LEGAL PERSPECTIVE: Family business leadership by Dr AbdelGadir Warsama, Legal Counsel

Dr AbdelGadir Warsama, Legal Counsel

In all countries, there are many family companies and very evident that they play important, active and effective role in developing corporate industry and national economies. Family companies start by one person, who starts the business he \ she likes and keeps on guarding it for long time. At a certain stage, during the process, other family members join forces with this one-handed pioneer entrepreneur and give him support and necessary impetus to keep the business rolling.

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The leadership of the pioneer entrepreneur continues even after family members join in “what is known” the family business and this continuation is due to many factors including the charisma of the 1st entrepreneur. It is almost established that family companies depend on the leadership of a single dynamic and business oriented entrepreneur perhaps with the assistance of relatives and children when they grow-up. However, certain problems could come up particularly for siblings who are the 2nd  or 3rd  generation. This is because new comers may not follow the leadership style of the founding parent.

After the expansion of family business and continuation for years the cousins, likewise, whose families share in the ownership in a later – generation family business could face more complex challenges. This situation could take them to adopt a different leadership style. With particular reference to family business, many studies revealed that there is remarkable noticeable difference between what is known as necessity – based entrepreneurship and opportunity – based entrepreneurial activity.

The 1st type is represented by the founder because other employment opportunities were limited or unavailable. Whereas, on the other hand, the 2nd type is represented by new generations who join the business after having necessary educational qualifications. The education, professional qualifications and external exposure which has been obtained by the new generation focuses on a new type of leadership.  Anew-look for the business. The old guards, in case they are still involved in the management, may resist the change and this could jeopardize the interest of the family business.

To overcome such difficulties we advise that family companies should be institutionalized through adopting certain rules of new structure for the company. Institutionalization of the business will help in wise leadership of the company. However, all such steps are in need of close understanding and cooperation among family members. The old classical views and the new comers with their new-look are to match. Many families worked hard and they survived by over-stepping this period. Others, are keenly advised to follow suit.

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