Roll af Succession Planning 0n Survival 0f Small and Medium Family Entreprises After Retirement/Death of The First Generation Entrepreneurs In Kenya

Abstract

Small and Medium Family Enterprises (SMFEs) are engines of economic development through contribution of jobs and poverty reduction. Currently, the SMFEs sector in Kenya contributes over 70% of the country’s GDP.Despite the importance of SMFEs in the economy, they have high collapse rate. In Kenya, 3 out every five collapse within 3-5 years of operation leading to loss of jobs. In Kenya, more often than not, families make applications in court to bar their family members from running or interfering with the running of family business. Many studies have been conducted on SMEs but little has is known about the contributions made by a well organized process of succession planning to survival of SMFEs in Kenya. The role of succession planning on survival of SMFEs after the retirement/death of the founding owners is influenced by four variables namely: mentoring, entrepreneurial orientation, level of education/training and capability of the successor.

The sample size was 71 respondents. The study used primary data collected using questionnaires which were given to the respondents at their places of businesses. Quantitative data collected was analyzed by SPSS and presented through tables, figures, charts, percentages, mean, /and standard deviations. In addition, a multivariate regression model was applied to determine the relative importance of each of the four variables with respect to SMFE growth.

The study found that capability of the successor had the greatest effect on the survival of SMFEs after retirement/death of first generation entrepreneur, followed by entrepreneurial orientation, and then mentoring while level of training had the least effect to the survival of SMFEs after retirement/death of first generation entrepreneur.

The study recommends that the owners/managers of the SMFEs should propose a successor for their business in good time so as to allow enough time for mentoring that could see their business survive through several generations. The study also recommends that the owners/managers should be trained on the importance of being innovative, proactive and how to take calculated risks in the business operations that would go a long way in enhancing business success.