Ever since corporate governance shortcomings were identified as a major cause of the recent meltdown in Ghana’s financial intermediation industry, the Institute of Directors (IoD) Ghana has stepped up its activities towards ensuring that enterprises in the county are better managed than hitherto. Its latest initiative in this regard is its ongoing development of succession planning and management strategies for Small and Medium-sized Enterprises (SMEs) in Ghana.
This is direly needed; the failure of SMEs to prepare for succession in their top management hierarchies is a primary reason why many of them do not last beyond their first generation ownership and management, which in most cases are one and the same.
To be sure, there are other reasons for the inordinately high mortality rate among SMEs in Ghana, such as use of an unviable business model, lack of understanding of target markets, lack of finance and poor managerial capacity of the founding owners and managers. But even those enterprises that get these aspects right and consequently thrive during their early stages, often fail because the second generation owners and managers are not equipped to sustain the level of corporate performance achieved by their predecessors.
It is ironic that big corporations, whose managements comprise people who got there strictly on merit, tend to prepare for succession, while SMEs, whose managements tend to comprise family and friends of their founding owners, do not despite the fact that the people in line to succeed them have their positions simply due their relationships with those owners.
When such beneficiaries are not deliberately prepped for the positions they will eventually inherit, business failure is a clear and present danger. Second generation business owners and managers need to fully understand the business model on which the enterprise was created and the customer markets it caters for. This requires identifying the successors to the incumbents and preparing them for the tasks ahead.
But understanding the business in its current form is only part of the talent required. Successors must also acquire the ability to be innovative so that they can change the business model in line with the changing times, whether this is brought about by changes in market demographics, regulatory framework, technology or other critical factors.
But while innovative thinking cannot readily be taught, thorough understanding of the existing circumstances in which a business operates is still vital, if only because it is needed in order to realize the need for change, its nature and its timing.
This is why we thoroughly commend the IoD for its impending initiative. By putting succession planning and management on the front burner of SMEs, the Institute will prepare them for the crucial transition from one ownership and management generation to the next.
To be sure, there is a huge body of work concerning this vital issue that the IoD can apply. However, global best practice will need to be adapted to the peculiarities of Ghanaian society and business culture and here, the IoD will have to think for itself.
But the biggest challenge of all will be that of spreading the knowledge available to the thousands of SMEs scattered nationwide. Those located in Upper West need that knowledge as much as those in Accra, who can most easily be reached by the IoD and its collaborating institutions.
The IoD must ensure therefore that they are all reached with the crucial knowledge about succession planning and management.