The Arabian Publication for Family Businesses Volume 14 Apr-Jun 2012
16
Q&A with Mohammed Alkhorayef
The vision behind the Alkhorayef Group’s agricultural expertise
52
Drivers of Talent management in the Middle East
Drivers of talent management in Middle Eastern markets and firms
42 58
The Nuqul Group: HR Systems in the Family Business
Pillars and standards for efficient HR systems in family businesses
Q&A with Veronica Maldonado, Venezuela
The Maldonado family history and their pursuit of good ownership
Special Features
Human Capital Developing people in- and outside the family
tharawat magazine
The Arabian Publication for Family Businesses
The ArAbiAn PublicATion for fAmily businesses Volume 14 Apr-Jun 2012
16
Q&A with Mohammed Alkhorayef
The vision behind the Alkhorayef Group’s agricultural expertise
52
Drivers of Talent management in the Middle East
Drivers of talent management in Middle Eastern markets and firms
Publisher and Founder Dr. Hischam El Agamy Editor-in-Chief Ramia M. El Agamy
42 58
The Nuqul Group: HR Systems in the Family Business
Pillars and standards for efficient HR systems in family businesses
Q&A with Veronica Maldonado, Venezuela
The Maldonado family history and their pursuit of good ownership
sPeciAl feATures
editor@tharawat-magazine.com
Human Capital
Assistant Editor Wafa Nasser Farhoud
Developing people in- and outside the family
wafa@tharawat-magazine.com
Editor-at-Large Farida F. El Agamy Creative Director Emad Khourfan
emad@tharawat-magazine.com
Translation House Tarjomeh Localization Ltd., Dubai, UAE Printing House Al Ghurair Printing, Dubai, UAE Acknowledgements Many thanks go to The authors for their work and input. The advertisers for their kind contribution. The readers for their feedback on the previous issues and their continuous interest in Tharawat magazine. The Al Ghurair’s printing facilities for their excellent work.
www.tharawat-magazine.com
COVER 014.indd 1
4/2/12 10:25 AM
VOL 14 | Apr - Jun 2012 Any other use, including but not limited to, the publication, reproduction, modification, distribution, transmission, republication, display, creation of derivative works, or performance of the content, or any other use of the Content for commercial reasons, is strictly prohibited without the express written consent of Tharawat Media FZ LLC. If you wish to use content or artwork from Tharawat magazine please e-mail: info@tharawat-magazine.com To advertise in Tharawat magazine please e-mail or call: advertising@tharawat-magazine.com +971 (0)4 452 6578 www.tharawat-magazine.com ISSN-2077-3714 Tharawat magazine is printed on recycled woodfree paper. Illustrations: Getty / Gallo Images Disclaimer
Tharawat magazine is published four times a year by Tharawat Media FZ LLC, a company registered in Dubai Media City. Reproduction without permission is strictly prohibited. All content in this publication, including but not limited to all text, visual displays, images, and data (“Content”) is the property of Tharawat Media and its content suppliers or licensors and is protected by the United Arab Emirates and International copyright laws. The compilation of all content in this magazine, including but not limited to the collection, arrangement, assembly, and coordination of content, is the exclusive property of Tharawat Media and is protected by United Arab Emirates and International copyright laws. The content in this magazine may be viewed as information gathering resource. Tharawat Media FZ LLC cannot be held responsible for any unsolicited material.
Volume 14 Tharawat magazine
1
contents
VOL 14 | APRIL - JUNE 2012
10
Contributors Allard Lugard
Regional Head Middle East and Executive VicePresident, Pictet Wealth Management, Pictet & Cie., Switzerland and UAE
Amy Schuman
Principal, The Family Business Consulting Group, USA
Dr. Hischam El Agamy
Founder and Executive Director, Tharawat Family Business Forum and Tharawat magazine, UAE and Switzerland
Essa Al Ghurair
Vice-Chairman, Al Ghurair Investment LLC, and Chairman, Al Ghurair Foods, UAE
Edward Nicholson
Managing Partner, Mercator Partnership Limited, Consultant to Maitland Group, UK
Farida F. El Agamy
Attorney-at-Law and General Manager, Tharawat Family Business Forum
GrĂŠgoire Imfeld
Senior Relationship Manager, Pictet Family Office, Pictet & Cie.
Lutfi Sayadi
2nd generation, Executive Management, Sayadi Pioneer Stone Carving, Tunisia
Mohammed Alkhorayef
CEO, Alkhorayef Machinery, Water & Power Business Unit, KSA
Nicola Billeh
08
16
Regulars
HR Director, Nuqul Group, Jordan
Prof. Abbas J. Ali
Professor of Management & Director, School of International Management, Eberly college of Business, Indiana University, USA
A few words by the publisher.
Prof. Philipp Sieger
08 G lobal Family Business News
Shirley Zinn
10 F amilyBusiness2FamilyBusiness
Professor, Center for Family Business, University of St.Gallen (CFB-HSG), Switzerland Deputy Global Head Human Resources Standard Bank Group &HR Director, Standard Bank, South Africa
Steve McClure
Principal, The Family Business Consulting Group, USA
Veronica Maldonado
GEM Family Office, Maldonado family, Venezuela
Zahi Fathallah,
Operations Manager, Chararib, Lebanon
2
06 P ublisher’s Note
Tharawat magazine Volume 14
The moves of family firms across the globe.
For the first time published with interactive survey results showing opinions of over 50 family members.
79 I nteractive
Our new section dedicated to the Tharawat magazine online activities and the Family Business Social Media page showing our picks from Twitter, Facebook, and Linkedin.
www.tharawat-magazine.com
VOL 14 | APRIL - JUNE 2012 contents
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38 46 52
42
20
26
Features 16 Q&A with Moahmmed Alkhorayef:
Family Business Expertise in Agriculture Insights into the vision behind the agricultural expertise of the Alkhorayef Group, KSA.
20 F inancial Governance for Family Businesses
The interaction between financial, corporate, and family governance and the repercussions for family businesses.
26 S uccession deconstructed
Two charts and a case that help decompose succession into management and ownership succession.
Special Features 34 H uman Capital: Evolution over Time A review of the evolution of human capital.
38 Human Capital in Family Firms
The specific challenges of human capital management in the family business.
42 The Nuqul Group: HR Systems in the Family Business
The HR system in one of the largest privateowned businesses in Jordan and the Middle East.
46 M anaging Family & Non-Family Employees
Dialogue between two family business experts.
52 T alent Management in the Middle East Drivers and challenges of TM in the Middle East.
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Volume 14 Tharawat magazine
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contents
VOL 14 | APRIL - JUNE 2012
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62
68
72
Spotlight 58 T he Maldonado Family, Venezuela: Q&A with Veronica Maldonado
Insights into the workings of a Venezuelan family business and why it is so important to learn how to be a good owner.
62 A Focus on Sustainability is an Investment in Value Creation
Five inter-related lenses provide a view on how to sustain a business presence in Latin America.
4
Tharawat magazine Volume 14
SMEs 68 C hararib - The Story of the Fathallah Family
A profile on a family specialised in the art of passementerie and a Q&A with Zahi Fathallah.
72 Sayadi Pioneer Stone Carving -
A Family History Written in Stone
The story of Tunisian Sayadi family and their stone carving business including a Q&A with Lotfi Sayadi.
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You can’t predict the future. But we’ll help You plan for it.
Structure is fundamental to successful wealth planning. We can help you make the right choices. Our global experts will set up your wealth in forms that safeguard your assets, optimise your financial affairs and meet the needs of your family. Life isn’t always structured. But we are.
rhoneservices.com
Publisher’s Note
Dear readers,
C
hange is inevitable. Business families are
family business experts who discussed the management of
encouraged to be flexible and adapt their
family and non-family employees. The special features section
organisations to new markets and the next
ends on a macro level with the insightful analysis provided by
generation. As a family business magazine we like
renowned academic Prof. Abbas J. Ali on the state of talent
to go along with the changes of family firms. So, as a first of
management in the Middle East.
many changes for Tharawat magazine in 2012, we would like to introduce two new sections: First, Global Family Business
In the third and last part of our Latin American spotlight series
News a section that we dedicate to the movements of family
we discover the history of a fourth generation Venezuelan
firms across the globe. Second, Interactive, the section that is
family business in an interview with Veronica Maldonado
dedicated to our online content and introduces our research
and are introduced to the five lenses of sustainable business
on family business information on social media sites.
practices in an expert article by Edward Nicholson.
In our features section we speak to family business leader
Last but not least, we are very happy to announce two
Mohammed Alkhorayef who shares his expertise on the
wonderful profiles in our SME section: The Fathallah family
agricultural sector in the Middle East. Our second article
from Lebanon and the Tunisian Sayadi family both speak of
explores the interaction between financial, corporate,
their histories and respective crafts and the futures of their
and family governance by wealth management experts
family businesses.
Grégoire Imfeld and Allard Lugard. Finally, Farida El Agamy deconstructs succession for family firms and provides two
We hope you enjoy our 14th issue and always welcome your
charts and a case study to illustrate solutions.
feedback.
In this issue’s special feature we dive into the complex matter of human capital in the family company: Beginning with an overview on human capital and its evolution through time by esteemed author Shirley Zinn, we continue by exploring the particularities of human capital management in the family firm described by Prof. Phillip Sieger. Nicola Billeh shares the Jordanian Nuqul Group’s experience in setting up an efficient HR system for a family firm. Our treat is the new article format we have implemented with Amy Schuman and Steve McClure: We documented a dialogue between these two
6
Tharawat magazine Volume 14
Dr. Hischam El Agamy Publisher and Founder Tharawat magazine Tharawat Publishing FZ-LLC
www.tharawat-magazine.com
GLOBAL FAMILY BUSINESS NEWS
GLOBAL FAMILY BUSINESS
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3 4 6
1
8 9
News
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Read up on the latest news of family businesses all over the world
01 | SOUTH KOREA
Samsung brothers conflict
The Murdochs
The Civil Court in South Korea is looking into a lawsuit submitted by Lee Maeng-Hee against his brother Lee Kun-Hee. Lee Kun-Hee is accused of taking over 700 billion won (around $620 million) from their father’s inheritance in shares of Samsung Life Insurance and Samsung Electronics. Samsung, South Korea’s biggest business group has not issued a comment on the incident considering it a personal matter. Lee Kun-Hee is the Chairman of Samsung group, the position he returned to in 2010 after he was given a presidential pardon in 2009 for the tax evasion charges in 2008.
News Corp. and the Murdochs have faced global criticism since the alleged phone-hacking scandals committed by their UK publishing unit, News International. Whether as a result of recent turmoil or for more private reasons, the family is making some significant changes: Lachlan Murdoch, Rupert Murdoch’s eldest son, hints at joining News Corp. again just as his younger brother, James Murdoch, quit his position as head of News International. Rupert Murdoch, stated to Forbes in February 2012 that James will remain with News Corp. forthwith focus on pay-TV business and international operations.
Lee Kun-Hee
8
02 | UNITED KINGDOM
Tharawat magazine Volume 14
03 | UNITED STATES
Who owns the Empire State Building? Since 1961 (Reuters, 2012) the best-known skyscraper in New York, has been family-owned: The Malkin Holdings, run by father, Peter, and son, Anthony Malkin did not only acquire the historical monument but proceeded to refurbish it according to the highest environmental standards. The family, after decades of private ownership, now wants to issue a 1bn$ IPO. 04 | SAUDI ARABIA
Aujan’s thirst for growth continues Established in 1905 and today the largest privately-owned soft drinks and confectionary marketer in the Middle East, Aujan Industries continues its expansion: It has just embarked on a modernisation of its manufacturing facilities in Dubai, Dammam, and Tehran. The family plans to build two more factories in the years to come; one in Iraq and one in Northern Africa.
www.tharawat-magazine.com
GLOBAL FAMILY BUSINESS NEWS
09 | SINGAPORE
05 | HONG KONG
East acquires West: Rykiel sells 80% In a move that will end the majority familyownership of a renowned French fashion house, the luxury brand Sonia Rykiel sold 80% of its shares to Fung Brands. The Hong Kong investors will expand the brand into Asia and North America. Nathalie Rykiel, the founder’s daughter will remain vice-president of the company that was founded in 1986. 06 | UAE
The Al Habtoor Group’s hospitality The Al Habtoor Group, one of the UAE’s largest family conglomerates and a strong player in the hospitality sector, invests in Europe through the acquisition of hotels in Paris and London. This step came after the group’s decision to demolish their 34 yearold Metropolitan Hotel in Dubai.
Hiap Hoe Holdings to wind up after family feud
General Motors Chairman and CEO Dan Akerson (left) with PSA Peugeot Citroën Chairman of the Managing Board Philippe Varin, Photo by Stuart Ramson for General Motors
Head of family business Hiap Hoe Holdings, Teo Guan Seng (81), has been caught in the family feud caused by his children’s and multiple wives’ competing interests. Business Times Singapore states that Teo is asking the court to distribute the Hiap Hoe Holdings to shareholders. Hiap Hoe Holdings holds 70% of Hiap Hoe Ltd and Superbowl Holdings.
07 | FRANCE
The big alliance: Peugeot and GM explore synergies
Family board reshuffled
After several months of discussions, the two car manufacturers General Motors and Peugeot Citroën have announced an alliance that includes co-producing vehicles from 2016. The synergy is seen to have great potential by saving both companies $2 billion annually that will be divided between the two parties equally. As a result of this alliance, the American automaker GM will hold 7% stake in Peugeot Citroën. This will make GM the second largest shareholder after the Peugeot family who retains 31% in the company.
Mining billionaire and controlling force behind Hancock Prospecting, Gina Reinhart, the richest person in Australia, has appointed her daughter Ginia (25) to one of her company boards. According to Perth Now, Mrs Reinhart has removed her eldest daughter, Bianca, from the company board. Ginia is the only one of Mrs Reinhart’s four children not suing their mother over the trusteeship of a key family trust.
