The ArAbiAn PublicATion for fAmily businesses Volume 10 Apr-Jun 2011
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.
family business
Diversification The balancing act of managing the familiy business portfolio
32 Philanthropy in Family Businesses
Philanthropic activities that increase family cohesion.
62 Toukan Enterprise
A family-owned soap factory in Nablus, and an interview with Chairman Farouk Toukan.
tharawat magazine
The ArAbiAn PublicATion for fAMily businesses
The ArAbiAn PublicATion for fAmily businesses Volume 10 Apr-Jun 2011
16 Profile: Pictet&Cie.
Centuries of history and an interview with Senior Managing Partner Jacques de Saussure.
Publisher and founder Dr. Hischam El Agamy
38 Interview with Moh’d A. Al Obaidly
Group Managing Director of the OITC GROUP, Qatar.
32 Philanthropy in Family Businesses
Philanthropic activities that increase family cohesion.
62 Toukan Enterprise
A family-owned soap factory in Nablus, and an interview with Chairman Farouk Toukan.
editor and Manager Ramia El Agamy editor@tharawat-magazine.com
Assistant editor Wafa Nasser Farhoud wafa@tharawat-magazine.com
editor-at-large Farida El Agamy creative Director Emad Khourfan emad@tharawat-magazine.com
Translation house Tarjomeh Localization Ltd., Dubai, UAE Printing house Al Ghurair Printing, Dubai, UAE Acknowledgements Many thanks go to The authors for their work and input. The advertisers for their kind contribution. The readers for their feedback on the previous issues and their continuous interest in Tharawat magazine. Brownbook publishing and the bin Shabib family for their kind and relentless support. The Al Ghurair’s printing facilities for their excellent work.
www.tharawat-magazine.com
family business
Diversification The balancing act of managing the familiy business portfolio
VOL 10 | Apr - Jun 2011 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 Publishing FZ LLC. If you wish to use content or artwork from Tharawat magazine please e-mail: info@tharawat-magazine.com for permission. To advertise in Tharawat Magazine please email us at: advertising@tharawat-magazine.com www.tharawat-magazine.com ISSN-2077-3714 Tharawat magazine is printed on recycled woodfree paper. Disclaimer
Tharawat magazine is published four times a year by Tharawat Publishing FZ LLC, a company registered in Dubai Media City. Reproduction without permission is strictly prohibited. All content in this publication, including but not limited to all text, visual displays, images, and data (“Content”) is the property of Tharawat Publishing and its content suppliers or licensors and is protected by the United Arab Emirates and International copyright laws. The compilation of all content in this magazine, including but not limited to the collection, arrangement, assembly, and coordination of content, is the exclusive property of Tharawat Publishing and is protected by United Arab Emirates and International copyright laws. The content in this magazine may be viewed as information gathering resource. Tharawat Publishing FZ LLC cannot be held responsible for any unsolicited material.
Volume 10 Tharawat Magazine
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contents
VOL 10 | ApriL - June 2011
38
Contributors Ahmed Youssef Partner, Booz & Company
Anees R Sultan Head of Marketing Development at W.J. Towell L.L.C., Oman
Bader Al Mobty Business Development Manager, Al Mobty Construction Company, Saudi Arabia
Dr. Hischam El Agamy Founder and Executive Director, Tharawat Family Business Forum and Tharawat Magazine, UAE and Switzerland
Dr. Steffen Hertog Lecturer at at the London School of Economics and Academic Director of the International Institute for Family Enterprises
Essa Al Ghurair Vice Chairman Al Ghurair Investment LLC and Chairman Al Ghurair Foods, UAE
Etienne Eichenberger Co-founder, Wise – philanthropy advisors, Switzerland
Farouk Toukan Chairman, Toukan Enterprise, Palestine
Jacques de Saussure Senior Managing Partner, Pictet & Cie., Switzerland
Jessie Johnsson Key Client Manager, Wise – philanthropy advisors, Switzerland
Mohammed A. Al Obaidly Group Managing Director, OITC Group, Qatar
Musaab S. Al Muhaidib General Manager, Al Muhaidib Technical Supplies, KSA
Najla Al Suhaimi Executive Manager, Suhaimi Design,KSA
Samer Khoury President (Engineering & Construction), Consolidated Contractors Company
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Tharawat Magazine Volume 10
Regulars 08 FamilyBusiness2FamilyBusiness A case study on the search for a magic formula in succession.
16 Profile: Pictet & Cie. and Interview with Jacques de Saussure
Over 200 years of history in a Swiss privat bank with all the traits of a family business
38 Interview with
Mohammed A. Al Obaidly
Insights of the Group Managing Director of the family business OITC in Qatar.
74 Reviews
Facts and Figures, Books and Websites.
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VOL 10 | ApriL - June 2011 contents
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68
16 28
62
Features 26 The Social Responsibility of Family Businesses
An opinion piece on the need of dynamic societies the ways family businesses can contribute to them.
28 Yes! To Reinvening the Wheel
An article on why it is crucial to ask ‘Why’ in a family business.
34 Philanthropy-What it Provides to
SMEs 62 The Toukan Enterprise
The history of the family-owned soap factory in Nablus, and an interview with its Chairman, Farouk Toukan.
68 Small is Beautiful - or is it?
Challenges for Small and Medium Family Companies in the GCC An indepth analysis of GCC SMEs, their development and challenges.
Families in Business
How philanthropic activities can increase family cohesion and how ‘doing good’ makes economic sense for families in business.
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VOL 10 | ApriL - June 2011
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56
48
Special Features 48 CCC - A Diversified Family Business
An Arab construction giant, with thousands of employees, and present in dozens of countries. Q&A with Samer Khoury on leadership in a diversified family business.
52 Diversification Mini Cases
A selection of facts and figures about four family businesses with diversified global activities.
56 Focus Beats Diversity - Familly Business Must Identify their Core Capabilities
A self-assessment for diversified family businesses and recommendations on how to handle diversity and how to regain focus.
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Publisher’s Note
Dear readers,
M
any family businesses in the Middle East manage large and diversified business portfolios. Having various and often unrelated activities in the family portfolio can hedge risk and augment the probability of continuity and growth. Moreover, as the family grows the next generations will include family members with different talents; in order to capture these abilities and make sure that the business stays within family ownership, it makes sense to create different business units that give opportunities to family members from all educational backgrounds. There is, however, a pronounced critique to be heard amongst experts against such wide diversification. The dangers of loosing focus and of neglecting core businesses have to be considered. In Tharawat magazine’s 10th Volume, we explore diversified family business cases and receive expert opinions and recommendations on how to manage a diversified family business portfolio.
Dr. Hischam El Agamy Publisher and Founder Tharawat magazine Tharawat Publishing FZ-LLC
We also turn our attention to those who by size often fail to command it, and yet, are essential to the survival of most economies in the world: the small and medium-sized enterprises (SMEs). We dedicate a whole new section to family-owned SMEs, their histories, challenges and achievements. In this first spread we include a profile of the Toukan family from Palestine that own one of the most renowned soap factories in Nablus; in an exclusive interview with Chairman Farouk Toukan we are taken on a journey and explore the traditional craft of soap production. Further in this issue, we speak to Group Managing Director of the OITC group in Qatar, Mohammed Ahmed Al Obaidly, and discover how diversification leads to continuity and why the tradition of family gatherings should be kept alive. In a historical profile of Pictet & Cie. and an interview with Senior Managing Partner Jacques de Saussure, we find out about the workings of a Swiss private bank, founded in the 19th century that has all the traits of a family business. Find more interesting contributions in our case study section where young family business members have given their solutions and recommendations to fictional CEO FbA. In our features a spread on the social responsibility of family businesses, Anees Sultan who argues the necessity of reinventing the wheel, and a contribution by family business philanthropy advisors Wise who expand on how ‘doing good’ can bring the family closer together.
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The global business program for individuals and teams
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KEYNOTE SPEAKERS:
Mr. Keith E. Wandell, Harley-Davidson President & CEO
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IntroductIon Family Business2Family Business
The most frequently mentioned problem in family businesses is that of succession. High percentages of family firms do not make it past the 3rd generation and it is often blamed on a lack of succession planning and governance structures. in this issue’s FamilyBusiness2FamilyBusiness case study, we narrate the story of Fba who as the CeO of the family firm faces succession planning. Three young family business members are providing analysis, approaches, and solutions for FbA to tackle these challenges.
succession in Family Business
Finding the magic formula over time
F
bA has just finished reading the outcomes
FbA took over the family business, NAS group, from his
of a report compiled by a consulting group
uncle in 1991, who was eldest of six brothers and sisters.
commenting a survey on succession planning
The transition was not well planned and was rushed due
in Middle Eastern and European family
to his uncle’s deteriorating health. The old man had been
businesses. The report states that even though
both the CEO and Chairman of the family business. The NAS
family businesses are influenced by different cultures and
group businesses were focused around the various sectors of
traditions, succession planning still remains an important
constructions residential and commercial buildings. Under
challenge for all of them. It furthermore highlights how not
the management of FbA’s uncle AbJ, the group got involved
only the family but also the national economy can get affected;
in big infrastructure projects benefitting from the investment
in certain countries in the Arab world family businesses are
boom in the Middle East.
important drivers for economic growth. The report concludes
8
with a set of warnings about the risks of a lack of succession
AbJ had taken the business over from his father and
planning and the possibly disastrous consequences. FbA didn’t
transformed it into a professional and competitive holding
learn anything new from this, but he was still impressed by the
structure. He structured the company into various business
number of family businesses that did not prioritise succession
units and appointed a general manager for each one of them.
planning. FbA’s own family business is no exception.
