Last week we met Mr. Mbanje, and we were introduced to his transport business. We went into a brief discussion about the legalities involved in the registration of a company when you are a family business and the issue of contracts, outlining shareholding, as well as monies borrowed and what that debt constitutes and how it can affect a company. This week I would like to continue the journey of Mr. Mbanje's transport business. As I pointed out last week, Africa's logistics sector holds so much potential and presents a significant opportunity for anyone willing to build their business in the industry. Millions of commuters travel every day across the continent and require transportation. The potential of the transport industry to a well-organised entrepreneur can be limitless. Like most businesses of this nature, where customer demand is high, the bus owner's turnover rises quite rapidly. Company turnover is the value of sales you make in a set period. As the turn-over increases, so are likely income and profit. One thing to note in business is the simplistic nature of success. To succeed in business, you have to be providing a solution to a significant problem in your customer's life. Most importantly, when a solution is provided to solve a viable problem, the business will then inevitably prosper. More so, when any business solves a problem effectively and efficiently, customers flock too. As Mr. Mbanje's fortunes grow, this quickly catches the attention of financial investors, and he quickly secures loans to buy more buses and increase his fleet. Before long, Mr. Mbanje has seven buses and projections (estimate or forecast of a future situation based on a study of present trends) that show that he can grow into a multi fleet business.
As the business gains momentum, a few qualified professionals are hired by Mr. Mbanje to give the company a professional image. However, no formal company board is set up; neither is there a formal hiring strategy. Mr. Mbanje prefers to hire impromptu with no consultation or consideration of operational needs or financial implications. Most people hired come from the ever-winding list of family and friends asking for favours from Mr. Mbanje and hoping he will assist as these individuals have been sitting around without a job for the longest time. Unemployment is not the best reason to employ someone. Experience, qualifications, and personality have to be considered, only after a definitive hiring strategy is identified. Embedded in this list of new employees, are his in-laws. They are employed because of pressure from his wife, and this is all wedged on the loan given at the beginning of operations.
As time goes on, the payroll increases and so do the unnecessary job positions which are neither monitored nor created to meet the ever-growing demands to gratify family and friends. The Human Resources function, as well as most of the business functions, are handled by Mr. Mbanje himself because "he knows his business, and he built it with his bare hands." Although true, the truth in this fact is overly emotive and exaggerated. Moreover, because of this ego-driven view, the managers he employs are disempowered, and most are either unqualified relatives hired to watch over the other staff, or they are managers who have held similar positions at other companies before. However, because of the nature of Mr. Mbanje's overall management style, they are more of messengers than real decision-makers at his company. Despite this colossal payroll, Mr. Mbanje is well-financed. His business is a well-oiled machine which is generating a lot of liquid cash flow. Given the demand for the company's services and the standards he set from the onset, the business continues to grow, as will most businesses in a situation where demand outstrips supply. Future projections may however see the business weighed down from the unnecessary staff and payroll which will eventually lead to mismanagement and abuse of positions and funds.
Solving the HR Dilemma:
HR is critical to every business. We all start with the good intentions of providing people with jobs. However, we cannot possibly supply everyone with a job, no matter how big our businesses are. We need to understand the HR function and not hire based on empathy or need to please others; more so, we should never hire to "show off." Some of the critical questions a family business owner should ask are:
Is this person necessary for the business?
Does this person share the same values as our business?
Does this person have the personality that fits with the company culture?
Is this person experienced?
Should we set up a graduate trainee program?
How do we continue training our personnel?
Do we need the skills this person has?
What are the Key Result Areas that this person must deliver on?
Are we hiring this person based on the need from within the company for their talent or skills?
How can this person take us further towards our overall vision as an organisation?
What is the cost-benefit analysis of having this person as part of our business?
Personal relationships should not influence business HR strategies. As complex as it may seem, critical positions in your company must be staffed by merit, not by relationships.