Tharawat magazine - Volume 15

The Arabian Publication for Family Businesses Volume 15 Jul-Sep 2012

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48

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Dialogue between Generations: The Elnefeidi Family Dialogue between the second and third generation members Conversation with Bakul Jain, DCW Ltd., India On the ingredients of running a successful family business in India

Interview with Razan Jafar, Crescent Petroleum Insights and advice from a next generation family business member Al Hamdani for Mocha Coffee: A Family with Flavour On a family’s passion for coffee and the Yemeni coffee industry

Next Generation Special Features

the

driving the family business into the future

tharawat magazine

THE ARABIAN PUBLICATION FOR FAMILY BUSINESSES Volume 15 Jul-Sep 2012

The Arabian Publication for Family Businesses

42

48

62

68

Dialogue between Generations: The Elnefeidi Family Dialogue between the second and third generation members Conversation with Bakul Jain, DCW Ltd., India On the ingredients of running a successful family business in India

Interview with Razan Jafar, Crescent Petroleum Insights and advice from a next generation family business member Al Hamdani for Mocha Coffee: A Family with Flavour On a family’s passion for coffee and the Yemeni coffee industry

Publisher and Founder Dr. Hischam El Agamy Editor-in-Chief Ramia M. El Agamy

editor@tharawat-magazine.com

Next SPECIAL FEATURES

Assistant Editor Wafa Nasser Farhoud

wafa@tharawat-magazine.com

Editor-at-Large Farida F. El Agamy Creative Director Emad Khourfan

emad@tharawat-magazine.com

Photography Simon Charlton www.simoncharltonphotography.com Eric Mijares In-house Photographer 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

the

Generation driving the family business into the future

VOL 15 | Jul - Sep 2012 Any other use, including but not limited to, the publication, reproduction, modification, distribution, transmission, republication, display, creation of derivative works, or performance of the content, or any other use of the Content for commercial reasons, is strictly prohibited without the express written consent of Tharawat Media FZ LLC. If you wish to use content or artwork from Tharawat magazine please e-mail: info@tharawat-magazine.com To advertise in Tharawat magazine please e-mail or call: advertising@tharawat-magazine.com +971 (0)4 452 6578 www.tharawat-magazine.com ISSN-2077-3714 Tharawat magazine is printed on recycled woodfree paper.

Illustrations: Getty / Gallo Images Disclaimer

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Volume 15 Tharawat magazine

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contents

VOLUME 15 | JULY - SEPTEMBER 2012

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Contributors Abdullah Al Zubair

The Zubair Corporation Muscat, Oman

Ahmed Ali Al-Hamdani Chairman, Al-Hamdani Export for Yemen Mocha Coffee, Yemen

Alexandra Sharpe

Partner at Peter Leach & Partners, UK

Amin Elnefeidi

President, Elnefiedi Group, Sudan

Anees R. Sultan

Head of Supply Division W.J. Towell & Co., Oman

Bakul Jain

Managing Director, DCW Limited, India

Ben Eavis

Corporate Responsibility Manager – International, DLA Piper Middle East LLP

Caroline Fattal Fakhoury

Vice President, Fattal Holding, Lebanon and Managing Partner, Praesta Middle East

Vice-Chairman, Al Ghurair Investment LLC, and Chairman, Al Ghurair Foods, UAE

Loay Anwar Ali Sultan, Supply Chain Officer, ENHANCE (Towell Group Company), Oman

Parimal Merchant

Director, Center of Family Managed Businesses, S.P. Jain Institute of Management and Research, India

Musab Elnefeidi

Kenana Sugar Company, Sudan

Prof. Craig Aronoff

Raid Maqbool Sultan, Marketing Manager, W.J.Towell & Co, Oman

Dr. Rania Labaki

Associate Professor of Management Sciences, University of Bordeaux IV, France

Chris Venter

Hassan Elnefeidi

Saleh Mohammed Al Habib

Crescent Petroleum, UAE

Board Member & General Manager, Seven RentA-Car, Elnefeidi Group, Sudan

VP Business Development Moh’d. Al Habib Real Estate, AlHabib Holding, KSA

José Luis Jiménez

Tony Bury

Banca March Family Business Fund, Spain

Dr. Hischam El Agamy

Founder and Executive Director, Tharawat Family Business Forum and Tharawat magazine, UAE and Switzerland

Tharawat magazine Volume 15

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Family Business Consulting Group, USA

Razan Jafar

HR & Admin Director, Elnefeidi Group

2

Essa Al Ghurair

Founder, Mowgli, UK

Wafa Elnefeidi

Marketing manager, Bank of Khartoum, Sudan

Regulars 06 P ublisher’s Note

A few words by the publisher.

08 G lobal Family Business News

The moves of family firms across the globe.

10 F amilyBusiness2FamilyBusiness

The interactive survey results showing opinions of family members on the problems of the fictional Al Mamnoon family.

79 I nteractive

Our Tharawat magazine online activities and the Family Business Social Media page showing our picks from Twitter, Facebook, and Linkedin.

Zaid M. Al Habib

External Auditor - E&Y, Mohammed Al Habib Holdings, KSA

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VOLUME 15 | JULY - SEPTEMBER 2012 contents

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Features

Special Features

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52

16 Aligning Family and Business Culture 32 T he Next Generation: Visions of the Discover the family business culture model explaining the impact of values on behaviour and artefacts.

20 C SR in Arab Family Businesses: A Checklist

A checklist designed for family firms.

26 B anca March - A Family Business Investing in Family Businesses

One of the most successful banks in Europe is family-owned and has established a family business fund.

Future

A few opinions and quotes from next generation members.

36 A Conversation with Prof. Craig Aronoff Perspectives on the next generation in family businesses.

42 D ialogue between Generations: The Elnefeidi Family, Sudan

Dialogue between the second and third generation members of the Elnefeidi family.

48 I nterview with Razan Jafar, Crescent Petroleum

Insights and advice from a next generation family business member.

52 Q &A with Dr. Rania Labaki

Discussion on a successful next generation.

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VOLUME 15 | JULY - SEPTEMBER 2012

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Spotlight 58 F amily Managed Businesses in India:

The Opportunities and the Challenges

ExposĂŠ on characteristics, opportunities and challenges of Indian families and their businesses.

62 A Conversation with Bakul Jain, Managing Director of DCW Ltd.

Bakul Jain speaks about running a family business in one of the fastest growing economies in the world.

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Tharawat magazine Volume 15

SMEs 68 A l Hamdani for Coffee: A Family with Flavour

Discover the century-old Yemeni Al Hamdani family business that has stayed true to its dedication to coffee for many generations.

74 M owgli: Mentorship in the Middle East

An exclusive interview with Mowgli Founder Tony Bury unveils the importance of mentorship for businesses in the Middle East.

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COMPLEXITY CONFUSES. CLARITY INSPIRES.

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, This issue has caused a lot of excitement in the Tharawat

In the first part of our Spotlight series on Indian family

magazine offices: Between organising our photo shoot for

businesses, we enjoy an introduction by Parimal Merchant,

the Next Generation special feature, getting to know family

and are honoured by the stimulating interview we had with

business pioneer Prof. Craig Aronoff, creating the first CSR

Bakul Jain, Managing Director of DCW Ltd. Finally, our SME

check list for family businesses and starting our new Spotlight

section includes the fascinating story of the Al Hamdani

section on family businesses in India, there was hardly a

family business from Yemen and a conversation with Tony

moment to catch our breath. So here it is, our issue 15:

Bury, founder of the Mowgli foundation, on the importance of mentorship for entrepreneurs in the Middle East.

Following

our

usual

introductory

pieces

on

the

first pages (Global Family Business News and the

We hope you enjoy reading this issue.

FamilyBusiness2FamilyBusiness Survey), we begin this issue with an interesting mix of content in our features section: Alex Sharpe delivers an insightful analysis of family business culture, which is followed by the first check list for CSR in Arab family businesses developed by Ben Eavis and our Editor-in-Chief Ramia El Agamy. Also in this section you will find out more about one of Europe’s last familyowned banks, Banca March, and its decades-old strategy of investing in other family businesses.

Our Special Feature is dedicated to, arguably, the greatest challenge and opportunity that family businesses face: The Next Generation. Various testimonials from next generation members from Arab family businesses are followed by the insights from family business members of different ages and origins: Read our great interviews with the Elnefeidi family and with Razan Jafar from the Crescent Petroleum company as well as two expert articles from Prof. Craig Aronoff and Dr. Rania Labaki.

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Tharawat magazine Volume 15

Dr. Hischam El Agamy Publisher and Founder Tharawat magazine Tharawat Publishing FZ-LLC

www.tharawat-magazine.com

Where family and business come together

August 29-31st, 2012 The Langham Hotel Mayfair, London

The Continuum Family Business Conference is a yearly conference bringing together leading business families from the Middle East, Asia, Europe and Latin America.

Continuum is a unique opportunity for families to meet, enjoy a family-focused program, exchange experiences, debates on global and regional issues and share visions.

for registration conference@tharawat.org or visit www.continuum2012.org www.tharawat.org

GLOBAL FAMILY BUSINESS NEWS

GLOBAL FAMILY BUSINESS

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News

Read up on the latest news of family businesses all over the world

01 | Mexico

Carlos Salim Stakes in YPF 8.4% stake in YPF, Argentina’s Oil Company was taken over by the Mexican billionaire Carlos Salim.

The Eskenazi family of Argentina borrowed billions of U.S. dollars through their holding company Grupo Peterson to acquire a quarter of YPF but failed to repay the debts, especially, after losing access to the YPF dividends due to the recent nationalisation of the company. Salim’s Bank Grupo Financiero Inbursa SAB was one among many financial institutions that received the YPF shares as a collateral, making Salim the fourth-largest shareholder of the company. The world’s richest person, Carlos Salim, hasn’t come to a final decision whether to keep the stakes in YPF or not.

Carlos Salim

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Tharawat magazine Volume 15

02 | Hong Kong

Li Ka-shing’s Succession Plan In a move that is considered controversial amongst business leaders in Asia, Hong Kong’s richest man Li Kashing put an end to the investors’ speculations about his succession plan and named his eldest son Victor as the next in line to the familyowned conglomerate, Cheung Kong. For almost a decade, the 47 year-old has been the Managing Director at Cheung Kong and the Deputy Chairman at Hutchison. To preserve the family business values and success, the newly appointed successor will be surrounded by a loyal team of a long-time managers and assistants of his father Li Ka-shing.

03 | UAE & Qatar

Damas and Mannai Corp More than 75% of the shareholders in the Dubai-based jeweller, Damas, have accepted to sell 66% of the company’s shares to the Qatari conglomerate, Mannai Corp. 14% of the remaining shares will go to EFG Hermes and 15% will remain in the hands of the Abdullah brothers. Mannai Corp., which will become the majority stakeholder of Damas, will delist Damas from NASDAQ Dubai.

04 | Italy

Ermenegildo Zegna Goes East Ermenegildo Zegna the top Italian luxury goods groups, is opening its first stores in Algeria and Morocco, which will establish a presence for the family company in Africa and the Middle East.

The century-old group’s expansion extends into foreign markets such as China and the US and is combined with their attempts to acquire other high end Italian brands.

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GLOBAL FAMILY BUSINESS NEWS

09 | Italy & US

05 | USA

Woolpert Family Loss

Fiat Industrial and CNH Merger

The president and CEO of the Graniterock construction company, Bruce W. Woolpert, died in a boat accident in Florida in June 2012. The company has appointed the nonfamily board member Mark Kaminski to be chairman and acting chief executive of the 112 year-old familyowned company. The late Bruce Woolpert took over his family company 25 years ago and succeeded to turn it into one of the best places to work for in America according to Fortune 500’s listing.

Fiat Industrial, the world’s third-largest Capital Goods group by revenue, has proposed to merge with the group’s majority owned US listed unit, CNH. The newly merged company will be listed at the New York Stock Exchange and secondarily in Europe. The merger will guarantee Fiat a better access to capital markets away from the debt crisis in the Euro zone countries.

06 | Italy

Benetton’s New Chairman The board of directors of the Italian retailer Benetton has named Alessandro Benetton the new Chairman of the group his family controls by owning 73% of its shares.

The appointment of the Harvard Business School graduate came after the resignation of the founder of the group, Luciano Benetton in April 2012.

07 | Germany

10 | Philippines

German Family Business Trends

Ayala Corporation

A 2011 survey conducted by Deutsche Bank and the BDI industry federation showed that 40% of family-owned companies in Germany are increasing their manpower and half of them are considering investment opportunities. Two thirds of the 408 firms surveyed in the study are hoping for a better economic future and are evaluating their economic outlook for 2012 as good or very good. According to the study, the majority of the German family companies are still heavily depending on bank financing instead of bringing in outside investors on board.

Ayala Corporation, Philippines’ oldest conglomerate, is forming a joint venture with Metro Pacific Investments Corp.

(MPIC) under the name of ‘Light Rail Manila Holdings, Inc’ to extend the Light Rail Transit Line 1 (LRT). The P60-billion Philippine Peso project will be identified under the government’s Public-Private Partnership (PPP) program and will be open for companies to bid for. Both local and international companies have expressed their interest in the project.

08 | Switzerland

Reichle & De-Massari (R&M) The family-owned Swiss cable provider, Reichle & De-Massari (R&M) has declared its ambitious expansion plan in the Middle East and Africa.

Besides increasing the company’s presence in the local markets, R&M addresses the scarcity of proper technical expertise in the region by providing technical training to both its employees and partners.

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Volume 15 Tharawat magazine

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Introduction FamilyBusiness2FamilyBusiness

The fictional Al Mamnoon Group is a successful Kuwaiti family business that is run by the second generation after its founder, Mohammed Al Mamnoon, faced sudden health issues and had to retire. With his two sons Rashid and Khalid in charge the business continues to strive. So much so that the third generation is gradually joining the family business in various different ways. This transition is challenging for the family and results in a few difficulties between Rashid and Khalid. Find out what advice Arab family business leaders give to the Al Mamnoon Group through this issue’s Tharawat magazine case study survey.

The Al Mamnoon Family and the Third Generation Challenge

T

he Al Mamnoon group was established in

Over the years, Mohammed and his two sons worked very

1967 in Kuwait by Mohammed Al Mamnoon.

hard to build a strong and diversified group of companies.

