Family businesses are the lifeblood of the Middle East. How do we ensure they survive?

middle east

Downtown Dubai, Dubai, United Arab Emirates. (Robert Bock, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Hassan Jameel, Deputy President and Vice-Chairman, Abdul Latif Jameel


For many the idea of a family business immediately conjures up an image of a small shop, in which a son is stacking the shelves while his father ponders the proud day he hands over the keys. It is easy to forget that some of the business world’s biggest names, such as Ford, Walmart or Tata, are or once were family enterprises, built on big ideas seized by bold entrepreneurs that have now been passed down through generations.

In my home region of the Middle East, family businesses play an outsized role, accounting for over three-quarters of the private sector economy’s workforce. Many of the largest businesses in the region remain family run, having grown over the course of several generations from small enterprises into conglomerates spanning sectors and geographies. Abdul Latif Jameel Company (ALJ), established by my grandfather, started off as a small vehicle distributor in Jeddah, Saudi Arabia. Today, 70 years later, the company has grown to become a significant global distributor and has diversified into multiple sectors including energy, real estate and finance, operating in more than 30 countries around the world.

For governments in the region and beyond, family businesses are key to meeting ambitious goals for private sector growth. For existing businesses like Abdul Latif Jameel, they represent a significant part of our ecosystem of partners, suppliers and consumers. Given this, it is in everyone’s interests to understand and address the challenges of family businesses and ultimately to ensure their survival.

What do family business owners in the region see as the main challenges facing them today?

What do family business owners see as the main challenges today?
Image: PwC

Whatever their stage of development, family businesses create a unique dynamic that features certain strengths and weaknesses. There are obvious upsides to the natural bond, commitment and tolerance within a family that you don’t always get in a ‘normal’ corporate environment. Surveys by leading consultancy firms frequently highlight the long-term strategic perspective, fast and flexible decision-making and shared values and ethos as key strengths – all areas that traditional businesses work hard to develop.

The same surveys reveal that preparing and training the next generation and putting in place succession planning are the primary concerns for senior generations, who want to ensure their values and guiding principles are cascaded through generations. Despite identifying these concerns, a survey this year by PwC showed 69% of family businesses in the Middle East (and 85% globally)have no formal succession plan in place.

Nurturing the next generation of leaders in a family business is, unsurprisingly, a delicate mix of good corporate practice and good parenting. A strict senior generation that centralizes authority and keeps subsequent generations out of decision-making can stunt the skills and potential of future leadership.

While it may be tempting to seek to groom a carbon copy, giving the next generation room to take responsibility in the business while listening to their concerns and perspectives helps them develop their own leadership style and accountability. Allowing next generations to fail and giving frank and honest feedback – as one would with any employee – is key to ongoing development.

There is no doubt that effective governance is a cornerstone of any corporate entity and it becomes more critical within the family business context. The same entrepreneurial spirit, close-knit ownership and rapid decision-making that gives them a competitive advantage can manifest itself in weak transparency and poor treatment of investors, partners and employees from outside the family.

It is essential to find a balance between the family’s informal approach and more professional governance, gradually shifting company culture from a kitchen table to boardroom table approach. Companies that have been through this transition can play a valuable role in transferring knowledge to others, through organisations such as the Family Business Council Gulf, which launched guidelines for governance in 2016.

 

Governance and strategy become more of a challenge as the business and family grow. Family members may have different appetites for risk, interests or ambitions, or be more focused on preserving and protecting hard-earned wealth than creating more. If families cling to old ways and consensus-based decision-making, there’s a risk the business becomes paralysed, weakening the entrepreneurial spirit that made it successful in the first place.

Whether it’s a first-generation start-up with dreams of creating a dynasty, or an established, diversified multinational with family across the business, flexibility in the corporate and family setting is key. Putting in place the structures to empower and nurture future generations, and giving them the room to explore and develop their interests, is the best way to encourage strong leadership and success in the long-term.