10 | AUSTRALIA
08 | INDIA
Blair mediates in Indian family business feud Cherie Blair was hired to mediate in the family feud of Indian real-estate giants the Hiranandanis. Cherie Blair will join an arbitration panel to solve the problem between Darshan Hiranandani and his sister Priya. Priya is accusing both her father and brother of taking over her shares in a signed agreement in 2006.
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Volume 14 Tharawat magazine
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Introduction FamilyBusiness2FamilyBusiness
The fictional Egyptian MS family faces many challenges including dealing with a growing competition for their hand-made leather goods, finding ways to include all family members in the family business activities, and increasing the profitability of their shop in the centre of Cairo. To assist the MS family business in making the right strategic decisions, Tharawat magazine has sent out this issue’s case study to family business members all over the world. They have shared their expert advice with the MS family and have generated interesting statistics.
Many years ago in Egypt...
I
n the early 1940’s MS immigrated from the South of
workshops that produced different lines of products at lower
Egypt with his wife and three children to begin his
prices but remained loyal to their values and style.
first workshop in a narrow street in old Cairo. He designed and manufactured bags, chairs, vests, belts,
As the second son MMS and his sister NMS graduated from
decoration items and more. MS developed a sense
university, they joined their father and elder brother in the
of perfectionism in his work detailing his products to into
business. Their talents were more commercial. Seeing the
the smallest detail. Employees were trained with much care
growing demand from the new middle class, they proposed
and over a long period of time. Soon MS’s reputation for top
to open a first shop for their products. MS and AMS were
quality products was known to the rich of Cairo. MS became
very hesitant to get into the retail business. What had always
a brand and demand continued to increase; the workshop
differentiated them from other manufacturers was that the
expanded three times within five years. MS’s eldest son AMS,
client could come to the workshop and see the birth of each
who trained from a young age in the workshops had a real
product. At the same time AMS as well as his father wanted
passion for leather and soon joined his father in the business.
to involve the rest of the family to ensure the continuity of the family business.
Egypt changed dramatically during the 70ies; new consumer
10
behaviours and tastes emerged. The MS family business
The first shop was established and run by the two younger
started to adapt to the new trends. The family created new
siblings in a highly frequented area in old Cairo. The old
Tharawat magazine Volume 14
www.tharawat-magazine.com
FamilyBusiness2FamilyBusiness Introduction
workshops continued to be frequently visited by loyal clients. Soon, the family decided to open a bigger shop in the business centre of Cairo. However, competition did not spare them and many shops started imitating the MS products and selling them at lower prices. In the mid-70ies Egyptian consumers wanted to have even
The MS family workshops remained profitable but the question was for how long. The family met to discuss the situation.
cheaper products. They did not mind the quality so much because the country had opened its markets to the import of cheaper foreign goods. The MS family workshops remained profitable but the question was for how long. The family
handmade goods. Pricing and volume would be an issue.
met to discuss the situation. MMS and his sister NMS proposed to expand the shops and AMS proposed to expand the workshops into other areas in
to sell other products that were not produced by the family
Cairo and to compete through their high quality, hand-made
at lower prices to attract the class of consumers that does
products. He worried, however, that the industrialisation
not identify itself with handmade products. But they could
of leather products would slowly destroy the market for
also see that this could dilute the brand of MS products.
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Volume 14 Tharawat magazine
11
Introduction FamilyBusiness2FamilyBusiness
Survey Results Our case study shows that the MS family business is faced with a myriad of difficulties. To find answers for the MS family’s dilemma, Tharawat magazine sent out a survey to a select group of Middle Eastern family business executives and owners.
50
Over 50 family business executives and members shared their opinions on the MS family case.
Do you think that the MS family was right to open the shop in the centre of Cairo?
85% YES 15% NO
Will an expansion of the workshop-experience bring more brand recognition?
Very unlikely
Unlikely
10%
20%
Will adding more product range to the shops dilute the MS family brand?
12
Very unlikely
Unlikely
Neutral
Likely
Very likely
10%
40%
20%
15%
15%
Tharawat magazine Volume 14
Neutral 25%
Likely 30%
Very likely 15%
Will the family find an investor for the expansion of the workshops?
Very unlikely
Unlikely
Neutral
Likely
Very likely
10.53% 15.97% 21.05% 47.37% 5.26%
www.tharawat-magazine.com
FamilyBusiness2FamilyBusiness Introduction
Will the family find an investor for the expansion of the product ranges in the shops?
Very unlikely
Unlikely
10.53%
15.79%
Neutral 26.32%
Likely 47.37%
Very likely 0%
Do you think the MS family should continue producing handmade products in spite of the changing economic landscape?
Do you think that the MS family should internationalise their shops?
70% YES 30% NO
47.37% YES 52.63% NO
Do you think that the MS family should internationalise the handmade products?
63.16% YES 36.84% NO Should the family consider diversifying into other industries?
52.63% YES 36.84% NO 10.53% Other
Results Summary and Recommendations for the MS family
When summarising the results above we can see that our respondents have the following opinions on the MS family case:
70%
The majority agrees with the family’s strategy to open the shop in the centre of Cairo, while 70% also believe that the family should continue producing hand-made products.
www.tharawat-magazine.com
60%
Near to half of the respondents believe that expanding the workshop experience is likely to bring more brand exposure and over 60% believe that internationalising the handmade products is a good idea.
+50%
Respondents do not apprehend a danger by expanding the shop’s product range, however, more than half oppose internationalising the shops.
+50%
Over half the respondents believe that the MS family should diversify into other industries.
Volume 14 Tharawat magazine
13
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BROADEN YOUR HORIZONS Orchestrating Winning Performance brings together first-class speakers from around the world to give insights on the hottest management topics and innovative developments such as: Building a Brand David Roman, Chief Marketing Officer, Lenovo The First World Tour Powered By Solar Energy Raphaël Domjan, Founder & Expedition Leader, PlanetSolar The Challenge of Change Catherine DeVrye, Former Australian Executive Woman of the Year
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FEATUREs
FEATURES 16
20
26
Insights into the vision behind the agricultural expertise of the Alkhorayef Group, KSA.
The interaction between financial, corporate, and family governance and the repercussions for family businesses.
Two charts and a case that help decompose succession into management and ownership succession.
Q&A with Mohammed Alkhorayef
www.tharawat-magazine.com
Financial Governance for Family Businesses
Succession deconstructed
Volume 14 Tharawat magazine
15
FEATURES
Family Business Expertise in Agriculture
Family Business Expertise in Agriculture
Q&A with Mohammed A. Alkhorayef With over half a century of business history, the Al Khorayef Group is one of Saudi Arabia’s most reputable family conglomerates. Established by late Sheikh Abdullah Ibrahim Alkhorayef in 1957, the group is now managed by the second and third family generation. Today, it is a leading technology provider in various industries; mechanised irrigation and agriculture machinery solutions, oil artificial lifting systems designed and built in Saudi Arabia. The group is also involved in water projects, is an EPC contractor and O&M provider. Mohammed A. Alkhorayef is the late founder’s son and a second-generation family member. When he began his career with the family business in 1987, he first joined the international agriculture machinery companies the family represented. Today, Mohammed Alkhorayef heads one of the four strategic business units of the Alkhorayef Group and is the CEO of the Alkhorayef Machinery, Water & Power Business Unit. In a Q&A with Tharawat magazine, he discusses the development and potential of the Middle Eastern agriculture sector, what can be done to prevent food crises, and the role of regional family businesses in the development of agriculture.
When did the Alkhorayef Group begin its
pumps, irrigation machineries and equipment, as
activities in agriculture and what was the main
well as well drilling equipment. Today, we are one of
motivator for this strategic decision?
the top three worldwide producers of mechanised irrigation, water pumps and drives.
It is mainly our family passion for farming that brought us into the agriculture business. However,
How do you find the agricultural sector has
the Saudi government’s initiative promoting
evolved in the Middle East over time?
agriculture and self-sufficiency during the 70’s and 80’s and the country’s efforts to diversify the
The Middle East faces major challenges and the
sources of national income were definitely also
food gap is not getting any smaller; it’s increasing
major contributors towards the business’ growth
every year and we are still dependent on imports.
and expansion. The concept of totally integrated
This in spite of the fact that the region enjoys
solutions in agriculture was born, which allowed us
tremendous agricultural potential which, if
to create a strong bond with our customers.
properly structured and integrated among Middle Eastern countries, would enable an economic
16
We began our agriculture activities by representing
paradigm shift towards sustainable growth. By
several reputable international producers of water
integration I mean the merge of intelligence of the
Tharawat magazine Volume 14
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Family Business Expertise in Agriculture
FEATURES
The region enjoys tremendous agricultural potential which, if properly structured and integrated among Middle Eastern countries, would enable an economic paradigm shift towards sustainable growth.
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Volume 14 Tharawat magazine
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FEATURES
Family Business Expertise in Agriculture
region’s natural resources such as energy, capital,
agriculture remains critical to sustainable long-
and mechanised farming experience with the vast
term food security” and in that sense the Middle
fertile lands, people and water.
East can be a valuable contributor to global food security through the merge and integration of
With the growth of the global population what
region natural resources.
LEFT: Mohammed A. Alkhorayef, CEO Alkhorayef Machinery, Water & Power Business Unit
do you believe is the role of agriculture in
18
relation to food security and the implications
What are the kind of services the Alkhorayef
for the Middle East?
Group provides farmers?
The driving forces behind food insecurity in the
We offer a total solution. This means that from the
world are composed of many factors amongst which
beginning of the client’s need we design solutions
are global population growth but also others such as
based on a scientific and experienced approach
climate change, the continuing economical growth
to optimise the farming operations; solutions
of China and India, and bio fuel policies. These will
comprise everything from the water delivery
impact food security and food prices, which might
system (water wells, rivers, lakes, etc.), to the most
lead to a repetition of the 2006-2008 food crisis.
efficient water distribution using Center Pivots or
As it has been highlighted by the 2011 FAO report
Drip, to mechanised farming machineries and
on Food Insecurity in the World “Investment in
equipment. In some cases we arrange financing
Tharawat magazine Volume 14
32 Countries
The Alkhorayef Group is today present in more that 32 countries and have an Engineering and Marketing company in the USA and a successful JV in China
www.tharawat-magazine.com
Family Business Expertise in Agriculture
FEATURES
through a step-by-step approach. We began the manufacturing of mechanised irrigation and pumps in 1985 after we were licensed by a worldleading manufacturer. At that time we were only focused on domestic sales. In 1994 we started to expand to neighbouring countries. In 2003 we became totally independent and had the experience and the know how to engineer and develop our own products and innovate. We are today present in more that 32 countries and have an Engineering and Marketing company in the USA and a successful JV in China to serve the Chinese market. We ship our products from three hubs globally. What are the Alkhorayef family’s future plans for this sector? We intend to consolidate our global presence in agriculture into a holding company for which we may issue an IPO at some point in the future. We intend to work with our customers and business
I believe what will drive the agriculture investment in the region is the private sector, which is dominated by family businesses.
partners to actively participate in our regional food security, in particular with the King Abdullah Agriculture Investment initiative. Do you believe that regional family businesses can and should contribute to agriculture in the Middle East?
through regional financial institutions. These
There are great opportunities ahead that bring
services and products are linked with an endeavour
with it rewarding returns and fulfill social
to provide satisfactory after sales services and in
responsibility. I believe what will drive the
some cases farm management.
agriculture investment in the region is the private sector, which is dominated by family businesses.
When did the internationalisation of the
However, governments, policy makers, and
agriculture and irrigation services of the
regional development banks should play their
Alkhorayef Group begin and how did it proceed?
vital role in integrating regional resources and build the necessary infrastructure and
Alkhorayef Group, through its subsidiary, took
frameworks and so enable the private sector to
internationalisation seriously and tackled it
make its contribution.
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Volume 14 Tharawat magazine
19
FEATUREs Financial Governance for Family Businesses
A comprehensive system of financial governance is an essential tool for family businesses to efficiently manage their wealth. It can be seen as one of the binding elements between the family governance and the corporate governance, and includes measures both for private and corporate wealth. Considering the multi-layered construction that such a system requires, it is not surprising that establishing efficient financial governance in a family business is no easy task. GrĂŠgoire Imfeld, Senior Relationship Manager, Pictet Family Office Services and Allard Lugard, Regional Head Middle East for Pictet Wealth Management explain how financial governance can assist the family in managing its wealth and what are the particularities to be considered for family firms in the Middle East.
The Importance of
Financial Governance for Family Businesses
E
xceptional levels of wealth in family
wealth preservation is generally granted through
firms often become extremely difficult
the management of financial assets. Both types of
to manage in a way that satisfies all
assets behave differently though, and have their
family members equally. For wealthy
own characteristics. As a result, they should have
families, it is therefore paramount
different governance structures.
to achieve financial objectives and to create an
appropriate structure.
In the family governance concept however, family councils and/or boards must be created, covering
20
Financial affairs and commercial affairs represent
both aspects of corporate governance and financial
two of the most important components making
governance. The former is often well put into practice,
up the wealth of families. Whilst in most cases
whilst the latter less so. In that regard, advisers often
wealth creation originates from commercial assets,
hear the following kind of observations: “My financial
Tharawat magazine Volume 14
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Financial Governance for Family Businesses FEATUREs
affairs are unattended. I have too many bankers
The elaboration of a successful financial governance
and I have no time to assess nor answer the many
structure assumes that the family governance
investment solicitations I receive. I cannot evaluate
structure is established and sound. Developing a
the true quality of my financial performance�. Such
family strategy that defines values and objectives
words are too often heard from busy and successful
associated to a family business plan is important.
entrepreneurs, still heavily involved in their business.
