MIDLANDS STATE UNIVERSITY

BUSINESS SCIENCES
DEPARTMENT OF MANAGEMENT SCIENCESTUDIES

PROJECT TITLE:
AN ASSESSMENT OF EFFECTIVENESS OF SUCCESSION PLANNING IN ENHANCING
BUSINESS CONTINUITY: - A CASE STUDY OF FAMILY- OWNED BUSINESSES IN
MASVINGO.

BY
FORTUNE NGUVO
R1917098M

SUPERVISOR: MR. DZINGIRAI

.
 CHAPTER ONE

GENERAL INTRODUCTION

1.0 Introduction

Chapter one of this study serves as the introductory chapter whereby the study is put into context
and its relevance is emphasized. The chapter starts by giving an introductory background to the
issue of Family- Owned Business. Objectives, research question and justification of the study are
outlined. Definition of terms is also included in this chapter where key terms are explained. The
chapter concludes by addressing limitations and delimitations of the study.

1.1 Back ground of the study

Family businesses represent an important pillar of the global economy, (Eddleston et al.. (2012);
E Gagné et al. (2014); Massis et al.. (2018), as well as employers or as economic growth engines
(Bjuggren et al. (2011). These entities are dominating among small, medium, and large
businesses, businesses, (Dos Santos et al. (2020). About 70 to 90 percent of the world’s GDP is
generated by family businesses, which subsequently help in wealth creation, generating
employment, and bringing prosperity to most of the countries. Beginning in the 1980s, academic
interest in family firms increased significantly Pieper (2010). Despite the major contributions of
family- owned business to GDP, they are facing a plethora of acute succession planning
challenges Ortiz, R (2007).

According to the family enterprise Survey United States of America (USA) 2011, the United
States has about 5.5 million family businesses contributing 57 percent of GDP and employing 63
percent of the workforce, (Tharawat Magazine (2014) and 78 percent of all new jobs ( Astrachan
& Schanker (2003). A substantial number of American companies that have family-owned
business origins are in existence today and have grown and spread across continents. These
include Nike, Oracle, Facebook and Wal-Mart, to name a few. The 2014 Family-Owned
Business Institute survey with a sample of 690 family businesses found a typical age of a family
business in West Michigan to be 50 years. Eleven per cent of the businesses were 100 years and
over with an impeccable history of social responsibility and job creation, (Family Owned
Business Institute (2019).

In South Africa, family businesses account for 50% of the economic growth of South Africa,
Fishman (2009). The rapid growth in family businesses in South Africa can be attributed to the
rationalization process taking place in many large organizations, as well as to a growing inability
of the informal sector to create new jobs, (Van der Merwe et al.e, Venter and Ellis (2011).
Poverty continues to wreak havoc in most developing countries and hence the contribution of
family businesses to national employment and poverty alleviation cannot be underplayed.
Family-y owned businesses play an important role in the economic development of a nation and
hence their survival and growth issues warrant in-depth research and analysis, Van der Merwe
(2012). Family businesses can wield enormous economic power and hence the survival of the
family business will have an impact on poverty reduction on the majority of the People in Africa.
However, the family-owned business in South Africa are also facing succession planning
challenges Van der Merwe et al. (2009).

Zimbabwe has its share of successful companies that started as family businesses transforming
over the years to become giant corporates. For instance, the Meikles family business empire is
the oldest in Zimbabwe to have successfully grown to become a listed counter on the Zimbabwe
Stock Exchange, (Meikles Africa Limited (2002). Other examples of the companies that started
as family-run businesses include Econet Wireless Zimbabwe, Nyaradzo Funeral Services,
Moonlight Funeral Services, and Peace Security Company, to name but just a few. However, for
most family-owned businesses, their longevity and sustainability through generations remain a
significant cause for concern. Family businesses can wield enormous economic power, Venter
(2007).

Most (80%) of businesses in Zimbabwe are family-owned and are predominantly small to
medium-sized, thriving under the guidance of the founding member, Nyoni (2019). The SME
sector has gained a substantial foothold of the Zimbabwean economy where it employs 60
percent of the workforce and contributes an estimated 50 percent of the country’s GDP, creating
scope for relevant authorities to give attention to the sector (Government of Zimbabwe 2015).
So far literature on family- owned businesses in Zimbabwe Indicates that approximately 80% of
small to medium size businesses are family owned, (Dzansi et al., Chipunza and Mashavira,
(2019) and the research mainly deals with issues of corporate governance and does not go further
into the family business dynamics relating to survival and growth as has been the case elsewhere.
Up to now there is no knowledge sharing platform in the form of a Family- Owned Business
Forum or Association where families can discuss issues of mutual interest pertaining to their
businesses. The knowledge gap in the dynamics of family -owned businesses in Zimbabwe
deserve to be studied in more detail as it will reveal issues which will help in coming up with
intervention mechanisms which will enhance the survival and growth of family- owned
businesses.

Table 1.1 DECLINE OF FAMILY- OWNED BUSINESSES IN MASVINGO FROM 2015

TO 2021

YEAR NUMBER OF FAMILY- OWNED BUSINESSES

2015 7520

2016 7219

2017 6515

2018 6513

2019 7012

2020 7011

2021 6310

Source: ZIMSTATS (2021)???

According to the above statistics it is revealed that in 2015 there were 7520 family-owned
businesses operating in Masvingo which declined over the years to 6310 family-owned
businesses in 2021. Which implies that in a period of 7 years 120 Family- owned businesses
liquidated.