With great commitment and hard work

In the 90ies the Al Mamnoon group established activities in

Mohammed grew his small trading business

agriculture, finance and real estate, as well as a successful

into a diversified business group in few years.

cement factory.

Mohammed’s first son Rashid chose to pursue his engineering

In the 2000s however, Mohammed faced sudden health

studies in Egypt. While in Cairo, he got married to Mona

problems. He trusted Rashid’s expertise and sense of business

Al Masri, whose family owned and operated a large cotton

and put him in charge of the day-to-day business activities. As

plantation in Egypt and they had three children together

the two brothers got on well, they decided to start a holding

after they moved back to Kuwait: Ahmed, Marwa and Tarek.

structure, Al Mamnoon Investments, to ensure that the family’s ownership remained clearly structured. Both Rashid and

Khalid, Mohamed’s second son, had always been passionate

Khalid would own 30% each while Mohammed kept 40%, and

about the fine food and service industry and wanted to

remained the non-executive Chairman. The brothers arranged

establish the Al Mamnoon Group as a leader in five-star

the management of the companies amongst themselves.

hospitality. However, his father was reluctant to start a

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business so different from the core activities of the company

In the meantime, two of Rashid’s three children, Ahmed

in trade and manufacturing.

and Marwa, finished their studies and decided to go and

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FamilyBusiness2FamilyBusiness Introduction

Rashid and Khalid got together to discuss the situation of the next generation. After the discussion, they were both unsatisfied.

live in Egypt to work in the Al Mamnoon Cotton business

in Egypt. Their uncle Khalid did not appreciate this, since

which Rashid had founded together with his wife’s family.

neither Ahmed nor Marwa had ever worked in another field

Ahmed and Marwa worked for the two cotton factories in

than the cotton industry.

Cairo (spinning and yarn manufacturing) and in Alexandria (the weaving plant).

Meanwhile, Ali, Khalid’s son, has not been very motivated to stay in the family business. One night, he was out with

Khalid and his wife Alia had two children, Ali and Yasmeen.

a group of friends and he started to express his frustration

Since he finished his studies in 2004, Ali is active in the family

about his situation. One of his friends captured his angry

business as a junior manager of Al Mamnoon Investment, the

speech on video and posted it online. What was supposed to

holding company. Yasmeen followed her father’s passion for

be a normal chat between a group of friends, now became

fine food and is a highly decorated Chef in London. With

hot gossip in the Kuwaiti business community.

offers to open her own restaurant in Europe, Yasmeen is still reluctant to join the family business.

Rashid and Khalid got together to discuss the situation of the next generation. After the discussion, they were both

In 2011, Ahmed and Marwa returned to Kuwait after the

unsatisfied: Rashid felt that Khalid did not want his children

political unrest in Egypt. The future of the Al Mamnoon

to join managerial positions, even though they had been

cotton factories was uncertain. Back in Kuwait Ahmad and

working for a while. Khalid on the other hand felt his brother

Marwa wanted to work as mid-level managers, as they had

was angry with him because of Ali’s remarks.

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Introduction FamilyBusiness2FamilyBusiness

Survey Results

After sending out the Al Mamnoon case study in a survey to over 100 family business executives, responses produced the following results.

On a scale from 1 to 5, how justified to you think Khalid’s negative reaction to giving Ahmed and Marwa managerial positions in the group?

Very unjustified

Unjustified

00%

42.86%

Neutral 28.57%

Justified 28.57%

Very justified 00%

Would it be beneficial for Ahmed and Marwa to have some education before joining the family in Kuwait?

Very unlikely

Unlikely

00%

00%

Neutral 00%

Likely

Very Likely

71.43%

28.57%

Will Ali’s action have an impact on the Al Mamnoon family reputation?

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Very unlikely

Unlikely

14.29%

28.57%

Tharawat magazine Volume 15

Neutral 00%

Likely

Very Likely

28.57%

28.57%

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FamilyBusiness2FamilyBusiness Introduction

Do you think that what Ali did is something that the family can control and solve internally?

85.71% YES 00% NO 14.29% Other: Has to be solved internally and publicly

Should the Al Mamnoon family consider getting into the food industry to fulfill Yasmeen’s ambitions?

71.43% YES 14.29% NO 14.29% Other: If beneficial, depending on a feasibility studies.

Results Summary for the Al Mamnoon Family

When summarising the results above we can see that respondents have the following opinions on the Al Mamnoon family case:

85.71% 71.43% 71.43% 42.86% The great majority of surveyed family members believe that the problem caused by Ali’s mistake can be solved within the family.

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Over 70% agree that the Al Mamnoon family should go into the food industry to fulfil Yasmeen’s ambitions and to provide her with a place in the family business.

Respondents believe it would be beneficial for Ahmed and Marwa to get some further education before joining the family business.

Less than half of the respondents believe that Khalid’s negative attitude towards his nephew and niece joining the business is not justified.

Volume 15 Tharawat magazine

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FEATUREs

FEATURES 16

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Discover the family business culture model explaining the impact of values on behaviour and artefacts.

A CSR type check list designed for family firms in the Middle East.

One of the most successful banks in Europe is familyowned and has established a family business fund.

Aligning Family and Business Culture

www.tharawat-magazine.com

CSR in Arab Family Businesses: A Checklist

Banca March-A Family Business Investing in Family Businesses

Volume 15 Tharawat magazine

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FEATURES

Aligning Family and Business Culture

Aligning Family and Business Culture

How to Create Competitive Advantage Originally an anthropological term within the social sciences, “culture” is, in everyday language, a word typically associated with the characteristics and customs of nationalities, religions or regions. Since the 1980s, the term “culture” has been applied to businesses and many companies now put considerable time and resources into strengthening their “corporate culture”. However, families have cultures too; it follows that, in a family business, a family can use its own culture to create considerable competitive advantage for its business. Alexandra Sharpe, Partner at Peter Leach & Partners, UK, expands on the considerable advantages that can be gained from aligning family and business values.

What is “Family Culture”?

drive and how the family dines together (types of

Every family, business-owning or not, has its own

food, quietly or loudly, formal or relaxed).

culture. In practice, family culture is what binds any family together, it is what informs people’s

Family Behaviours:

perceptions about a given family and it is what

The next layer within the culture model is

creates a family’s and reputation. It is what makes

“behaviours”, both conscious and unconscious:

every family unique. While, in theory, culture has

Within family culture, behaviours include how a

been defined and explained in many different

family deals with conflict, grief, celebration and

ways, a useful model for business families to

philanthropy, how a family shows love, greets

adopt, if they want to use their family culture to

new spouses, and has fun together. In summary,

create advantage for their business, is the one

behaviours describe how families go about their

depicted in Figure 1. According to this model,

activities and how are things get done.

culture is comprised of three layers, with family values at the core:

Family Values: At the heart of a family’s culture are the family’s

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Family Artefacts:

deeply held “values”: Values are what drive

An “artefact” here describes culture at its most

behaviour and what lead to certain artefacts

visible level: Artefacts are the surface-level aspects

within a family’s culture. Therefore, as it is

of culture that are easy to observe. Examples

impossible to observe values directly, people

within a family’s culture include the type of dress

interpret what a particular family’s values are

the family wears (traditional or modern, modest

by the way they behave and the artefacts they

or colourful), the sort of cars the family chooses to

observe. For example, you might infer that a family

Tharawat magazine Volume 15

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Aligning Family and Business Culture

FEATURES

Figure 1: Family Culture Model developed by Peter Leach & Partners based on social psychologist Edgar Schein’s conception of culture

Family Values

Family Behaviours

Family Artefacts

Family Artefacts

Artefacts are the surface-level aspects of culture that are easy to observe from the outside.

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Family Behaviours

Behaviours can for instance include how a family deals with conflict, grief, celebration and philanthropy.

Family Values

Values are what drive behaviour and what lead to certain artefacts within a family’s culture.

Volume 15 Tharawat magazine

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FEATURES

Aligning Family and Business Culture

that often attends charitable events includes philanthropy as a core value or that a family who spends a lot of time together deeply values “unity” or “togetherness”.

Family and Business: Implications for Culture When a family owns a business, things can get complicated: As much as a family has a culture, so does a business. Business culture can be structured into values, behaviours and artefacts. In a family business, the family and the business culture meet.

When both are aligned considerable benefit can be generated. A strong family culture aligned with a strong business culture can create a powerful brand identity, with an extra dimension that other business models simply cannot compete with. In addition, a strong connection between the values of the family and the business tends to result in a strong connection between the next generation of family members and the business. Moreover, a business with a strong value-led culture, owned by a family with strong, identifiable values and principles, can result in a motivated, high-performing workforce.

Firstly, families should articulate what their underlying core values are. This can be achieved,

At the start of the lifecycle of a family business, this

using the model of culture described above, by

alignment is created naturally as the founder creates

spending time considering what is unique about

the business with his/her own values; but as the family

their family’s artefacts and behaviours, telling stories

and the business grow, the culture of both becomes

and thinking about what the unwritten, unspoken

more complex and can fall out of alignment. In these

rules are within their family. Once understood, these

cases, either the family’s values change over time or

values can then be clearly communicated to future

the business’s culture evolves first. Therefore, after

generations and the accompanying behaviours that

the first generational transfer, additional attention is

are expected can be discussed. By a family discussing

required to ensure that the family business capitalises

and revisiting their values on a regular basis and

on its family ownership by continuing the alignment

of course through key family members leading

of the family’s and the business’ culture.

by example, the continuity of their culture can be maintained and passed down through generations.

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Using Family Culture to Gain Competitive Advantage

Secondly, once the family has clearly articulated its

In order for a business to gain competitive advantage

values, the next step to create competitive advantage

from a family’s culture, considerable work is needed:

from family culture, is to ensure that the family’s

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Aligning Family and Business Culture

FEATURES

In reality, it is not really about creating alignment; it is about constantly re-creating alignment between the family and the business culture. between the two, work can be done to ensure continuity of the business’ culture. This involves embedding the underlying values of the business into all of its systems and processes. Doing so within the HR function is especially important, as after all, it is a business’ staff that demonstrates the values of the firm on a day-to-day basis. For example, recruitment processes can be designed in such a way that people are hired whose values are consistent with those of the business, and appraisals and incentive plans can values are understood by external stakeholders:

be structured in a way that encourages employees to

This is how the identity of the family can add value

live the values of the firm.

to business reputation. Many families do this by either creating a booklet or adding this information

In reality, it is not really about creating alignment; it

to their website. The key here is that the values

is about constantly re-creating alignment between

communicated are not entirely of aspired nature –

the family and the business culture. As the family

the behaviour of the family must be consistent with

and businesses develop, so will their cultures and,

the stated values. If family members are observed

therefore, a continuous process is needed to enable

to behave in accordance with their values, over time

the family and business culture to evolve together.

people begin to expect certain positive attributes

By taking the steps outlined above and putting time

from them and considerable goodwill is created.

and energy into revisiting the culture of the family

However, if there is inconsistency between the values

and the business, a family business can generate

that are communicated and the behaviour of the

potentially

family distrust may arise.

advantage.

Thirdly, once the family’s values are understood, it is also possible to test to what extent they are aligned with the business. Assuming there is alignment

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powerful

long-term

competitive

Author Alexandra Sharpe, Partner at Peter Leach & Partners, UK

Volume 15 Tharawat magazine

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FEATURES

CSR in Arab Family Businesses

CSR in Arab Family Businesses A Checklist Family businesses are said to be the backbone of Arab economies. They are strongly embedded in their communities and consider themselves responsible not only for their own welfare but also for that of the people around them. They take great care in transmitting their values both to the next family generations as well as their non-family stakeholders. While culture and religion dictate many of these values, each family adds its own ingredient that often is based on a specific characteristic that can be traced back to the business founder.

Generally, philanthropy is a great part of Arab culture and there is need of it for the region faces many social and environmental challenges that need to be addressed by the private sector. Like many other things in the family business, strategies around social engagement, while successful, tend to be informal. More and more, however, strategic CSR activities are emerging with families dedicating funds to job creation, poverty alleviation, education, and the arts, which are aligned with their core business activities.

But what is Corporate Social Responsibility and how have and can Arab family businesses successfully implement it? In this article Ben Eavis, International CSR Manager at the world’s largest law firm, DLA Piper, and Ramia M. El Agamy, Editor-in-Chief of Tharawat magazine, propose definitions of CSR, why it is a fit for family businesses, and, finally, a CSR checklist providing you with a tool to find out what type of CSR strategist you really are.

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On Corporate Social Responsibility

Strategic CSR goes beyond charity and philanthropy,

Corporate Social Responsibility (also known as

it is about ensuring that businesses are serving the

Corporate Responsibility or Sustainability) can

interests of society and the environment, whilst

be defined as conducting business in a way that

in turn the self-interest of the company. The

not only aims to make a financial return but that

concept of CSR is underpinned by the idea that

encourages full awareness of the economic, social

corporations can no longer act as isolated economic

and environmental impacts of an organisation’s

entities operating in detachment from broader

activities. Corporate Social Responsibility (CSR)

society. Key areas of CSR include environmental

describes the behaviours of an organisation that

protection, the wellbeing of employees, financial

go beyond basic legal compliance and one that

transparency, suppliers ethical and environmental

promotes a vision of responsible business practice,

responsibilities and impacts on the community and

transparency, and accountability to stakeholders.

civil society in general.

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CSR in Arab Family Businesses

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A robust approach to managing CSR is to divide the business activities into four key areas: Creating jobs Community regeneration Strategic community engagement Employee volunteering Cause related marketing Company donations and philanthropy

Energy efficiency Waste management Supply Chain efficiency Carbon foot print reduction Sustainable design Biodiversity Environmental Management System

COMMUNITY

quality, diversity E and inclusion Fair pay and benefits Learning and development Reward and recognition Employee health and wellbeing Employee engagement Health and safety

ENVIRONMENT

Responsible marketing Responsible advertising Ethical and environmental standards of suppliers Treat suppliers as partners Respect customers and protect vulnerable customers

WORKPLACE

MARKETPLACE

A robust approach to managing CSR is to divide the

way that also creates value for society by addressing

business activities into four key areas:

its needs and challenges. The creation of shared value

Community - Managing the impact of the

is a new way to achieve economic success that links

business on the community

to the core of the business.

