Tharawat magazine - Volume 14

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

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Volume 14 Tharawat magazine

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contents

VOL 14 | APRIL - JUNE 2012

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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

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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.

www.tharawat-magazine.com

Volume 14 Tharawat magazine

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contents

VOL 14 | APRIL - JUNE 2012

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62

68

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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.

www.tharawat-magazine.com

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

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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.

www.tharawat-magazine.com

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

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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

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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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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

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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.

www.tharawat-magazine.com

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.

Tharawat magazine Volume 14

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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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Volume 14 Tharawat magazine

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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Volume 14 Tharawat magazine

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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Volume 14 Tharawat magazine

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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

31

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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Volume 14 Tharawat magazine

33

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.

Tharawat magazine Volume 14

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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.

Tharawat magazine Volume 14

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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

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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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SPECIAL FEATUREs

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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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Dialogue between Amy Schuman and Steve McClure

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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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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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A Focus on Sustainability is an Investment in Value Creation

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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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Volume 14 Tharawat magazine

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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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Volume 14 Tharawat magazine

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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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Tharawat magazine Volume 14

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

65

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

www.Arabian-NextGen.org

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Family Business

SMEs 68

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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SMEs

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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SMEs

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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SMEs

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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SMEs

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,

72

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

74

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

Tharawat magazine Volume 14

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Sayadi Pioneer Stone Carving

SMEs

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.

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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

Registered charity England and Wales 1076822.

Anna Kari

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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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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