Governance no longer optional for family businesses – LBS

Lagos Business School (LBS) has stressed that governance is no longer optional for family-owned enterprises, warning that many businesses fail to survive across generations due to weak governance structures and poor succession planning. The institution made this known during a recent expert session convened through its Family Business Initiative, where stakeholders examined the governance challenges […]

Lagos Business School (LBS) has stressed that governance is no longer optional for family-owned enterprises, warning that many businesses fail to survive across generations due to weak governance structures and poor succession planning.

The institution made this known during a recent expert session convened through its Family Business Initiative, where stakeholders examined the governance challenges facing family businesses in Nigeria and the need to strengthen institutional frameworks to ensure long-term sustainability.

According to LBS, family-owned enterprises remain a major pillar of Nigeria’s economy, dominating the small and medium-scale enterprise sector and providing employment across several industries.

Despite their importance, however, the long-term survival of many family businesses remains uncertain.

Experts at the session noted that the greatest risk to family enterprises is not necessarily poor business performance but poorly managed leadership transition.

Global data discussed during the session indicates that more than 70 per cent of family businesses fail to transition successfully from the first generation to the second, while fewer than 13 per cent survive into the third generation.

Participants noted that Nigerian family businesses face similar challenges, often collapsing not because the businesses are unviable but because governance structures were never designed to manage succession, accountability and clear decision-making processes.

According to the experts, family enterprises typically operate across three interconnected systems — family relationships, ownership interests and business management.

Each of these systems follows different priorities. While families tend to focus on relationships and emotional ties, businesses require objectivity, discipline and performance-based management, while ownership emphasises control and financial returns.

They warned that when these systems are not deliberately aligned through governance frameworks, tensions can arise that slow decision-making and weaken business value.

The experts also noted that governance is often misunderstood by founders as unnecessary bureaucracy or a challenge to their authority.

However, they explained that governance should be viewed as a value-preservation tool that helps separate family relationships from business responsibilities, clarify decision-making authority and strengthen accountability within the enterprise.

Insights shared during the session also showed that governance structures do not necessarily begin with complex corporate policies or large boards.

 

The experts also identified common governance weaknesses among family businesses, including poorly defined roles for family members working in the company, reliance on verbal agreements and undocumented expectations.

 

Participants stressed that family members working in the enterprise must operate as professionals and be subject to defined responsibilities, reporting structures and performance standards rather than relying solely on family ties.

 

As part of its ongoing engagement with family business owners and advisers, Lagos Business School also announced that it will host the Third International Family Business Conference on March 26, 2026, at the Ecobank Pan-African Centre in Lagos.

 

The conference, themed “Beyond Survival: Governance and Culture as the Foundation for Lasting Family Legacies,” will bring together family business owners, successors, board members and advisers from across Africa to share insights and practical frameworks for sustaining family enterprises across generations.