Environment - Managing the impact of business on the environment

CSR in Arab Family Businesses

Workplace - Ensuring the business has a diverse,

The Arab world faces many challenges on the social

skilled and healthy workforce and promotes

and environmental level: Unemployment, access

diversity, and fair pay.

to education, water scarcity, waste management,

Marketplace - Responsible business behaviour

employee equality, and many other issues.

throughout the supply chains and through the marketing and development of products and

Family businesses, especially in the Arab world,

services.

are uniquely well equipped to design lasting and successful CSR strategies. Due to their natural

Activities and policies within these four areas lead to

inclination towards longevity and their understanding

the creation of “shared value�, which can be defined as

of how their success depends on their standing in the

the policies and operating practices that enhance the

community, Arab family businesses inherently carry

competitiveness of a company while simultaneously

all the characteristics of CSR strategists.

advancing the economic and social conditions in the communities in which it operates. The principle of

Some have commented that Arab business families

shared value involves creating economic value in a

are not being strategic and transparent in their

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CSR in Arab Family Businesses

philanthropy. This criticism may stem from the fact that whilst many families are renowned for the their charity, it is rarely known whether they engage in actual CSR planning. It stands to argue that in a region where the concept of CSR is still relatively young, there may be very little visibility of those families that have CSR policies in place. It is known that many family businesses in the region have engaged in extensive activities for the purposes of job creation, poverty alleviation, environmental sustainability, equal treatment of minorities and many other causes.

The fact is that for Arab society at large, the longevity of family businesses is of the greatest importance.

In a way assuring the longevity of family businesses is a social responsibility in itself. This highlights how important it is for family businesses to educate themselves and others in the CSR field and to set an example for the private sector in the region.

How much CSR are you already doing?

Often family businesses are not aware to what extent they already engage in CSR activities. In family businesses this is often the case; many business

Often businesses are not aware to what extent they already engage in CSR activities.

families do not think twice about the “good” they are doing and rarely think of giving it names or formulating it into policies. Here are a few examples

legal services in the world. This engagement sees the

of family and non-family businesses that have made

firm utilise their greatest resource, their people, to

efforts in formulating CSR strategies aligned with their

contribute to their local and global communities.

businesses: Cause related marketing - Burjuman Shopping Centre, Community

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Dubai

Strategic Community Engagement - DLA Piper

The Burjuman Pink Breast Cancer Walkathon is

In each of the firm’s offices around the world, DLA Piper

an annual event to raise awareness and campaign

make a commitment to public services by dedicating

on breast cancer. This event not only raises a lot of

their lawyer’s time and legal expertise to projects

money for this worthwhile cause but in turn raises the

related to education, enterprise and equality. In 2011,

profile of the Burjuman shopping centre and increases

DLA Piper donated more than 193,000 hours, for a

customers visiting the shopping centre, thereby

contribution of $108 million worldwide through their

increasing revenues. Such cause-related marketing

pro bono and community engagement programmes.

when executed well is a classic win-win between a

This makes them the largest provider of pro bono

business and the community.

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CSR in Arab Family Businesses

Environment

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calories contained in their products. Within the

Zero waste - Interface

Middle East some fast food retailers even include

The carpet tile company, Interface, has developed a

the calories contained in their products on their

leading sustainability strategy called Mission Zero.

menus to enable their consumers to make informed

A key aspect of this strategy has been to eliminate

food choices. Many fast food companies have

all forms of waste in every area of their business.

introduced healthy alternatives to give customers

After achieving their early goals of sending zero

more choices, which do not have a detrimental

operational waste to landfill, Interface extended

impact on their health.

their efforts throughout their entire supply chain.

Workplace Energy Efficiency - UK supermarket sector

Health and Safety - Al Futtaim Carillion

The UK supermarkets regularly compete on prices but

Al Futtaim Carillion has a strong commitment

more recently the comparison has been redefined to

to health and safety and to ensuring that labour

the goal of energy reduction and efficiency. Tesco have

and safety standards of their own people as well

introduced the target of being a zero carbon business

as their contractors are a top priority. Improving

by 2050, whilst this is the most ambitious target it is

their health and safety performance is one of their

so far away that it is hard to relate to. Probably a more

key strategic objectives.

realistic and leading target is Sainsbury’s commitment to reduce their absolute environmental footprint by

Health and Wellbeing - Du

50%. This required a $1 billion investment but will

Telecommunication provider Du has developed and

eventually save the company money. Waitrose have

implemented an engaging, multi layered approach

similar targets but are a fraction of the size of the other

to helping employees understand and address some

two businesses.

of their cardiovascular risks by implementing a range of assessments, appointing a full time

Marketplace

physician, a calendar of health and wellness events,

Responsible Supply Chain - Burberry

activity programmes, educational material and

Burberry believes that its products should be made

workshops as part of its developing health and

only in factories that comply with local labour

wellbeing strategy. Engaging a workforce on a

and environmental laws and by workers who can

well-designed health and wellbeing programme

exercise their right to freedom of association as well

provides the basis for employees to understand their

as collective bargaining. Members of Burberry’s CSR

basic health needs (blood pressure, cholesterol,

team are ensuring the implementation of the policy

diabetes, weight etc.) to which small adjustments

throughout the supply chain, working in partnership

to their lifestyle (diet, activity level etc.) can have

with third-party auditors and NGOs as appropriate

significant impact upon their quality of life and

to approve and assess the activities of suppliers. The

performance, both at home and at work.

team conducted over 700 audits, capacity building and hotline interventions in 2010/11.

These are all examples of firms having implemented CSR strategies within the four areas introduced.

Responsible marketing - Fast food retailers

The shapes and forms of CSR activities, however,

There is a growing trend for fast food retailers to

are endlessly variable and naturally depend on the

openly disclose the nutritional content and the

business undertaking them.

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CSR in Arab Family Businesses

What type of CSR strategist are you?

Find out what type of a CSR strategist you are by going through the checklists below: Community You engage in philanthropic activities that have little or nothing to do with your core business Your family business reacts to ad hoc charity initiatives that are brought to your attention You support one or two charities per year

Workplace You have HR policies in place that enforce equal opportunities Your employees receive fair and reasonable pay and benefit from the work that they do Family and non-family employees are evaluated based on the same criteria You have health and safety policies in place Your employees are regularly asked for their opinions on matters concerning them Marketplace You enforce high quality in customer support You established a robust anti-bribery and corruption policy You are transparent and allow customers to make informed decisions (e.g. Health advice on cigarettes) You treat suppliers as partners.

You put in place fair payment terms for all suppliers

Community You collaborate with non-profit organisations to deliver community programmes and workshops You have employed a dedicated person responsible for community initiatives or CSR Your family board members are involved in community work You are actively sharing and learning from best practice in the region Your employees and family members take part in volunteering actions

Workplace You enforce CSR targets by including them in KPIs for your employees Your family and non-family employees, including board and management, are rewarded and recognised for their CSR work You have flexible working times and family friendly practices in place Your employees are given the opportunity to develop their skills through courses Marketplace You manage the impact of products or services and any unwanted consequences from normal use and actively discourage product misuse You actively manage ethical and environmental responsibility of your suppliers by implementing a policy on ethical and environmental sourcing You regularly realign your products and services to new market standards and social needs You address the issues surrounding the normal use of you core products (e.g. Toyota has popularised vehicles using less petrol)

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Tharawat magazine Volume 15

CSR Reactive You are a family business that is working on a strategy for its philanthropy and CSR activities.

Certain policies are already in place and are being enforced by individual family members. Your CSR practices are in their initial stages but have not spread throughout the whole family business yet.

Your family business is>>>

Environment You have developed an environmental management system that covers key areas of impact of your business You purchase more sustainable resources such as FSC certified wood products, recycled paper, etc.

You have formulated short term environmental targets

Your family business is >>>

Environment You undertake little or no environmental activities You enforce recycling in your company You react to proposed ad-hoc environmental initiatives such as beach and desert clean ups You talk over environmental issues in family meetings

You are a family business that is aware and reactive to social and environmental issues. While you are active in your community and care for your employees, you do not have a fixed CSR strategy in place and not everyone in the family is aware of the social and environmental impact of the business.

CSR Proactive

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CSR in Arab Family Businesses

Community You have established a strategy addressing community issues relevant to your business You measure the impacts of business and community benefits You are developing cross-sector partnerships and are shaping best practice in community investment Your family name is linked to various education and social initiatives in your community

Workplace You use volunteering as a tool to train and develop employees.

You have established a diverse and inclusive workforce You have developed a health and well being strategy and have implemented it Your family includes a commitment to CSR as a part of its value statements

You are a family business that has a CSR strategy and enforces it on many levels.

The whole family and all employees are involved in the CSR activities.

Your social and environmental engagement is the basis of your overall corporate strategy.

Marketplace You enforce responsible marketing of products (e.g. no advertising of products to children that are age-inappropriate) You audit suppliers to check compliance with policy on ethical and environmental sourcing You redesign products that can cause issues for consumers (e.g. removing fat, salt, sugar from food products) and withdraw harmful products from the market You develop cross-sector partnerships and shape best practice in responsible marketing and responsible supply chain management

Your family business is >>>

Environment You include environmental issues in board decision-making Your long-term environmental targets (5-15 years) have been developed and are being endorsed by the management and the family Your family has a reputation in environmental activism You look beyond your own business and work with suppliers and customers to reduce their environmental impact You develop cross-sector partnerships and shape best practice in environment

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CSR Proficient

This test is by no means exhaustive and there are many

from core business activities

more aspects that define types of CSR strategies.

Appoint a family sub-committee that constantly

Establishing successful CSR practices in your family

works on CSR strategy

business can only be done by understanding that

Learning from other family businesses in the

a full commitment is required. Ideally, the whole

community sharing best practices

family and all non-family employees recognise the need for social and environmental awareness. If a

By establishing CSR strategies and enforcing them

family wants to get started with its CSR strategy

throughout the organisation, business families can

or move from one type to the next, the following

create competitive advantages while at the same

recommendations may be helpful:

time meeting social and environmental needs of the community.

Understand what CSR means as opposed to

philanthropy and charity Consult with third party CSR and Corporate Philanthropy experts Sit with the family and understand social and environmental responsibilities that you derive

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Authors Ben Eavis Corporate Responsibility Manager International, DLA Piper Ramia M. El Agamy, Editor-in-Chief, Tharawat magazine

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Banca March Family business fund

The Banca March was established in 1926 on the Balearic island of Palma de Mallorca by Juan March and his family. The March family quickly expanded across the neighbouring islands and has since become one of the leading banks in Europe. After nearly one century of existence Banca March is still entirely family-owned. Apart from the Balearic Islands, it has branches in the Canary Islands, Madrid, Barcelona, Zaragoza, Valencia, Alicante, Malaga, Cadiz, Luxembourg and London. The March family has always been known to invest into other family businesses. Recently, the family-owned bank has taken this strategy a step further by creating a family business fund. Tharawat magazine explores what makes a family business invest in family businesses.

Banca March

A Family Business investing in Family Businesses

About Banca March

and is one of the largest Spanish financial groups

The Banca March Group includes a variety of

with one of the highest solvency ratios in Europe

activities such as banking, investment and pension

(Core Capital of 26%). The bank is now in the

fund management, handled by March Gestión,

hands of the four brothers and sisters of the third

as well as insurance activities. Through its listed

March family generation: Carlos, Juan, Gloria and

holding company, Corporacion Financiera Alba, the

Eleonor March. With the fourth generation slowly

March group also owns long-term stakes in Spanish

taking their place on the company’s board the

firms. In recent European banking stress tests the

family seems to be gearing up for another century

Marches came out on top, which in the public eye is

of family ownership.

to a great deal attributed to the bank being owned

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by a family with conservative values and business

Banca March is probably the only family-owned

ethics. Banca March has been ranked the first bank

Bank in Spain and today employs over 1400

in Europe for two years in a row by the World Bank

people. The March family is also known for its

Tharawat magazine Volume 15

26 percent

Banca March is one of the largest Spanish financial groups with one of the highest solvency ratios in Europe (Core Capital of 26%).

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Banca March Family business fund

1955

FEATURES

philanthropy; it established the Fundación Juan

bank holds family businesses in most of its private

March patrimonial and operative institution

investment portfolios. Taking their committment

dedicated to fostering culture and the arts in

to family-owned firms a step further, Banca March

In 1955 the Fundación Juan March was dedicated to fostering culture and the arts.

1955. Through the Fundacion, the March family

established a unique portfolio that only invests in

also supports research in its Centre for Advance

family businesses. But why are family businesses a

Studies and sponsors the Banca March Chair of

good investment? According to José Luis Jiménez,

Family Business at the University of the Balearic

CEO of March Gestión, family businesses are more

1400

Islands.

profitable than non-family business in the long-

year

employees Banca March employs over 1400 people.

run partly because they are more conservative:

The Family that Invests in Families

“Anytime you talk to a family member, they are

The March family has always considered family

talking about the next generation and what they

businesses a viable investment opportunity. This

want to leave them. They are not only talking about

strategy has led to considerable success and the

short-term results.”

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Banca March Family business fund

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Fact is that more than 15% of the companies listed

Most family businesses on the long run perform

in S&P 500 and Stoxx 600 are family businesses.

much better than non-family business. The Banca

Moreover, historically, family businesses have

March has experienced this first hand by investing

outperformed non-family businesses and also have

in them for the last 30 years and carrying out

percent

a better earning predictability. The Banca March’s

specific research on this topic. The research

family business fund is a vote of confidence that

appointed by Banca March aims to explain why

the intrinsic values of family businesses heighten

family businesses perform better than non-family

their odds of survival even during economic crises.

business. A first conclusion is that family businesses

25% of the company at least must be in the hands of one single family.

grow and create employment despite the crisis and

How Families Qualify

that they seem to go for low leverage and controlled

For a family firm to qualify as an investment

risk in investment.

opportunity in the eyes of the Banca March, 25%

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of the company at least must be in the hands of one

Banca March did not only start the fund because

single family. Ideally, a senior family business member

of its own convictions with regards to family

is active in the executive committee or the board

businesses but did it in response to investors

of directors. The March family feels that a family

asking for such opportunities. Many family offices

member involved at top level is an advantage because

for instance seem to prefer to invest in family-

they know their business better than anyone else.

owned companies because they are aligned with

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Banca March Family business fund

FEATURES

Through its family business fund, the March family does not only think of the next generation of the family but applies that thinking to the next generation of investors as well. the organisation to the next generation. However, Banca March has found that companies that have reached the third and fourth generation mostly show the greatest potential as they tend to have strong protocols and structures in place. The

30 years

The Banca March has experienced this first hand by investing in family businesses for the last 30 years.