Every business unit focused on a few core businesses and
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Family Business2Family Business IntroductIon
competed to be the best in its field. This structure was at
group made losses for the first time in its existence. During
the time very new for the group and required a change in
this period the tension among the family members increased
mindset.
and several of FbA’s cousins working in the family business left their positions to protest against the new structure. Even
The change was not easy and AbJ, faced a lot of resistance
FbA‘s father started questioning this new business strategy.
from the family. Some members of the family preferred to keep a portfolio of activities with a high degree of diversity to
Of the third generation only FbA and another cousin stayed
spread the risk. Also, a number of family members working in
with the business. AbJ remained firmly convinced of his
the group lost power due to the new structure. AbJ had a very
strategy despite the bad results. FbA was fascinated by the
clear vision and strongly believed that this structure would
determination and the creativity of his uncle. He saw him
reposition the business and open up new opportunities.
as a real leader who had the ability to listen carefully to his
He hoped that the family would align once they’d see the
team and take decisions fast.
benefits. NAS group was the talk of the community and a lot of people Unfortunately, it took some time for these changes to bear
speculated that the six brothers and sisters would split. FbA’s
the fruits and AbJ faced a tough three years during which the
uncle, AbJ, remained focused on the market and developed a
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IntroductIon Family Business2Family Business
very aggressive marketing and PR campaign to highlight the
The family also changed its attitude towards AbJ. The six
strengths of the group and new level of services it could provide.
brothers and sisters started to meet regularly in a kind
NAS, under AbJ’s leadership, succeeded to deliver on time a
of informal family council sometimes inviting the third
series of small projects with high service quality very much
generation. But due to the tough time he went through and
praised by clients. AbJ did not stay in his office but was on sites
the considerable efforts he invested in the group AbJ became
talking to the clients and explaining his strategy to them. The
more wary and cautious. He became less open to new ideas
result was very positive; the local media started writing about
and wanted above all to consolidate the business success. He
the new style of customer services AbJ introduced to the region.
refused to reintegrate the third generation that left during the difficult times. In the meantime he welcomed the fourth
In the following six months NAS group won three projects
generation (men and women) who were fresh graduates
one of them the expansion of an airport, which was a
from university but they all had to go through an assessment
flagship project. This news started changing the business
process to evaluate their capabilities.
community’s perception of the NAS group. It became very
10
quickly one of the successful players in the construction
AbJ moved to another level whereby he grouped the various
sector known for its top services.
business units under a holding company and gave each
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Family Business2Family Business IntroductIon
business unit a legal identity. FbA and his only cousin from
as Chairman and CEO of the NAS group was approved by
the third generation still working in the family were moved
the second and third generation.
from the operations to the holding level. Ten years later FbA runs the group successfully. He has FbA was appointed responsible for finance and investment
applied a lot of his uncle’s vision and values for which he had
while his cousin took over business development. During
great admiration. Yet he always asked himself whether the
the ten years that followed the business grew faster and
succession process imposed by his uncle was the right one.
prospered. The old family conflicts were forgotten. FbA and his uncle were very close, however, AbJ never discussed
Today, twelve fourth generation family members are working
succession. As the family became bigger, FbA was asked by his
for the NAS group. Amongst them are the children of FbA’s
uncle to work on a more efficient and transparent dividends
cousins who were not admitted back into the group by AbJ
policy for the family. This of course allowed FbA to talk to
and who now seek to push their children into higher positions
all the family members and to gain a better understanding of their feelings about the family and the business and also how they would expect the business to grow. Very suddenly AbJ’s health deteriorated and as a consequence FbA basically moved the CEO & Chairman office to his uncle’s house to spare him from the efforts of coming to the office. The informal family council gatherings were also taking place at the Chairman’s house. More and more the third generation was invited to the family council by the
Succession planning is now a top priority for Fba; he wants to protect the family and the business from any confusion or conflicts.
Chairman. It was during one of these councils that the new dividends policy was discussed in the presence of the second and third generation. FbA had done most of the presentation and there were no surprises as he had carefully discussed the expectations and explained the structure of the new
in the company. FbA himself has two children working in the
policy to each member of the family from the second and
group at the operations level.
third generations. Succession planning is now a top priority for FbA; he wants With everybody showing satisfaction, the Chairman stood up
to protect the family and the business from any confusion
and announced that he was retiring and wished to appoint
or conflicts. NAS group is now even bigger than ten years
FbA as his successor. In his opinion FbA had succeeded to
ago, the group relations to the external world have become
manage the business and gain great respect from the non-
more complex due to the increasing number of important
family management. The chairman asked his brothers and
projects it is involved in. Moreover, the fourth generation is
sisters to vote on this and if there were no agreement they
much more competitive, encouraged by the group’s success,
would have to start a process to identify a successor. FbA’s
and is now very motivated to take on more responsibilities.
father expressed his happiness others were surprised. The Chairman asked the question if the family members present
FbA wonders what lessons he can learn from his own
would need more time but none of them requested it for fear
succession story and how he had best make a fair choice for
of upsetting the organisation. And so the nomination of FbA
the next generation.
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IntroductIon Family Business2Family Business
Solution 1 Talking To: Bader al MoBty, Business DevelopmenT manager al moBTy ConsTruCTion Company, sauDi araBia, 3rD generaTion
B
efore going into analysis it is worth mentioning that
FbA has definitely gained a great amount of experience and
most of conflicts and disagreements between differ-
lessons from his own success story with his uncle. I believe
ent generations are caused by the different goals each one
a key lesson he learnt is the importance of committing to
of them has. For example, FbA’s goal is to maintain the
the succession plan once in place, keeping in mind possible
company’s image and performance throughout the coming
tension and the resistance against change. At the same time,
years. On the other hand, the new generation might not
I believe it is very important for FbA to continue the assess-
necessarily share the same vision. Another point to men-
ment process, which new family members have to go through
tion here is that some family members do not seek a future
before being assigned a position in the family business.
in the family business, and sometimes personal power and higher positions are considered a priority over what is best
Goals and responsibilities should be set for new generation
for the business. Family members from the new generation
once assigned a position. Since it is always difficult to give
might not share the same feeling of responsibility towards
each member of the new generation an equal opportunity,
the family business. In my experience, most of them prefer
it is best to design a fair, rewarding system for all, which
to work independently and to have their own business. At
shall eliminate or reduce tension among family members.
the same time, they still believe that they have the right to be part of the family business. I would make the following
NAS has transformed into a professional and competitive
recommendations to FbA:
holding company, which consist of various business units. It is, therefore, important for FbA to take advantage of the
I suggest developing a family charter written and agreed
existence of such diversity and to distribute the new gen-
upon by the top family members. This charter will support
eration in such a way that each would work in a separate
each transition process of any family member’s position from
business unit from another. This will eliminate or reduce
the next generation.
conflicts among them.
I would also recommend to create a family fund box with a
I have noticed in many family businesses that the younger
defined role stated in the family charter. The role of this fund
generation often has little knowledge of the business history.
box is strictly to support family members with any separate
It would be beneficial for the next generation to be aware of
business ideas they might have. Having the family charter
the business’ past success and challenges.
and the family fund box in place can reduce the conflicts among family members, and give a better chance for each of them to succeed.
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Family Business2Family Business IntroductIon
Solution 2 Talking To: Najla al SuhaiMi, exeCuTive manager suhaimi Design, sauDi araBia, 2nD generaTion
A
n integral part of a family business is to ensure
Finally, family business should not feel threatened by seeking
the continued growth and success of the business
professional advice. Lawyers, accountants, financial advisors
throughout the years. All family businesses should have
can help in putting together a successful succession plan.
a succession plan to ensure a smoother transition from one generation to another. If we look up the definition of
In this case study, in terms of succession planning, the grand-
Succession; “it is the right, act, or process, by which one
father who started NAS Group didn’t need a succession plan.
person succeeds to the office, rank, estate, or the like, of
It was easy for him, since the idea of succession planning at
another”, which can only be achieved through starting the
that time meant that the eldest son takes over. Luckily AbJ
succession planning process at least five years in advance.
had a clear vision, capability and commitment of how he
Many business advisors tell budding entrepreneurs to build
wanted the company to succeed.
an exit strategy into their business plan. The point is that the longer you get to spend on succession planning, the
Throughout AbJ’s leadership, he focused on the growth of
smoother the transition process is likely to be. The follow-
the company and neglected to prioritise succession planning.
ing aspects need to be mentioned:
Because of the hurdles he faced, most of the third generation deserted the company, except for FbA and his cousin, which
A vital step in succession planning is to get everyone in the
made it easier for him to name his successor.
family business involved in the process. “Opening a dialogue among family members is the best way to begin the process
FbA believed in his uncle’s vision and climbed the corporate
of a successful succession plan” (Grant Thornton, LLP).
ladder through his hard work and commitment until he became the leader of the company. Succession planning won’t
A close and realistic look should be taken at the family and
be easy for FbA but should be considered a priority. He has
succession should be planned accordingly. Strengths of all
twelve fourth generation family members working in the
possible successors should be examined as objectively as
business, all of which are well educated and competitive.
possible and thought about in terms of what’s best for the
Choosing his successor doesn’t mean choosing someone like
business.
him or even someone he likes. It entails choosing someone who is not only ready for the job but has the respect of the
Training all possible successors and working closely with them
key team members and the ability to guide the company
is very important as well. The family business succession plan
into the future.
will have a much better chance of success if the leader works closely with successors before handing over the reins.
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IntroductIon Family Business2Family Business
Solution 3 Talking To: MuSaab S. al Muhaidib, general manager al muhaiDiB TeChniCal supplies, sauDi araBia, 3rD generaTion
T
his is quite an interesting case touching upon an impor-
while also having a proper shareholder council that elects
tant topic; succession. I am sure most family businesses
the board of directors. In addition, this procedure will help
in the Gulf know it very well, but in my humble experience,
by bringing independent (non-family) directors in that can
few really take it as an important objective and exercise to
play a bigger role in the succession as they often have an
agree on and have their next leader in place to be groomed
unbiased view/opinion of family members.
for the challenges ahead. Therefore, I would recommend that FbA… Succession is key for any business continuity and growth and
(1) Creates a nomination committee that does not include
we, as family business owners, know that challenge and the
any family members; instead, it should include two to
success rate of continuity of the third and fourth generation.
three independent board members. FbA might also bring
I always think that it is best to look at our family business as
one HR consultant from outside the company to provide
a professional work place where we wear our professional
new views and ways to tackle this issue,
hat and never think of it as our own place and/or home –
(2) Instills a fair process communication channel where every
maybe the question that really needs to be asked is whether
family owner can voice their views and recommendation
the family or the business comes first!
on the selection process and help define it. (3) Creates a company culture where only competent
In my opinion, it is always good to have a business policy
professionals and individuals may be the next leaders.
where employment is based on a “competitive base” rather
This method helps preventing glass ceiling perception
than a “family comes first” principle. This should be the
and will help retain talented employees and managers.
objective for those who want their business to succeed over many generations to come. In other words, I should let my
My last recommendation is that it is always good to listen
family member run the business only if he/she is the most
twice as much as we speak, this is why, after all, we all have
competent member in the organisation considering both
two ears and one mouth.
family members and professional associates. Another way of tackling this situation this is to implement a “fair process”, where you have a forum (a sort of structure) where most family owners can communicate their views and recommendations on what they want their successful succession methodology to be based on. This of course only
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Tharawat Magazine Volume 10
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Profiles
Pictet & cie
Swiss private bank, Pictet & cie was established over 200 years ago in 1805 in the heart of Geneva’s old town. today, it is one of the largest private banks in Switzerland and one of europe’s leading independent asset management specialists. Pictet & cie, the name by which the Bank is known today, was chosen in 1926. the bank is owned and managed by eight general partners. Due to its clear governance structure, the Bank can by no means call itself a ‘family-owned’ business. On closer inspection, however, Pictet &cie has, from its inception, had all the traits of a family business.