It provides the prerequisite information for the creation of an investment policy, which should
This illustrates that successful family businesses
translate the family’s objectives into financial
that create large amounts of cash find themselves
objectives. Family objectives depend on where
confronted with the task of wealth management,
the family stands in the wealth cycle, on whether
but with limited time and sometime interest, to
it is creating or preserving its wealth (Figure 1).
dedicate to it.
One key advantage a wealthy family has is that
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Volume 14 Tharawat magazine
21
FEATUREs Financial Governance for Family Businesses
its financial objectives can be set over several generations. That way, financial turmoil and periods of increased market volatility can be better
FIG 1: Family, corporate, and financial governance link into each other in order to fulfil the functions of preservation, wealth management and growth.
endured. This unique characteristic shapes choices Wealth
of asset classes. The financial governance setup allows the
Family
creation of formal guidelines, which will guide the investment committee. The investment committee is set up to oversee the family’s financial governance and is a crucial organ of the financial
Governance
governance system. Furthermore, it offers the
ia nc Pr es
er
va
tio
n
na Fi
e
at
or
th
regards to financial expectations and consequently
ow Gr
importantly it should also unite the family with
rp
for interaction amongst family members. More
Co
culture and dynamics while providing time also
l
opportunity to truly understand the family’s
should result in the most appropriate, long lasting tailored solution. Families generally have more than one asset manager or private banker. The role of the investment committee varies from an institutional approach to a private banking approach. The former rests on a delegation principal, which consequently requires a strong investment committee, whilst the latter offers more flexibility and customisation, with a more controlling responsibility.
Creating an adequate financial governance early on is paramount to the success of both meeting financial objectives and insuring a smooth transition to the next family generation.
With an investment policy created and agreed upon, the implementation can begin, from the RFP
22
(request for proposals) to beauty contests, right
As the wealth cycle evolves, the importance of and
through to the elaboration of reporting tools. Once
the dependence on financial wealth increases.
the investments have started under the guidance of
Creating an adequate financial governance early
a carefully crafted financial governance system, the
on is paramount to the success of both meeting
monitoring of the various managers in terms of risk
financial objectives and insuring a smooth transition
and investment guidelines, supervision and market
to the next generation. It prepares the young
reviews become the investment committees’ core
family members for their future and increasing
activity. A fine-tuned financial governance system
responsibilities in the world of financial asset
should manage a family’s financial portfolio
management. Additionally, it provides a truly, long
efficiently and in a transparent manner.
term fiduciary relationship with external advisors.
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Financial Governance for Family Businesses FEATUREs
Particularities of Financial Governance for Family Firms in the Middle East
Risk Management
Institutional Environment
Economic and Political Crises
Liabilities
Mix of Assets
Legal Frameworks
Family Structures
FIG 2: Particularities of Financial Governance for Family Firms in the Middle East
of their private and corporate assets, their risk management, and diversification. However, there are considerations when families formulate their
Family firms must understand why financial
financial governance that cannot be ignored;
governance is important and what its core functions
considerations that are on the one hand imposed
are. However, at the same time the socio-economic
by the socio-economic and institutional context
and institutional context have to be taken into
from which family businesses operate, and on the
consideration for family firms who are defining
other hand the individual characteristics of the
their financial objectives. Therefore, when speaking
family:
of establishing such structures in Middle Eastern families, a closer look is warranted at their context-
Family structures: In the Middle East, the family
specific considerations and implications.
composition is rendered more complex because of the number of family members and the different
In family businesses corporate wealth and private
age groups included in one family. Often by the
wealth are strongly linked with each other. It
time a family reaches its third generation (the
can often be seen that successful families, have
cousins consortium), its numbers may have
managed to separate corporate from private
reached the three digits. It can be easily imagined
assets. To what extent a family firm has been
how many different opinions and attitudes should
able to undertake such a separation may be a
be considered in financial objectives given these
function of the degree of professionalism within
structures. To have a large next generation is an
the organisation. Large families in the Middle
important consideration in the formulation of the
East have started many years ago to become
family and has a direct impact on the financial
more sophisticated with regards to the structuring
governance.
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23
FEATUREs Financial Governance for Family Businesses
Legal frameworks: In Middle Eastern countries
the rules and regulations attached to buying, for
financial governance must be compliant and
instance, fixed assets abroad (e.g. real estate in
take into account sharia law where it applies.
different countries). The challenge here lies in
In cases of inheritance, a country’s legal system
different legal and fiscal regulations. Often this
might suggest a different distribution of wealth
is well-coordinated when it comes to corporate
within the family than is perceived as just and
investment, however, families should not forget that
fair by family members. While the question of
the same care should apply to their private wealth.
inheritance is regulated by the family governance, good financial governance represents a tool
Liabilities: When speaking of corporate wealth,
that can provide the family with a balanced
liabilities cannot be ignored. Private investments
distribution of the family’s wealth.
can be a liability when families buy fixed assets that come attached with financial responsibilities
24
Mix of assets: Middle Eastern families are known
(e.g. mortgages). Families do not only need to
to diversify their private and corporate investments
consider how to diversify and structure their
regionally as well as globally. Such financial
assets but also how much of a liability they
decisions bring with them certain additional
represent and to some extend how much they
challenges: Many families have to take into account
wish to “invest” in it.
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Financial Governance for Family Businesses FEATUREs
Economic and political crises: Certainly,
wealth can be but beneficial for the business and,
factors, which are beyond the family’s control
more importantly, for the family welfare.
such as political instability and economic crises, have to be acknowledged when formulating
Many family businesses in the Middle East are
financial governance. The late banking crisis, for
thinking about these issues and seriously study
instance, has caused a great crisis of confidence
opportunities and consequences. There is an
and businesses that were not prepared for such
awareness and sense of urgency to act. Some have
a dramatic shift in their surrounding institutions
taken sophisticated planning measures and by
greatly suffered in terms of financial losses on both
setting up financial governance structures they can
the private and the corporate wealth side.
tackle challenges that arise from their context or their own structures. They set up investment boards
Institutional environment: Depending on the
and policies. Others become so large that they set up
level of economic and social development of their
separate family offices for their wealth management.
home countries, Middle Eastern families may be
There are also those that decide to work with a select
confronted with limited institutional support for
number of banks and their advisors. The choice of
financing. When business is tough and when bank
the right advisors is something that a family should
financing becomes a real issue, families often have
invest considerable time in, as their roles are crucial
to be prepared to tap into their private funds to
for the success of financial objectives. Unfortunately,
finance their businesses. Again the strong link
there are still many family businesses that have not
between the corporate and private wealth of family
addressed the issue of financial governance at all.
businesses becomes apparent and, with that, the importance of structuring both through a clear
In the current financial turmoil many families
financial governance system.
would love to get a helping hand to explore financial opportunities. Financial assets can be
Risk management: A family’s attitude to risk is
very complicated but are sometimes made to look
often the same in private and corporate wealth
more complex than they really are. A golden rule
management. Over the last few years there have
is to keep it as simple as possible. The benefits of
been many disappointments in terms of returns
financial governance are manifold but first and
on investment on the corporate and on the private
foremost it provides the family business with peace
side. A conservative attitude to private wealth
of mind. Most importantly, the result of a balancing
combined with a careful planning of corporate
act between private and corporate considerations should always make sense to the whole family. It
A conservative attitude coupled with careful planning of both corporate and private wealth can but be beneficial for the business and, more importantly, for the family welfare.
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should be recognised as a crucial ingredient for family business sustainability and continuity over the coming generations. AuthorS GrĂŠgoire Imfeld, Senior Relationship Manager, Pictet Family Office Services Allard Lugard, Regional Head Middle East for Pictet Wealth Management
Volume 14 Tharawat magazine
25
FEATUREs
Succession deconstructed
Succession deconstructed Managing succession is one of the greatest challenges businesses face. By realising that it is a topic where the subjective perception trumps objectivity, and by accepting that there is no one right answer, family businesses can approach the issue with more structure, before it becomes a matter of urgency. Splitting “ownership succession” from “management succession” provides a way to look at succession with structure and innovation. Farida F. El Agamy, Attorney-at-Law and General Manager of the Tharawat Family Business Forum, deconstructs the succession problem and analyses the difference between management succession and ownership succession.
Succession? I’d rather not talk about it…
on the family’s psychology can be extreme and
There is something about the process of handing
therefore family businesses need to approach the
over power and responsibility to another person
issue with much care and feeling. As it often is the
that makes us cringe a little, makes us want to turn
harmony, strength and balance of a family that
to something else and not confront the issue ever
determines the success of a business, it is crucial
again. Do we fear that by allowing someone else to
to keep this balance whilst finding a succession
take over our roles we lose part of who we are? Is it
solution.
a natural human reflex? Or is it just because we feel that no one else can continue our work? Whatever
Family businesses and the black hole
the reason, succession touches upon many issues we
In family-owned companies the most frequent
normally prefer to avoid. This makes it an extremely
succession questions are:
sensitive and subjective issue, with perspectives
Can we find one leader who can take over the full
influenced by our life’s experiences and sometimes
responsibility or should we split leadership?
inexplicable emotions.
If we split leadership, how can we ensure that we do not reach a deadlock when we have to take
26
For family businesses, succession has even more
decisions?
dimensions: The impact of succession decisions
How should corporate control be distributed
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Succession deconstructed
I have worked so long and so hard to provide security for our family and our employees. Who can I trust to take over and to continue on the right path? How can I keep an active role in the business?
Senior Generation
FEATUREs
I would like to prove my leadership skills and be given responsibility. But I am also very scared of taking on such a great task. How can I gain the competence I need and at the same time make everyone trust me?
Junior Generation
amongst various branches of the family?
to see their work continued and provide for the
Who should be allowed to own shares and vote in
next generations. On the other hand, the junior
assemblies and sit on boards?
generations want to make their mark in the world,
Can family members take any positions
use their energy to show what they can do, but
disregarding their qualifications and merit?
also very often shy away from the serious tasks
How can family business leaders remain active in
and responsibilities that await them.
advisory positions and at the same time hand over part of the responsibility to the next generation
Deconstruct to reconstruct
of leaders?
The only fairness in the quest for a succession plan is that all generations of a business family
It is not hard to understand that for some family
are equally anxious about it. Be it the leader, the
business members succession seems like a big
young manager, or even the non-active family
black hole; the closer they get to it the more they
member, everyone fears for the strength and unity
get drawn into something beyond their control. On
of the family during this process.
the one hand, the senior generation, that has been taking care of the business for many years and
One way to structure the approach to succession
has borne the burden of responsibility, would like
is to “deconstruct� the situation and classify the
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27
FEATUREs
Succession deconstructed
Chart 1A: Succession Challenges Ownership
Ownership & Management
Management
High Urgency
Very urgent ownership challenges
Very urgent challenges that concerns ownership and management equally
Very urgent management challenges
Low Urgency
Important but not immediately urgent ownership challenges
Important but not immediately urgent challenges that concern ownership and management equally
Important but not immediately urgent management challenges
Chart 2A: The Successors
28
Owner
Manager
Short Term
Who is the owner? Short term plan for the ownership of the business
Who is/are the manager/s? Short term plan for the management of the business
Long Term
Who is the owner? Long term ownership succession plan
Who is/are the manager/s? Long term plan for the management of the business
current family challenges and business challenges
management of the business. Management
facing the family. The family or individual family
succession should (and can) be treated in a very
members could start by establishing a list with
rational, facts based manner. Some families,
the most urgent worries and challenges they
especially in Europe, come to the conclusion that it
are facing. Once the list has been established,
is necessary for a non-family member to manage the
the family member can categorize each item
business, for example during a time of transition.
by establishing if it concerns “Management
Other families want to have a minimum number
Succession” or “Ownership Succession”:
of family members in management positions, but
Management Succession: This concerns the
base the selection on their qualifications rather
decision of who will take over the day-to-day
than representation of family branches.
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Succession deconstructed
Ownership succession: This addresses a different matter; ownership succession establishes who owns the business. It addresses for instance the inheritance of shares in the business, whether non-family members can be shareholders, and how the wealth is distributed amongst the family.
FEATUREs
The most important element, however, is to ensure that there is a constructive dialogue between all generations and between active and passive family members.
A simple tool for the family to make the categorisation are the following charts: exercise for the whole family. The most important Chart 1A helps to find out, whether a challenge
element, however, is to ensure that there is a
concerns the ownership of the business, if it is
constructive dialogue on the subject between all
purely a management matter or if it concerns both.
generations and between active and passive family
It is important to cristallise which issues are the
members.
most urgent to be addressed, as this can influence the succession plan.
Handing over A&Co. – A family business succession case
Once the top challenges are categorised, Chart 2A
To exemplify how business leaders can use systems
will help to establish, which family members need
to manage succession, we can follow the short
to be put in which position to address them. The
example of AA and his company, A&Co.
chart allows to plan for the immediate future, as well as for a longer term strategic plan.
AA is the founder, Chairman and CEO of his company A&Co, which produces spare parts for a global car
Family members can use the chart to think about
brand. His two sons and two daughters have recently
scenarios for their families or structure it as an
joined the family business: BA is working as assistant
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29
FEATUREs
Succession deconstructed
AA
AA is the founder, Chairman and CEO of the company A&Co
CC
AA worries about the continuity of the business and its expansion opportunities. AA’s wife CC built the business with him and has always been involved in the financial side as CFO. However, now she wants to focus on taking care
CC is AA’s wife and has built the business with him as the CFO
of him during his hospital stay. His daughters do not agree with each other and have repeatedly clashed. However, both are very well qualified and have a good business sense. AA is thinking about acquiring two thirds of the shares of one of his competitors. However, the financing proves difficult due to some conflicts in his (non-family) management team. Another option he has been thinking about is diversifying into other manufacturing sectors. Currently, he is the only family member on A&Co.’s board. The business is successful but heavily leveraged. Even though he has to leave the day-to-day
BA
BA is the assistant to the CEO and is shadowing his father’s work.