Few could have envisaged how both the automotive industry and the Jameel family business would transform in the seven decades since my grandfather first started selling cars in Jeddah in the 1940s. While our business has grown and evolved, we are still guided by the same values and vision, which we endeavour to pass on through our family and our employees today.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Eliminating hepatitis calls for ‘bold political leadership, with investments to match,’ UN health chief says

UN chief calls for ‘enlightened self-interest’ from world leaders to save ‘the whole planet’ from climate change

UN rights chief ‘strongly’ condemns ‘shocking’ mass executions in Saudi Arabia

China’s lead in the global solar race – at a glance

Palestine refugees’ relief chief warns Security Council money to fund Gaza operations will run out in mid-June

Tax Inspectors Without Borders making significant progress toward strengthening developing countries’ ability to effectively tax multinational enterprises

Women’s voices must be heard in the battle to save the ocean

EU adopts new €100 million assistance package to benefit refugees and local communities in Lebanon, Jordan, and Iraq

IMF: European banks do not perform their duty to real economy

EU Trust Fund for Africa: new migration-related actions to protect vulnerable people and foster resilience of host communities in North of Africa

Food safety: more transparency, better risk prevention

Iran: UN rights chief ‘deeply disturbed’ by continuing executions of juvenile offenders

EU Commission indifferent on Court of Auditors’ recommendations

How each country’s share of global CO2 emissions changes over time

Which countries have the highest unemployment rates?

Health & Sustainable Development Goals: it’s about doing what we can

Here are 5 security challenges Nigeria’s leader must tackle

At COP24, countries agree concrete way forward to bring the Paris climate deal to life

Main results of Environment Council of 09 October 2018

Release of prize-winning Reuters journalists in Myanmar welcomed by UN

Is the EU competent enough to fight human smuggling in 2015?

Three ways Finland leads the world – and education isn’t one of them

A Monday to watch the final act of a Greek tragedy; will there be catharsis or more fear?

EU Council: The US airlines may freely pollute the European air

Slovakia and its failure to abide by the European law

From cheeseburgers to coral reefs, the science of decision-making can change the world

European Commission: the LED lights of your Audi A6 shall save our planet

Better training ‘a necessary and strategic investment’ in peacekeeping that saves lives: Guterres

COP24: World sports join team UN in race against climate change

‘We need to do more’ to transform the world, deputy UN chief tells African audiences

ECB guarantees the liquidity of the Atlantic financial volume

These countries are pioneering hydrogen power

Businesses, governments and consumers to implement a more climate-friendly approach to #BeatPlasticPollution on World Environment Day 2018

European Development Days 2013

The mother of all fights about inflation, growth and banks

Europe on the Move: Commission completes its agenda for safe, clean and connected mobility

Tunisia wants to change inheritance rules to boost gender equality

ECB indicates south Europeans can endure more austerity

The movement of anti-vaccers: taking humanity back 200 years

What if big-tech companies became non-profits?

Counting unemployment in the EU: The real rate comes to anything between 16.1% and 20.6%

Spotlight Initiative – EU and UN fight against domestic violence in the Pacific region

Global economy to see ‘steady’ growth of three per cent in 2019 despite risks, says UN

The Ecofin Council creates officially the clan of ‘undead’ banks

Collaboration: the key to success in the digital economy

Boosting adult learning essential to help people adapt to future of work

EU’s unsparing question to UK: now what kind of future relations do you want?

Outgoing UN official praises Iraq’s ‘exemplary peaceful transfer of power’ at the top

EU Commission draws the wrong conclusions

Robots will soon be a necessity but they won’t take all our jobs

Tackling ‘deeply worrying’ global rise in anti-Semitism is a job for all societies everywhere, says UN chief

Mankind’s first tool to fight malaria also kills

Euro celebrates its 20th birthday

How smarter machines can make us smarter humans

G20: Less growth, more austerity for developing countries

Our healthcare systems are ailing. Here’s how to make them better

From drones to health data, how Japan can power ahead

ECB offers plenty and cheap liquidity to support growth in all Eurozone countries

Accountability in Sudan ‘crucial’ to avoid ‘further bloodshed’, says UN rights office

Forget about growth without a level playing field for all SMEs

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s