Pictet & Cie A Swiss private bank with all the traits of a family business
W
hen it was founded in the beginning of
family members have followed in each other’s footsteps into
the 19th century, the Bank was named
the world of finance, thus fostering quite an extraordinary
Banque de Candolle Mallet & Cie after
sense of loyalty and shared vision of the Bank’s future.
its two young managing partners and
Indeed the Bank’s story, past and present, is linked to the
founders, Jacob-Michel-François de
achievements of a few distinguished individuals who often,
Candolle and Jacques-Henry Mallet. The Bank’s initial vision
but not exclusively, share the same name:
was “to trade in goods and articles of all types, collect annuities and undertake speculation in commodities”. Soon, however,
After it was founded in 1805, the first Pictet family member
it started to focus on assisting clients in their financial and
to enter the business was Edouard Pictet, the nephew of
commercial affairs, as well as on wealth management. To this
founder Jacob-Michel-François de Candolle’s wife. His
day, these activities form the core of the Bank’s business.
career with the Bank lasted more than 37 years until 1878. By then, the Bank had been changed to Edouard Pictet &
16
Even though Pictet & Cie does not consider itself to be a family-
Cie Between 1890 and the First World War, the bank grew
owned business, a brief look at its history soon reveals that
substantially and employed over 80 members of staff. The
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Pictet & cie
Profiles
ABOVE: Former Offices in Rue Diday, Geneva، LEFT: Former Pictet Partners at work BELOW: Geneva around 1900
Partner at that time was Ernest Pictet, who was succeeded
also during this dramatic period that Alexandre van Berchem
by his second son Guillaume following his sudden death in
was made Partner. He has since gone down in the Bank’s
1909. Guillaume Pictet was a traveller at heart and added
history as the man who symbolised the transition to the post-
much value by setting up the Bank’s network in the United
War boom. He was the first member of the Bank to promote
States and Latin America. He was in turn succeeded by his
the its international presence and to set up offices abroad.
eldest son, Aymon Pictet, who later entered the world of
Until 1945, most of Pictet & Cie’s clients had been from
politics. In 1926, the Bank was given its current name: Pictet
Europe and Switzerland. After the war, the Bank increasingly
& Cie Aymon was succeeded at the Bank by his cousin, Albert
started to offer its services to clients from all over the world.
Pictet, in 1928 against the backdrop of the market turmoil,
A significant upturn followed, bringing with it many years of
which followed the First World War and in the midst of the
growth and prosperity. Much as it had been in the late 19th
Great Depression. Pierre Lombard, who had been appointed
century and to the advantage of the banking sector, during
a Partner one year previously, shared the task of addressing
the Cold War Geneva became a diplomatic and financial
the disastrous consequences of years of recession and
centre. Pictet & Cie grew substantially between 1980 and
another World War, which shook Europe to its core. It was
2005 and the number of staff it employs has increased from
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Volume 10 Tharawat Magazine
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Profiles
Pictet & cie
Pictet & cie grew substantially between 1980 and 2005 and the number of staff it employs has increased from 300 to over 2000 employees. in 2010, Ivan Pictet, one of a long line of family members to have worked at the Bank, retired from his position as a Senior Managing Partner of Pictet & Cie and was succeeded by Jacques de Saussure.
Today, Pictet & Cie. stands for over 200 years of family and industry history. To this day, the Bank’s headquarters are in Geneva but it has expanded its global presence to include Present Pictet & Cie. Headquarter, Acacias, Geneva, Switzerland
offices in Barcelona, Basel, Dubai, Florence, Frankfurt, Hong Kong, Lausanne, London, Luxembourg, Madrid, Milan,
300 to over 2000 employees. In 2010, Ivan Pictet, one of a
Montreal, Nassau, Paris, Rome, Singapore, Turin, Tokyo and
long line of family members to have worked at the Bank,
Zurich. Staying true to its values and core business activities,
retired from his position as a Senior Managing Partner of
Pictet & Cie negotiated its way through two centuries of
Pictet & Cie and was succeeded by Jacques de Saussure, who
economic and political changes, and shows every sign of
has been with the Bank since 1980.
continuing to do so, always steering a steady course.
1805 1890 1926 1945 2010 the Swiss private bank, Pictet & cie. was established over 200 years ago in 1805 in the heart of old town Geneva, Switzerland.
18
Between 1890 and the First World War, the bank grew substantially and employed over 80 members of staff.
Tharawat Magazine Volume 10
the Bank’s name, as we know it today, was appointed to it in 1926 and is owned and managed by eight general partners.
Until 1945, most of the Bank’s clients had been from europe and Switzerland. After the war, the Bank internationalised its client base.
in 2010, ivan Pictet, one of a long line of family members to have worked at the Bank, retired from his position as a Senior Managing Partner of Pictet & cie.
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Pictet & cie
Profiles
Interview with...
Jacques de Saussure Senior Managing Partner, Pictet & Cie In 2010, you were appointed to the Senior Managing Partner position in Pictet & Cie.. Can you tell us more about the path that led you to join this centuries-old bank? To do so, I will need to tell you something about my own family history. Ours is a very old Geneva family and one that it is best known for the many scientists it has produced over the years. Geneva has always been a place that favours exchanges between representatives of the worlds of science, the arts and business. My own father was the first member of the de Saussure family to be a banker, and he became a partner of Pictet in 1960. As you can imagine, this was a decisive factor in my own decisions.
I studied science because I thought it was the most interesting
Moreover, my grandfather on my mother’s side had a private
way to look at the world and also because the scientists in the
bank in a small town in the mountains, which had in turn been
family were a lot more famous than any bankers had ever
founded by his father. And added to all of that, I now live in
become. You know, bankers are often entirely forgotten after
our family house, which was built three centuries ago by an
one or two generations, whereas artists and scientists are more
ancestor who was a banker as well. That was the time when
often remembered! I therefore studied science at the Federal
France was the great power and the bankers in Geneva were
Institute of Technology and Engineering. After a while the
its financiers. This meant that the 18th century was a great one
other side of me came to the fore, the financial side, if you
for Geneva; the city was at the height of its power because of
will; and I decided that the best way to connect the two things
the prosperity of its economy, which was composed essentially
was to study business but in a scientific setting; I went to MIT.
of the watchmaking and banking sectors. At the same time,
This was just a fantastic experience because the professors
Geneva also played a key role in the arts and sciences. Much like
were outstanding. They were brilliant and fascinating people.
in my own family, there was always a strong mutual relationship
Having this unusual background is useful in my work at the
between the two professional orientations, because if there
bank, first and foremost because it is a differentiating factor.
was a trader or banker in a family, that meant other members
In business you always try to differentiate yourself.
could dedicate themselves more freely to the arts and sciences. I think it is important to strike that balance within a family and
What was your first position when you started with
to have not only business people but also others who contribute
the bank?
to society in a different way. For many years I worked as a portfolio manager in the My own personal development was naturally influenced by
asset management department. Maybe here my scientific
this rich historical background and by my own family history.
background was more important, because IT has become a
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Volume 10 Tharawat Magazine
19
Profiles
Pictet & cie
key tool in banking today, and the way markets and trade are
we have in place, we have managed to avoid this situation.
run and analysed is highly technical and scientific.
As the owners and at the same time the executive team, we have introduced an operational convention whereby we meet
If I could do something differently then it would be to spend
every morning. Being both owners and managers accelerates
more years working for other organisations outside the family
the decision-making process. Rather than having to pass
business. After my graduation I worked in a small research and
information up and down the hierarchy, our employees share
consulting firm in New York for about two years, after which I
their thoughts and questions with us directly and we can react
was offered a job at Goldman Sachs. However, I thought that
quickly. We are responsible, we are accountable, we know
it was maybe time to go back into the family firm. Today, we
what we are doing, we know what risks we want to take, and
urge the younger generation to develop outside of the firm
when we want to take them! We have nobody else to report to.
as much as possible. Staying outside until the age of 33 or
It is a great model although one that places a lot of weight
35 is perfect, because the more you learn outside, the more
on individuals. It does confer privileges on the partners but
experience you can bring to the family firm when you come
above all duties and responsibilities. Moreover, even though
back to it later.
the partners buy into the firm at book value, they also retire
i think it is important to strike that balance within a family and to have not only business people but also others who contribute to society in a different way.
at book value, which many executives would not want to do. Non-family members may become partners as well, which would probably be one of the main aspects that differentiates us from most family businesses. However, we believe that in the services industry, the human being is the essential element. You just mentioned the partners’ daily meetings. Can you take us behind the scenes and tell us what the core purpose of these gatherings is?
The Pictet leadership model is one of great interest
It ensures the flow of information between the partners.
and repute. What particularly characterises it and why
Every time something happens or a special situation arises,
do you believe that this is the recipe for the future?
it is important that you are aware of the key decisions to be taken - particularly so in our case where we share unlimited
20
What makes us different is that, since the beginning, we have
liability for the bank›s balance sheets. For one thing, you want
combined ownership and management in the same hands.
to make sure that nobody works in isolation and does things
The advantage of having this combination of management
that he should not do or feels that he cannot talk to someone
and ownership is that we reduce conflicts and diverging
else about it. It also has another interesting side effect, namely
interests; the usual conflicts that you may have between
the promotion of a smooth inter-generational transmission
owners and managers and the conflicts that you have between
of the firm. For 25 years I have seen senior partners take
employees and managers are avoided because the interests
decisions day after day, which helped me in assuming my
are all aligned. We see our employees daily and we develop
current position. We have two younger partners who were
long-term relationships with them and also with our clients.
elected following Ivan Pictet’s retirement last year and who
The clients› interests have to come first, but we see many other
now attend these meetings and can see the decisions being
organisations where there is a lack of connection between the
taken day after day. So when managers have a problem in
owners, the management and the clients. Thanks to the system
their specific field of competence, they can discuss it every
Tharawat Magazine Volume 10
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Pictet & cie
Profiles
day. This helps to create a commonality of views, a corporate culture and a vision for the firm. Moreover, we do not need to get outside consultation for our strategy: indeed, we build it gradually every day, in small steps. It is an ongoing process that we are engaged in. Finally, one more advantage of this system is that as the senior partner, one does not experience the loneliness that such a position often entails - as in the case of CEOs - or feel the rivalry from others that can ensue from different structures. Do you think that this is also helping you to adapt quicker to a required change? Yes, absolutely. Decision-making goes through a careful process, though. I remember having to correct presentations in our meetings over and over again until everyone was satisfied. In the end the final decision is almost always better than the initial proposal because it has gone through that process. We believe very much in our culture of teamwork. This is what we practise at the head of the firm: a lot of teamwork, a lot of team decisions and full endorsement of the decisions made. Considering how many family members are working within the firm can you still consider Pictet & Cie. a family business? The way the partners are elected is purely by cooptation. Only existing partners have voting rights, not the families. This helps us avoid nepotism. For instance, we have a rule that if one of the new potential candidates for election happens to be a close relative of one of the existing partners, then that partner has to withdraw from both the discussions and the voting. Interestingly, we still prefer to have people with a strong family tie to the firm working with us. This is
What makes us different is that, since the beginning, we have combined ownership and management in the same hands. the advantage of this is that we reduce conflicts and diverging interests.
for a number of reasons: There is, of course, the financial side. However, most important to us is the fact that this is a wonderful firm and, because of that, we want to see it in the hands of someone close to us. Pictet›s combination of long-
belonging and identification with the company. I also believe
term tradition and vision is its backbone, and when you have
that this is important for employees. This identification with
someone whose uncle or grandfather worked in the firm and
families, tribes, and communities must be deeply rooted in
whose name has been there for several generations, it gives a
the DNA of human beings.
sense of accountability for what is inherited. This is particularly the case for people who bear the name of the company. Our
Back in the 40’s Francois de Candolle and Guillaume
clients very much like to see this as it reinforces their sense of
Pictet witnessed a financial crisis that led them to
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Volume 10 Tharawat Magazine
21
Profiles
Pictet & cie
take cautious actions regarding the services offered
to provide them with security, be it for their pensions or
by the bank. Today, again, we are confronted with a
enabling them to pass their wealth on to their children. If
post-crisis world. How does Pictet position itself in
I look at certain countries, the misallocation of capital is
this new economic context?