CA
CA is the General Manager of one of the family factories.
DA
DA has joined the business and works in HR in a senior position.
EA
Just joined the HR department in an assisting role. She often clashes with her sister.
business, he would like to stay involved in A&Co. AA has used Chart 1B to assess under which categories his worries could fall. After having structured his succession challenges, AA can now think about the talents and experiences
to the CEO, his brother CA is working as General
of his family members and position the right people
Manager of one of the factories. The sisters DA and EA
to take over responsibilities and roles in Chart 2B:
both work in the HR department, with DA retaining a senior position and EA starting out in an assisting role.
With this chart, AA can map out several scenarios of how to act in the short- and long-term. He
Due to health issues AA is suddenly facing a difficult
will realise that his children and his wife have to
situation: He will no longer be able to run A&Co.
agree on the plan, and that there have to be clear
As he is taken by surprise by this situation, he was
procedures in place that will allow them to take
not able to observe and groom one of his children
decisions and improve the system put in place.
to take over as a leader right away. However, most importantly of all, the family has
30
AA is very worried with his succession decision,
to ensure that all members agree on the basic
as he does not believe that any of his children is
principle that they want to keep the business on
ready to take over his role. His main worries are
track, that they will do their best to collaborate and
the following:
communicate and take time to address any threats
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Succession deconstructed
FEATUREs
Chart 1B: A&Co. Succession Challenges Ownership
High Urgency
Low Urgency
Ownership & Management
Management
Prepare shareholder agreement to distribute shares amongst the children. AA and CC keep shares and remain on the board for a transition period
B oard Membership of children C ompany vision F inancial governance
S olve management conflict to ensure financing D ecide on expansion or diversification F inancial strategy to manage leverage F ind new CFO
trengthen family governance S structures (family education, employment principles etc)
S trengthen corporate governance structures
L ong term strategies for the business
Chart 2B: A&Co. The Successors Manager
Owner
Short Term
Long Term
AA and CC keep share for transitory period. BA, CA, DA, EA become board members.
B A as interim CEO (he has been able to shadow the CEO and has leadership qualities). D A as interim deputy CEO (she has leadership qualities and has successfully held a management position for a while). Recruit non-family CFO to replace CC.
hareholder agreement distributes A&Co. shares S equally between BA, CA, DA, and EA.
stablish strategy that allows family members E to be put in the right positions (maybe create an independent nomination commission)..
to the family harmony.
realise that succession is not an impossibility, it is just one of many challenges and its importance,
Conclusion
whilst paramount, should not be blown out of
In the end, any succession decision will be a
proportion. It is an ever-changing process, that
risk. However, family business leaders and their
needs family members of all walks of life to make
family members can ensure that that risk can be a
it a strengthening experience for all.
calculated one. Family businesses have to keep a clear vision and focus on the big picture. The family has to
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Author Farida F. El Agamy, Attorney-at-Law and General Manager of the Tharawat Family Business Forum
Volume 14 Tharawat magazine
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SPECIAL FEATUREs
32
Tharawat magazine Volume 14
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SPECIAL FEATUREs
SPECIAL FEATURES
Human Capital It is often said that people are an organisation’s greatest asset. Whether one agrees with this statement or not, fact is that efficient human capital management has been shown to increase business performance financially and socially. For the family business, tackling human capital management holds a few more challenges: for instance, in a family-owned company there may be family and non-family employees that enjoy different advantages, there may be persons that are managers and owners at the same time, or there may be separate entry requirements for family members. Accordingly, family firms have to face the particular challenges their structures can pose when formulating and implementing their human capital policies. In this issue’s special feature we discover how human capital has evolved over time, what families have to pay particular attention to, how family- and non-family employees had best be handled, how the Nuqul Group in Jordan found an efficient way to manage their HR systems, and the general state of talent management in the Middle East.
34 Human Capital: Evolution over Time
A review of the evolution of human capital.
38 Human Capital in Family Firms
The specific challenges of human capital management in the family business.
42 The Nuqul Group: HR Systems in the Family Business
An account of the HR standards of one of the largest private-owned businesses in Jordan and the Middle East.
46 Managing Family & Non-Family Employees Dialogue between two family business experts.
52 Talent Management in the Middle East Drivers and challenges of TM in the Middle East.
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SPECIAL FEATUREs
HUMAN CAPITAL AND ITS EVOLUTION OVER TIME
The Evolution of
Human Capital over time
In the past human resources managers and human capital strategies used to be seen as part of the administrative side of an organisation. Today, however, that perspective has shifted dramatically and it is supported by many that Human Capital Management is one of the most central considerations in corporate strategies. Shirley Zinn, Deputy Global Head of HR for Standard Bank Group and HR Director for Standard Bank South Africa, explains what Human Capital Management used to be, what it is now, and what it should be in the future.
“The future of any organisation is dependent on the management of people� (Colin Coulson-Thomas: The Future of the Organisation, 1998)
D
efining an effective human capital strategy
future need within a fast evolving business, economic and
is a complex process. It is a subject which
societal context (adapted from CIPD).
constantly evolves and is studied and
34
discussed by academics and commentators
Generally, organisations understand Human Capital
globally. Its definition and relationships
Management (HCM) to signify the accepting and involving
with other aspects of business planning and strategy is not
of the HR function such as recruiting, selecting, training
absolute and opinions vary between writers, researchers, and
and rewarding employees, as a strategic partner in the
even HR professionals themselves. Strategic Human Capital
formulation and implementation of the company’s overall
Management can be regarded as a general approach to the
strategies. This places HCM at the heart of business success.
strategic management of human resources in accordance
Many organisations have still not realised how critical its staff
with the intentions of the organisation on how to ensure
is to its success. This has lead to human capital strategies
current business success, and the future direction it wants
being neglected. It often takes a crisis of the magnitude of
to take. It is concerned with longer-term people issues and
the global economic recession, for businesses to understand
macro-concerns about structure, quality, culture, values,
that we are in a war for talent and to reposition and prioritise
commitment, performance, and matching resources to
their human capital strategy.
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HUMAN CAPITAL AND ITS EVOLUTION OVER TIME
The effectiveness of the Human Resource (HR) function
SPECIAL FEATUREs
After all, it is the people who generate the profits.
is a key component of the human capital strategy in organisations. The HR function has evolved significantly
Contrary to its previous more administrative description
over the past few decades; it used to be an administrative
the HR function is now required to include the following
and transactional role, which included keeping records of
activities and policies (Figure 1):
staff, ensuring that employees are paid on time, and the
Co-constructing: Participating in the formulation of
hiring and firing of staff. It was rarely, if ever, included in the
the business strategy and embedding the human capital
business planning process and was regarded as a back-office
strategy as a key success factor.
function that was insignificant in achieving strategic goals.
Design: The way the HR value chain is designed can ensure a competitive edge in the finding, keeping,
Most organisations now realise, that if they are to be successful
development of talent.
in the turbulent economic times we live in, there needs to be
HR planning: Ensuring that workforce projections, head
a fundamental shift in how we manage our human capital.
count growth, and the skills mix enables the organisation to
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Volume 14 Tharawat magazine
35
SPECIAL FEATUREs
HUMAN CAPITAL AND ITS EVOLUTION OVER TIME
36
Design
High performance culture
Employee wellbeing
Attraction and retention
Employee relations Values and vision
Planning
Compliance Performance recognition
Training and development Knowledge transfer
HR Planning
Relationships Co-constructing
Minimal Bureaucracy Employee engagement
Focus
Logistics
Culture Career paths
Transformation
Innovation Empower
FIG 1: HR is now required to include the following activities and policies:
perform and achieve its business goals now and in future.
engaging people.
Attraction and retention: Keeping key talent through a great
Employee engagement: Leadership has an important role
employee value proposition. Many companies have put in
to play in inspiring and motivating people and creating
place strategies around becoming a “great place to work in�.
employee engagement and congruence with the vision and
Planning: Recruitment and effective deployment of talent
values of the organisation.
and succession planning for key roles.
Employee relations: There is a need to build healthy
Training and development: Developing skills and
relationships between management and staff to ensure
investing in people to retain a competitive edge is critical
that people are focused on the execution of their roles.
to business success.
Moreover, it is imperative to engage meaningfully with
Career paths: Career progression and advancement has
trade unions where they are involved and avoid strikes and
to be systematic and well defined to effectively deploy
industrial action.
talent, retain it and meet individual aspirations in line with
Employee wellbeing: Implementing initiatives that take
business needs.
care of employee health so that they can outperform
Performance recognition: Remuneration and recognition
competitors.
for high performance and sanction for poor performance
Transformation: The ability to embrace diversity and
are key factors.
inclusive practices are key in a global workforce and the
High performance culture: There is a need to develop a
demographics across nationality, age, seniority, gender,
sustainable culture of high performance which needs to
language, religions, etc. will vary widely.
be enabled by effective human engagement, processes,
Empower: Allow employees to make decisions by effective
and systems.
delegation and to take accountability for their actions.
Values and vision: Organisations that are value-led and
Compliance: Much of Human Capital Management is
vision-driven are able to sustain themselves through long
governed by international and local legislation. A key HR
periods of stress and duress (Richard Barrett). Respect,
function is to ensure that there is compliance with laws and
integrity, honesty and transparency go a long way in
employment regulations and not put the employer at risk.
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HUMAN CAPITAL AND ITS EVOLUTION OVER TIME
SPECIAL FEATUREs
Focus: With proper HR systems in place, senior management
Human Resource Management states that employees spend
can focus on strategic aspects of the business and can build
more than 70% of their year at work. If that claim is true,
more nimble, and more responsive organisations.
then organisations and their leaders are challenged to
Innovation: We need to nurture innovation and creativity
create a more balanced life that is aligned with the long-
and enable our people to challenge conventional wisdom.
term, sustainable needs of employees, the community in
Culture: A culture of delivery and execution needs to
which they reside, and the networks essential to healthy
purposefully embedded and supported by an organisational
communal living, as well as attending to the critical issues
design and structure.
of organisational success and sustainability.
Minimal Bureaucracy: Policies, procedures, processes that support the high performance culture and strip out undue
In conclusion, the world has experienced significant shifts
bureaucracy need to be developed and implemented.
over the past five years with the onset of the global economic
Knowledge transfer: Facilitating the sharing of knowledge
recession and globalisation more generally. This requires
across the workforce and communication, especially by
that we reframe our approach to human capital quite
leaders, is important.
fundamentally. In the new normal, if we are to be successful,
Logistics: Provide a physical environment that is conducive
we need to focus on:
to the performance of all staff, including those with
Developing synergistic, holistic, integrated human capital
disabilities.
practices and providing solutions that are cost-effective.
Relationships: Fostering positive relationships across levels
Benchmarking with role models and competitors so that
and functions (inter and intra-divisional relationships).
we know how we are doing and where we need to improve. Measuring everything we do in Human Capital Management
If you are responsible for the human capital in your
because “what gets measured, gets done”.
organisation, your continual mission is to seek ways of
Requisite systems need to be in place to enable efficient
improving the return-on-investment in the organisation’s
tracking and logging of data, reporting and monitoring,
human assets. However, the analogy of people being assets
as well as quality assurance.
needs to be used with care in order to ensure that people are
Ensuring continued re-alignment with strategic business
not construed as commodities: Employees are not numbers,
plans and direction.
they are people. Many programs and systems have to be put in place focussing on the knowledge, skills, and motivation
To live up to new and old challenges in HCM, Human Resource
of the individual performer as well as the team.
professionals and line managers need to raise the bar on themselves and shift their behaviour. Their capabilities and
Employee engagement i.e. the battle for hearts, hands,
competencies have to be continuously developed. Failing
and minds, is critical to business success. The Society of
to recognise the importance and urgency of human capital
To live up to new and old challenges in HCM, Human Resource professionals need to raise the bar on themselves and shift their behaviour.
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strategies and management would be failing to understand that to create an effective organisation , you need effective people. “The key factor in determining the success of any organisation is its ability to use human talent” (Peter Cheese, et al: The Talent Powered Organisation, 2008). Author Shirley Zinn, Deputy Global Head of HR for Standard Bank Group and HR Director for Standard Bank, South Africa
Volume 14 Tharawat magazine
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SPECIAL FEATUREs
HUMAN CAPITAL IN FAMILY FIRMS
Human Capital in Family Firms:
Challenges and Opportunities Human capital, broadly defined as knowledge, abilities and skills that reside within a company and / or a business family, is one of the key success factors in long-living family firms. However, the family firm context offers specific challenges but also opportunities when it comes to creating unique human capital and a resulting long-term competitive advantage. Prof. Philipp Sieger, Professor at the Center for Family Business at the University of St.Gallen (CFB-HSG), Switzerland, discusses the particularities to consider when analysing human capital in family businesses.
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families also develop unique entrepreneurial knowledge, meaning knowledge and skills how to found and run a business in the long-term. This knowledge may also be transferred to members of the next generation. This leads to a more comprehensive perspective on succession: effective succession, thus, does not only include the transfer of assets, but also the transfer of a unique entrepreneurial mindset and related capabilities. The main challenge here is for business families to become aware of their own relevance in terms of human capital. As a consequence, an explicit and systematic enhancement of family-internal human capital is needed. In addition, business families should always be concerned that only family members that are both highly committed and highly qualified can join the family firm. Hence, clear guidelines and policies should be formulated regarding when, how, and under what conditions family members can get involved in the business. Important aspects are the level of required education, experience gained outside the parents’ firm, entry positions, possible career paths within the firm, and continuous performance assessment. Taking family members on board that are not sufficiently qualified may erode the family’s human capital base over time.