March family knows from its own decades of family their clients’ values and philosophies. Through its

history which faced them with many economic and

fund the March family has invested in all types of

political changes, how crucial such structures are

family companies: The core criteria is the quality of

and how they increase the odds of survival for

the business model not the origins of the business

family businesses.

or even its sectors or market capitalization, as confirms José Luis Jiménez. The fund selects the

Through its family business fund, the March

right businesses through its investment committee;

family does not only think of the next generation

a body constituted by the bank’s most distinguished

of the family but applies that thinking to the next

professionals who undertake an analysis of the

generation of investors as well. The family has its

economic environment, as well as the investment

own wealth fund and continues to invest, along

strategy with regard to the family businesses.

with its clients, into family businesses. Certainly, seeing a century-old family business such as the

Considering the Stage of the Company

Banca March investing and believing in family

Whether a family business is a good investment

businesses, cannot fail but be credible and,

opportunity or not is largely determined by what

hopefully, encourage others to do the same.

stage it is at. If the company is at a transition stage it can be riskier to invest as not all family businesses have been successful in handing over

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IN COLLABORATION WITH José Luis Jiménez, CEO, March Gestión

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SPECIAL FEATURES

Next Generation Special Features

the

driving the family business into the future

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The Next Generation: Visions of the Future

A Conversation with Prof. Craig Aronoff

Dialogue between Generations: The Elnefeidi Family, Sudan

Interview with Razan Jafar, Crescent Petroleum

Q&A with Dr. Rania Labaki: A Successful Next Generation

Opinions and quotes from next generation members.

Perspectives on the next generation in family businesses.

Dialogue between the second and third generation members of the Elnefeidi family.

Insights and advice from a next generation family business member.

Discussion on a successful next generation.

Every family business, no matter what its origins are, is concerned with the next generation. For many business families success is not only measured by its financial performance and growth, but also by how successfully the firm transitions from one generation to another and for how long the family retains ownership. The role of the next generation comprises the responsibility to preserve what was built by the parent generation and to leave its own mark by creating new value. Family members are considered part of the next generation at all ages as not only those family members that have just joined the business are included, but also those that are at senior management level. This special feature section is dedicated to the next generation. In a series of expert articles and interviews with family business members, we explore the various challenges that the next generation faces, what advantages it can bring to the family business, and why it is so important to communicate expectations between family members.

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SPECIAL FEATURES

THE NEXT GENERATION: VISIONS OF THE FUTURE

The Next Generation:

Visions of the Future The Next Generation of family businesses harbours talent, innovation, and more than anything opinions. Tharawat magazine recorded views of seven successful family business members and their insights on helping the business and the family ahead.

Anees Sultan Head of Supplies Division W.J. Towell & Co., Oman

I see the parent generation managing stakeholder with great levels of trust and respect. I would like the new generation to continue this practice, although I would suggest that levels of trust are checked with appropriate levels of independent views and advisors as stakes are usually higher as one becomes involved in group business level discussions, and allegiances have a tendency to shift with people’s interests.

Respect, however, is something that I see missing in many new generation managers, which includes respect for the staff, for the client (many don’t even visit or know their clients) and indeed respect for work. This can be evident in showing up late or not working for a targeted goal or KPI. I would encourage the young generation to study engineering, IT, law, accounting, finance, or even medicine and economics, but not necessarily have a long-term career in these fields. The discipline and knowledge, as well as the analytical framework is essential in today’s business environment. Business requires a lot of value-added production and the world is infinitely more competitive now than before.

On managing family, I think many parent generation members don’t start handing over part of their skills and knowledge until late in the game. This puts the new generation at a great disadvantage and may threaten the stability of the business. I feel they should make their voices heard and should organise meetings with the elders to stress the issue of the gradual time-honored hand over, provided of course they have acquired adequate levels of knowledge and experience. The next generation should instill a sort of training academy for all future generation, make a budget for it and run a highly competitive program to shape the best possible talent to lead the business in the future.

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THE NEXT GENERATION: VISIONS OF THE FUTURE

SPECIAL FEATURES

Raid Maqbool Sultan Marketing Manager 5th Generation W.J.Towell & Co., Oman

In terms of job responsibilities, family members should be treated the same as non-family members. However, family members’ career paths are different, because they end up owning and managing the business.

They need to be retained and the best way to treat them differently is to train them. Of course, planning education for the family members needs to be aligned with their career path.

Saleh Mohammed Al Habib VP Business Development, Moh’d. Al Habib Real Estate 2nd Generation Al Habib Holding, KSA

Family members should not be treated differently from non-family members. It’s not healthy for the business and it might affect the sustainability and the retention of talent.

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THE NEXT GENERATION: VISIONS OF THE FUTURE

Abdullah Al Zubair 3rd Generation The Zubair Corporation, Oman

Succession planning is one of the main challenges for family businesses, without it companies will most likely suffer and, in some cases, might not only end family relationships but also the business itself.

Zaid M. Al Habib

Abdullah M. Al Habib

Zaid Mohammed Al Habib External Auditor – Ernst&Young 3rd Generation Mohammed Al Habib Holding, KSA

As long as the family business has an educational plan for the next generation in place, they should invest to achieve it. The success depends on the plan itself; it has to be focused on developing the individual’s skills and potential, which will be used for the progress of the institution.

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THE NEXT GENERATION: VISIONS OF THE FUTURE

SPECIAL FEATURES

Loay Anwar Ali Sultan Supply Chain Officer 5th Generation ENHANCE (Towell Group Company), Oman

It is important for the new generation to work outside the family business, especially if they work in wellknown regional or international organisations. This will allow them to confront different kinds of opinions and gain wide experiences, which they can apply once they join the family business. It will also teach them to be more responsible in their decisions as they are treated as normal staff and not as business owners.

Caroline Fattal Fakhoury Vice President 4th Generation Fattal Holding, Lebanon Managing Partner, Praesta Middle East

I strongly support the idea of having clearly written conditions of employment for family members wanting to join their family business. It is a key piece of the family governance jigsaw that sets expectations and helps avoid potential nepotism and related family conflicts.

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SPECIAL FEATUREs

Perspectives on the Next Generation in Family Businesses

A Conversation with Prof. Craig Aronoff

Perspectives on

the Next Generation in Family Businesses

Prof. Craig Aronoff has been in the family business field for near to 40 years. In 1994, he established together with family business pioneer and colleague Prof. John Ward the Chicago-based Family Business Consulting Group, which grew to be a hub of family business experts, serving family businesses in the US and internationally. Aside the vast amount of written material that Prof.

Aronoff has produced over the years as an academic and consultant, he has also worked with hundreds of business families. Tharawat magazine taps into his extensive knowledge and finds out more about him, the agenda he sets for family businesses today, and his recommendations to the next generation.

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Perspectives on the Next Generation in Family Businesses

C

SPECIAL FEATUREs

raig Aronoff was born the eldest of three children in Atlanta, Georgia. In his youth, Craig used to help out in his father’s small entreprise. Looking back at that time he confesses: “It became clear to me by the age

of twelve that I would not join my father’s business. I started to make plans to leave for college when I was still in 8th grade and that is what I did.” Craig Aronoff became a business management professor, teaching organisational behaviour, theory, and communication for many years.

When we hint at his reputation as one of the pioneers in family business research and education, Prof. Aronoff modestly replies that family businesses have always been of interest to many but that the subject had been neglected mid20th century, when researchers steered their focus towards the management of multinational corporations: “Everyone was serving primarily large public corporations and moved away from helping individuals developing resources for their families and communities. I feel that we have gotten back to a more traditional view nowadays.”, he says and confirms our belief that looking at the family business model is more relevant today than ever. In 1994, together with Prof. John Ward, he founded The Family Business Consulting Group, Inc. resulting in his collaboration with hundreds of families all over the world.

When a family business is successful, it becomes all about taking responsibility and assuming stewardship.

The Relevance of Family Businesses The role of family businesses remains undiminished in today’s economies: They are often principal job creators

Studies show that many of the largest businesses in the

and community benefactors. “I think it has always been the

world are or at least started out as family businesses.

role of family businesses to act in a way that is responsive

“Economies should really be looked at as stools with

not only to the economic but to the social and cultural

three legs: Governments, publicly traded enterprises, and

needs of their communities. A business family’s view on

privately owned entreprises.” Prof. Aronoff declares. “Such

making money tends to be fundamentally different from

a stool can be awfully wobbly if the latter leg is not there

that of non-family corporations. When a family business is

and in an economic era like the present we feel this keenly.”

successful, it becomes all about taking responsibility and

He adds that in times of crisis family businesses tend to be

assuming stewardship.”, adds Prof. Aronoff. It is why, even

more people oriented and are known to retain staff in spite

after several decades, he continues to enjoy his work with

of down-turns; a strategy that is shown to be rewarding

business families.

when economic times improve.

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SPECIAL FEATUREs

Perspectives on the Next Generation in Family Businesses

The Changes in Understanding the Family Business Like any other discipline, the family business field and best practice has changed considerably over the years. When we ask Prof. Aronoff about this, however, he underlines, that it

d) Assuring outstanding leadership for the family and the business. e) Developing policies for the integration of the next generation.

is more likely that it is our understanding of family firms that has evolved rather than they in themselves. In his decades of

Prof. Aronoff further elaborates: “Our understanding of how

experience, he has seen the family business practice focus shift

the family business works is broader and more systemic. It

from a management to an ownership and family relationships

is not just reduced to picking the best manager or CEO. For

related approach. According to Prof. Aronoff, the priorities for

example, I remember once working with the third generation

family businesses nowadays are the following:

of a family business; they were three cousins. The initial

a) Understanding what it means to be owners.

question that concerned the second generation was who

b) Having a vision as owners and agreeing on values and

should lead the business. I convinced the family to let the

goals by learning to speak in one voice. c) The setting up of a good governance structure.

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three cousins work together to articulate their visions for the company, their understanding of the relationship between

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Perspectives on the Next Generation in Family Businesses

The mistakes in dealing with the next generation:

1

Raising children with a sense of entitlement

2

Leaving the next generation a legacy that is hard to structure

3 4

SPECIAL FEATUREs

Founders tend to create high accountability for themselves but do not create management models that are easily replicable. best practice for yourself. Rather than doing so I encourage anyone to observe what mistakes others make and to learn from them.” He identifies the following four major mistakes he has witnessed in family businesses dealing with the next generation:

Falling short of fostering strategic awareness

The first mistake often happens in the early childhood of family members: If children are raised with a sense of entitlement and no understanding of hard work, things become tricky very early on. “Sometimes allowing your children to fail and learn how

Paying inadequate attention to building family identity

to overcome adversity can be greatly beneficial.”, underlines Prof. Aronoff. He adds that if children are raised believing that they are not accountable, it could lead to serious problems in the family business. “You can hire non-family CEOs and other executives and keep the business going to buy time, but you still need to develop the key qualities in family members if you

the business and the family, and their view on governance

want them to take responsibility.”

structures. The three cousins came back to their elders with a 25-page document including their collective vision

The second mistake Prof. Aronoff observes in business

of the future. They had concluded that the issue wasn’t so

families, is to leave the next generation a legacy that is hard

much which one of them would become CEO, but rather

to structure. The founding generation often enjoys great

the company’s ability to establish the right kind of business

autonomy. Founders tend to create high accountability for

structures, vision, and goals in order for the family business

themselves but do not create management models that are

to survive for many generations to come.“

easily replicable. The next generation is then confronted with the dilemma of deciding what structures to apply, which

The Mistakes in Dealing with the Next Generation

can lead to conflicts, as Prof. Aronoff emphasises: “This is

One of the main concerns for family businesses remains

usually a first to second generation, although sometimes

the successful handover to the next generation. When we

even a second to third generation problem. One of the

ask Prof. Aronoff about the best-practice in successfully

greatest mistakes that can be made with the next generation

dealing with the next generation he argues: “Going out and

is to underestimate the importance of establishing a good

accepting somebody else’s idea of best-practice means that

governance system to make it possible for them to carry on

you are resigning yourself from the beginning not to create the

the legacy. It is like setting them up to fail.”

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Perspectives on the Next Generation in Family Businesses

The third mistake Prof. Aronoff describes as follows: “Founders or parent generations often have strategies, which

Major areas of responsibility of the next generation:

though brilliant, are not clearly articulated. Formulating strategy is a meaningful process leading to better understanding your strengths, weaknesses, opportunities and threats. The discipline to implement and change your strategy is necessary.” According to Prof. Aronoff it is only through fostering this strategic awareness that a successful way of integrating the next generation into the family business can be found.

The fourth mistake is inadequate attention to building family identity, cohesiveness and teamwork. In sibling and cousin generations, family teams typically fulfill the responsibilities of governance and ownership and often, management as well.

How the Next Generation Can Make it Work Equally important as avoiding the above mentioned mistakes, are recognising the responsibilities of the next generation members towards the family business. Prof. Aronoff defines five major areas of responsibility that the next generation should address to make it work: 1. Considering the multiplicity of roles and responsibilities any family business member faces, the right education is a key factor for the next generation to be successful. “How can you formulate your vision?”, Prof. Aronoff asks. “You do it by educating yourself, you do it by studying, you do it by

1

Articulating your vision

2

Becoming a deserving heir

3

Making the most of yourself in every respect

4

Innovating within the framework

5

Practicing patience

thinking, you do it by interacting with other successful family businesses, and you do it by understanding the required compromise. And why do you have to do these things? To

business itself.” He mentions the great risk of ‘Successors,

prepare yourself to articulate a vision for yourself and for

who want to be CEO, but don’t want to do CEO’: “They

your family business, which you’re going to be responsible

want all the perks and the status and respect, but they fail

for at some point.”

to understand that continuously building the family business and others commitment to it are huge responsibilities.”

2. “You have got to show that you are a deserving heir,”,

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Prof. Aronoff begins emphatically, “and you have got to do

3. The world continues to change at a fast pace and family

that through mental labour: Work on gaining perspective,

businesses must change with it. The next generation holds a

maturity and discipline as well as accountability. The

crucial role in this: “The world changes and we depend upon

combination of all these factors will not only preserve but

the youth to embrace and understand new technology and

advance the family business. It is about leadership in the

its implications. If they are really seeking to grasp how the

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Perspectives on the Next Generation in Family Businesses

Part of the strengthening process for the next generation is to learn how to intellectually confront their elders. I think that it can be done respectfully, and that the conflict is not necessarily a bad thing.