striking, and it is frustrating to see the amount of senseless spending that has been going on. From Pictet’s perspective,
We have to remember that most of the banks in Geneva were
one improvement that could be made would be to suggest
founded somewhere between 1798 and 1815. This was because
to some of the governments currently in power that they
all the previous banks had collapsed with the breakdown of the
shift their allocation of resources towards a better use. This
French assignat currency (originally conceived as bonds, they
could bring considerable economic advantage. In the end,
developed into a paper currency, the excessive printing of which
however, the allocation of resources is just one element; we
led to hyperinflation) in 1796. I believe that the crisis we have
firmly believe that only education can ultimately bring wealth
witnessed now is not only a sovereign crisis in the usual sense of
and prosperity to a country.
the word but also an adjustment to a new economic paradigm. We are seeing the shift of power away from the US and Europe
Pictet has set up successful operations in Asia and
to Asia and also countries like Brazil. We have not seen the
the Middle East. How do you feel your global footprint
i believe that the crisis we have witnessed now is not only a sovereign crisis in the usual sense of the word but also an adjustment to a new economic paradigm.
is going to evolve in the future? I have to mention here that having our base in Switzerland is certainly a very valuable asset for us, not just because of the country’s political stability but also its financial governance. At the same time, we also operate on a global scale and invest all over the world, including the Middle East. It is marvellous that we can offer our services here in particular, as many of the successful entrepreneurs in the region are our clients, and it is amazing to see the potential and creativity that they demonstrate. We should not forget that the Arab world led
end of It because it is happening as part a major structural
the rest of the world in the Middle Ages and was the link
secular change in the world. As far as Pictet is concerned, it
between Europe and India. Indeed, it still has a central role
is true that we do constantly adapt our business model to the
today. When you look at the energy of this emerging young
changing climate; however, it should be emphasised that the
Arab generation, you can see that there is a lot of hope and
core of what we do has always remained the same. The nature
potential.
of our clients has changed enormously, not only over the span of 200 years but even within my own lifetime. For instance,
***
when I started, asset management (for institutions) was just
Worldwide, we see that family firms play a strong part in the
at an embryonic stage, whereas today it makes up half of our
development of good governance and responsible behaviour;
business. So although we have changed and expanded, our
when you have your name associated with a company, you
core business and our principles have remained the same. In
are committed to its continuity and you need to see to your
that sense, we are well prepared for the future.
children enjoying a good life. That is the most important thing. The Arab world is particularly strong in this regard, because
22
The usefulness of what we do can be seen in good allocation
family ties are very strong and this is definitely something we
of assets and wise investment of our clients› wealth so as
can learn from.
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Family Business ConferenceInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation 2011 will be an exclusive gathering ofInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability family business leaders Sustainability from the MiddleInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity ontinuity Sustainability Innovation Continuity Sustainability Innovation East and Continuity Europe. TheSustainability conference willInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability feature a program focused on sustainabilityInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation in various Continuity areas of business and theInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Sustainability innovative program will facilitate exclusiveInnovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuityexecutive Sustainability business networking, learningInnovation ontinuity Sustainability www.tharawat.org Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation and cultural exchange.Innovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation ontinuity Sustainability Innovation Continuity Sustainability Innovation Continuity Sustainability Innovation
July 6th-8th 2011
Coming this Summer
On Family Business
Internationalisation... Tharawat magazine Volume 11
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FEATURE
FEATURES 26
28
34
The Social Responsibility of Family Businesses
Yes! To Reinvening the Wheel
Philanthropy-What it Provides to Families in Business
An opinion piece on the need of dynamic societies the ways family businesses can contribute to them.
www.tharawat-magazine.com
An article on why it is crucial to ask ‘Why’ in a family business and how reviewing processes can be benefitical.
How philanthropic activities can increase family cohesion and how ‘doing good’ makes economic sense for families in business.
Volume 10 Tharawat Magazine
25
FEATURE
Social ReSponSibility
The Social Responsibility of Family Businesses in the Arab World
Increasing Competitiveness through Social Impact Sudden changes in social structures and shifts in economic systems are inextricably linked with each other and naturally have a direct impact on the competitiveness of a business community. next to governments seeking to improve business standards through regulations and creating new incentives, the business community itself can be a great engine to improve the creation of business opportunities and raising the level of commercial interaction. Dynamic societies and their needs
need for education and employment. The way
Over the last months, the Arab world has been
corporations, family-owned or not, decide to tackle
facing many new challenges and there is little
these two issues will have a great influence on
doubt that the business environment for family-
improving the competiveness of the business and its
owned companies of all sizes has been most
environment and may well become a decisive factor
importantly impacted. Since family businesses in
in the further development of the Middle East.
the Middle East have always been very close to their stakeholders and deeply embedded in their direct
What can be done for education?
social environment, the challenges facing the rapidly
When it comes to education there are several ways
evolving communities can be an opportunity for
in which family businesses can and have contributed
them to set an example on how businesses can deal
and see the immediate benefits this will yield for their
with change. The importance of business families, as
own competitiveness and that of their environment:
well as their vast influence in their local communities makes their role in shaping the future of the region
Creating education funds: Many families have
a fundamental one. Many families have dedicated
created a fund to sponsor education for family
large amounts to the welfare of their communities
members but also for people in their community.
and the environment. Even though little is known in
Often this addresses post-graduate degrees,
facts and figures it is yet commonly understood that
however, there are only few initiatives that support
they are benefactors to the community.
vocational training. Increasing support in vocational training and technical education could expand the
However, in order for businesses to have a real
qualified work force for family businesses to hire
impact, to contribute to overall prosperity and
from and at the same time help communities to
thus increase of competitiveness, they have to
become self-sufficient.
look at the main need of their immediate economic
26
environment. In Arab economies, the two main
Contributing to universities and schools: Another
aspects that lie at the core are undoubtedly the
way to contribute to education often undertaken
Tharawat Magazine Volume 10
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Social ReSponSibility
by families is by adding to or building schools and universities. This increases the value of the family portfolio and the branding of the family business. Education of family business employees: Another immediate way of tackling the issue is by emphasising the education of employees working within the family business. It can be only advantageous for family businesses to further develop the skills of their employees, whether they belong to the family or not. This can ensure a smooth running of the firm in case of transition periods and foster in-house innovation and development.
FEATURE
Since family businesses in the Middle east have always been close to their stakeholders and are very deeply embedded in their direct social environment, the challenges facing the rapidly evolving communities can be an opportunity for them to set an example on how businesses best can deal with change.
What can be done for employment? According to the International Monetary Fund the region needs to create 18 million new jobs within the
Create in-house vocational training systems:
next decade. But how businesses can contribute to
Combining the need for employment and for
the creation of employment is not a question with a
education, companies in manufacturing sectors,
straightforward answer. Looking beyond that rather
companies can accept non-skilled workforce at low
classical approach to job creation, businesses could
wages and let them develop through an vocational
consider the following options:
training course within the company over a period of time. This would allow the companies to lower their
Supporting SMEs and start-ups: family businesses
employee costs in the beginning and at the same time
can support the development of new business
gain well-educated workforce.
ventures by either investing in start-up ideas to be added to the company’s portfolio or by setting up
Social responsibility for better competitiveness
a family venture fund, which seeks and supports
The outcomes of individual or even coordinated
young entrepreneurs. Whilst creating employment
efforts by family businesses to boost education and
opportunities, the return on investment for the
employment in the Middle East can only be beneficial.
family business, may be monetary, but will mainly
The more energy is bestowed on raising the general
be access to new and upcoming business ideas and
standards of education and thus the possibilities
first access to potential business opportunities.
for employment, the more competitive the markets will become on a regional, as well as a global stage.
many
They will generate more and increasingly interesting
governments in the Middle East have developed
business opportunities. After all, creating a better
projects for short- and long-term job creation.
future for their next generations is at the heart of
Businesses can advise as to market requirements
the mission of family businesses.
Supporting
government
projects:
and offer internship opportunities. Potential talents for future employment can be thus found by the family business.
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Author Staff Writer, Tharawat magazine
Volume 10 Tharawat Magazine
27
REINVENTING THE WHEEL
FEATURE
Once procedures and habits are established in an organisation, it is often difficult to make people believe that re-evaluating whole work processes can be beneficial. Anees Redha Q. Sultan, Head of Marketing Development at W.J. Towell L.L.C. in Oman, shares his experience of when he insisted on to reinvent the wheel in his family company.
Yes! to Reinventing the Wheel - Why it is important to ask ‘Why’
C
ivilisation is not imperishable.
resentment at the idea that I might try and improve
It must be relearned by every
something or, God forbid, find a gap. Under my
generation.’ By William Durant. A
fervent assurances that my job was to create
year into my experience with the
something parallel to the existing structures and
family business I was assigned the
not to overhaul everything, I started.
task of working with the financial division to create
28
an owner-friendly MIS. Ours is a business of many
My direct boss was the one posing the biggest
divisions and, as we now call them, clusters. As a
challenge; he dismissively called my efforts
result, the accounting and the financial reporting
‘reinventing the wheel’. In one of these rare defining
are well established and, one may expect, robust.
moments that you later often recognise as being
It was therefore no surprise to me that my task was
moments of truth, I challenged him back saying,
met with some resistance if not even a feeling of
‘Yes, I want to reinvent the wheel, if for nothing
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REINVENTING THE WHEEL
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FEATURE
Volume 10 Tharawat Magazine
29
FEATURE
REINVENTING THE WHEEL
else, than to learn how it was made in the first
skills – never a bad thing to do- and set to work. My
place’. No one can openly deny family members
findings were not mind-boggling, nor unexpected. I
the wish to learn in their business, and so it was
guess after a few years in the business, I see my job as
a cool and clear win. A handy trick, I guess, for all
that of a middleman for information. Traditionally,
ambitious family business members.
in many of our Gulf businesses, accounting has always been done by outsiders, and it is not a bad
30
As a result of that confrontation, I got the information
idea and never too late to have firsthand knowledge
I needed, I started to polish my slightly rusty financial
of numbers. In fact, I would even go as far as to
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REINVENTING THE WHEEL
suggest an immersion into it in order for the owners of the capital to be able to decipher financial symbols as well as their accountants. The whole process got me thinking of my former work experiences. Many years ago I worked with a CEO who professed that asking one simple question was the crucial factor in order for anyone
FEATURE
People with conflicting sets of values or interests, will always use derisive statements such as “too theoretical” or “reinventing the wheel”.
to understand any business: Why? Why to the nth degree? ‘Why’ to everything until you get to the bottom of things. In asking ‘why’ you force the other party to question and defend his assumption;
such as geometry, physics, chemistry, metallurgy,
in essence, it is a form of reinventing the wheel.
and production. Now tell me that’s not worth
Asking ‘why’ is non-threatening and it runs in the
learning!
spirit of learning – and so it is a defensible strategy. He never told us, however, that asking ‘why’ many
At any rate, as I pondered upon the untamed data
times over would make you increasingly unpopular.
in front of me, I managed to draw some conclusions
However, as a CEO, I imagine, he didn’t really care
that I knew would be hugely unpopular within
about that sort of thing.
our finance division. I wondered if I should show them to the chairman first and ‘score a point’. I
Related to the issue of whether going back to basics
further imagined challenging him that if he were
is the right thing to do, is the all too easy dismissal
to ask the division for a similar report, he would
of college education by some business leaders.
get a watered-down version. I then dismissed
Many reason that this is because ‘college teaches
such superfluous, yet tempting, heroics, knowing
you theory’. Well, theory is only impractical if you
very well that other than creating a stout enemy
confine it to books. Once you actually practice
in an already testy relationship, I am still at the
it, your work becomes all the more powerful.
mercy of what’s given to me; what if I was missing
In business it means that the use of financial
other parts of the puzzle. Sure enough, as I called
theory coupled with practical knowledge makes
the first meeting with more participants, major
you understand what ratio or what analysis to
shortcomings became evident. The group realised
use rather than just to accept what’s randomly
that is the gaps were serious and needed to be
thrown at you. People of conflicting sets of values
rectified. If all this sounds like a challenge, then
or interests, will always use derisive statements
the next step is even more daunting. How do you
such as ‘too theoretical’ or ‘reinventing the wheel’.
bring about major change in the way and format
I believe that you need to reinvent the wheel if you
of reporting managerial numbers? Well, I guess I
are coming from a low knowledge base.
need a few more years in the family business to be able to write about that.
