SUCCESSION planning is crucial for the survival of family-run companies.
With many local companies having their genesis hinged on a need for subsistence and not necessarily the creation of wealth, lecturer at the Mona School of Business Lawrence Nicholson said it is easy to overlook the importance of ensuring the life of the company after the founding members no longer hold the helm.
For local snacks manufacturer, Honey Bun, business success is a combination of sound corporate practices and the principles of the family council by which it was guided before their public listing.
"Corporate governance is almost like an improvement on the family council," Chief Executive Officer Michelle Chong said, adding that the family acted as the board that would set the rules by which the company should be guided.
According to Nicholson, the family council facilitates the development of entities through a system of governance spear headed by the founders (parents) of a company.
Rules concerning ownership, as well as guidelines for the treatment of highly "emotive matters" are discussed and "penciled out" from the onset so succeeding members of the family and company are clear on what obtains, he said.
For Honey Bun, "the council would come together and decide, for example, that you (the children) would have to be qualified for a job in order to be put in that position," Chong said.
The CEO added that children need to be made to understand the rules even before entering the business to eliminate the perception of entitlement.
"So it doesn't come up later on in the day that someone is going to get a job or position because they are the daughter of the CEO, that just doesn't happen because the rules in your family council would have established that," she said. "You can actually develop a rule book for the family in the business."
The inclusion or exclusion of in-laws as the family grows, may also be fleshed out at this stage.
For their part, siblings Krystal and Daniel agree that the success of the second generation entity must take precedence over the emotional and personal views of the family members.
"We recognise as a family that we all have different strengths and very different areas of expertise," Marketing Manager Krystal Chong said. "It could be a conflict if we didn't look at it to see how each contributes to the company and then appreciate that in itself."
This, she said, "made us stronger as a team, as in the end it is how it benefits the company as oppose to your personal feeling about something".
Founded some 30 years ago by the Chong family, Honey Bun listed on the Jamaica Stock Exchange Junior Market in 2011, with its initial public offering being oversubscribed four times the targeted amount of $50.8 million
The company recorded $192 million in sales for their last quarter compared to $145 million for the corresponding period of 2012.
"Our last quarter results showed a 32 per cent increase in revenues and 56 per cent in profits," the marketing manager said, adding that the company increased its exports "significantly" as well as "thoroughly improved" its distribution system.
As the dominant player in the Jamaican "individually wrapped baked snack" market, the company's products are sold in more than 1,000 outlets islandwide, including gas stations and 250 school canteens.
With a $70-million plant expansion set to be completed this year, the company said the "strategic move" will provide for greater "logistic efficiencies to be realised".
Additionally, "we are building in our existing markets as well as developing new products for export," the company told the Business Observer.
While conceding that "there were many challenges in 2012" the company said plans for increased automation will improve its overall efficiency and distribution as it seeks to also bolster its franchising opportunities.