Effect of Business Succession on Performance in Kisumu County, Kenya
Maende, Chrispen B.O.H.
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The economic landscape of most nations, Kenya included, remains dominated by small and medium businesses which include family businesses. The importance of such businesses cannot be overemphasized, economically and socially. However, lack of business longevity is a cause for concern. Succession planning is the process of identifying and preparing suitable employees through mentoring, training and job rotation, to replace key players within an organization as those key players leave their positions for whatever reasons such as retirement, advancement and attrition. A few businesses survive to the second generation and even fewer make it beyond the third generation. Currently, there are a few family owned businesses in Kenya that have survived to the third and fourth generation. The literatures about family businesses suggest that there are a number of family businesses that fail in transitioning from the first generation to the second generation. Family businesses lack a practical understanding of succession planning resulting in the implementation of weak succession plans. The specific objectives of the study were to establish the relationship between business succession process on business performance in Kisumu Central Business District; to evaluate the relationship between handing over procedures of business on business performance in Kisumu Central Business District analyze the relationship between the demographic characteristics influence on business performance in Kisumu Central Business District; to examine the moderating effect of external factors on the relationship between business succession process on business performance in the Kisumu Central Business District. The research design was descriptive survey, data were collected by using a questionnaire through drop and pick method. Target population of 211 (two hundred and eleven) businesses (see appendix II), which were businesses in manufacturing, service, wholesaling and retailing industries. Testing the questionnaire for reliability and validity was done. The unit of analysis comprised of manufacturers, wholesalers, retailers and service firms. These findings revealed that there is a significant positive relationship between business succession processes on performance of businesses in Kisumu Central Business District. Marital status and experience were found to have significantly affected the performance of businesses in Kisumu Central Business District while age bracket and education had insignificant effect on business performance. The findings implied that in most businesses, successful and smooth business succession process enhanced its performance. Procedures of business succession significantly affected the performance of retail business. Educated business owners or proprietors were more likely to have high performing retail business than less educated colleagues. External factors (Legal Structure and Economic Factors) have a significant moderating effect on the relationship between business succession process and performance of retail business. The study concluded that businesses that intend to survive beyond their founders must have a smooth succession process. Smooth change of leadership, smooth transfers of ownership and smooth transfer of control ensure that the performance of business is not significantly affected. The study recommended that founders/owners of the businesses should start working on the succession process early enough to ensure the process is smooth and does not have negative impacts on business performance.