By the way, if you were to produce a simple bicycle wheel – note even a wheel for cars, airplanes or high-end technology uses but a simple bicycle wheel- you would still have to master disciplines
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Authors Anees R Sultan, Head of Marketing Development at W.J. Towell L.L.C., Oman
Volume 10 Tharawat Magazine
31
FEATURE
FAMILY BUSINESS PhILANthroPY
Philanthropy - What it provides to families in business Family business philanthropy, though widely practiced all over the world, is an area that is still unexplored and little commented on. The field is, however, fast evolving and has witnessed much innovation. Etienne Eichenberger, Co-founder of Wise - Philanthropy advisor, and Jessie Johnsson, Key Client Manager at Wise, discuss what makes a successful engagement and the benefits for families that get involved in philanthropy. Two case studies are presented that illustrate the successful implementation of philanthropy for families in business.
Philanthropy: Are we observing a momentum?
is that an increasing number of family businesses
Philanthropy is an evolving sector. The 2010 World
are reaching a moment in which the questions of
Wealth Report by Merryll Lynch and Capgemini,
transition and family governance are essential.
found that the allocation of High-Net-Worth-
This long-term vision of family businesses, striving
Individuals in philanthropic activities grew in every
to insure that the future generations will benefit
regions except North America. The same report
from the successful enterprise, can benefit from
reveals that 35% of HNWI in the Middle East said
the platform, which philanthropy offers to them.
they planned to increase their level of philanthropic In parallel, family businesses are increasingly
engagement this year. Every region and country has its own philanthropic culture. There currently seems to be an interesting momentum for family businesses in the Middle East. Two observations draw our attention. While family businesses are playing an important role in the economy and studies have regularly shown that on the long-term they outperform other businesses, there is a continuous challenge of succession to the next generation. Our observation
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35
becoming global actors in their sector and, thus,
of HNWI in the Middle East said they planned to increase their level of philanthropic engagement this year.
continuing their charity to their communities.
percent
developing a more global commitment. These businesses are likely to seek a more international approach to the act of giving in addition to
Family giving: how it mirrors the family business In our experience, we often observe that the impulse to engage in philanthropy often comes from one family member before it turns into a family project.
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FEATURE
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FEATURE
FAMILY BUSINESS PhILANthroPY
Philanthropy is plural and the reasons to involve the family are as varied as families themselves. Here are some of the common impetuses: Nurturing family legacy Family entrepreneurs’ long-term vision for their
FIG. 1: Drivers for Family Business Philanthropy
Our Family Philanthropy Family driven (legacy, platform, NextGen)
business is anchored in the ambition to create
Impact driven
value and wealth for their descendants and for
(good giving principles)
society. The business development is often aspired by sustainability and these entrepreneurs want the future generation as well as the community to benefit from their success. Hence, philanthropy becomes a natural expression of personal and
Meet with peers
Work with advisors
Learning by doing
Leverage your Resources
spiritual values. It can translate the desire to ‘give back to the community’ and help the development of action promoting general interest to leave a
Guide them in finding their modus operandi that
strong family legacy.
will help shape their personalities, Learn how to defend one’s point of view within
Strengthen the bond between and among
the family,
generations
Make them understand the value of money and
Philanthropy can become a common ground, or a sort
teach them to work together,
of neutral ground that can include parents, children,
Explain the importance of wealth management
partners, and grandchildren in a project that is not
In this sense, it can help the younger generation
the family business. In other words, it becomes a place
to acquire practical skills and develop the
for encounters, dialogues, or exchanges of shared
entrepreneurial attitude that will be important
altruistic interests. It is a wonderful opportunity to
in life as well as in the business world. One of
bring together, and even to unite family members.
the approaches to involve the younger family
It also provides a space to create new conversation
members is to have a separate next generation fund
topics, especially around intangible values. As such,
allowing them to allocate smaller grants to their
it also offers opportunity for personal growth. In an
individual choices. This experience helps them to
increasingly rapidly changing cultural, economic and
take responsibility and to develop confidence by
social context, sharing a common family project can
recognising their preferences.
bridge geographic distances as well as generational gaps. In this sense philanthropy is a channel between
Some Good Giving Principles?
and among generations.
Donors want generosity to go hand in hand with real opportunities. However, in the words of a donor
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Involving the next generation
“the hardest part is to find a balance between heart
Philanthropy can also be a learning tool giving
and reason- it is a perpetual challenge”. Maintaining
parents the possibility to...
professional standards is, nevertheless, essential to
Accustom their children to share their resources
families who have built their business successfully.
and to give them the opportunity to do so,
In other words, being good at doing good.
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FIG. 2: Trends in Philanthropy
FEATURE
accountability are called for, having the right tools
Emerging new style in philanthropy
for project management has become essential. Project management is a complex process that
Former paradigm
New paradigm
requires multiple stages including the planning
Doing on your own Responding to solicitations Non-for-profit as a recipient Giving to general cause
Learn from others, get advised, involve children Pro-active on issues of interest Donors & social enterprises as partners Specific objectives to create impact
the predictability and sustainability of a project.
of objectives and results, taking into account Defining a specific project within the chosen organisation will enable the donor to get to know the partner organization better and to build trust for greater impact. Exit strategy The sustainability of the organisation is assured once it can provide its activities autonomously
Philanthropy becomes a natural expression of personal and spiritual values. It can translate the desire to ‘give back to the community’ and help the development of action promoting general interest to leave a strong.
or with a variety of support. Predictability lets an organisation anticipate the end of a support cycle. An exit strategy combines these two perspectives. At the same time an exit strategy allows for a project planning phase (3 to 5 years). When finalising this phase, an analysis of the challenges, failures and successes of the project serves as lessons for future improvements. At the end of a project cycle you will be able to choose between renewing your support for a new phase or project, or retract from the organisation with the feeling of having contributed to a significant and lasting impact.
Pro-active engagement
Leveraging your engagement
“Giving” is about making choices and taking a
It is important for donors to ensure that their
position on what you consider to be the right
family dynamic as well as their available resources
course of action. “Giving” is also about selecting
converge to fulfil social impact. For many families
trustworthy actors on issues close to your heart in
time is a constraint and financial resources are
order to optimise the impact of a donation and to
limited. We draw from our experience working
be part of a rewarding and challenging experience.
with families to put forward hereunder ways of
Such an engagement calls for a rigorous definition
leveraging philanthropic engagement:
of interests to ensure that the best suited partners and the most appropriate mechanisms are found.
Meet with peers Inspiration
through
peers
is
important.
Project approach
Gatherings that are exclusively for families
At a time when greater transparency and
engaged in philanthropy allows donors to learn
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FEATURE
FAMILY BUSINESS PhILANthroPY
about other families’ modus operandi or discuss
Work with advisors
pertinent issues ranging from strategic choices
Giving involves choosing. In a dynamic sector where
of funding approaches to family dynamic. This
choosing organisations you trust in areas you are
opportunity to share practical experiences among
drawn to or making common family decisions can
peers allows donors to enrich their philanthropic
be overwhelming, getting the support of professional
engagement.
advisors can be key. “They help us figure out what we can expect from the various projects that are
An exclusive donors’ network such as ‘Families
presented to us and more importantly, they share their
in Philanthropy’ provides a platform to discover
experiences at a time when we could get carried away
and share ideas with families represented across
by excessive idealism” says a member of a family who
different generations involved in philanthropy.
relies on philanthropy advisors for their engagement.
CASE STUDIES 1:“I wanted to include philanthropy in the family governance” Laure, her brothers and sister are involved in the company
business, because of strict family rules that pertain to them.
that their father Matteo founded twenty years ago. As a
However, they are strongly encouraged to play a role in the
young immigrant from Italy who arrived in France in the
family’s philanthropic projects, which helps to strengthen
1960s, he studied in Alsace before starting to work in the
the family’s values.
conversion of old buildings owned by the steel industry.
Laure believes that this strictly family approach to
Matteo and his wife wanted to express their gratitude
philanthropy was actually an excellent choice. Keeping
for the opportunity that was given to them by personally
family philanthropy separate from the company policy
engaging, with their family, in a philanthropic project. “When
on philanthropy allows each structure to play its role
we started reflecting on family governance five years ago,
efficiently, according to guidelines, without succumbing
we wanted philanthropy to be included and we decided it
to the constraints of the other, even if they have very similar
was the right moment to start our family engagement. We
values and motivations. The reputation of the family or
wanted to include our children and our grand-children in
of the business is not at stake, should either of them be
the project” says Matteo. The family agreed immediately.
subject to criticism.
They started by putting down in writing the first values and principles that mattered to them. This became the first “family charter.” As Laure explains, “We and our spouses thought about the strengths of our family, what kept us together, and what was meaningful to us all”. The charter inspired the founding document of the foundation that they established a year later. Since then, they have supported about ten projects in France and abroad. All family members are involved in the decision-making process, which gives meaning to philanthropy, and unites the family. It is particularly important for the spouses who are not involved in the
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FEATURE
Learning by doing
the learning phase in which you take the time to
Learning from experiences is an important part
review your experiences and learn from them.
of philanthropy. A philanthropic engagement has
Philanthropy is multi-faceted and it is important
several stages: the initial phase, based on a few
that the initial vision be allowed to evolve.
issues that speak to us, where the donor can test his assumptions by making preliminary commitments; the evaluation phase where you highlight what you liked, what worked and what you learned from exchanges with other philanthropists; the
AUThorS Etienne Eichenberger, Co-founder, Wise – philanthropy advisors, Switzerland etienne@wise.net
expansion phase where the initial pilot is scaled
Jessie Johnsson, Key Client Manager, Wise – philanthropy advisors, Switzerland
up while refining the principles of action; and
jessie@wise.net
CASE STUDIES 2: Creating a legacy Ahmad inherited the financial business from his father
Three years into the project, the parents are thrilled to
and made it even more profitable. Ahmad and his wife
see that their children have become more proactive, make
are very attached to the values of simplicity and respect
group decisions, and also like to give individually to smaller
that were nurtured in their family; they raised their four
projects. “They do not feel that they are giving, but rather
children modestly. When the older children left, the family
sharing with others, which is very enriching and motivating”
dynamics changed; it turned out to be the right time to
says Ahmad. Looking ahead, they are now thinking of
unite all children around a project that embodied these
establishing a foundation, hoping it will encourage the
values.
children to give themselves when they will make a living.