W
Referring to the second main aspect of human capital in family firms, it is obvious that the firm grows significantly quicker hile there are numerous different
than the owning family itself. The business family cannot
aspects of human capital in the
provide a sufficient number of highly qualified family members
family firm context, two main
to fill all positions in a growing company; as a consequence,
aspects will be considered in the
hiring family-external employees becomes necessary.
following. Firstly, human capital
provided by the business family itself is a decisive factor
On the positive side, the family firm context can provide a
to be discussed. Secondly, the human capital from outside
unique setting to foster non-family employees’ knowledge,
the family is crucial for long-term success as well. Both
skills and abilities. Family firms are often characterised by
perspectives hold unique challenges and opportunities.
very strong cultures, where non-family members may even feel part of the family. In addition, family firms’ long-term
To start with, the presence and long-term involvement of
orientation and the absence of hire-and-fire policies in the
a controlling family in family firms can have both positive
majority of cases contribute to a setting where human capital
and negative effects on human capital. Across time, business
can develop systematically in the long-term.
families can develop unique industry-specific knowledge that can be transferred from one generation to the next.
On the downside, the family firm context can be hampering
Even more importantly, research shows that business
when it comes to retaining and attracting highly qualified
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HUMAN CAPITAL IN FAMILY FIRMS
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Business families can create a unique competitive advantage by fostering human capital both within and external to the family. family-external staff. In family firms, attractive top-level positions may be reserved for family members. For instance, a business family could determine that the CEO always has to be a family member. This is related to another potential weakness, namely the presence of nepotism or altruism. When family members receive preferred treatment in terms of salary or promotions within the firm, even though they might be less qualified than family-external applicants, it might lead to perceptions of injustice by non-family employees. As a consequence, they might want to leave the firm, which would lead to a loss of human capital. In addition, if those practices are known, highly qualified potential employees might not want to join the family firm to begin with. Furthermore,
potential entry. Referring to non-family employees, business
business families are often very reluctant in handing over
families should try to exploit the advantages that they have
shares to non-family employees, as they do not wish to
as a family firm to get access to human capital from outside
dilute their ownership and control rights, which is a basic
the family, and also to keep and develop it in the long-term.
condition for remaining a family business. Thus, non-family
Non-family employees should feel that they can develop their
employees realise that they will never have the chance to
full potential within the family firm, meaning that positions
own a substantial amount of stock, and that they will never
are filled based on qualification and not on blood ties. In
be able to exert controlling rights. As a result, they might be
addition, stock ownership for a small circle of employees
receptive to offers from competing firms where substantial
might be worth considering. However, formal ownership
ownership is possible. Logically, employees striving for at
alone may fall short in creating the desired effects. On top
least partial stock ownership in the long run will be hesitant
of formal ownership, business families should also focus on
to join a family firm in the first place.
creating a sense of belonging, attachment and psychological ownership among their employees. This would further
Summing up, business families can create a unique
increase the chances of creating a highly knowledgeable,
competitive advantage by fostering human capital both
skilled, and loyal workforce, contributing to family firms’
within and external to the family. Family-internally,
long-term competitive advantage and success.
knowledge and skills of young generation members that are intrinsically motivated and interested in the business should be enhanced systematically, while at the same time implementing clear rules and procedures regarding their
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Author Prof. Philipp Sieger, Professor at the Center for Family Business, University of St.Gallen (CFB-HSG), Switzerland
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HR Systems in the Family Business
The Nuqul Group
HR Systems in the Family Business
The Nuqul Group is one of the largest family-owned company in Jordan and the Middle East and has just celebrated its 60th anniversary. A business family is often mentioned in relation to its external achievements such as the establishment of brands, acquisitions, mergers, projects, and community involvement. Undoubtedly, however, when faced with six decades of success the real question is what is happening on the inside that makes such a family business work. Nicola Billeh, Group HR Director of the Nuqul Group, analyses the ingredients for success of HR systems in a family business, gives insights into the Nuqul Group’s yearly HR meeting, and shows how HRM should be a change agent for organisations.
The Pillars of HR Systems
shifted its focus to meet these changing requirements.
Human resources are the most valuable capital an
In my view, the most important pillars for a successful HR
organisation possesses. It is, therefore, imperative that
system are:
Human Resource Management (HRM) is proactive and progressive and addresses the organisation’s dynamic needs.
1. Legal Compliance and Standards: The HR systems of
Businesses that recognise this imperative enable a better
any organisation must be in full compliance with the national
working environment wherein they become change agents,
labour laws as well as any other related legal guidelines. In
can successfully structure compensations and benefits, and
addition, HR systems must live up to global HR practices
create room for talent management and career growth.
including but not limited to EEO (Equal Employment Opportunity), Affirmative Actions, and Fairness.
In reality, the workforce has evolved and become more
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diverse, and companies count on their HR managers to
2. Relevance: HR systems have to serve, support, and enable
consider ways to meet the divergent needs of an increasingly
the vision and strategy of an organisation. This is the only
complex world. The HRM profession is evolving and it has
way HR can be considered a strategic partner and can have
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an impact on the organisational scorecard. HR managers,
3. Compensation and Benefits Administration
must fully understand the business and its stakeholders.
4. Policy Administration
3. Adaptability: For the HR system to function as a change
HR Systems in Family Businesses
agent, it needs to be adaptable. There is no point in having
Family-owned and/or -run businesses represent the
a system that is legally sound and adapted to corporate
majority of the business community in many countries
strategy but that cannot be adopted or implemented.
around the world. It is, therefore, crucial for HR leaders to understand the special considerations and uniqueness of
Some HR professionals refer to below activities as the pillars
family businesses. However, the degree of adaptation often
of HR. I tend to consider them enablers and fundamentals
varies depending on the maturity of the business and the
of HR functions and believe that they have to be founded on
governance system in place.
the three pillars we defined above: 1. Recruitment and Selection
I think HR managers in family businesses need to consider
2. Learning and Development
the following challenges:
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HR Systems in the Family Business
FIG. 1: The Pillars of HR Systems
HR system Legal Compliance and Standards
Relevance
Adaptability
Control Environment: It is important that the family
This separation has to be fully implemented in all aspects of
business owners give HR managers the autonomy to act.
HR, starting from the selection and recruitment of employees,
To what extent do the heads of HR have the authority and
to their learning and development, to compensations and
empowerment to take strategic decisions? In order to create
benefits, and ending with the cultural transformation from
such an environment, compliance, systems, and frequent
the “family” culture to the desired “business” culture. This
overviews need to be delivered to the family.
separation requires the building of trust and empowering the human capital strategy throughout the organisation.
Alliance: Acting as the change agent, taking the strategic partner role, and providing expertise are key to drafting HR
HR strategies in the Nuqul Group
strategies in a family business. HR managers in family firms
Every year the HR teams of the Nuqul business units from
have to collaborate with the family and earn credibility as
different countries meet to agree on strategic plans, report
trusted advisors, which will make the HR system succeed.
results, and discuss HR activities. This year our meeting was special since the Nuqul Group was celebrating its 60th
Support: It is important for HR managers to create harmony
anniversary. After separating ownership and management
between all stakeholders and keep the balance between
in 2004, the group experienced solidification and the
organisational and personal objectives. This can only be done
“institutionalisation era”, which included the creation of
by supporting the strategy of the organisation and at the
many systems and procedures not only to build the control
same time communicating with the family and non-family
environment but also to capture and maintain the corporate
members who implement it.
values of the group. This phase took almost six years and part of the group’s continuous improvement was to create new
When families are setting up their human capital strategy,
business drivers to overcome the challenges it faced in the past.
it is important for them to understand and practice the
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separation between ownership and management as well
Our regional HR meeting focused on communicating and
as between the family’s social principles and the business
implementing the new business (Xi) drivers. The following
operations.
business drivers and enablers were created to enhance some
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FIG. 2: HR managers in family businesses need to consider the following challenges:
Control Environment
Alliance
Support
HR
manager
of the main characteristics of the Nuqul Group during the
program, and implement the improved and enhanced
institutionalisation era:
methodology for talent management.
iMaster (only the best): When everyone masters his/ her
In addition to elaborating these drivers, the Nuqul HR team
role, the group will provide first class products and services.
members presented the challenges they met during the previous year and shared their experiences, best practices,
iTeam (together we can): This stands for a straight forward
and future plans.
formula: 1+1 is more than 2 meaning that combined efforts amount to more than individuals pursuing goals alone.
In the Nuqul Group we consider HR as a strategic partner to the organisation. Its main purpose is to add value and positively
iDeliver (to the dot): Each team member in the group
impact the organisation’s results in both the short- and long-
delivers exactly what is requested from him/ her.
term. Especially, in uncertain economic times, HRM is of more importance than ever: HRM should make sure that it is helping
iZoom (faster than the rest): Competition is a race and
the organisation to survive through difficult times by optimising
we have to be the first always, reshape our core values (Our
its operations and utilising resources efficiently, bearing in
World, Our Soul and Our Pride), maintain a culture change
mind the importance of satisfying the organisational needs
Every year the HR teams of the Nuqul business units from different countries meet to agree on strategic plans, report results, and discuss HR activities.
through retaining and developing its internal capacities. The HR strategy should be focused on people and stakeholders and clearly communicated to all related parties to ensure its success and effectiveness. It should not be separated or isolated from the business needs and requirements; they should work hand in hand to ensure the success of the organization. Author Nicola Billeh, Group HR Director, Nuqul Group, Jordan
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SPECIAL FEATUREs
Dialogue between Amy Schuman and Steve McClure
Managing Family- and Non-family Employees
A dialogue between
Amy Schuman and Dr. Stephen McClure
What happens when you put two family business experts into one room? We have tested it with family business consultants and authors Amy Schuman and Dr. Stephen McClure from The Family Business Consulting Group, USA. Providing us with deeper insights than ever, the dialogue between Amy and Steve allows a true appreciation of the complexity of human capital management in the family business, the relationship between family and non-family employees, and the importance of the planning process.
What are the greatest challenges family businesses face in formulating their human capital strategies?
Amy: Probably the biggest challenge is that many families do not recognise the need for a human capital strategy in the first place. What is it that causes a family business to formulate a human capital strategy? Are they good planners by nature or do they only formulate strategies when they are faced with difficulties? I commend businesses that choose to create these strategies as a pro-active effort. Stephen: I agree that in many cases family businesses just don’t believe that they have to work on a plan. I think that families think of human capital strategies when a critical point of succession is reached and also they have a hard time distinguishing between human capital planning and management succession planning. Generally, it is hard to get a family to plan for its human capital strategy especially when it concerns employees below senior management. It is a great challenge.
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Amy: Yes, but an even greater challenge is that each family generation assumes that they can do things the same way the previous generation did. The founders have a lot more freedom and self-determination that leads to their success as entrepreneurs. The second generation comes along expecting the same level of independence and autonomy, which can create problems. It is hard for siblings and cousins to accept their limitations in the relationship with the business; they should be subjected to the same performance measurements as non-family members and do not have the independence of the previous generation who mostly worked without a job description. Stephen: You are right in that the new generation wants to manage things the same way. Yet, we also see that it is they who undertake challenges that the previous generation did not tackle well, especially, if they have been exposed to a lot of education and exposed to a lot of other business leaders inside and outside family firms.
Do you think a difference should be made between family and non-family employees in human capital strategies?
Stephen: I think that there should be a difference. Family members should be successful. While merit principles need to be implemented across the entire organisation, family members cannot be put into a position wherein they are going to fail publicly. It is important to consider what might be done to help family members become successful in their position. Amy: I agree. I think for many years in the family business field best practice taught that family members have to be treated exactly like everyone else. It has always been a real concern that if we treat family members differently it might be damaging to the business. However, in reality it would be hard to find a family firm where no special consideration is given to family members. While they shouldn’t hold positions for which they are not qualified, it is dangerous if we don’t recognise that family members are different. So how do you deal with that duality in which family members need to be like everyone else while recognising the ways in which they are special? Stephen: By developing policies and explaining those policies at a very early age before people even start thinking about their careers and allowing at the same time to create the understanding that a merit system is dominant in the business. Amy: Indeed, maybe the human capital strategy for family members should start when the next generation is 8 years old! This way it is not just about them fulfilling a specific role in the business but also about carrying on the legacy and a set of values.
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Dialogue between Amy Schuman and Steve McClure
Isn’t that confusing succession planning with the human capital strategy? Amy: I think it is important to always think about both. You might be making a decision on the talent management side that influences the succession of ownership. Let’s say we have a controlling owner who is not performing adequately. It is not easy to give him feedback on his lack of performance because he has the deciding power. This is where talent management and succession planning become intertwined. One of the remedies is to raise this issue early on and help the family understand the different roles of owners and managers. Later on, owners choose managers and one of their most important tasks is to make sure that the business is run by the best qualified people whether they are from the family or not. Stephen: Maybe an extension of human capital planning in a business family is to add a section dedicated to ownership. Too many families are just left to discover what it means. They often base their ownership notions on what they have seen in the previous generation.
This is where talent management and succession planning become intertwined. One of the remedies is to raise this issue early on and help the family understand the different roles of owners and managers.
When is it acceptable not to apply the merit principle to family members? Amy: It is easy to argue for the need for meritocracy but it is not easy to argue for the need for special treatment and status for family members. If we talk about merit in a business setting this involves employees demonstrating certain business skills. But you might have family members that do not have strategic or financial skills but are very talented in transmitting family values to the rest of the organisation. Stephen: It is a fine line especially with leadership roles. There are of course all kinds of pluses in having a family member in a leading position. The question is how much competence from a pure merit perspective does that family member bring in.