SPECIAL FEATUREs

seem to have the intention ever to retire. Sometimes these next generation members are in their 40ies and 50ies and want to know whether they should stay or whether they still should try themselves outside the family business.” Prof. Aronoff pauses, reflects, and then resumes: “Either decision is the right decision if you make it for the right reasons and either decision is the wrong decision if you make it for the wrong reasons.” He continues to explain that as a rule, if the next generation is not retiring by the time they are in their 70ies, he encourages the next generation members to go and talk with the older generation. “If the parent generation confirms that they do not intend to leave the business in the foreseeable future then a next generation member might want to consider

world works, and how not only they themselves but their

what that means to them. They might want to join another

enterprises, resources, and assets can fit into it in a more

organisation where they can provide leadership more directly.

productive way, family business continuity becomes more

This can be done respectfully and without resentment towards

likely. As a next generation you need to find the motivation

the family business if everyone communicates successfully.

to want to make the most of yourself, understanding that you

There may always be a way back into the family business at

are potentially set up to have a great impact on the world,

a later stage. I recommend to be broad and flexible in your

your community, and your family.”, stipulates Prof. Aronoff.

understanding of the roles in your family. Combine that with patience, communication, and taking responsibility for

4. He goes on to explaining that, in order for the next

yourself. Don’t sit there and wait for life to happen to you.

generation to make things work, they should understand

Done well, you can find success whichever decision you take.”

that family business values can be implemented in numerous different ways. Maintaining the family’s values does not

It Cannot Always Work Without Conflict

mean that the next generation needs to deploy them in the

Many next generation members reading this will inevitably

same way as previous generations. “Being innovative within

feel the urge to protest and say that they have tried to

an existing framework is an art that the next generation

contribute in various ways but were either discouraged or

needs to learn how to master. Those who succeed usually

the attempt resulted in conflict. We ask Prof. Aronoff whether

develop into leaders. It’s those who are kicking and

he thinks that conflict can be avoided when next generation

screaming because they are not getting their way who

members try and make their mark in the family business:

will not make any progress. It is very much like achieving

“I’m not sure if it can be accomplished without a little bit

happiness: If you pursue it directly you don’t get it but if you

of conflict. Part of the strengthening process for the next

pursue it indirectly it often becomes a by-product of all the

generation is to learn how to intellectually confront their

other things that you are doing.”

elders. I think that it can be done respectfully, and that the conflict is not necessarily a bad thing. You learn over time

5. “Then there is probably the most crucial factor to make

how to skilfully inject your own thinking into the family

it work in the family business.”, here Prof. Aronoff smiles

business.” Prof. Aronoff smiles affectionately when thinking

indulgently. “Patience is what is hardest for the next

of the family businesses he has worked with over the years

generation, and it truly is very hard to be patient. I have been

and adds: “I agree that it is never simple or easy; but then

in a position to advise a number of people whose parents don’t

again nothing worthwhile in this life ever is.”

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SPECIAL FEATUREs

The Elnefeidi Family, sudan

Dialogue between Generations:

The Elnefeidi Family

Sudan

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The Elnefeidi Family, sudan

SPECIAL FEATUREs

The Elnefeidi Group is one of Sudan’s most prominent family businesses. The late Bashir Elnefeidi, founder of the Elnefeidi Group, started to work with his two brothers in 1934 in a small retail shop, which they grew into wholesale trade. This partnership continued until 1974 when Bashir started to focus his activities on transportation. The brothers expanded the business into other sectors such as agriculture, the oil industry and property development. The family’s investment activities kept on growing under the leadership of Bashir and expanded into the largest transport companies in Sudan and excelled in Chad, Ethiopia and the horn of Africa. Over the years, the Elnefeidi Group diversified into industry, trading and other services. Tharawat magazine met with Amin, Wafa, Hussein and Musab Elnefeidi and witnessed an insightful dialogue on values, the next generation and the future of the family firm.

Amin Elnefeidi, President, Elnefeidi Group, 2nd generation Wafa Elnefeidi, Graduate from Towson University, 3rd generation, currently employed outside the group in the field of marketing at Bank of Khartoum in accordance with the family protocol (two years external experience required before joining the family business) Hussein Elnefeidi, Board Member and General Manager of Seven Rent-A-Car, Elnefeidi Group, 3rd generation Musab Elnefeidi, Graduate from Liverpool University as Mechanical Engineer, 3rd generation, currently employed outside the group at Kenana Sugar Company Chris Venter, HR & Admin Director, Elnefeidi Group

What are the chief character traits of the Elnefeidi

second generation has really taken what the late

family?

founder established to the next level and expanded the business beyond the field of transportation.

Hussein: I think we are patriotic and humble.

The family is always extremely particular about values and ethics.

Musab: I would say we are a very tightly knit family.

What are the core values that the Elnefeidi group Wafa: I think we are humanitarian, in sync, and put great

stands for?

emphasis on values and traditions.

Amin: We grew up in an environment in which we care Chris: The Elnefeidi family really embraces people and

about what our investment add to the community.

involves you into the family. They are known for

We want to instill this in our third generation like

that and also for their social responsibility. The

my father did with us.

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The Elnefeidi Family, sudan

Musab: I think to our family it is important to be seen for the values we stand for, which are clearly aligned with the needs of the community and should benefit all stakeholders.

What would you like the business to stand for in the future?

Hussein: We want to develop the country. We always look at how our investments are going to help the community. I guess that is what I meant by us being a patriotic family.

Amin: Yes, we always think about how our businesses can add to the community. Recently we have been concentrating more on agriculture. We think that this adds not only to Sudan but to the whole region. We are also getting interested in green energy.

These are the areas that we want to focus on.

What do you think are the three main characteristics that a family member needs to be successful?

Wafa: Use your individuality but at the same time stay in sync with everyone. If you lose your individuality you lose what you can bring to the business. Another point is open communication; communicate clearly what your vision is. For me the most important thing is not to get lost in problems but to maintain what makes you unique. Thirdly, don’t lose sight of what the vision of the company is and how it was run by the first and the second generation.

Musab: I also think that being on good terms with all family members is important, as well as to be well educated and self-motivated.

Hussein: In addition to what I said earlier I think that ethics, integrity, being hard-working, down-to-earth, and understanding is fundamental.

Amin: I think commitment and being open to say what you believe in is crucial. But at the end of the day you have to be flexible and align yourself with the family’s needs.

Chris: The Elnefeidi family does not take a decision unless there is full

I think that ethics, integrity, being hard-working, down-to-earth, and understanding is fundamental.

agreement. Decisions are not finalised unless the family has fully

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The Elnefeidi Family, sudan

SPECIAL FEATUREs

discussed matters and listened to all perspectives.

They never give up the belief in this family. Family comes first, even before the business.

What do you think the next generation should bring to the family business?

Hussein: The next generation should come up with new ideas that are good for the company and that the family can benefit from. They should maintain the values of the business while trying to grow it.

Wafa: I would say that the next generation needs to keep the momentum going. Our third generation includes members from aged 1 to 36 years. We like to divide it into generation 3A and 3B and 3C. Hussein, Musab and myself are the generation 3A and we want to keep the momentum so generation 3C can still benefit and be exposed to the same values the second generation has transferred to us.

Amin: I believe the next generation should think of how they can develop the family’s investment and make it more advanced and more beneficial to the community. This should come before implementing new ideas. New ideas are good because improvements always open new horizons.

When we added new lines to the business we didn’t neglect the existing core activities and we always tried to improve it. That this is what we

I suggest finding common ground between different generations and using that as a stepping-stone to get over issues that may come up later.

would like to see the third generation doing. We developed the family business from a company that depends on owner’s management into a corporate structure. We need the next generation to reinforce this. This is why an outside experience is very important for young members before they join us because we need them to bring in new ideas.

This cannot be done unless someone has the chance to be exposed to the outside world, experience which they can then transfer to the family values.

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The elnefeidi family, sudan

Does the role of the parent generation change when the young family members join the business?

Amin: It should! We are expecting their ability to take over responsibility to increase day by day. The next generation should relieve the parent generation from a lot of the duties and the role of the parent generation should be more about directing and planning rather than day-to-day work. This is our hope.

Chris: We have successfully integrated several members from the third generation so far. Now there is even a detailed process in place to take care of the next generation joining the business and the responsibilities that should be appointed to them.

What do you think the measures that could be put in place in order to ensure that no misunderstandings can occur?

Amin: The best measure is good communication. We are trying to set a good example for the next generation. We try to open a dialogue and to set rules for the family like the family protocol, and to be fair in judgment but it’s not an easy thing to do.

Wafa: Sometimes I wish there was a magic dust that you could use to trade bodies with someone else for a day in order to understand other family members’ perspective. Communication is hard sometimes. I suggest finding common ground between different generations and using that as a stepping-stone to get over issues that may come up later.

Musab: It’s the way that we were raised that makes the big difference; we grew up seeing how close our uncles were to each other. It helped

Being on good terms with all family members is important, as well as to be well educated and self-motivated.

us with our siblings and cousins. We all live close to each other and see each other everyday, which we love.

Wafa: We were raised as siblings, not as cousins. Most of the time our cousins are also our best friends. We spend a lot of time together even with the extended family, which is good for the business as well.

Hussein: We want to preserve what our ancestors left us and just carry it on. I think we trust each other a lot. It is this trust that makes us succeed.

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Interview with Razan Jafar, Crescent Petroleum

Interview with

Razan Jafar Crescent Petroleum

On Being Part of the Next Generation Crescent Petroleum is an upstream oil and gas company with headquarters in Sharjah, UAE, and offices all over the world. It is part of the Crescent Group of companies, which includes activities in power, port management, logistics, contracting, healthcare, private equity and real estate. The group has been in existence for over four decades and behind its success lies the hard work and full commitment of the Jafar family. Today, the family is making the transition from the first to the second generation. In an exclusive interview, Tharawat magazine gets to know the Jafar family’s youngest member: After graduating from Cambridge University, as well as completing her legal training at the Norton Rose Group, Razan Jafar is following her father and two brothers’ footsteps into the family business and is leaving a mark very much her own.

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The Outside Experience

throw you in the deep end.’ I said to him that I wanted to be

We are sitting opposite a young woman who cannot be

able to stand on my own two feet. My brother Majid argued

described as anything else but a “modern lady”. “I have never

that it was important for me to work in a law firm and, if

done an interview like this before”, she says modestly. Fact is

I liked it, I might want to do that and not join the family

that Razan Jafar is the youngest of the Jafar’s second family

business.” Razan’s eldest brother Majid himself started his

business generation. Less than a year ago she followed her

career outside the family business. Feeling that this was an

two elder brothers Majid and Badr into the family business,

important experience, he strongly believed his sister should

Crescent Petroleum. We wonder whether it has always been

be given the same opportunity. Razan did get a job at a top

Razan’s plan to join the family business and get a charmingly

London-based international law firm, and qualified as a UK

direct reply: “To be honest, it wasn’t. It’s a very recent

solicitor. “I enjoyed what I did; I found it very rewarding.

development. When I graduated I applied for jobs to get

Then I truly was intrigued by the family business and I

a legal training contract, which is usual for law graduates.

wanted to explore it.” She adds that the fact that she loves

One day my father asked me ‘What are you doing? You’re

her family played a great role in this. “I respect my father and

going to come back and work with me!’” Razan recollects

brothers not just because they are family but also because of

her father’s words affectionately. “My father said: ‘You will

what they do and how they do it. I did hesitate before joining

learn way more with me. I will give you real work and I will

the family business. Once you’re in, you’re in!”

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The Inside Experience Razan’s external experience provided her with qualities she felt she would need in the family business.

“You learn good habits from working full-time at multi-national corporations, and it’s so important to acquire that discipline early on in one’s career. I learnt so much that can’t even be pinpointed but it all adds up to value that I hopefully bring to the family business”, she says, thinking back.

As soon as Razan joined the family business, her father gave her a lot of responsibility. She confesses to us that she had never been more nervous than during her first few weeks in the family business. “In a corporate environment you know your place and you know everybody else’s place too. When my father said he’d throw me in the deep end, he meant it! He told me to handle most things myself and to use my own judgement.” Razan goes on to describe how her father’s confidence in her gave her more confidence in herself. She soon found herself participating actively and usefully making her mark in the business. “It has been really great and things have changed rapidly in my life: I studied law but when I joined I wanted exposure to all aspects of the business, and to see it from all viewpoints and not just through a legal lens.

My brothers’ roles are really specific as they have been in the business for a while and have established their own domains, using their individual strengths for the ultimate benefit of the business. I am not at that point

When my father said he’d throw me in the deep end, he meant it! He told me to handle most things myself and to use my own judgement.

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SPECIAL FEATUREs

Interview with Razan Jafar, Crescent Petroleum

yet; it will take time. I am a director at the group level and I

us as second generation members. He encourages us to

sit on the board, but to know exactly what I want to do, and

take the reins effectively. Since we joined the business he

more importantly where I can usefully contribute and add

is mostly handling high-level matters. He wants to give us

value, I want to spend a year doing a bit of everything. This

the responsibility and is open to our ideas. We are given the

includes shadowing my father and working directly alongside

room to breathe and be creative, and I know that this is not

him.” Razan affirms that her legal training gives her a unique

usual, especially not in family businesses.”

view of the family business, yet after joining the business she discovered that she enjoys many other areas as well.

The Next Generation Challenges Next generation members often face challenges in the family

How it Feels

business especially when they have just joined it. Razan

In many ways Razan describes her experience in the family

knows of a few: “A great challenge for the next generation

business as a sort of process that helped her come into her

family members is to be treated as professionals in their own

own. She tells us that even though she had done well in

right by others. It can be difficult to gain respect inside and

all her studies and also in her previous work experience,

outside the family business, particularly by the old hands.

she still never felt as if she had quite gotten the confidence

When you tell people that you work for your family they

that went with her position. This changed when she joined

sometimes believe that you have an easy life. I think that

the family business. Razan leans back into her chair and

there is absolutely nothing wrong with the parent generation

frowns a little: “The one thing that I did feel when I got here was that I have relevant knowledge. I surprised myself by understanding that all my skills had grown over the years and that I could now use them effectively. My confidence started growing when I shared ideas with my father; he liked them and encouraged me to share them with others.”