Ahmad and his wife were already giving to different organisations in their community. “For us it is important to share with our children the values that our parents transmitted to us”, explains the father. By involving them actively in this project, it was also encouraging them to spend more time together, so that they could get to know each other better, in spite of the geographic distance imposed by their studies. Finally this project was also an opportunity to give the children a notion about asset management. After understanding their parents’ perspectives, Jasmine and her three brothers accepted the challenge. In the first months, the children defined their first project – providing assistance to troubled youth. They started with projects close to them, in Lebanon. After learning a lot from culturally familiar cases, they decided to expand their horizons and extend their action to other areas.
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IN TERVIEW MohaMMed ahMed al obaidly
OITC GROUP was founded by Mr. Ahmed Bin Mohammed Al Obaidly in 1978 in Qatar and is today a largely diversified family business with 25 subsidiaries to the Group’s name. Famous for its full range of products and services, the Group is just as well-known for its alliances and partnerships with world renowned brands as well as other regional family businesses in properties and investments, joint ventures, business development, EPC contracts, commercial businesses, bulk materials, heavy industries, agriculture, farm management, production & beautification and environmental related works, travel management, hospitality services, transportation, and retail businesses. Mr. Mohammed Bin Ahmed Al Obaidly, Group Managing Director of OITC GROUP speaks about the diversity of the family business, the importance of family gatherings, and the future family generations.
Mohammed Bin Ahmed Al Obaidly Group Managing Director, OITC GROUP, (Al Obaidly) Doha, Qatar
At the time of the establishment of the OITC
the formal establishment of OITC, our Group of
GROUP by Mr. Ahmed Bin Mohammed Al
Companies. In the 50s and 60s Mr. Ahmed Bin
Obaidly in 1978, the country was in quite
Mohammed Al Obaidly started in properties, and
a different stage and has lived through
it was only in the early 70s that the family business
considerable changes ever since. Could
became more organised. The family established
you tell us about the main milestones in the
the company as a contracting and trading business
development of your family business over the
at the time. Our company was the first one to
last 30 years?
include fabrication. In that period, it was more usual for people to be in real estate and property
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I believe it is very important to differentiate between
management. While the construction of houses and
the time that my father Mr. Ahmed Bin Mohammed
buildings was quite established by then, my father
Al Obaidly started doing business in the region and
and my uncles brought something new to Qatar by
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INTERVIEW
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IN TERVIEW MohaMMed ahMed al obaidly
introducing fabrication in the electro-mechanical
legal, financial, and technical aspects of running
sector. The family started the company with a
the affairs of the companies. All these learning
very hands-on management philosophy. While we
experiences added up to the managing expertise
children were studying abroad, the family started
that I have built through the years, thus, making
another company in 1978, which was named Green
the mission of the Group and my vision more solid
Tree Agricultural Materials Company, the focus of
and strong within the family business.
which lay on landscaping irrigation and agriculture and included some commercial activities in Qatar.
I was highly motivated and wanted more
It was run by my father and uncles and some
experience; to me the sky was the limit, and in
expatriates, who got involved in the marketing
fact, it still is. In the years that followed I failed in
sector. By this time our Group of Companies was
some things and succeeded in others. I am happy
starting to be more professional and organised in
to state that I was able to diversify our company
the diversified sectors of the businesses.
from the agricultural sector all the way to more
Under your leadership, the family business has
Over the years that followed i failed in some things and succeeded in others. i am happy to state that i was able to diversify our company from the agricultural sector all the way to more modern and sophisticated engineering products.
expanded in many other industries and has been very successful in them. What was your primary motivation for these moves and why these specific industries? During the 70s until 1984 business boomed, however, the recession came and more difficult years followed. I completed my studies in the United States and France. Throughout those years I always knew that I would join the family business, and therefore, I spent some time in contacting companies related to the businesses. When I
modern and sophisticated engineering products. I
came back after my graduation I had the ambition
remember how we had to work hard for it and how
to create a group of activities across different
we would actually send around 400 to 500 letters to
sectors. I felt that while we successfully focused
companies every month to introduce ourselves. This
on agriculture and properties, it was not the right
was very important in order to build up our network
field to be in Qatar. Moreover, I believed that other
and to find partners for the projects, and the right
business units could considerably contribute to
know-how. Out of the hundreds we would send out
an even better and more visible image. As a fresh
we’d get back maybe ten or twelve positive replies.
graduate, however, it was not easy to push through
I remember one particular tender from Australia,
these new ideas and to give advice within the family
which we got from the Ministry of Electricity and
business. No one would accept such input at such
Water. There were electrical regulators as required
a young age.
by the Ministry of Electricity and Water and several challenges were there but we pulled through them
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The initial business experience was not an easy
and made money on two levels: from the tender
path as we learnt more about the commercial,
and on the currency exchange. Before the delivery
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INTERVIEW
our history. Part of the motivation in diversifying the business was for the sustainability of the family business and for it to withstand the fluctuation of business trends, for the encouragement in the region, for business experience and networking of family members, and for the coming generation to be able to cover all the sectors through high standard of management and know-how in family partnerships. The sectors OITC works in today are various: The contracting and engineering sectors are in the field of Power and Desalination, Marine, Onshore and Offshore civil works; Infrastructures such as Roads, Bridges, Tunnels, Interchanges, Piling and Foundations, Ports and Harbors, Airports, Railways, High-end technology products such as Steam and Gas Turbine blades, vanes, hot gas path; heavy equipments; the commercial sector, which cater for Electrical engineered products and services, also for the Mechanical engineered products and services, and the services sector complementing the projects under the Group. The Group also caters to the travel and tourism sector as well as the medical and educational sector. The part that we are developing now is the retail Mr. Mohammed Ahmed Al Obaidly, addressing the audience in a conference in Qatar.
of the project, I had bought some Australian
business. Our activities till now mostly referred
dollars, which appreciated shortly afterwards and
to engineering items, construction, and power
yielded considerable benefits. Through the profits
industries. Essentially, we want to tackle four new
of that tender we were able to almost cover all
sectors: Education, Healthcare, High technology,
our company’s losses. That was a shifting point
Manufacturing and Retail.
in my career where I gained more control in the family business. I had to win this respect through
We are always looking for the right partners to
achievements.
undertake these new activities and are very careful in the selection process. The retail business is of
I continued to pursue my aim of diversifying the
particular importance to us as it will enable more
family business into the right sectors. At the time in
visibility for our brand and will create awareness
Qatar this meant expansion into power generation,
with all types of consumer segments. Healthcare
oil and gas, and other heavy industries. We still
and education as well are core objectives for
maintained the agricultural business. It does yield
us and we are collaborating with other family
very much and it is a symbol of tradition and of
businesses on this towards social responsibilities.
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IN TERVIEW MohaMMed ahMed al obaidly
We have this diversification because it means that all the talent in our family can later be captured. The incoming generation will have a wide choice of how and where they want to add to the family business and develop the family entrepreneurship.
The diversification of family business sectors opens new market possibilities, new technologies and state-of-the art manufacturing of engineered products. This creates capital expansion of the family business partnerships in the GCC, regional and international arena. The reason why I decided to diversify into these sectors was not because it was really needed. It was
region for much longer than the existence of
always my own vision to cover a wide spectrum
the family business OITC Group (Al Obaidly).
of sectors: Why? The main reason is that we have
Could you tell us what the family history is
noticed that it is good for family businesses to have
and what the family trades were before the
different activities in one basked because of the
establishment of the company?
Mr. Mohammed Ahmed Al Obaidly in his office.
next generation. I am not expecting the whole coming generation to be the of the same category.
Of course there is a big difference between the
We have this diversification because it means that
tribal history, the family, and the family business
all the talent in our family can later be captured.
history. Our tribe has always been situated within
The incoming generation will have a wide choice
the Al Audaid area belonging to the AL ABADLAH
of how and where they want to add to the family
tribe. We trace back our family tribe to 999 Hijri.
business and develop the family entrepreneurship.
We stand for 433 years of tribal history. If we go
Diversification becomes a way to ensure the
further back, thousands of years, the AL ABADLAH
sustainability and continuity of the family business.
tribe originates in the Arabian Peninsula. Now the Al Obaidly family are all over the GCC region in
The Al Obaidly tribe and family has been in the
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general and in Qatar in particular. At the time of
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Mr. Ahmed Mohammed Al Obaidly with his sons and Grandsons in a family gathering.
INTERVIEW
my own grandfather we undertook the rather usual
stipulates transparency to a certain extent.
activities, which were ‘pearl diving’ and general
However, as a family business why would you
trading in the GCC. At the time there were also
worry yourself about this? Transparency amongst
many that were active in the food trade through
the family members is important and an obligation.
the connections to India and Turkey. Then in the
However, it remains a family business and not a
50s we started in real estate.
listed company. If a company is listed then, yes, information should be accessible to the public.
Much criticism is applied to family businesses
Of course, sometimes a family business is partly
in the region for what is called a lack of
listed, which changes the situation. Also when a
transparency. Do you believe that there are
family business enters a partnership, naturally,
aspects and issues that family businesses
information needs to be made available.
need to be more open about? You have played an important role in the I think a difference needs to be made between
development and expansion programs of
transparency to the family and the transparency
the Government of Qatar in different fields.
to the business community. Of course the law
Moreover, you are now the Secretary General
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IN TERVIEW MohaMMed ahMed al obaidly
in Business Council as well as a Board Member in the Qatar Chamber of Commerce. What do you think is the role family businesses should play to contribute to or stimulate the growth of the national economy? Whichever the country or context, family businesses always seem to face the same issues. The mindset is the same. During the financial crisis this mindset was the reason why most family businesses were much less affected than other corporations. Families may have a lack of governance according to the new sense of the term, which includes all aspects related to ownership structures, organisation charts, transparency and so forth. I believe, however, that there may be a
sustainability and continuity of the family business.
lack of governance but that it has in some form or other always existed in family businesses. Of
Within the Chamber of Commerce we are looking
course the more formal definition gives us a good
for ways to support family businesses as well by
idea of how to organise ourselves. We have seen
creating platforms for exchange knowledge and
some other families that were well organised
by encouraging that family businesses set up
and have fostered close relations between family
ventures together and form business as well as
members. These families have grown and they
personal alliances. Another goal that is a priority
have succeeded and are now market leaders.
is to establish a better understanding between the
Others have failed due to the clashes amongst
public and the private sector businesses. We focus
family members. Personally, I believe that it is not
here particularly on SMEs as most economies are
enough to just look at the governance structure
depending on them. We are working on developing
and problems cannot always be solved by just
a stock of listed SMEs with a special focus on the
simply listing a company; the family unity is what
manufacturing sector.