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Should there be a glass ceiling for non-family members in the family business? Amy: I have met a great number of non-family executives that do not really feel limited by their lack of access to the top jobs in the family business. Part of their satisfaction comes from supporting the family in their continuity and talent management. Their dedication is to the continuity of the business and its values. If you were to ask them if there is a glass ceiling for them they would say ‘yes’. If you ask them if it’s a problem then most of them would say ‘no it really isn’t’. Of course there are many family firms that fill the top jobs solely based on merit and I think that is a very legitimate approach as well. Stephen: I would add that there is a glass ceiling in some family businesses and in others there isn’t. In families that have developed towards being family-owned and well-governed, family members may not feel the need to lead the business themselves. On the other hand there are family businesses with good cultures have long-term employees that understand that the family owns the business and that they can do with it what they want. There are also families that introduce a glass ceiling in a reckless way
I think that many non-family managers accept nepotism (...) many even support it. often when they are too oriented towards providing family members with certain roles; for instance, if one brother or sister gets a senior level role then the other siblings should get similar positions. That’s a natural thing for families to think about but it is also destructive if the required capabilities aren’t there. If it is handled in a reckless way it becomes difficult to maintain motivation for non-family members and the best ones leave or never join. Amy: Yes, maybe the glass ceiling is not necessarily an issue if it is handled well. A good barometer would be to see whether the family can retain the high-quality talent in the long run. If you can’t attract or retain the very best non-family managers then that could be a sign that the glass ceiling is not being handled well. Stephen: Generally, I think that many non-family managers accept nepotism and in fact we are surprised by how many even support it. If a family really invests in its human capital strategy and formulates the policies for family members and if they apply objectivity to the process then non-family members find it easy to accept the company culture. Family companies may not be able to offer the CEO role just as they can’t offer ownership. There are, for instance, many different ways to work around not being able to transfer ownership to non-family members. There are lot of good reasons why non-family managers should not own stakes in the family business and too often I think that families do not invest in explaining that to the non-family members. If the family is transparent about their reasoning for family leadership then nonfamily employees will find it easier to accept glass ceilings and preferential treatment.
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SPECIAL FEATUREs
Dialogue between Amy Schuman and Steve McClure
What are motivators for non-family members to join a family business and what are the incentives that can be offered to ensure non-family talent retention?
Stephen: For attraction and retainment I think that business families have the potential to capitalise on their integrity, their values, and their culture. Not every executive non-family candidate is going to find that appealing but the ones who do will understand and appreciate the family culture. I think that is a key motivation factor for the right candidates. Amy: Moreover, it is a great motivator for non-family members that there is often less bureaucracy in family businesses and you can reach a decision-maker more easily. To create more incentive the family business human capital planning should consider compensation approaches that allow nonfamily executives to create wealth, as they contribute to the success of the family and the business. I also think that compensation and benefits for family and non-family managers should be up to market standards. To make this all work there is the need to create an atmosphere of open and honest communication. Non-family executives don’t want to work in a place where they have to speculate about what is going on. You may not choose to treat family members exactly like others but it is best to be honest about it. It is best to create an environment in which people can raise problems when they perceive them. If the special treatment of a family member goes beyond what is reasonable there should be a way of communicating this in the company. Stephen: There should be channels though; not everything should be said in an open meeting for instance and embarrassing a family member publicly should be avoided. It should always be handled in a graceful way.
I also think that compensation and benefits for family and non-family managers should be up to market standards. Should non-family employees act as mediators between family members? Amy: Here we are caught between aspiration and reality. I think the aspiration is for people to talk directly to each other and that using an intermediary is not conducive to developing communication skills. In reality, however, people may not be able to do this. It is human to get a third party involved. I think that as long as the third party works toward promoting direct communication it is fine. Unfortunately, sometimes that third party starts to garner increasing power the more they are confided in. Whether consciously or unconsciously the family starts to believe that they wouldn’t be able to function without these people and direct communication becomes less and less probable. Non-family members are often put into an intermediary position. Often this role falls to the
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HR person who gets involved as a mediator in the career planning for family members. Stephen: I do not think that non-family managers should be asked to be mediators. I think that they should be asked to be educators and facilitators. They might often see the family business in a clearer light than the family itself and are crucial to the business success. I think they can become advocates for the self-sufficiency of family members resolving their issues in a productive way. It is not just non-family managers; sometimes it is an independent board member, sometimes a trusted legal or accounting advisor who becomes part of the fabric of the family business success. Amy: Yes, people evolve into these roles because of their natural skills and their trust-worthiness. I think that the loss of such a key person in terms of succession planning can be very detrimental to the business: If everybody has been relying on that person as the central communication point and they are gone with no one to fill the gap, things can fall apart because the family hasn’t built the ability to communicate on its own. Stephen: I think that is when we step in and the consultant becomes a temporary fix. We help the family business remain sustainable while they are dealing with the succession. At least that is our goal. Amy: When planning for a successor we often can’t imagine who would ever step into a key person’s shoes. One thing we have learnt about the human capital planning process is that the planning itself will allow families to understand what they look for in the future. But it is the discussion not the plan that really matters. Having a written human capital plan on the shelf does not guarantee implementation. Plans have their place; they are not worthless but often things change and they are made redundant. However, the understanding that was created through the planning process is what endures and enables the family to make decisions. Stephen: If a family engages in an emergency succession plan, for example, if someone dies, the question is whether they are ready to adapt to the radical change that would be required. Often discussing changes that would be required in the event of a tragedy actually prepares a business for the eventuality. Rather than waiting for it to happen they understand that they are at risk if they do not anticipate such events. Non-family members can be a great help in these cases and assist with objective insights. Amy: In human capital strategies it is really the planning process and the dialogue around the planning that is significant and will lead to lasting success.
Often discussing changes that would be required in the event of a tragedy actually prepares a business for the eventuality.
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TALENT MANAGEMENT IN THE MIDDLE EAST
Talent Management is the process of discovering, deploying, motivating, and energizing the workforce within an organisation to effectively achieve objectives and enhance the competitive position in the marketplace. Best practice for talent management can, therefore, vary and emphasise different aspects according to the organisation’s national and cultural context. Prof. Abbas J. Ali, Ph.D., Professor of Management and Director, School of International Management, Eberly College of Business, at Indiana University of Pennsylvania, speaks about talent management in the Middle East its challenges, drivers, and trends.
Talent Management in the Middle East:
Q&A with Prof. Abbas J. Ali
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What is your opinion on the current state of Corporate Human Capital strategies in the Middle East?
How would you define the term “talent management� and what are the global trends in that discipline?
In some countries, where competition is relatively fierce, there
Talent management is the process of discovering, developing,
has been an increasing emphasis on acquiring, retaining, and
deploying, motivating, and energizing the workforce within
rewarding talent. However, human capital issues have been
an organisation to effectively achieve objectives and enhance
neglected. In fact, the focus is still on functional training,
the competitive position in the marketplace.
rigidity of job descriptions, and ignoring the need to align
Major global talent trends are:
recruiting and training to strategic objectives of the business.
Increasing competition among industrial nations for talent.
In some organisations the idea that investment in people is not
Acute shortages of talent in the developed world and the
an asset strongly persists. Furthermore, career advancement
emergence of developing nations as vital suppliers of talent.
should be linked to potential contribution instead of focusing
A shift from an emphasis on narrow skills to broad skills in
on seniority and conformity. Talent management is not yet
recruiting.
considered an integral aspect of business strategy.
Increasing challenge of managing a diversified workforce.
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TALENT MANAGEMENT IN THE MIDDLE EAST
Increasing emphasis on HR as the most important factor in
FIG 1: Talent Management Drivers, Middle East
creating value in the marketplace. Increasing the strategic importance of succession planning for senior executives. Companies have begun to devise plans linking compensation to competencies, performance to rewards, and recognising and nurturing internal talent while surveying the globe to attract talent. Furthermore, information systems and advanced technologies have made it easier for corporations to organise and standardise business activities, personnel, and performance.
What can talent management bring to the Middle East? Talent management is strategically critical for achieving growth, improving productivity, setting the stage for
Emergence of private equity firms as major investors at national and regional levels. Growing role of entrepreneurs and SMEs in national development.
Phenomenal growth in higher education institutions.
Maturity of most family businesses and increase of their roles across borders.
Talent Management Drivers
MNCs’ increasing demand for qualified personnel.
Dynamic and committed youth groups.
Huge investments by governments in infrastructure.
Rapid integration in the world economy.
innovation and creating a creative culture. It is also important for competing effectively in a highly global marketplace. While these are significant at the organisational level, effective utilisation of talent is important for alleviating poverty, and generating wealth and creating jobs in society. The latter takes on an added value as economic development programs have generally failed to produce tangible improvement in the wellbeing of the people in the region.
What are the drivers of talent management in the Middle East?
The region is uniquely situated to be a major economic force in the global economy (...) Arab businesses should espouse talent management policies that accelerate growth and creativity.
There are various drivers of talent management, which make it essential to face the mounting complexity of the challenges that countries in the region confront. Major drivers include
Maturity of most family businesses and increase of their
(Figure 1):
roles across borders.
Huge investments by governments in infrastructure.
Dynamic and committed youth groups which are inspired to be
Rapid integration in the world economy.
a force in shaping economic development and opportunities.
MNCs’ increasing demand for qualified personnel. Phenomenal growth in higher education institutions. Growing role of entrepreneurs and small and medium firms
What are the challenges for talent management in the Middle East?
in national development.
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The emergence of private equity firms as major investors
The region enjoys five promising and relevant developments:
at national and regional levels.
economic expansion and growth, economic reform,
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productivity and growth. There is a lack of articulation of human resource policies, and an absence of a systematic approach to recruiting talent. It is crucial to recognise people with potential, and to nurture and cultivate human capital.
What are your recommendations for Arab businesses that want to set up talent management policies? The region is uniquely situated to be a major economic force in the global economy. This is not because of the abundant energy reserves but also because the region is endowed with an enthusiastic workforce and it exhibits a capacity to preserve what is cherished and vital while adapting to modern technological and economic trends. For these very reasons, Arab businesses should espouse talent management policies that accelerate growth and creativity. What has to be done can be summarised in the following points: Businesses should revitalise the work environment unlocking trapped and underutilised talent of employees, be they nationals or expatriates, through enhanced recognition, motivation, and deployment of existing resources. Institutionalising assessment in recruiting and in linking rewards to performance. Investing in discovery and innovation especially in sectors essential for strengthening the wellbeing of future generations. Articulating human resource policies that prevent discrimination and enhancing retention of talent. increasing political openness, highest levels of labour force
Diversifying the workforce and giving a voice to women in
growth, and a young labour force. Nevertheless, talent
decision-making.
management faces macro and micro impediments. At the
Enabling employees to release their creative energy and
macro level, challenges centre on weak legal institutions
appreciate their imaginative capacities.
and institutional arrangements, weak private sectors,
Engaging with government agencies to enact labour policies
weak structural foundations of the economy as many Arab
that enable expatriates who contribute to human capital
countries are turning into increasingly import oriented and
formation and quality of life to be rewarded and offered
service based economies, low quality of education, and the
citizenship option.
low participation of females in the workforce. At the micro
Broadening cooperation with civic organisations, educational
level there is a noticeable presence of females at operational
institutions, and global corporations.
level but not at the senior level. Most business leaders
Strengthening partnership with governments across the
appear not to value the pivotal role that employees play in
region to reduce poverty and enhance social responsibility.
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OffErING
hIgh qualIty INtErNshIps tO thE yOuNG generatIon MEMbErs Of
famIly OWNEd
COMpANIEs IN
thE MENA
arabian nextgen
InternshIp program If you are
a member of the next generation of a business family who ... Wants to gather experience outside of the family business or Wants to learn about other family businesses inside and beyond the Middle East or Wants to learn more about a specific trade, industry or profession or Wants to start establishing his or her professional network or Wants to innovate Contact nextgen@tharawat.org to get all the information on the Arabian NextGen Internship program; or call : +971 (0)4 452 6578
arabian nextgen www.tharawat.org
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LATIN AMERICAN FAMILY BUSINESSES
SPOTLIGHT
SPOTLIGHT ON
LATIN AMERICA AND ITS FAMILY BUSINESSES PART 3
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62
Insights into the workings of a Venezuelan family business and why it is so important to learn how to be a good owner.
Five inter-related lenses provide a view on how to sustain a business presence in Latin America.
The Maldonado Family, Venezuela: Q&A with Veronica Maldonado
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SPOTLIGHT The Maldonado family, Venezuela
LEFT: Ivan Dario Maldonado, and his granddaughter, Allegra RIGHT: Alvaro Maldonado, Juan Maldonado and Marcos Maldonado BELOW: Hato El Frio in the 1930ies
Q&A with Veronica Maldonado, Venezuela
The Maldonado family In 1911, Samuel Dario Maldonado, bought a large ranch of about 100’000 hectares called Hato El Frio in Venezuela. In 1948, Samuel’s son Ivan Dario used his father’s legacy and founded CA Invega, a cattle company that was to become the corner stone of the Maldonado family business. Today the Maldonado family still runs its cattle business, and has added many more activities to its portfolio: production and distribution of dairy products in Venezuela, Dominican Republic and Uruguay and real estate investments in the USA and the Check Republic. The family also owns another cattle ranch in South Africa. Today, the Maldonado family business is managed by the third and fourth family generation and consists of five branches. Out of the 17 Maldonado cousins that are part of the fourth generation, around eight are active in the family organisation. The family is in the process of professionalising the group and is looking to hire professional managers to run the companies, while family members are shifting to the supervisory roles and boards to separate ownership from management.
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The Maldonado family, Venezuela
SPOTLIGHT
Maldonado family members
Veronica Maldonado belongs to the fourth generation of the Maldonado family business. She left her home in Venezuela to study in the US. After graduating, she moved to Japan where she worked and learned the language for seven years. Eventually, Veronica’s path took her back to her family business in Caracas in 2002 where she set up the GEM family office. She currently supervises the family office, and is a board member of three of the family’s companies. She is also the president of the family’s foundation, La Compañía Humana dedicated to education, and collaborates with other family business related organisations. She speaks to Tharawat magazine about family businesses in Venezuela, about the Maldonado ingredients for success, and why it is important to learn how to be a family business owner.
