almost as much as a small car. On paper, it was a family business because it was registered in both our names. In reality, it was Patricia ' s business. It was her idea, and she did almost everything herself, with a little help from me.
Apart from registering the company and opening a bank account, both requirements of our first client, an international bank, we had virtually no formal structures. We looked for business wherever we could find it: friends, colleagues, and anyone willing to give us a chance. Yet the business grew.
What began in our bedroom became a formidable SME and eventually spawned other businesses that grew even faster thanks to the lessons we had learned from the initial business. Despite both having worked for large corporations, we still had to learn about governance, payroll, taxes, operating licenses, staff management, regulatory compliance, and solving countless problems we had never anticipated.
This is where the first family business paradox reveals itself. Most family businesses begin as highly informal enterprises. The founder wears every hat, decisions are made around the dinner table, and family members step in wherever they are needed. Conventional wisdom suggests that this level of informality should limit growth. Instead, it is often the very reason these businesses survive and, in many cases, thrive. Entrepreneurial spirit, relentless hard work, resilience, and an unwavering belief in the vision carry the business through its earliest and most vulnerable years.
Eventually, however, growth demands something different. There comes a point when one person can no longer play every position on the field. The informality that fuelled the business in its early years must gradually give way to systems, structure, and delegation. The challenge for many family businesses is recognizing that the very practices that created the business may not be the ones that sustain it. Perhaps the most difficult transition of all is moving from knowing and doing everything yourself to trusting others enough to delegate, empower and consult.
Jack Welch once said, " You want the muscle of a big company and the soul of a small company." Few observations capture the family business paradox more accurately.
Large corporations spend millions trying to recreate the entrepreneurial spirit that comes naturally to family businesses. Family businesses already possess the soul. Their challenge is developing the muscle without losing what made them successful in the first place.
As they grow, they must replace instinct with systems, informal conversations with governance and individual decision-making with professional management.
That is the family business paradox. Family businesses do not fail because they have too much soul. They struggle when they build the muscle but lose the soul, or when they cling so tightly to the soul that they never develop the muscle.
This is not merely an interesting management dilemma. It is an economic imperative.
Family businesses are the backbone of the Kenyan economy and play an equally significant role in economies worldwide. In Kenya, they are estimated to contribute between 60 and 80 percent of GDP and employ more than half of the country ' s workforce. Yet despite their importance, many remain governed more by habit than by design. Surprisingly few founders receive formal guidance on transitioning from building a family business to sustaining it across generations. Most learn through experience, often the hard way.