Mr. Mohammed Ahmed Al Obaidly and Mr. Ali A. Al Obaidly with other directors of a J.V company visiting one of the ongoing project.
has to be maintained under all circumstances. Similarly, I am also putting an emphasis on the
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I think that one of the main reasons why families
development of rules and regulations in the
struggle to maintain unity in the region is that they
private and public sector, as in the Public Private
have let go of the tradition of family gatherings. A
Partnership (PPP). I am trying to formulate
Majlis or Grand House setting gives the opportunity
definitions of what the differences are between
to all family members to meet each other. Different
public and private companies. Another distinction
generations can communicate and create a sense of
we are now trying to make is the one between small
unity that nothing can take away from them. I think
and middle-sized enterprises (SMEs) as well as
that families nowadays have lost this connection
between the various industries. This is for the
and that is why we see so many family conflicts and
time being my role. I am a Board Member of the
clashes. The Majlis culture can help to support the
Chamber of Commerce as well as the Secretary
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INTERVIEW
Mr. Mohammed Ahmed Al Obaidly Chairing the meeting of Agricultural & Environment committee.
General of the Business Council, also I am the
family business name and that failure in any area can
Chairman of the Agricultural and Environmental
weaken it and damage the whole family.
Committee as well as the Deputy Chairman of Arbitration Committee and as Member of Arab
How would you advise the young generation
Business Council. My main activity still remains
to work with the generation that is in charge
in the family business as the Group Managing
of the business? Is there a magic formula?
Director of OITC GROUP (Al Obaidly). As I mentioned, we should not forget our own What advice can you give to the young
traditions. Being modern in management practices
generation that will face the challenge of
is very well but it is our tradition that we have to
ensuring family business continuity?
go back to in order to become closer to our families again. Governance structures and all these things
They have to work hard, they have to live up to the
are right solutions, the most important thing is
challenge, and they have to look after their family
to gather the family and to create the bonds of
business. I believe that they should choose the family
solidarity. When the family gathers, its members
business over other jobs that may pay more initially.
can learn from each other; parents and children
They may make less in the family firm in the beginning
are sitting together and knowledge is passed from
but in the long run the returns are much higher than
one generation to another. I believe that you can
if they go elsewhere. Of course, they should go for
tell the difference between people who have been
training but it would be advisable to go for businesses
raised with this tradition of a Majlis or Grand
that are useful to the family business itself. Once part
House culture and those that haven’t. They are
of the family business, they have to be creative and
usually creative, polite, interactive, friendly and
to retain entrepreneurial spirit for the company to
sincere and they know how to respect others. And
expand and to create the long-term vision of how to
I think these are exactly the characteristics that
develop the family business. It is important for them to
should be displayed always by family business
understand how much effort it takes to keep a strong
members.
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SPECIAL FEATURES
Family Business
Diversification The balancing act of managing the family business portfolio Many family businesses in the Middle East, especially those of larger size, started out as experts in one core business, however, over time diversified into many different directions. The argumentations for such diversification in family businesses varies: Having various and often unrelated activities in the family portfolio can hedge risk and augment the probability of continuity and growth. Others state that as time goes on, the family grows, whereby the next generations will include family members with different talents; in order to capture these abilities and make sure that the business stays within family ownership it makes sense to create different business units that give opportunities to family members from all educational backgrounds. There is, on the other hand, a pronounced critique to be heard amongst experts against such wide diversification. The dangers of loosing focus and of neglecting core businesses have to be considered.
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SPECIAL FEATURES
48 CCC-A Diversified Family Business One of the biggest and first Arab construction companies, employing thousands, present in dozens of countries and heavily diversified in its activities.
52 Diversification Mini Cases A selection of facts and figures about four family businesses with diversified global activities.
56 Focus Beats Diversity A guide to selfassessment for diversified family businesses and recommendations on how to handle diversity and how to regain focus.
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ccc SPECIAL FEATURES
The ConsolidaTed ConTraCTors Company
The Consolidated Contractors Company
A Diversified Family Business
The Consolidated Contractors Company (CCC) was founded in 1952. CCC is a heavily globally diversified company and it employs over 110,000 people (2010) encompassing over 60 nationalities in over 27 offices around the world. CCC manages an annual revenue of over US$4 billion. Samer Khoury, President of Engingeering and Construction in CCC and son of one of the founding member Said Khoury, talks to Tharawat magazine about managing a diversified family business.
C
CC was formally established in 1952 in Beirut,
head quarters in Athens, Greece. Said Khoury is the President
Lebanon by Hassib Sabbagh, his brother-in-
and Chairman of the group and two of his sons are members
law Said Khoury, and their friend Kamel
of the board of directors. CCC is now a highly diversified
Abdulrahman. At the time it was one of the
company carrying out construction, engineering, procurement,
very first Arab construction companies and
development, and investment activities around the world with
today is undoubtedly one of the largest. CCC has its current
emphasis on the MENA region.
Wood Group - CCC JV wins US$800m contract with Petroleum development oman. Tethys oil provides oman with an operations update (CCCcontractor). CCC ranked 17th in the world and 1st in the Middle East in the annual ‘ ENR Top 225 International Construction Survey’, with a turnover of U.S. Dollars 5,000 millions and new sales of U.S. Dollars 4,500 millions, employment throughout 2005 was more than 75,000 employees of 60 different nationalities based on projects worldwide and a headquarters in Athens, Greece.
48
Tharawat Magazine Volume 10
2010 www.tharawat-magazine.com
The ConsolidaTed ConTraCTors Company
1952
CCC obtained a major contract for a Bechtel-Wimpey joint venture, this time in Aden, to build a refinery and a camp for workers.
1953
various projects in the UAE, Bahrain and Qatar were undertaken and led to considerable interationalisatoin.
SPECIAL FEATURES
1960
CCC secured a contract related to oil pipe storage facilities for the Iraq Petroleum Company, which entailed working with the Bechtel Group, the world’s largest construction company, which was to define the scale of operations across the world. as a consequence of this prestigious alliance the group started to expand massively and find other significant partners.
1973 CCC set up the national petroleum Construction Company in abu dhabi to provide offshore services to the oil and gas industries in the Gulf countries. pipelines were built in yemen connecting various oil fields to ports on the red sea.
CCC undertook a successful partnership with Canadian OXY, and won a bid to explore for oil in Masila, South Yemen. Shares in the project were sold to shell and american oXy with CCC retaining a 10 percent share. Oil exports from Masila peaked at 170,000 barrels per day.
1980
CCC bought Underwater Engineering, a British firm specialised in underwater oil projects, and ACWA, an environmental company.
1988
The family business also bought SICON, an italian mechanical engineering company specialised in petroleum-related projects.
morganti Group in palestine was acquired by CCC.
2007 Wood Group - CCC, a joint venture set up to provide operations and maintenance services for the oil & gas and petrochemical industries in Oman, Bahrain, Kuwait, Qatar, Saudi Arabia, UAE and Yemen.
1990
Brought diversification into yemen and egypt where infrastructure such as roads, sewage systems, and electrical grids were built.
Tethys oil awards 3d seismic survey Contract to BGp (CCC-contractor).
2009
Borouge Awards $1.075 Billion Contract to build Ethane Cracker In Ruwais, Abu Dhabi (CCC-contractor).
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2005
CCC undertook expansion of the business into Pakistan and China
2004 Completion of Gaza energy Generating station Gulf egypt for hotels and Tourism awarded a construction contract for the expansion of the heliopolis hotel in Cairo to CCC.
CCC was awarded the construction contract of oman moTC - sohar to Buraimi road dualisation.
Volume 10 Tharawat Magazine
49
The ConsolidaTed ConTraCTors Company
SPECIAL FEATURES
FIG. 1: Major ongoing projects 2Q 2010
Morocco
Al Houara Costal Resort, Tnagiers
Libya
Tripoli Airport Tripoli Towers
Ibn Hani Bay, Lattakia
Jordan Algeria
Sonatrach Tennis Club
Sudan
Kuwait
Kazakastan
Syria
Palladium Project, Abdali
Kashagan Field Dev. AgiKCO Kashagan
KSA
Princess Noura Bint Abdurrahman University for Women, Riyadh
Musheireb Project, Khartoum
Tank Maintenance Mina Al Ahmadi Refinery Diverse Road Projects Supply & Installation of 400KV UPC & Accessories Kuwait City
UAE
The Landmark Building Habshan Gas Complex Expansion, Abu Dhabi SAS Fields Dev.Project Package 8 Borouge 3 EPC Ethzlene Cracker 3, Abu Dhabi Habshan 5 Process Plant Project Habshan Flare Gas Recovery Bab Thamama G & Habshan 2 Dev. Qusahwira Field Dev.
Grenada
Agricultural Feeder Roads
Yemen
Equatorial Guinea
Al Rayyan Hills Dev., Sanaa
Long Term MSC Maintenance Service
Egypt
Oman
Saudi Embassy in Cairo Nile Corniche (St. Regis Hotel), Cairo Sharm El Sheikh Project Ain El Sokhna Supercritical Thermal Power Plant
Guinea
Sangaredi Alumina Refinery
Namibia
Tsumeb-Katwitwi Road Link Project
New Port at Al Duqm Muascat Airport Runway A’Seeb Collection and Conveyance System Third Laining of road from Mawaleh to Bait Al Boraka
Madagascar
Ambatovy Pipeline Project
Ethiopia
Gore Gambela Road
Nigeria
Dualisation Onitsha Dualisation of Ughelli Enugu bound Carriageway Rehabilitation of Oba
Australia
APLNG Early Works Contract
Botswana
Gaborone, Molepolole Road Mahalapye, Kudumatse Road
Qatar
Doha Int’l Airport-Midfield Area -Access System & Air Traffic Control Pearl GTL Project, Ras Laffan Common Cooling Water, Ras Laffan EPIC of Ras Laffan Porst Expansion Barwa Commercial Avenue
New Guinea
PNG LNG EPC5B, Komo Airfield & Infrastructure
Diversity of services Heavy Civil Construction: power plants, bridges and highway
works for light industry and heavy mechanical works
interchanges, harbour and docks, and civil work for process
(refineries, petrochemical plants, gas oil separation plants,
plants and the petrochemical industry.
oil loading and off loading terminals).
Highways, roads and airports.
Pipelines for water, gas and oil,
Water and sewage treatment plants, pumping stations and
High Quality Buildings.
all related networks.
50
Mechanical Construction: fabrication and installation of
CCC was awarded quality certification by BVQI to ISO 9001,
piping, erection of equipment and vessels, structural steel
ISO 14001 and OHSAS 18001.
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The ConsolidaTed ConTraCTors Company
SPECIAL FEATURES
Q&A
Samer Khoury Designation: President (Engineering & Construction) Leadership in a Diversified Family Business Consolidated Contractors Company Family Generation: 2nd Country: Lebanon Successfully running a diversified business portfolio depends on a variety of factors; where would you see the biggest challenges facing business leaders running highly diversified businesses? I believe that in the leadership of a diversified company there are two main aspects to consider. Firstly, we have to be close to the market and anticipate any and all changes in order to be able to react ahead of others. Secondly, we must think and act long-term as short-term goals can sometimes hurt a long-term strategy and, as a family business, we must always look ahead of about 5 to 10 years. How can a manager make sure attention is evenly distributed across all diversified units?
mission of the parent company is implemented throughout the portfolio?