What are the main challenges Venezuelan family
What do you think differentiates Venezuelan family
businesses face today?
businesses from their Latin American peers?
I would say that amongst the greatest challenges are inflation,
Family firms in Venezuela have to deal with an oil-based
the threat of expropriation, political instability, exchange
economy, which means that we deal with different dynamics
controls, weak legal systems, corruption, and brain drain. On
compared to the rest of Latin America. For us having oil has
the other hand we also enjoy many advantages in our great
been a blessing but also a challenge: Due to the great wealth
country: there is wealth, opportunities for growth, a vibrant
from the oil resources, the private sector’s contribution
young population, an entrepreneurial culture, and we are
to national GDP constitutes but a small percentage. This
strategically located at the tip of South America, which
had the consequence that businesses have not yet seen the
makes it easy to get anywhere you like. Last but not least,
support that they require to expand and grow. On the up
in Venezuela we are endowed with incredible quantities of
side, because of the oil wealth, our poverty is not as bad as
natural resources.
for instance in countries like Bolivia and Peru.
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SPOTLIGHT The Maldonado family, Venezuela
LEFT and CENTRE: Hato El Frio photographed by Tony Crocetta RIGHT: Veronice Maldonado (left) and her cousin Dharla (right)
What are the ingredients that have made your family
opportunity to be involved in the family organisation. We are
business sustain over time?
part of a group where we feel supported and where we feel that we can interact with people as professionals. All requests
Never give up! Never ever give up! Our Commitment, being
from the family or employees are taken into consideration
business savvy, and of course our good values. I also think
no matter how small or trivial they may seem.
that seeing our parents growing the business and feeling that we are part of something bigger has been an important
But most of all, we are a family that enjoys spending time
ingredient for overall success.
together. We like to have dinners and take trips together. My cousins and I really enjoy being together as friends. Like
Another factor is that we are not obliged to work in the family
every family business we face challenges and the situation
business but we all have the option to if we wish it. Depending
is not easy but we are committed.
on our skill set we can all contribute to our business’ success. For instance, in my generation, we all feel that it is an
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One more thing that I admire and cherish about my family is
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The Maldonado family, Venezuela
SPOTLIGHT
our family is that there is a great difference between being encouraged to be a family business manager on the one hand and to be a family business owner on the other hand. We think it is better to encourage people to be good owners and to pursue their other career dreams than to force them into management positions just because they are family members. That is why we are professionalising: We are trying to find the best managers and to prepare the family members to be good owners and stewards of the family business. We do not think that the business has to be run by a family member. However, we do need family members to understand ownership.
We think it is better to encourage people to be good owners and to pursue their other career dreams than to force them into management positions just because they are family members.
Are family firms likely partners for companies seeking market entry in Venezuela? Yes! We are partners with Dairy Partners of America (NestlĂŠ and Fonterra) in Venezuela, and we are looking to partner with another big South American family group for one of our business units. Family businesses are a good choice for partners because they tend to have good, sound values, are committed for the long run and know their local market very well. In addition, the good reputation of family firms tends to bring another competitive advantage. Everybody knows about each other in our culture. We are always seeking to diversify and grow with other groups that share similar goals and values.
that we go and get help when we need it. Whether it means going to family therapy, workshops, further education or
What is your advice to family businesses that want to
other, we will do it if it’s required. We will invest the time,
set up a presence in Latin America?
the energy and the funds to make it happen. It helps us grow as a group and as individuals.
Go in slowly. Do your research and a very thorough due diligence of your opportunities. Get a local partner with a
Does your family business encourage the next
solid and long-standing reputation. Don’t fall for the flash
generation to join the business?
and remember that slow and steady wins the race. The best is to reach out to family business owners that you can speak
Yes, we encourage them to be a part of our family business
frankly and openly with. Always have high tolerance and
group in whatever capacity they are able to participate. We
patience for risk and uncertainty. Lastly, understand that
all have different skill sets and we see how we can cooperate
culture plays a huge part in how business is conducted in
with each other. One of the things that we have learned in
Venezuela and with family firms.
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SPOTLIGHT A focus on sustainability is an investment in value creation
Value Creation A Focus on Sustainability is an Investment in
Sustainability could be considered to be the alignment of the business within the market and environment in which it operates to maintain strategic flexibility and increase business longevity. This article by Edward Nicholson, Managing Partner at Mercator Partnership Limited, and Consultant to Maitland Group, demonstrates how businesses can incorporate sustainability into their thinking and strategy and provides a checklist for businesses that have established a presence in Latin America and other emerging economies.
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A focus on sustainability is an investment in value creation
SPOTLIGHT
To identify what makes your organisation sustainable, it is necessary to look at the business “holistically” and consider what the key elements are on which the long-term survival of your business depends. What makes a business sustainable will differ from business to business but there are certain key elements that are common to most businesses operating in developing markets. To identify what these elements in your business are, it is necessary to look at the business “holistically” and consider what the key elements are on which the long-term survival of your business depends. Not all will have the same relative importance. For example, for a mining or natural resources company, which has the potential to impact the environment significantly, managing the relationships with the local community in which it operates and with the government from which it receives licenses is critical; a breakdown in either could cause licenses to be revoked with significant economic consequences. The international mining group, Anglo American, has significant
H
mining assets in Chile and has recently been in a dispute with the Chilean government regarding options granted to
aving successfully established your business
the government for the purchase of some of the assets. The
footprint in Latin America the attention
government is contesting Anglo’s position and as such it will
will be on optimising the business to build
be interesting to see how this gets resolved given that there are
value. To build a truly successful business
considerable economic, reputational and regulatory risks at
in the Latin American environment it is,
stake for both sides. The following sets out some suggestions
however, necessary to look beyond the core value proposition
on how best to achieve sustainability looking at the business
of the business and consider what actions can help make the
through 5 inter-related lenses:
business sustainable in the market in which it now operates. To some, a sustainability agenda is seen as an elective but
1. Core Business
others would argue that having a such an agenda in place
While the achievement of satisfactory margins and the
is not only critical to the long term survival of a business
efficient use of capital is common to every successful business,
but that it also creates value and is, therefore, an essential
consideration of the following can help the business be more
dimension.
sustainable in its market environment:
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SPOTLIGHT A focus on sustainability is an investment in value creation
FIG 1: Five Inter-related Lenses
Core Business
Management
Ownership
Growth strategy: Critical to have articulated in order to
Value Capture
Environment and Community
Intellectual Property (IP): Protect what is valuable!
drive momentum in the business and keep the focus on the external market particularly in high growth environments.
2. Ownership:
Funding of growth: How will growth be funded and
Partner relationships: It is important to anticipate how
what are the constraints? Through internally generated
partnerships might evolve. Anecdotally, most partnerships
cash flows, a capital injection, or recourse to local capital
end with one party acquiring the other. What is the vision
markets bearing in mind that in many countries these are
for your venture?
still under-developed?
Control: Decide on the extent to which the need for
Regulatory changes: Attention to these is critical as they
control is important going forward. It may be possible, as
can evolve rapidly, have a significant impact and be hard
a minority, to include negative covenants in a shareholders
to contest retroactively. In Argentina, many of the major
agreement giving effective control if certain defined
utility companies have been privatised during the last 15
objectives are not met.
years under a regulatory framework, which contained
Implications of growth: Acquisitions or mergers could
clear parameters for tariff increases. Following the severe
significantly dilute ownership, reaching to the extent of a non-
economic crisis in 2001, the framework was unilaterally
control position. The risks of this will have to be judged against
changed preventing the owners, many of them foreign,
what is the best strategy for longer-term value creation.
from imposing tariff increases in accordance with the original contract. Although the position has now improved,
3. Management:
residential tariffs remain artificially low.
In developing markets the requirement for strong and
Staffing: Investment in training and development will
adaptive management can be much greater than in developed
improve the quality of your workforce and reduce reliance
markets where change is slower and the environment more
on the market. Reducing dependency on expatriate staff
predictable.
will encourage skills transfer and reduce costs.
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Governance mechanisms: There is a need for robust
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A focus on sustainability is an investment in value creation
mechanisms that also reflect the changing needs of the business. Use local expertise: Local board members can make a valuable contribution if selected carefully and encouraged to do more than just “rubber stamp” decisions. A local board is recommended. Intelligence gathering: Build a network of contacts to get independent and objective insights on economic,
SPOTLIGHT
While exiting may not be on the agenda, having the certain knowledge that exit could, if needed, be achieved provides comfort for ongoing investment in the business.
political and industry issues to identify threats and opportunities early.
5. Value capture/Profit taking: 4. Environment and community:
In a rapidly changing business environment the ability to
This is a critical aspect to be considered by all companies
realise and repatriate profits when needed should not be
but particularly for companies with foreign control or
overlooked.
significant foreign ownership. It is one area where modest
Dividends/profit extraction: Governments change and
investment can bring significant rewards. Investment
economies go through cycles. Having an implementable
should be directed to actions having a positive, visible and
dividend policy in place, which is regularly reviewed, is
tangible impact on the environment or community. It is
a necessary discipline.
easy to forget what actions/policies have been implemented
Exit: While exiting may not be on the agenda, having the
and it is, therefore, recommended that all actions, however
certain knowledge that exit could, if needed, be achieved
small, are recorded in a way in which they can be readily
provides comfort for ongoing investment in the business.
shown to community leaders or local officials if required.
There may nevertheless be times when exiting is prudent,
Good corporate citizenship: Be recognised as making
even if the timing is not perfect – be guided by your market
a positive contribution through actions, which benefit
intelligence sources, foresight and instinct, which will no
the community directly such as improved healthcare,
doubt tell you if the time for this is right. A slightly different,
education or recreational facilities. In more sophisticated
yet innovative approach was adopted by Banco Santander,
communities the emphasis will be more on cultural
the major Spanish bank, in 2009, when it undertook an IPO
activities. Across Latin America, wealthy families
for it’s Brazilian subsidiary raising more than US$8 billion
increasingly pay attention to their social responsibilities.
to fund growth and strengthen the group’s capital position.
Foundations with philanthropic aims have been established by many entrepreneurial families including
Sustainability is naturally embedded within the actions of most
those behind Itau-Unibanco and Gerdau in Brazil, the
businesses. What is being suggested here does not, therefore,
Santo Domingo family in Colombia, The Fundacion
represent a radical departure from normal business practice
Carlos Slim and the Fundacion Femsa in Mexico to name
but rather a fine-tuning of these actions to take account of the
but a few.
local environment via a focus on those actions that can really
Good place to work: In high growth economies the
make the difference and help add value to your business.
availability of qualified human resources can be a challenge. A competitive package of benefits and salary together with issues such as recognisable corporate values is an investment providing competitive advantage in attracting talent and necessary skills.
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Author Edward Nicholson, Managing Partner at Mercator Partnership Limited, and Consultant to Maitland Group edward@mercatorpartnership.com
Volume 14 Tharawat magazine
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Arabian NextGen
Career Days May 27th/28th 2012 - Dubai
Addressing the challenges and opportunities of career planning for the young generations of family businesses
The Career Days offer » A platform for future family business leaders to exchange ideas and experiences with their peers.
» Addressing the challenges of career planning in interactive workshops and individual sessions.
» Tools to assess “where you are’’, ‘’where you are headed’’, “what you want to achieve.’’
» Understanding the trends and expectations of the regional and international job market.
Registration open now! For more information and registration: contact conference@tharawat.org or call +971 (0)4 452 65 78
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Family Business
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Chararib - The Story of the Fathallah Family A profile on a family specialised in the art of passementerie and a Q&A with Zahi Fathallah.
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Sayadi Pioneer Stone Carving A Family History Written in Stone The story of Tunisian Sayadi family and their stone carving business including a Q&A with Lotfi Sayadi.
Volume 14 Tharawat magazine
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Chararib - The Story of the Fathallah Family
The Chararib business traces its beginnings back to 1908, when the Fathallah family started operations in a small trimmings factory located on Maarad street, in the heart of Beirut. From one generation to another, the firm succeeded to transmit and enrich the know-how and the quality of its interior decoration products, and to build a prestigious name in the Middle East. Today, the family business designs and supplies products and, managed by the third and fourth family generation, continues to thrive. Tharawat magazine explores the family history and speaks to Zahi Fathallah, Operations Manager at Chararib, and fourth generation family business member about the craft that has impassioned his family for over a century.
Chararib I The Story of the Fathallah Family
Lebanon
n 1908 Mosbah Fathallah, a man who had
In 1962, Oussama succeeded his father as the head
much entrepreneurial flair and knew how
of the company and devoted his life to developing
to develop new business ideas, set up his
the family business. During the 70ies, he moved
own company. His trimmings business
the factory to Bauchrieh to accommodate a larger
attracted many Beirutis who wanted to
workload. In the 90ies, he expanded to a new
decorate their furniture and curtains. Mosbah’s
factory in Mkalles along with a new showroom, as
two sons Khaled and Mostafa started to work
the business demanded a bigger space with more
with him and in 1953, they encouraged their
machinery, labour and products display. The brand
father to move production to a bigger factory in
name “Chararib” was created in 1998 to represent
El-Nahr. Two years later, Mostafa left the business
the Fathallahs commitment to quality, creativity
to venture into construction and contracting in
and customer support.