In a company that is all about chemistry, physics, and engineering, the young woman sitting opposite us is finding her way. She is the first woman to join the family business at the executive level. She laughs outright when she confirms

I think that there is absolutely nothing wrong with the parent generation being tough on the next generation; I think it is even healthy for everybody else in the business to see this.

that sometimes she is even the only woman in the room.

“All the senior executives here are men. But I am used to it now.” Man or woman, Razan believes that every individual

being tough on the next generation; I think it is even healthy

in the family brings different strengths to the table. The

for everybody else in the business to see this. It is normal to

three Jafar siblings complement each other in the business

work twice as hard to earn the respect of your peers and of

and also have a strong relationship outside the office. “We

your colleagues to demonstrate that you are in the business

socialise together and enjoy it. We don’t talk about work; we

because you want to be but also because you deserve it.”

talk about personal things and share everything together.”

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Razan’s face lights up affectionately. “We are there for each

Another challenge Razan identifies for the next generation is

other.” When we ask her what she thinks the secret ingredient

one that depends on the stage the family is in; she explains:

is for this type of family cohesion, she has her answer ready:

“You need the right governance system in place. A family

“My father is not a typical first generation member; he is

business always has real challenges, so the rules are best

very hands off and he is happy to delegate, particularly to

addressed and put in place early on. It is up to the next

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SPECIAL FEATUREs

generation to implement these systems and enforce them.

a casual place, and really being a family is important. When

Fixing a problem or an issue is much harder than preventing

you do that you realise that business is important but family

it in the first place.”

is equally if not more so.”

“But I think that the greatest challenge of all is to maintain the

Finally, Razan puts it very simply: “The role of the next

awareness that as new family generations join the business,

generation is to preserve old value, to create new value,

the complexity of the organisation increases.” Razan adds

and also to hold the family together.” After talking to her,

that awareness and communication among generations is

we think this particular next generation member is going to

key. “Open dialogue, being brutally honest, sitting down in

have no problem living up to the task.

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SPECIAL FEATUREs

Q&A with Dr. Rania Labaki

Q&A with

Dr. Rania Labaki A Successful Next Generation

Dr. Rania Labaki, Associate Professor of Management Sciences at the University of Bordeaux IV and researcher specialised in finance and family business management, is an expert when it comes to the many challenges that family businesses can face with the next generation. In this Q&A, Dr. Labaki gives valuable advice on how to successfully manage transitions between generations while respecting values and regulating emotions.

How can family businesses transfer family values and

the document itself. All generations should be encouraged to

knowledge to the next generation?

take part in the process of writing the charter by identifying their values, illustrating them, and reflecting on their

Family businesses have a unique competitive advantage

implementation. This will make of the next generation an

compared to other businesses. This advantage stems from

integral part of the process by being clearly aware of the

family values and tacit knowledge that are transferred from

values and taking on responsibility to transfer them on to

generation to generation. This transfer is a crucial, ongoing

the future generation.

and long-term process. It normally starts informally at a very early age; whether it is at the dining table, during the

The organisation of family business-related workshops

traditional family gatherings, or even in the company itself,

or regular company visits for the next generation

by listening to family stories and business issues and the

also contribute to the development of knowledge and

way they are dealt with, the next generation progressively

preservation of values. Involving the next generation

develops business skills and gets inspired by the founder’s

into the family’s social activities such as philanthropy or

values. This process is key to encourage favorable attitudes

family foundations gives a practical opportunity for the

of the next generation towards their roles of successors.

next generation members to operationalise the knowledge and values learned, which they can later execute them at

At later stages of the family business this informal process can

the business level.

be complemented by formal family governance mechanisms.

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When the business spans many generations, it is often more

The next generation should also play an active rather than

difficult for the senior generation to instill the family values

a passive role by becoming value leaders. They should not

in the next generation. A family charter outlining the family

take the family values for granted but also contribute

business values contributes to this endeavor. The process of

to adapting them to the changing environment while

setting up a family charter is however more important than

maintaining their roots.

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Q&A with Dr. Rania Labaki

What are the measures that should be taken on the family and the business level to be prepared for the integration of the next generation into the business?

Over the life cycle, the family business generally evolves from a founder’s ownership stage to a siblings partnership followed by a cousins’ consortium. It progressively spans an increasing number of next generation members. Starting the third generation there is a higher potential for family relationships to weaken; the emotional attachment to and identification with the family business may fade away. Family business managers should strive to motivate the next generation to integrate into the business while acknowledging that this should happen voluntarily and on a merit basis.

It needs in fact to be considered that the next generation members may have different professional goals that are not compatible with the family business industry or available positions. They might have conflicting interests with the generation in charge of the business’ strategic and financial policies. On the other hand, they might be highly motivated to join the business but not have the professional and personal qualifications to do that. Family business managers should be careful in the selection process of future successors and make sure that their judgment is not biased.

Educational themes for the next generation should not only be focused on the business level but also address the personal, family, and social levels.

Educating the next generation about the family business helps cultivating pride and responsibility and strengthens their identification with the family and the business. Enhancing inter-generational communication is also important because it keeps the next generation in the loop and fosters their

next generation with specific educational tools:

desire to follow the path of their predecessors.

By encouraging the next generation to participate in family What are the most important educational tools that the

business-related events, family business managers provide

next generation in family businesses needs?

them with a unique opportunity to interact with next generation members from other businesses all around the

54

In addition to the traditional requirements that pertain

world, share their experiences and learn from each other in

to any business, such as high level of education in

a confidential and friendly atmosphere. It is often at these

specialisations that are congruent with the business

events that the next generation members get to finally realise

activities and professional experience outside the family

that they are not the only ones facing complicated family

business, family business managers should provide their

business issues.

Tharawat magazine Volume 15

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Q&A with Dr. Rania Labaki

SPECIAL FEATUREs

Educational themes for the next generation should not

and express unexpected types of emotions might cause

only be focused on the business level but also address

destructive conflicts.

the personal, family, and social levels. In order to explore the related topics, the educational formats should also be

Emotional regulation appears a relevant challenge. The

diverse, ranging from case studies presentations by families,

family business CEO (Chief Executive Officer) should also

to interactive discussions with inspirational speakers and

play the role of the CEO (Chief Emotional Officer) regulating

experts in different fields such as psychology, finance,

the family members’ emotional dissonance. By developing

management or governance, to group work among next

their emotional intelligence capabilities and setting up the

generation members and/ or senior generation members

right governance mechanisms they will learn more about the

to stimulate collaboration and mutual learning.

family’s expectations and reduce the possibility of emotions leading to conflict.

How can the emotional factor between the different generations in family businesses be regulated?

From your experience, what are the biggest concerns the next generation has?

Emotions are an integral part of any organisation but are of particular importance in the family business. They emerge

The biggest challenge for the next generation is undeniably

and influence two systems rather than one; the business

succession. The low rates of survival of family businesses

system on one side and the family system on the other.

during succession (less that 5% of family businesses make

Therefore, emotions triggered and/or expressed in the family

it to the fourth generation) are a clear indication of the

can influence the business and vice versa. Notwithstanding

difficulties of passing on the baton from one to the next

the beneficial influence of positive emotions such as love

generation. The succession process encompasses several

and happiness in strengthening family cohesion and the

sub-challenges for the next generation: The major ones are

convergence of family and business interests, negative

overcoming resistance and maintaining good relationships

emotions can also have a positive effect:

between generations. In many cases, the senior generation is reluctant to let go and to trust the next generation with

Emotions such as guilt might lead to reparative actions that

managing the business. Resistance to succession comes not

enhance the future business performance, while emotions

only from the family manager but also from other senior

such as regret might lead to better future decision making.

family members who may feel threatened by losing power.

Resistance can also relate to other next generation members

What emotions should be regulated between generations

who are fiercely competing against each other to grab the

and when? It is rather the discrepancy between the type of

opportunity of managing the business. Added to this,

emotions felt and the type of emotions expressed, also called

there is the resistance of non-family stakeholders, such as

“emotional dissonance”, that may have dramatic effects and

employees, suppliers or clients towards new successor(s).

should be regulated.

The next generation members have to struggle in order to achieve legitimacy. This entails proving themselves

The degree of emotional dissonance is highly correlated

on professional and human levels in the family business

with the family business culture. In some cultures,

while being respectful to the senior generation. It also

the expression of certain emotions is prohibited in the

means being patient while remaining open to learn from

family and/or the business. Oftentimes the expression

the senior generation and showing understanding of the

of emotions refers to implicit rules in the family. Family

difficult psychological forces they are facing during the

members that do not abide by these emotional rules

succession process.

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SPOTLIGHT india FAMILY BUSINESSES

INDIA SPOTLIGHT ON

PART1

And its family businesses 58

Family Managed Businesses in India - The Opportunities and the Challenges

ExposĂŠ on characteristics, opportunities and challenges of Indian families and their businesses.

56

Tharawat Magazine Volume 15

62

A Conversation with Bakul Jain, Managing Director of DCW Ltd. Bakul Jain speaks about running a family business in one of the fastest growing economies in the world.

www.tharawat-magazine.com

india FAMILY BUSINESSES

SPOTLIGHT

6.9 India’s Real GDP growth at 6.9% in 2011

3.3 3.3 thousand square kilometer is the surface of the Indian subcontinent

1.727

4 India is the world’s fourth largest economy

In 2011 the Indian GDP was at $1,756.8bn according to IMD WCY.

1.22

India is home to over 1.22 billion people speaking hundreds of different dialects

It is estimated that around 90% of Indian businesses are family-owned. In a country that is home to one of the fastest growing economies in the world, family businesses play a a crucial part through their economic contribution and through their role in society at large. While India has produced many major conglomerates under family management, the majority of its family businesses are SMEs and were established after the 1980ies. With this first part of our two-part spotlight series, Tharawat magazine embarks on a discovery journey of the history and achievements of Indian family businesses.

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Volume 15 Tharawat magazine

57

SPOTLIGHT FAMILY MANAGED BUSINESSES IN INDIA

FAMILY MANAGED BUSINESSES IN INDIA THE OPPORTUNITIES AND THE CHALLENGES Family businesses are the lifeline of India’s economy. Almost 90% of Indian businesses are family-owned, which makes the rest of the business community largely dependent on them. Be it as their vendors, transporters, contractors or distributors; non-family corporations collaborate with family firms on various levels. Parimal Merchant, Director of the Center of Family Managed Businesses, S.P. Jain Institute of Management and Research, India, explores in this article the challenges and opportunities that Indian family businesses face.

A

58

lthough family businesses are vital to the

third of the companies listed in 1970 had vanished by 1983.

Indian economy, little attention is paid

In reality, survey findings reveal that the average life of a

unless there is an opportunity to criticise

corporation in Japan and Europe is no longer than 12.5

them. They are often accused of a lack of

years independently of whether they are family-owned or

professionalism, of nepotism, infightings,

not (Jagdish Sheth, “The Self-Destructive Habits of Good

and mismanagement. There is a famous cliché, which is

Companies“). There are many reasons for short life cycles

quoted frequently and seems to have been accepted as a

in businesses, yet, family ownership is often particularly

universal truth: The first generation builds, the second

mentioned. In reality, however, the contrary is frequently

generation consolidates, and the third generation destroys

the case: Family businesses on average not only outlive, but

the family business. When accusing family businesses of

also outperform non-family corporations. A Morgan Stanley

such a short life span it is often conveniently forgotten that

study shows that family firms generated Return on Equity of

longevity is an objective difficult to achieve for any business.

18.5% as compared to 14.1% from non-family corporations

In 1982 the book “In Search of Excellence” by Tom Peters and

(John Ward 2007, quoted by Amy Schuman, FBCG, Inland

Rober H. Waterman listed 62 companies as high performers.

Press, February, 2010). A Newsweek (April 12, 2004) study

By 1992 most of them were languishing. Similarly, in

shows that family firms outperform their rivals in all leading

Fortune magazine’s yearly list of top 500 companies; one-

stock indexes of Europe.

Tharawat magazine Volume 15

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FAMILY MANAGED BUSINESSES IN INDIA

SPOTLIGHT

Indian Family Businesses The majority of Indian family businesses are quite young.

India faced wars in 1962, 1965 and 1971; it was only after 1980 that the economic environment became more business friendly. As a result the period from 1980 to 1995 was one in which a large number of family businesses were established and prospered. Many of those family businesses split up over the last few years due to family differences. There are some families with large business operations, but the majority are SMEs. Family businesses have a culture that is often at the same time entrepreneurial, flexible, paternalistic, agile and frugal. Since the family’s name is at stake, they stand for values, long-term commitment, relationship orientation, and dependability.

Indian family firms are also highly efficient. They often have to work with limited resources and make the most out of it.

A multinational car plant can get free land from the Indian government and access to financing from capital markets, but for the majority of family businesses each step is a challenge.

Yet, they embrace it with a true entrepreneurial spirit.

Indian family businesses also have distinct advantages, particularly that of vigilant ownership. The family owners’ commitment and visibility leads to higher productivity in the business. Their dedication and perseverance enables

90 18.5 14.1

percent of Indian businesses are family-owned a Morgan Stanley study shows that family firms generated Return on Equity of 18.5% as compared to 14.1% from non-family corporations

them to extract opportunities from complex non-routine problems. In addition, family firms also tend to be less bureaucratic and can take fast decisions. Their stakes are

1. The Next Generation

emotional as well as economical and they are likely to look

The greatest challenge concerns the gap between family

for sustained value creation. As a result they can move faster

generations: A business founder is used to doing everything

with unconventional logic, can go counter-cyclical and can

himself. Thus developed the unique culture of the present

reach for new opportunities.

Indian family business: Inward-looking, owner centric, smaller scale, with a restricted perspective, and conservative

The Challenges

mindset. This culture eventually becomes a hurdle in

Indian family businesses enjoy various advantages due

absorbing ‘outsiders’. The same culture also poses a serious

to their inherent characteristics and a social culture that

challenge in absorbing the next generation family members:

supports their structures. However, these advantages can

Different generations, seeing the world differently are

be destroyed if the family is not united; as the family grows,

supposed to work together. It can be a difficult thing as the

the challenge is to keep a sense of unity. These are a set of

young generation is often in a hurry and has big ambitions,

typical challenges that Indian family businesses face today:

while their elders are more conservative and skeptical.