1.2 Statement of the Problem

The specific business problem is that some family businesses are being shutdown at an alarming
rate. The number of liquidated family- owned businesses decreased from 20 in 2015 to 10 in
2021. This issue could be attributed to succession planning issues that are hindering business
continuity. Family- owned businesses in Masvingo are bedeviled by lack of continuity, as
submitted 20 family- owned businesses from 2015 to 2021. Therefore, this study aims to assess
the effectiveness of succession planning in enhancing business continuity.

1.3 Research Objectives

This study is driven by four objectives. These are the quest:

1.3.1 To determine the succession strategies implemented by family-owned businesses in

Masvingo.

1.3.2 To assess the effectiveness of succession planning strategies implemented by family

business in Masvingo.

1.3.3 To establish the benefits of succession plan in family- owned business.

1.3.4 To ascertain the challenges associated with establishing succession plan in family- owned
business.

1.4 Research Questions

The interrogative questions that are poised to guide this study are the following:

1.4.1 Do family- owned businesses develop succession plan?

1.4.2 Do family -owned businesses develop leadership development strategy?

1.4.3 What are the benefits of succession plan to family- owned business?

1.4.4 What are the challenges associated with development of succession planning?

1.5 Significance of the study

1.5.1 Theoretical significance

The knowledge gap in the dynamics of family- owned businesses in Zimbabwe deserve to be
studied in more detail as it will help in identifying the intervention model for the survival of
family businesses and also reveal the necessary key success factors. Despite increased attention
on family businesses in developed economies, management and entrepreneurial scholars in
general seem to have ignored emerging economies in Africa and have not adequately addressed
the dominant form of business in this region i.e.i.e., the family business, (Khavul et al., Bruton
and Wood (2009). The dominant literature on family business has used the family firm in North
America and Western Europe as its reference point. The concept of a family in Africa is very
different from the concept of a family in North America and Western Europe.

1.5.2 Practical significance

1.5.2.1 Importance of the study to policy makers

The study is also essential to policy makers that include different government ministries captains
of industry and commerce. The findings of this research will enhance policy formulation and
assist policy makers to create an enabling economic environment for FOBs which will enhance
their performance and growth prospects. Success of FOBs will have a positive impact on poverty
reduction particularly in the rural areas where the majority of Zimbabweans (about 70%) live. It
can be used by the University as a basis for future studies and research in this area. For the
researcher this research is important in giving insight into the success of his family business In
Masvingo.

1.5.2.2 Importance of the study to the industry

The organization can use the project as a reference manual when devising succession plan
programs that are aimed at invoking continuity of family- owned businesses. It is expected that
the study will inform the management of the organization in which the research will be carried
on the effective programs that can be implemented in order to attain continuity and growth of the
business. The study findings and recommendations shall be important to FOBs operators in that
it would enhance their understanding on the challenges that are prevalent in the sector and be in a
position to comprehensively address them in order to improve their succession plans of the
businesses

1.5.2.3 Importance of the study to the management of family-owned businesses

The management of family-owned business can use the project to devise succession plan for the
future managers of the business and to implement succession planning and development in the
business.

1.6 Delimitation of Study

1.6.1 Theoretical

The subject of this research is the study of intergenerational family businesses In the Masvingo
Province of Zimbabwe with a view to establishing the impediments to the survival of these
businesses; establish the key success factors and coming up with recommendations to enhance
their survival and growth prospects. The study will focus on those businesses where members of
senior and next generation are actively involved.

1.6.2 Geographical

The choice of Masvingo for this research is based on following factors of the size of its
population, the centrality of Masvingo and the unique resources in the form of tourist attractions,
cattle ranching pastures and biggest irrigation scheme in the Lowveld.

1.6.3 Time frame

The businesses to be studied will have been operating for at least 7 years and will focus on 6
industry categories i.e.i.e., retail, manufacturing, wholesale distribution, transport, agriculture,
and construction.

1.7 Limitations

1.8 Assumptions of the study

The assumptions are that:

 The participants will respond to the questions accurately and honestly

 The participants are going to take part in the study.

 Data collection methods used provided correct and accurate information for the research.
  The business operating environment remains highly unstable over the period of study.

1.9 Definition of terms

Economic growth: it refers to constantly increasing volume of production in a country, or an

increase in gross domestic product as the main quantitative indicators of production for a period
of one-year Ivic (2015).

Family ownedFamily-owned business Miller et al. (2003) defines family ownedfamily-owned

business as a firm in which multiple members of the same family are involved as major owners
or managers, either contemporaneously or over time.

Succession is an event that confronts virtually all viable organisations Gephart (1978), but in
situations where the incumbent dies, retires or resigns, succession is forced upon the
organisation, while in instances like firing or internal relocation of the incumbent, such as
transfer, promotion or demotion, succession is a decision over which an organization’s decision-
makers do have some control.

Succession Planning it is a process for identifying, recruiting, training and mentoring high-
performing employees with leadership potential, preparing them to step into senior or executive
positions when vacancies occur. It ensures a company can continue to run smoothly during
planned or unplanned leadership changes. (Dyck et l., Mauws, Starke and Mischke (2002)

1.10 Acronyms

GDP Gross Domestic Product

FOB Familyy -Owned Business

SME Small and Medium Enterprises

1.11 Chapter Summary

The chapter presented the introduction of the study which comprised of the background of the
study and its importance. Also covered are the delimitations, limitations and assumptions
pertaining to the research. In the next chapter relevant contributions by different authors on the
subject of education and job performance are going to be explored.

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