The Fathallah family has been designing and handcrafting trimmings since 1908
Saudi Arabia. Khaled continued to take care of
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the family business on his own. He had two sons
For over four generations the family has remained
and four daughters. His eldest son Mounir later
true to the tradition of crafting top-quality and
became a prominent lawyer in the Middle East.
distinctive trimmings assuring that all elements,
However, Oussama, Khaled’s youngest son, got
harmony of colors, choice of materials, and
involved in the family business at a young age.
originality of designs work together. The family’s
He worked alongside his father learning the skills
custom-made strategy has never changed, and it
and secrets of the passementerie craft (the art of
still delivers high-end trimmings for curtains and
making elaborate trimmings or edgings).
furniture with a great range of design choices.
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Chararib - The Story of the Fathallah Family
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Chararib - The Story of the Fathallah Family
Q&A with
Mr. Zahi Fathallah Operations Manager of Chararib, Lebanon
Zahi Fathallah is the Operations Manager of Chararib and belongs to the fourth Fathallah family generation to manage the business. He joined the family business while he was still a student at the American University of Beirut. He even chose his field of study, Business Administration, because he wanted to pursue a degree that would help him in developing the company. Zahi always had the intention to join the family business and used to spend his summer breaks at the factory following his father and accomplishing happily some small tasks he used to assign to him. He later went to Italy where he learned Italian and was trained in the fine art of trimming. Today, Zahi works in the business with his father who is the General Manager and his brother who is in charge of business development, together sustaining and growing the family legacy.
products and services. Our core competence is based on learned secrets and know-how transmitted to us from the former generation: We have accumulated our experience over more than 100 years.
ABOVE: A traditional twisting machine in the old Fathallah Factory
Moreover, the elder generations established a name that we are proud of. They have built our reputation in the market. Our customers and suppliers work with us based on the trust we have generated during the years. On the other hand, we should remember that it is as hard to keep a business great, as it is to build it. The new generation of the family business is continuously developing the company. We are adopting new technology, opening to new international markets and upgrading the standards of our services. Today, our products and services can easily compete with European and American firms.
In
your
opinion,
what
were
the
main
contributions of each of the three Fathallah
The Chararib company has enriched the
generations to the family business?
interior design world in the Middle East since its establishment in 1908, how did the family
Each generation has added value to the continuity
succeed in transferring the craft from one
and success of the family business. The previous
generation to the next?
generations showed entrepreneurial spirit in
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choosing this specific industry for its business
Since 1908, each generation was happy to get
venture, and developing a niche market for its
involved in the family business at an early age
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challenges that the family business faced in its long history and today? Being
a
“Lebanese�
family
business
and
headquartered in Beirut, the political and economic instability of the country has been our main challenge. Based on current and recurring circumstances, the continuity and success of the family business is a challenge in itself. What are the family’s future plans for the Chararib company? We already have a strong regional presence in markets such as the UAE and Qatar. We are
Because of the type of product that we make, we still use traditional craft techniques; however, while we preserve these old techniques we also regularly innovate on methods and designs.
currently working on expanding to European markets and developing our existing relationships with our European and American partners. Moreover, we are expanding our main factory and venturing into a new product line of interior accessories. As a sustainable family business what is the best advice that you can give to family businesses in the region?
and learn the craft of making trimmings. Moreover,
Being a family from the Middle East brings many
we have some non-family employees who are as
advantages. Our culture encourages the sense
loyal as family members, who got trained by our
of belonging and the strong ties help the family
grandfather and kept working with us.
firm motivate managers and employees to work harder for the well-being of the family company.
All our products are skillfully designed and made.
No amount of business success, however, can ever
Many of our hand-woven trimmings are still
make up for a family failure. If the family is not
produced on a late-nineteenth-century hand looms.
working right, sooner or later, it will bring down
Because of the type of product that we make, we
the business.
still use traditional craft techniques; however, while we preserve these old techniques we also regularly
Addressing the young generation of family
innovate on methods and designs.
businesses, I would like to add that we should be proud of the heritage of our firms, and because we
Your family business has been in existence
are part of it we should dream, dare, and do more
for over 100 years. What are the main
towards developing our family businesses.
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Sayadi Pioneer Stone Carving
The city of Dar Châabane, in Nabeul, Tunisia, is the home of traditional craftsmanship; it is best-known, however, for its experts in the art of stone carving. Sayadi Pioneer Stone Carving is a family business set up by a Dar Châabane resident, Mohammed Al-Saleh Bin Abdul-Salam Sayadi, nearly fifty years ago, originating from his passion for this craft and its rich history. In an interview with Tharawat Magazine, Eng. Lutfi Sayadi, son of Mohammed Sayadi, speaks about the various stages of development of the stone carving industry, the secret as to how his family has preserved the craft, and the challenges the family business is facing today.
Sayadi Pioneer Stone Carving
Tunisia
Family history written in stone
T
he success and survival of the Sayadi
Al-Qarawi (the guardian of the craft), who taught
Company is credited to a man who,
him for many years. Mohammed quickly learned the
besides being uniquely talented and
secrets of the trade, starting from the extraction of
skilled, has a passion and dedication
stones from quarries in the mountains, through to
that has made him, over time, an expert
cleaning stones and shaping them into various forms,
craftsman. He is the founder of the Sayadi Company:
and ending with decorating stones and turning them
Mohammed Al-Saleh Bin Abdul-Salam Sayadi.
into works of art. In the 70ies, he worked alone, and
LEFT: The Sayadi family’s craftsmanship is showing on many facades of important buildings in Tunisia
sometimes with fellow craftsmen in the restoration,
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Mohammed Sayadi grew up in the city of Dar
construction and decoration of many important
Châabane in Nabeul, Tunisia, whose people are known
buildings in Tunisia, including the decoration the
for mastering the art of traditional stone carving. It
main entrance of the presidential palace in Carthage.
was an evolving industry at the time and began to
Mohammed also participated in the restoration of
attract great attention. He joined the workshop of
Al-Asram house, under the supervision of a UNESCO
stone carving pioneer, the late Mohammed Al-Asghar
panel, and many other projects in Tunisia and abroad.
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Sayadi Pioneer Stone Carving
RIGHT: Mohamed Sayadi has a rich career CENTRE: Mohamed Sayadi’s picture on the Tunisian Dinar note
SMEs
After Mohammed had won appreciation and
The family-owned business has seen a marked
encouragement from the culture and arts society
development after the second generation,
in Tunisia, he decided to return to his hometown,
represented by Eng. Lutfi Sayadi, the founder’s
and started in 1973 his own stone carving
son, joined the company in 1997. He started
business, which would transform into a family
to organise the production processes and
firm over time. He continued his career in the
introduced modern technology and machinery to
design and manufacturing of high-quality pieces
the business after he had developed the general
of work for the decoration and restoration of
strategy and vision.
various buildings. Today, the family-run company owns several galleries in various Tunisian cities,
The Sayadi family has preserved the fundamentals
as well as in the Gulf, Libya and Algeria. The
of the traditional craft, and continues to develop
number of its craftsmen increased from an
some of its aspects, undertaking the responsibility
initial nine to 50 trained artisans working in a
for maintaining this art and introducing it to an
new workshop.
international audience.
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Sayadi Pioneer Stone Carving
Q&A with
Lutfi Sayadi 2nd generation, Executive Management, Sayadi Pioneer Stone Carving When did you start working in the family-run company? Officially in 2003, but I must say that I have been working in the craft since my childhood. I used to spend my school holidays learning our craft in a small workshop in the city of Dar Ch창abane. I learned the fundamentals, such as design, and methods of selection and classification of stones. I also learned how to engrave and carve on stones, but today I do not work as a craftsman. I work as a designer of production methods and models, in addition to being the official in charge of marketing and sales. I started to help my father practically after finishing secondary school in 1991. Before joining the family-run company and immediately after obtaining the certificate of industrial engineering I worked as the director of
Mohammed Saleh Sayadi was known locally and became famous for his dedication and the quality of his products.
marketing in a pharmaceutical company. I chose that job in order to gain experience. I participated in establishing the firm. This enabled me to develop
of his products. As the craft is traditional and
my experience, learn about foreign markets and
based on labour without the adoption of modern
understand the structure of projects and how to
methods, and because the workshop included
deal with the administration and management of
only about 20 artisans, our company could not
companies. Since 2003, I have started to develop
meet the size of international demand. At the
the method of production and diversification of
end of the 80ies and due to the high demand,
our products and introduced a quality surveillance
modern machines were introduced to make up
system.
for part of the manual work. These methods have enabled the company to expand its production.
How did the family-run business expand
Thus, we started to look for overseas markets. We
internationally since its creation?
participated in some international exhibitions and started to accept external orders. The search for
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Mohammed Saleh Sayadi was known locally and
appropriate logistical solutions for shipping and
became famous for his dedication and the quality
delivery took a long time. The second problem that
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Sayadi Pioneer Stone Carving
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Fig.1: Major projects Sayadi Company:
2004-2010
1960
• Palace of Carthage
1960-1972
• Restoration of Dar El Asram • Mosque Ezitouna • Mosque El Kasba • Several other monumental sites
1960
ABOVE: The Sayadi Company in a trade fair.
1970
• Hotels: one of them the 6-stars hotel Hsdrubal Djerba. • High standard villas • The Chamber of Councils, Ministry of Human rights. • Conference rooms: The biggest Medina Hammamet-style conference room (capacity 1300 persons). • Airports: Carthage Airport, Tina Sfax Airport, Nfidha Airport. • Traditional style: The new entertainment city El Medina Hammamet. • Commercial centers: Geant Center • Residential cities: high standard apartments Folla properties Chott Meriem Sousse. • Cultural City of Tunis: the biggest of the Tunisian projects.
1980
1990
2000
2010 ...
had to be resolved was how to make the products
How did the stone carving craft evolve over
match the global market needs. We had to study the
the years?
market in terms of their architectural formations and the conformity with building structures. This
In the 60ies, the main problem were the tools for
required a long and costly study that contributed
extracting the raw materials, as we used traditional
to a delay in the development of the company at
means which were very slow. For transportation
the international level. We started engraving on
we used donkeys. To make cylindrical parts,
artificial stones, as it is sometimes difficult to find
everything was done by hand and small iron tools.
colours in natural stones matching the customer’s
Today, everything is mechanised, tractopels are
request. Hence, our philosophy has changed from
used to extract and transport the rocks, special
being handcraft-based into a manufacturing-based
cutting machines with special diamond tools are
industry. However, a unit for traditional hand-
used for carving and more.
crafted products has remained; the most important unit and a symbol of beauty and creativity to our
However, for the time being, we have other
company. By using artificial stones we were able to
problems:
respond to some special orders, however, it must be
We cannot find artisans to do the handmade parts
noted that natural products are the most requested
which is essential to keep the work true to type.
for exportation. And so, the business has undergone
There are no different types of natural stone:
a professional development that enabled it to enter
many carriers stopped their activities because of
foreign markets. This development will continue so
the new ecological rules.
that we can keep abreast of the trends and ahead of
The biggest problem for the future: There is no
the competition.
next generation learning the stone craft work. We
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Volume 14 Tharawat magazine
75
SMEs
Sayadi Pioneer Stone Carving
believe that to educate a good handcraft artisan
What are the ingredients that you believe
you have to start at an early age.
make a family business sustainable?
ABOVE: Some of the major Sayadi projects
In order to run a family company you should‌ Al Sayadi family has been considered a pioneer
Try to introduce many members of the family to
in the business of stone carving for many
the business.
decades, what is your strategy in keeping the
Be professional and forget the family relations
craft alive?
within the work environment. Design an organigram illustrating all the
In order to keep our company up to date and able
relations between employees and fix the limits of
to go ahead, we tried through the last decades to
responsibility of each person independently from
keep in touch with the latest techniques enabling
the family structure.
us to ensure good quality. We tried to encourage
Try to introduce children at a young age, to give
our workers and to make them identify with the
them the opportunity to discover the job.
projects. Also, since we belong to a small family,
Train children to take decisions in a way to
we are trying to keep our children in touch with
prepare them for management.
the craft. We try to introduce them to the workshop
Keep in touch with the latest technology, to
during their school vacations. We believe that in
be innovative, creative and to compare your
order to succeed in running the family business,
company to the biggest competitor.
they should learn the principal and basic rules of
76
the craft. The only way to do this is to practice and
This is the way enabling the company to remain
by being in love with handcrafted work.
sustainable over many generations.
Tharawat magazine Volume 14
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MIRACULOUS, UNFORGETTABLE FULL OF EXPECTATION
BUT FOR MILLIONS OF CHILDREN, IT’S ALL THEY GET. Every year 3.1 million babies die in their first month of life. EVERY ONE leaves a heartbroken family. EVERY ONE of us can stop children dying. To find out more about the campaign and how you can help, go to www.everyone.org
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The fIrST day Of LIfe...
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FAMILY BUSINESS SOCIAL MEDIA
We live in the age of social media and much of our knowledge and information is drawn from sources that are referred to us on facebook, linkedin, twitter and other. The family business topic is no exception. in this new section we bring to you the social media sources on family business topics that we recommend and follow, as well as our own favourite tweets and posts.
Family Business Social Media
Facebook.com/tharawat.magazine
Check out our Likes on Facebook The Tharawat magazine Team uses the Facebook page to post family business news items and announcements about upcomiing issues. We have over 3000 fans and are enjoying the interaction with them on a daily basis. Other family business pages we like are:
@Tharawatmag
With our Twitter account we follow many interesting Tweets: @TharawatFBF: Our founding partner posts interesting family business facts items @Fambizpros: Provide interesting tools and management articles on a daily basis
Abdul Latif Jameel Community Initiative - experts in job creation.
Family Business Wiki is a US based resource for family firms and experts.
The Tharawat Family Business Forum page updates on Tharawat members and other regional adn international family businesses.
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Tharawat magazine Volume 14
Linkedin hosts many interest groups amongst which are many relevant to family businesses Join Group Harvard Business Review, keeps you abreast of all their newest releases and articles Join Group TED has set up a great group that monitors the newest ideas that will change the world.
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