The Founder’s Dilemma

The Founder’s Dilemma

My first trip from Hoima to Kampala was in 2000. I will never forget it. It was one of my longest trips. I came on top of a lorry, carrying dry tobacco leaves. We set off from Hoima at 2pm and arrived in Kampala at 10:30am the next day. It took us longer time that it takes to travel from Entebbe to Washington DC!

At the time, there were few Taxis and a Posta Uganda bus. The Taxis were very expensive. And the Posta Uganda but had an inflexible route.

A year later, a new bus company opened on the Kampala – Hoima route. It was owned by one of the top entrepreneurs in Hoima at the time. This bus company was a God sent. It tapped all the business opportunities – so many passengers and few seats. Demand exceeded supply. At the time, there were no speed limits. No route controls. No wonder, the bus company expanded so fast and became one of Hoima’s success stories. It added more buses. Business was booming without correspondent changes in governance systems and processes. And that is how some cracks started appearing.

It is a fact: Small and Medium Sized (SME) businesses are the glue that bind this economy. Whether it is trade and commerce (Kikuubo shops, wholesale and retail shops in towns and villages), hotels and restaurants, transport business, farming or services (pharmacies, hospitals, law firms, accountancy firms or clinics), many of these are family enterprises.

In the village I come from, the shops I grew up seeing have remained the same size to this day. The only change is in ownership and the fact that many of them closed shop long ago after the death of their founder.

It all boils down to poor governance: the system by which a business is run. The first challenge is founder’s dilemma – how do I retain control of the business without being involved in its day- to- day operations? Most founders are too greedy. They want to sign on each and everything. They think (foolishly) that only then they remain in control, business is efficient. That is poor governance mindset.

The other challenge is: founders- know- it all. They think that what made them start the business and grow it to its current size and profitability has remained the same. And only them have the vision and knowledge to keep it running. Many end up standing in the way of business growth since disruptions due to technology and change in buyer behaviors call for fresh business models.

The number one reason for the failure of most SMEs is that they remain informal. That way, they fail to establish the minimum basics to remain agile, dynamic and well governed.

SOURCE: SUMMIT BUSINESS MAGAZINE. NET/VOL. 09 ISSUE 05 November- December 2016