The effect of succession planning on financial performance of family-owned supermarkets in Nairobi county

Abstract

Succession planning is the process of pinpointing key needs for leadership and intellectual talent throughout the organization over time and preparing individuals for present and future work responsibilities. Succession is an inevitable event in the life of a family owned supermarkets. The strategies employed to facilitate the transferer of ownership and control have been observed to have a significant influence on the financial performance of family owned supermarkets. In Nairobi County a number of families have gone to court with intentions of barring other family members from taking control of the family businesses or barring them from getting a share of the family estates after retirement or death of founder. This has lead to additional costs used in resolving conflicts in courts, hence affect financial performance of family owned supermarkets. Many studies have been conducted on supermarkets but little is known about the contributions made by a well organized process of succession planning on financial performance of family owned supermarkets. This study determined the effect of succession planning on financial performance of family owned supermarkets in Nairobi County. The design of the study was descriptive research. Quantitative methods were applied in data collection and analysis. Data on the succession planning and their financial performance were obtained from a sample of 45 family owned supermarkets through a structured questionnaire. The sample was selected using convinience sampling technique.The study carried out frequency, descriptive, correlation and multiple regression to analyze data. The study found out that three independent variables showed positive relationship with financial performance namely succession planning, firm capital structure, firm age, but though the association for capital structure was not significant with financial performance. However, firm governance and firm size independent variables relationships with financial performance were negative. The study concluded that there is positive effect of succession planning on financial performance of family owned supermarkets. The study recommends the need for firm to develop succession planning policies that will improve future management of their firms. Also it recommended the used of debt financing in their investment and need for small supermarkets mergers. Further studies should be replicated in the different sectors of the economy to determine any significant differences in the relationship between succession planning and financial performance of family firms.