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59

SPOTLIGHT FAMILY MANAGED BUSINESSES IN INDIA

The gap keeps on getting wider and wider. When conflict

Having founded the business, the owner is used to having insight

escalates between fathers and sons it is often the mother,

into all aspects of his business. Allowing the same insight to an

who takes the role of CEO (Chief Emotional Officer). This is

outsider can be hard. On the other hand non-family employees

a common story in many Indian family businesses.

may also have difficulties in adjusting to the family business culture. They are used to structured corporate environments.

2. Attracting and Retaining Non-family Employees

In family businesses that structure may be missing.

Another possible challenge is non-family employees joining

60

the family firm: The culture, which has solidified over time,

It is important that time is bestowed on new professionals so

becomes a barrier for accepting ‘outsiders’. Business owners

they can settle. Many Indian family business owners end up

are often at a loss as to how much authority a non-family

selecting non-family employees based on their performance

employee should be able to attain. In most Indian family

in the corporate world without paying much attention to

businesses stakes are high: It is not easy to put their own

their ‘fit’ with their own firm’s culture. They forget to spend

destiny in the hands of non-family employees.

time in facilitating the settling down process.

Tharawat magazine Volume 15

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FAMILY MANAGED BUSINESSES IN INDIA

SPOTLIGHT

The next generation has to learn to appreciate their parents’ wisdom and understand at the same time that there is no substitute for hard work.

increasingly it will have to respond to these demands. It is only reasonable for family businesses to tap into this huge source of talent.

The Realities The Indian business landscape has started expanding fast.

With the involvement of the older generation alone, such growth is unthinkable. While the parent generation needs to accept this, the next generation has to learn to appreciate their parents’ wisdom and understand that there is no substitute for hard work.

The solution to these challenges requires an understanding of the family business dynamics and a separation of people from problems. Family business members should learn that no one is wrong but that each generation 3. Women of the Family Joining the Family Business

has a different culture. Once families learn about these

Indian family businesses are still largely male dominated.

cultures and understand the need to appreciate different

The role of women in business and employing women is

perspectives, whether young or old, they will be able to

largely accepted and encouraged in India. However, when

harmoniously work with professionals as well as across

it comes to hiring women in the family business, there are

generations. Thus, if family businesses can manage these

reservations. Within the Indian social context of business

dynamics, they will be better placed to reap the benefits

families, bringing up the children is considered primarily

of the great range of opportunities in the Indian economy

a responsibility of the mother. Thus, whenever the issue of

and beyond.

women in the family business is raised, it is subject to her ability to balance between her duties at home and her duties at work. However, as more and more women are highly educated, they are demanding a say in the family business.

The traditional family model is still disapproving of it, yet

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Author Parimal Merchant, Director of the Center of Family Managed Businesses, S.P. Jain Institute of Management and Research, India

Volume 15 Tharawat magazine

61

SPOTLIGHT Conversation with Bakul Jain, Managing Director of DCW Limited

A Conversation with

Bakul Jain Insights from the Managing Director of DCW Limited, India

DCW was established in 1925 as one of the first Soda Ash factories in India. Behind the lucky horseshoe, that serves as the DCW Limited’s logo, stands a hard working family: In the 1930ies Sahu Shriyans Prasad Jain took over the management of the factory and grew it together with his family into the industry leader it is today. Bakul Jain is the eldest member of the 3rd generation of this family business. He joined the family in 1975, when he was given the responsibility of looking after a cutlery manufacturing company belonging to the family group – Kishco Cutlery Private Limited. After almost four years of gaining experience, he undertook a one-year MBA. After graduating, he returned to India and resumed his work with the family. In 1982, he joined DCW Limited as Vice President in its Caustic Soda Division. Working with his two uncles and three cousins, Bakul Jain today is the Managing Director of DCW Limited, and is on the Board of a number of other public and private companies. He is the Trustee of the family’s various charitable trusts, serves on the Board of the International Association for Human Values India, as well as a member of the Board of Management of the Bombay Hospital Trust and S.P. Jain Institute for Management and Research. Tharawat magazine speaks to Bakul Jain about his family, his business, and his recommendations to other family businesses.

62

Tharawat magazine Volume 15

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Conversation with Bakul Jain, Managing Director of DCW Limited

SPOTLIGHT

Left: Sahupuram Complex, Top Right: “Padma Bhushan” Sahu Shriyans Prasad Jain, Bottom Right: Bakul Jain, Managing Director DCW Ltd. DCW Ltd has been run successfully by your family since

India is a country that has undergone dramatic

the 1940s. What are the Jain family characteristics that

transformations throughout the last decades. What

have contributed to this continuous success?

were the moments where the Jain family made key strategic changes in DCW Ltd. to adapt to the

The family has always understood that to be successful, one

macroeconomic context?

must display a combination of vision, dedication and drive.

Vision is critical to identifying business opportunities, but

The family has always been keenly aware of its environment

this isn’t enough. Without the dedication and focus to follow

and the context in which it operates, which has enabled it to

through on the execution, DCW would not be where it is

take advantage of changes in the macroeconomic context.

today.

The significant changes that India has experienced have been great opportunities for the family to build and grow

Another hallmark of our family has been our commitment to

DCW Ltd.

a larger perspective, such as social service and community development. We have always recognised that no business

As independence beckoned, my family understood the need

can exist in isolation, and have hence always been committed

for industrialising a nascent nation, and decided to enter

to improving the world around us.

the chemicals industry by acquiring a soda ash plant in the Western state of Gujarat.

All of these qualities have been handed down in our family starting with my grandfather, the late respected

As India’s impetus for domestic industrialisation grew in

Sahu Shriyans Prasad Jain, and have been critical to our

the 1960s and 1970s, the family was quick to seize the

continued success.

opportunity to expand across India by setting up a chemical

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63

SPOTLIGHT Conversation with Bakul Jain, Managing Director of DCW Limited

Top: Sahupuram Complex Next page: Kamlavati Higher Secondary School founded by the Jain family complex in the Southern state of India, Tamil Nadu. Later,

of the business is a privilege, not a right, and comes with

foreseeing the growing importance of the petro-chemicals

the responsibility to grow it for the next generation of the

industry, we entered this nascent sector in 1970 with one

family, and also for all the other stakeholders such as the

of the first integrated PVC resin plants. The family also

shareholders, customers, employees and the community at

constructed a beneficiated ilmenite manufacturing plant,

large. Making sure the children grow up with and imbibe

a global first.

this attitude is critical for the family’s continued personal and professional success.

How does the Jain family prepare the next generation for joining the family business?

Additionally, in today’s day and age, education is key, both formal and informal. The next generation should strive to

64

The family has always instilled a sense of duty into its

be educated at the best schools and experience working

younger generation, and has taught them that being a part

with the best companies and people before being allowed

Tharawat magazine Volume 15

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Conversation with Bakul Jain, Managing Director of DCW Limited

SPOTLIGHT

professional managers to make sure that DCW executes the family’s vision. Moreover, as the third generation of the family has received the best education and have been exposed to considerable work experience, they can be considered as “professionals” in their own right.

How do you value the importance of Indian family businesses in relation to the economy and what challenges do they face today?

Family businesses account for the lion’s share of India’s

We believe that our family structure and operating style has been an advantage to DCW Ltd. Having a visionary founder instill the right skills and beliefs into the next generation has helped the family be nimble and focus on creating long term value.

corporate activity, and hence continue to remain critical to the economy. Furthermore, family-run companies can take a long-term view on value, and can hence look to build businesses that will benefit the economy in the long run, something that is not always possible at companies only focused on their next quarter’s results.

The key challenges family businesses face today is lack of focus amongst the younger generations, and a lack of critical mass to build truly world-class companies. These can be addressed by ensuring that the younger generation has the right education and work experience, or by shifting to professional management. The best run businesses can then look to consolidate in their respective industries and build world-leading companies.

to have managerial responsibilities at DCW.

What is your advice to the next generation of Indian family businesses?

Do you feel that being a family business has brought specific advantages and/or disadvantages in running

The next generation should strive to build on the

an industrial group such as DCW Ltd.?

achievements of their predecessors, and not just rest on their laurels. This requires hard work, dedication and

We believe that our family structure and operating style

a certain entrepreneurial zeal. If they are not able to or

has been an advantage to DCW. Having a visionary founder

interested in doing this, they should know enough to leave

instill the right skills and beliefs into the next generation has

the management of their inherited businesses to professional

helped the family be nimble and focus on creating long term

managers, and only remain involved as shareholders. They

value, in a way that is not possible at less tightly controlled

should have the wisdom and clarity to separate ownership

groups. Having said that, we have a significant number of

from management if need be.

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65

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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SMEs

Family Business

SMEs 68

74

Discover the century-old Yemeni Al Hamdani family business that has stayed true to its dedication to coffee for many generations.

An exclusive interview with Mowgli Founder Tony Bury unveils the importance of mentorship for businesses in the Middle East.

Al Hamdani for Coffee A Family with Flavour

www.tharawat-magazine.com

Mowgli: On Mentorship in the Middle East

Volume 15 Tharawat magazine

67

SMEs

Al Hamdani for Mocha Coffee

Al Hamdani for Mocha Coffee

A Family with Flavour - Yemen

The Al Hamdani family business is over a century old. Its true passion and the source of its continuous success lie in the flavour and quality of Yemeni mocha coffee beans and the family’s long experience in the coffee industry. In a short profile and an interview with Ahmed Ali Al Hamdani, Chairman of Al-Hamdani for Mocha Coffee, we discover the incredible journey of a Yemeni family business transcending challenges and time.

68

Tharawat magazine Volume 15

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Al Hamdani for Mocha Coffee

O

SMEs

ver 130 years ago, Ahmed Naser

expanding the business outside Yemen. The family

Ahmed Al Hamdani established

business started to develop the business by directly

what is today known as the

exporting coffee to Saudi Arabia, Qatar and other

renowned Yemeni coffee company

Arab countries and to find agents throughout the

“Al Hamdani for Mocha Coffee”

Gulf countries.

with his son Ahmed. Father and son started their endeavour in Bani-matar (Baoan market is where

The Al Hamdani family continued to be involved

coffee farmers from various Yemeni cities meet to

in planting as well as processing coffee and the

sell their coffee bean crops), Yemen, in 1870. Bani-

family’s many coffee farms in Bani-matar are

matar is till date well-known for the quality of its

managed by local farmers. It is part of the Al

coffee beans. The Al Hamdani family collected and

Hamdani’s strategy to provide local coffee farmers

bought coffee beans from the whole region. They

with interest-free loans in order to help them to

peeled and cleaned the coffee beans manually and

reap the crops. The family began with providing

sold the them in Hodeidah and Aden.

coffee farmers with this service over 70 years ago and has dramatically increased the number

ABOVE: Mocha coffee bean plantations, Yemen

In 1994 the main branch of the Al Hamdani for

of loans over the past few years. Yemeni coffee

Mocha Coffee company was relocated to the

farmers continue to face substantial financial

capital, Sana’a which is about 25 kilm far of Bani-

burdens as their activities often require substantial

matar. This strategic decision played a great role in

investment in infrastructure.

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69

SMEs

Al Hamdani for Mocha Coffee

The Al Hamdani family business attribute their success to the fact that they have kept their dedication to the coffee industry in the family.

Over the last century, the progress in technology

The Al Hamdani family has faced many challenges

has played an important role in the coffee industry.

to maintain the quality standards associated with

Nowadays, modern machinery is used at all stages

the reputation of the Yemeni mocha coffee beans.

when processing coffee beans; sorting, peeling

One of the challenges is caused by Yemeni as well as

and clearing. The Al Hamdani family began to

national fake companies to export non Yemen Coffee

incorporate such new technology into their business

beans under the name of green Yemen mocha coffee

from 1991. The main purpose behind this was to

beans. There is an inherent need for global standards

increase the efficiency of the production process as

and specifications for Yemeni mocha coffee. Another

well as to maintain the high standards in quality.

challenge is that the coffee industry lacks support

The family felt the benefits of these changes quickly

from the public sector. Due to the lack of services

and was able to increase production.

and facilities provided to coffee farmers, coffee

LEFT: Peeling and clearing coffee beans RIGHT: Sun-drying of coffee beans

planting has decreased in many areas in Yemen. A In 2000, the Al Hamdani company opened its first

third challenge is the scarcity of water, which adds

branch outside Yemen in Saudi Arabia andQatar

to the problem because most of the coffee farms in

under the name of (Green gold Corporation) . In

Yemen fully depend on rainwater.

2006, another branch was opened in Kuwait(Green

70

gold Corporation). In 2008 , the Coffee Processing

The Al Hamdani family business has braved many

Factory, a complete coffee factory with new

challenges over its century of existence. They

machinery and mills was built in Yemen, with high

attribute their business success to the fact that they

production power .

have successfully kept their dedication to the coffee

Tharawat magazine Volume 15

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Al Hamdani for Mocha Coffee

SMEs

Q&A with Ahmed Ali Al Hamdani Chairman, Al Hamdani Mocha Coffee Ahmed Ali Al Hamdani joined the family business in the 1980ies as part of the fourth generation. He is presently the Chairman of Al-Hamdani for Mocha Coffee. His experience in the coffee industry, he feels, has developed his knowledge in many areas of life. His passion for the industry and for the family business drives him to continue innovation.

What were the three most important things

Al-Hamdani for Mocha Coffee is part of the

that you have changed or added to the

Yemen Mocha Coffee Association; what is

business since you joined the company?

the role of this association?

Opening locally branches for the company.

The association is still very young: It was

Exploring new European and Arab market

established in 2008 by the Al-Hamdani and the

through many agents for Mocha coffee in these

Al-Kabous family for best practice in the Yemeni

markets for our products.

coffee industry. We are hoping the association will

Founding a complete factory to process Yemeni

be very active in the future and to encourage and

mocha coffee beans.

train the Yemeni coffee farmers. Our chief role is

In 1995 we added Many European markets to our

to support the coffee farmers by providing and

export list side beside to Arabic market including

facilitating access to loans for them.

Canada, USA, Japan. We have succeeded in becoming a trusted coffee brand in these markets.

Today, the association has eight members who are merchants and over 100 members who are coffee farmers. Due to the current situation in Yemen,

We are hoping the association will be very active in the future and to encourage and train the Yemeni coffee farmers. Our chief role is to support them by facilitating their access to loans.

however, the association cannot develop or expand its activities as rapidly as we would wish.

