Financial Controls and the Perceived Performance of the Sugar Factory in a Family Business Enterprise: Evidence from the Madhvani Sugar Factory in Uganda

Abstract

Abstract: This paper examines what it takes for family businesses to succeed with a focus on the Madhvani group sugar factory in Uganda. A sample of thirty (36) supervisors was used to determine the effect of financial control practices on the perceived performance of the factory. The main purpose of the study was to examine the effect of financial controls in predicting the performance of the sugar factory which has been a success story for the family for decades now. The specific objectives were; (1) to determine the relationship between compliance with financial policies and procedures and the perceived performance of the sugar industry; (2) to establish the relationship between the application of adequate financial and management controls and the perceived performance of the sugar factory; and (3) to ascertain the effect of safeguarding assets on perceived performance of the sugar factory. Results reveal that; (i) there is a significant and positive correlation between compliance with financial policies and procedures and the perceived performance of the sugar factory [r = .774**, p<0.0001]; (ii) there is a significant and positive relationship between adequate financial and management controls and the perceived performance of the sugar factory (r = .894**,p<0.0001). Similarly, the research indicated a significant and positive correlation between safeguarding assets and the perceived performance of the factory [r = .844**, p<0.0001]. In addition, Anova results also support the tested hypothesis that there is a significant and positive main effect of financial controls on the perceived performance of the sugar factory [F = 135.921, p<0.0001]. It was concluded that family firms that strive to be well-managed with strong financial controls succeed because they are built with the financial discipline to last and survive generations. Therefore, the need for a professional administrative business approach is arguably critical for a successful family enterprise.