How do you transfer your passion for coffee to the next Al Hamdani generation?

I try to transfer the passion for coffee to the next generation of our family by making them participate in the field as well as telling them about my experience. We teach the next generation

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71

SMEs

Al Hamdani for Mocha Coffee

everything about the coffee business and involve them in it as well. There are ten young members of the family who have already joined the business.

What are your future plans for Al-Hamdani for Mocha Coffee?

We are a family that feels proud of this business even though we are active in other trading streams as well. Our main focus has always been the mocha coffee business.

My future plans are to stretch market our brand all over the world in order to promote the high quality of Yemen mocha coffee beans;

The Al-Hamdani family has been in this field for

a quality that cannot be found in any other

over 130 years; what do you think is the main

coffee and increasing the production power of

reason behind the success and the continuity

Mocha coffee through stretch the planted land

of your family business?

of Mocha coffee. We participate in many coffee

72

fairs internationally in such as China, Denmark,

We are a family that feels proud of this business even

Germany as well as Ethiopia. We are also

though we are active in other trading streams as well.

participating in the Scae World Coffee-2012 Fair

Our main focus has always been the mocha coffee

in Vienna - Austria

business.

Tharawat magazine Volume 15

Clockwise: Picking the coffee bean crops; Al Hamdani for Mocha Coffee participating in an international trade fair; Al Hamdani factory producing and processing Yemeni Mocha coffee in Sanaa

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Committed to enhancing life Aluminium Foundation Readymix Masonry Marble

SMEs

Mowgli, On Mentorship in the Middle East

Mowgli

On Mentorship in the Middle East With unemployment in the MENA region rising and now standing at 10.3%, the highest regional rate in the world (ILO, 2011), Arab countries alone need to create approximately 80 million new jobs by 2020 (World Bank). It is a daunting goal. One way to address this enormous task and to tackle unemployment is the incubation and support of sustainable entrepreneurship and SME development. The organisation Mowgli, founded by Tony Bury, does its part by providing mentorship to entrepreneurs in the Middle East.

T

ony Bury, a serial entrepreneur

sustainable job creation, and social and economic

with over 45 years of experience

development. The organisation achieves this by

in the Middle East, believes that a

recruiting, training and matching mentors and

highly effective way to create long

entrepreneurs in relational and business mentoring

term,

employment

relationships through their unique Mowgli Mentor

opportunities is by mentoring, supporting and

sustainable

Experience (MME) programs. The role of the

empowering entrepreneurs who start and grow

mentor in this relationship is to provide hope and

businesses and helping them to develop their

aspiration, to help entrepreneurs build confidence,

own leadership and decision-making capability.

mitigate risk, focus on individual personal

Following that conviction Bury founded the

development, expand their business, and address

mentorship organisation “Mowgli Foundation�.

challenges along the way.

Mowgli’s mission is to provide mentors who inspire,

74

support and empower entrepreneurs in achieving

Interestingly it is not only the entrepreneurs, the

their business and personal potential, encouraging

mentees that benefit from this relationship and

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Mowgli, On Mentorship in the Middle East

SMEs

Q&A with Tony Bury Founder of Mowgli What inspired you to start The Mowgli Foundation?

Fast growing markets have produced entrepreneurs, who have developed businesses that have set fantastic examples in fighting unemployment and have greatly contributed to poverty alleviation. The ABOVE: Mowgli Mentoring Experience (MME)’ Programs

exchange: Bury realized that the mentors, too hugely

moment I understood their positive role in society,

benefit from the experience through their own

I concluded that we really need to find ways to

personal and leadership development. The learning

support entrepreneurs. After extensive research I

process is often a period of self-discovery resulting in

quickly realised that the thing that entrepreneurs

the development of new skills and competencies that

needed the most were mentors, people who support

can be applied within their own professional and

them on their journey. This is how the idea of

personal lives. From published reports to Mowgli’s

Mowgli was born.

own impact analyses and reports, mentoring has a clear and proven influence on the ability of

Initially, I knew little about mentoring. But when I

entrepreneurs to grow their business sustainably,

started researching the topic I saw that I myself had

learn, develop and mentor others. It is for this reason

many people in my life who to me were mentors,

that Mowgli strives to place mentoring at the heart

and I began to appreciate the concept. When

of enabling entrepreneurship, as well as personal

we started Mowgli in 2008 mentoring wasn’t a

and business leadership.

widely spread practice in the Middle East, though

undoubtedly it is happening informally between

To date, Mowgli, run by Tony Bury together with a

many people.

high-energy team including his daughter Kathleen, has successfully run 24 MME programs in Jordan,

Why is mentorship so important to the Middle

Lebanon, Syria, Palestine and the UK. They have

East?

trained around 200 mentors and matched them with high growth potential entrepreneurs, from all

The Middle East is faced with dramatic youth

backgrounds, ages and sectors, to undertake a year-

unemployment. When we looked into ways of how

long mentoring relationship supported by Mowgli.

society could solve this problem, different strategies

In line with their plans to launch in Egypt, Tunisia,

came to mind. Mostly, however, Arab countries

Morocco, Algeria, Qatar and the UAE, Mowgli has

have to get more private sector ownership over

successfully secured funding to deliver a further

commercial businesses. Supporting entrepreneurs,

20+ MME programs within 2012-13, training up

creating SMEs and developing them is one way of

to a further 240 mentors within the MENA alone.

going about this.

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Volume 15 Tharawat magazine

75

SMEs

Mowgli, On Mentorship in the Middle East

However, becoming a successful entrepreneur in the Middle East is still largely dependent on what kind

Figure 1: The Hero’s Journey, Joseph Campbell: The Journey of the Entrepreneur under Mentorship

of relationships you have in the business community.

This makes it hard for many entrepreneurs to get

7

access to interesting opportunities. To support them on their journey and help them get access to these

9

opportunities, we first have to understand how

A New Perspective

entrepreneurs work. The first building blocks for any entrepreneurs to be successful are their hopes and aspirations. Therefore, the first thing mentoring does is support entrepreneurs in exactly that. I cannot tell you the difference that the following words make to

10 The Return

1

Ordinary World

8

Facing the Darkness

6

The Journey

Trials, Allies & Enemies

The Hero’s Journey 4 2

an entrepreneur: ‘I believe in what you are doing and

The Call to Change

3

Meeting the Mentor

5

Crossing the Line

Refusing the Call

I believe that you are able to do it.’ Just that kind of encouragement is a fantastic experience. It is the whole point of mentorship.

In a next step we focus on business competency, which consists of three components: Knowledge, skills and behaviour. If you have the highest level of knowledge and the highest level of skills but do not demonstrate consistent behaviour, your competency is rated low. This is why in mentorship

The importance of mentorship in the Middle East goes far beyond supporting entrepreneurship to developing different models of leadership.

we focus on behaviour. Whenever you listen to successful entrepreneurs they will tell you that it was a mentor who significantly helped in that area.

easy, they do not necessarily have the skills to grow the organisation at a later stage when processes

The key element that you see in Figure 1 is the

and structures are needed. A mentor can assist in

personal development journey that we all go through

deciding what additional skills the entrepreneur

from time to time, including entrepreneurs. You can

needs and needs to bring in at this growth stage.

see that there is a thunderstorm at a certain stage:

The third critical moment is when an entrepreneur

Each entrepreneur goes through these turmoils.

becomes very successful, his ego may start to grow

There are three critical moments in an entrepreneur’s

and he/she begins to make decisions that are not in

life cycle where he/she needs a mentor most: Often,

his/her personal or business interest. A mentor can

at the very beginning, when financial performance is

help check this behaviour.

poor, they are all stressed out and they make wrong

76

decisions. A mentor is exactly the person to talk to

The importance of mentorship in the Middle East goes

because entrepreneurs can hardly tell their friends

far beyond supporting entrepreneurship to developing

and family that they are going bankrupt next week.

different models of leadership. My definition of

Another critical moment is when entrepreneurs

leadership is simple: To serve is to lead; if I serve you

realise that while starting the business was fairly

and you follow me and then I will become a leader.

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Mowgli, On Mentorship in the Middle East

SMEs

The greatest thing that one human being can do for

The word “Mentor” is often greatly misused: Some

another is to mentor them and if you cannot mentor,

people think of mentoring as providing advice,

you cannot lead. That is why I believe mentoring is so

others think of coaching as mentoring. In reality

important: it actually develops leadership.

coaching is about performance enhancement.

In mentorship the mentor needs to be able to be

Our mentors give their time to entrepreneurs

involved and understand what are the issues in the

without expecting anything back or receiving

entrepreneur’s personal life, which is impacting his

financial compensation, but they always confirm

or her business life and vice versa. It requires a high

that they get such joy from doing it. They enjoy

degree of trust. Mentors as a rule have to have or

seeing their mentees develop their decision making

to develop a high level of emotional intelligence.

and leadership capability around the advice that is given and that the guidance and support is

Are the relationships between mentors and

appreciated. Mentors therefore get just as much

the entrepreneurs continued after the Mowgli

out of the mentor/mentee relationship as the

program?

entrepreneurs that they are supporting and often say that the mentee actually becomes their mentor.

Following the 3 day mentor training and mentee-

Many have come back to me and told me that being

mentor matching program, we facilitate a one year

a mentor has helped them deal with challenges in

mentoring program and after that the mentor and the

other, sometimes more personal, areas of life as well.

entrepreneur are free to continue their relationship on their own. Although they remain part of the Mowgli

What are the major do’s and don’ts of

Family (alumni), we do not monitor them for our

mentorship?

official impact reports. Of the 80% of the relationships that last the one year with Mowgli, 97% go on to a

Of course, a mentor is someone who listens and tells

second year, and so far 95% have gone on to the third

you the truth and not necessarily what you want

year. The relationship with the mentors doesn’t have

to hear, but at the same time they should not be

to be maintained on a daily basis, but if a trusting

judgemental. What is also really important is that

relationship is developed, they usually remain in your

the mentor should not have any vested interest in

life. In addition, both parties need to understand that

the performance of their mentee. For instance, if the

the mentorship relationship is absolutely symbiotic, if

mentor has an interest in shares of the entrepreneur’s

it is not, the relationship falls apart. In fact the mentees

business then that corrupts the value of the

are the drivers of the relationship: if they do not keep

mentorship program.

in touch with the mentor, the relationship will fail.

The other aspect that is really important for a

One of the greatest benefits of our Mowgli

mentor is that in case of failure they do not criticise

program is that we partner entrepreneurs up

their mentees or discourage them, but support them

with one “official” mentor but during the program

in getting back up, celebrating and learning from

they are able to benefit from numerous unofficial

the experience. In the future, I would like mentees

mentors at the same time. It is this experience that

to share their failures because it is so important

we try to provide and that we hope contributes to

to share these experiences with the community,

the sustainable success of entrepreneurs in the

especially in the Middle East.

Middle East.

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77

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...

interactive

The Tharawat magazine website keeps expanding its functions to provide our readers with more and more interactive content. Check out who is featured and what is new this month in our Interactive section.

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COMING SOON The ArAbiAn PublicATion for fAmily businesses The ArAbiAn PublicATion for fAmily businesses Volume 10 Apr-Jun 2011

Volume 11 Jul-Sep 2011

The ArAbiAn PublicATion for fAmily businesses The ArAbiAn PublicATion for fAmily businesses Volume 13 Jan-Mar 2012 Volume 14 Apr-Jun 2012

16 Profile: Pictet&Cie.

Centuries of history and an interview with Senior Managing Partner Jacques de Saussure.

38 Interview with Moh’d A. Al Obaidly

Group Managing Director of the OITC GROUP, Qatar.

32 Philanthropy in 14 Profile: van Bommel Nine generations of shoe-making Family Businesses excellence and three young Philanthropic activities that brothers in charge. increase family cohesion.

46 Interview with 62 Toukan Enterprise Essa Al Ghurair

Vice Chairman of Al Ghurair A family-owned soap factory Investments and Chairman of in Nablus, and an interview Al Ghurair Foods, UAE. with Chairman Farouk Toukan.

30 Family Business Relationships

Solutions to toxic relationship patterns in family firms.

64 The Naji Family

Arabesque architecture and art preserved over generations by the Naji family based in the USA and Morocco.

12 40

Ahmed Seddiqi

& Sons - A Family History of Precision

60 years of passion for luxury watches.

Alserkal Group A Family Business Going Green

Profile of the Alserkal Envirol plant.

60 70

Ajegroup

16

The most Global

Q&A with Mohammed Alkhorayef

The vision behind the Alkhorayef Peruvian Family Group’s agricultural expertise A Peruvian family firm goes East.

52

Abdul Latif Jameel Community Initiatives

Drivers of Talent management in the Middle East

Drivers of talent management in A family’s quest for job creation.

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

Special FeatureS

Family Business

family business

Diversification The balancing act of managing the familiy business portfolio

Internationalisation

SPECIAL FEATURES: Family Businesses Driving Environmental Strategies

Finding the key to successful internationalisation for family-owned firms

Developing people in- and outside the family

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THARAWAT MAGAZINE BACK ISSUE STORE Tharawat magazine is launching its back issues store, which will allow our readers to purchase any and all issues of Tharawat magazine. With PayPal and Credit Card payment the checkout will be made easy and fast.

OUR FEATURED AUTHOR: Caroline Fattal Fakhoury, Vice President of Fattal Holding, Lebanon and Middle East Managing Partner, Praesta: Caroline’s article on “Family Business Relationships” in Volume 11, 2011 accurately describes the challenges we encounter when dealing with family members and provides tools to overcome them.

THE THARAWAT MAGAZINE WEBSITE

www.tharawat-magazine.com Discover the Arabian publication for family businesses online

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Volume 15 Tharawat magazine

79

interactive

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 our interactive 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 upcoming issues. We have over 19’000 fans and are enjoying the interaction with them on a daily basis. Other family business pages we like are:

Fondazione Zegna Family business Emernegildo Zegna’s philanthropic foundation.

Business Families Foundation Provide educational material for business families.

Ford Motor Company Century-old family business Ford Motors.

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Tharawat magazine Volume 15

@Tharawatmag

With our Twitter account we follow many interesting Tweets: @WJTowell: We are following the 5th generation family business from Oman. @FFIGlobal: A leading family business education and services provider.

Linkedin hosts many interest groups amongst which are many relevant to family businesses Join Group UK Family Business Research Community, for researchers of family firms Join Group Family Business United, provides international family firm news and stories.

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