We have to have enough trust in the people we assign to the various units. They have to be able to call the shots and
Family companies have a specific family culture and this
determine when they need us, as higher management or
culture encompasses, in many cases, the values of the family
family members, to interfere.
company founder. The job of the second and third generation owners is to identify these values and make sure they are
Do you believe that family businesses are better
communicated across the entire company and are adhered to.
equipped to diversify than other businesses?
This can easily be done by frequent meetings and by counter action initiated by top management re-affirming these values.
Family businesses can take decisions faster than other companies and, therefore, when we see an opportunity we
Do you believe that a strategy of diversification is able
can jump into it. In several cases this is how we leverage on
to stimulate growth in the current, rapidly changing
our entrepreneurial skills towards investing in new businesses.
economic landscape?
In an organisation with diversified businesses each
I believe diversification is important, but only if the opportunity
business faces its own, specific challenges; in such
arises. Sticking to the company core business is the best advice
complexity, how do you ensure that the vision and
I would give any firm.
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Volume 10 Tharawat Magazine
51
SPECIAL FEATURES
Mini cases
Diversification
Mini cases Four family businesses with diversified global activities
100
The group started as a trading company more than 100 years ago, and has since expanded and diversified its activities.
2008
MaK group has been certified as conforming to international Quality Standards – ISO9001:2008 for its quality commitment.
Kuwait
Mohammed Al Kharafi Group
M
ohammed Abdulmohsin Al-Kharafi
It has construction contracts in more than 30 countries
& sons Company (MAK Group) is
worldwide. MAK group has been certified as conforming
a Kuwait based group with diverse
to International Quality Standards – ISO9001:2008 for its
activities worldwide. The group started
quality commitment. Besides construction, the group also
as a trading company more than 100
owns Americana; the largest food company in the Middle
years ago, and has since expanded and diversified its activities
East introducing U.S fast food brands such as KFC, Pizza
into construction, manufacturing, commerce, marketing
Hut, TGI Fridays to the Gulf. The Kharafi family is a major
and hospitality throughout the Mideast, Africa and Eastern
player in the Kuwaiti news paper industry
Europe. The Kharafi family’s wide investment portfolio includes shares in Krispy Kreme, U.K. construction firm Costain, Mobile
Nasser Al Kharafi, today, is the Chairman of the conglomerate.
Telecommunications Co., and the National Bank of Kuwait.
His estimated fortune is of several billions as of 2008 and he is considered amongst the 50 richest men in the world. M.
52
The group’s main activity has been general contracting and
A. Kharafi Group operates in more than 25 countries with
civil construction, which made the company a leader in the
an annual turnover of US$ 5 Billion and more than 120,000
construction boom in the Gulf during the fifties and after.
employees.
Tharawat Magazine Volume 10
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Mini cases
Cheung Kong (Holdings) Limited; a group that –in Hong Kong alone- includes eight listed companies with a combined market capitalisation of approximately HK$898 billion (2011).
1950
SPECIAL FEATURES
The company was established in 1950 by Li Ka Shing and was called then ‘Cheung Kong Industries’.
52
The group operates in 52 countries and employs approximately 250,000 staff worldwide.
1991
In 1991 the company acquired the UK’s busiest port, Felixstowe.
Hong Kong
Cheung Kong Holdings Limited
B
ased in Hong Kong, Cheung Kong (Holdings)
3G mobile video and multimedia services in the UK, Italy,
Limited
Austria, Sweden, Ireland, Australia, and Hong Kong
is
a
leading
multi-national
conglomerate. The company was established
Over the years Li Ka Shing’s company became Cheung Kong
in 1950 by Li Ka Shing and was called then
(Holdings) Limited; a group that –in Hong Kong alone-
‘Cheung Kong Industries’. The company
includes eight listed companies with a combined market
obtained its name from the Yangtze River that flows through
capitalisation of approximately HK$898 billion (28 February,
China and aggregates many streams. The core business of the
2011). The group operates in 52 countries and employs
company was plastic, however, in 1958 the company ventured
approximately 250,000 staff worldwide.
into the real estate business with great success and repeated its expansion into many other industries. In the 80s Li Ka
Today, the diversified portfolio of the Cheung Kong group
Shing pursued his philanthropic activities by establishing the
includes business activities in many areas such as property
Li Ka Shing Foundation to improve life conditions in China as
development and investment, real estate agency and estate
well as the Shantou University in his hometown. In the years
management, hotels, telecommunications and e-commerce,
to follow many acquisitions followed in the electronics and
finance and investments, retail, ports and related services,
energy sector. In 1991 the company acquired the UK’s busiest
energy, infrastructure projects and materials, media, and
port, Felixstowe.
biotechnology. Li Ka Shing is now the Chairman of his company that came from modest beginnings. He was named
Hutchison Whampoa Limited, a Fortune 500 company that
Entrepreneur of the Millennium at the turn of the century
had been acquired by Cheung Kong in 1979, introduced its
by The Times and Ernst & Young, UK.
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53
SPECIAL FEATURES
Mini cases
Tata Steel became the tenth-largest steel maker in the world after it acquired Corus Group in the UK in 2007. Tata produces steel at the lowest cost in the world.
90
11.2 80
Today, the Tata group is one of India›s largest private-owned conglomerates with over 90 operating companies in seven industrial sectors. Recently the Tata brand was valued at $11.22 billion and ranked it 65th among the world›s Top 100 brands. The group is based in Bombay and employs around 395,000 people worldwide with operations in and exports to more than 80 countries across six continents.
India
Tata Group
T
his world-renowned company was established
in the world after it acquired Corus Group in the UK in 2007,
in 1868 in Bombay by a man called Jamshedji
later renamed Tata Steel Europe. Tata produces steel at the
Tata; he started working in his father›s
lowest cost in the world. Tata Motors is among the top five
trading company before starting his own
commercial vehicle manufacturers in the world and has recently
business.
acquired Jaguar and Land Rover. It made India’s first developed car in 1998 and recently launched the world’s lowest-cost car,
Today, the Tata group is one of India›s largest private-owned
the Tata Nano. TCS is a leading global software company, with
conglomerates with over 90 operating companies in seven
delivery centers in the US, UK, Hungary, Brazil, Uruguay and
industrial sectors. The group is based in Bombay and employs
China, besides India. Tata Global Beverages is the second-largest
around 395,000 people worldwide with operations in and
player in tea in the world. Tata Chemicals is the world’s second
exports to more than 80 countries across six continents. The
largest manufacturer of soda ash and Tata Communications is
total revenue of Tata companies was $67.4 billion in 2009-10,
one of the world’s largest wholesale voice carriers.
with 57% from business outside India. Brand Finance, UK, recently valued the Tata brand at $11.22 The present chairman of the group is Ratan Tata who took
billion and ranked it 65th among the world’s Top 100 brands.
over from his uncle J.R.D. Tata in 1991. Mr. Ratan is a
BusinessWeek magazine ranked Tata 17th among the “50
distinguished industrialist with years of business experience.
Most Innovative Companies” and the Reputation Institute, USA, in 2009 rated it 11th on its list of world’s most reputable
Tata Steel started in 1912 became the tenth-largest steel maker
54
Tharawat Magazine Volume 10
companies.
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Mini cases
Today, the Ghabbour Group employs over 6000 employees, operates 3 factories, runs 20 retail outlets, and 8 service centers.
1946
1.2 1
SPECIAL FEATURES
1946, the Ghabbour Brothers company was established; a family-run business, which grew to become the largest private sector automotive group in Egypt. GB Auto completed an initial public offering and shares began trading on the Cairo and Alexandria Stock Exchange (now the Egyptian Exchange). The IPO raised EGP 1.2 billion in 2007. The Group generates a turnover of about 1 billion US dollars, which makes it undoubtedly the leader of the Egyptian automotive sector.
Egypt
The Ghabbour Group
I
n 1946, the brothers Kamal and Saddek Ghabbour
centres for their auto-representations, which was the initial
established the Ghabbour Brothers company; a
approach to the industry. By 1986, they proceeded to setup
family-run business, which grew to become the
operations in the manufacturing of bus-bodies.
largest private sector automotive group in Egypt. The core business of the group has always been vehicles;
In 1991, Dr Raouf Ghabbour -second generation family
GB Auto is a leading diversified automotive company in
member- ventured into the field of agriculture and the
North Africa and the Middle East and a part of GB’s capital
cultivation of fruits and vegetables. While developing export
is engaged in a complete automotive product range from
markets in Europe and the Middle Eastern countries, the
manufacturing, assembling, importing and distributing in
company started retailing crops domestically through its
addition to dealing in automotive related products such as
own retail chain.
tires and spare parts. In 1995 the Ghabbours got involved into the assembly of cars The company started to diversify in the late forties when GB
and light commercial vehicles. In short, the family developed
Auto expanded into trading and all car related activities. In
into every industry that fed into auto manufacturing. GB
addition, in 1972, Sakkar travel group was establishes by
Auto completed an initial public offering and shares began
Baher Munir Ghabbour. The group gained a reputation of
trading on the Cairo and Alexandria Stock Exchange (now the
being a leading company in the tourism sector not only in
Egyptian Exchange). The IPO raised EGP 1.2 billion in 2007.
Egypt but all over the world. Today, it has branches in France, the UK, India, and the United States.
Today, the Ghabbour Group employs over 6000 employees, operates 3 factories, and runs 20 retail outlets and 8 service
After 1973’s new trading policies in Egypt, the company
centers. The Group generates a turnover of about 1 billion
started to represent different international manufacturers
US dollars, which makes it undoubtedly the leader of the
such as Bosch and others. They then established service
Egyptian automotive sector.
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Volume 10 Tharawat Magazine
55
SPECIAL FEATURES
Focus Beats Diversity
Widely diversified family businesses are common in the GCC, often including units in more than ten unrelated industries under one holding structure. Although this may have been a viable growth strategy at one time, GCC family businesses now potentially face the task of divestment and consolidation. Ahmed Youssef, Partner at Booz & Company, elaborates on the relevant points of self-assessment for families in business and makes recommendations on how to handle diversity and regain focus.
Focus Beats
Diversity Family Businesses Must identify their core capabilities
H
istorically, wealthy families in the GCC
from domestic and international rivals that now have access
have developed diversified portfolios of
to capital, talent, and local markets. Meanwhile, retail
businesses for a variety of reasons: Access
and business customers are ever more sophisticated and
to capital and management talent made
demanding, which means family businesses need greater
diversification possible, and the closed
expertise and responsiveness to serve and retain their
nature of local markets—which limited competition and
customers. Finally, financiers expect greater transparency
capped the growth potential of existing businesses—made it
and analysis of a family’s holdings before extending growth
necessary to enter new fields, often unrelated to the original
capital or credit--a tough adjustment for those families that
family business, in order to keep growing and accumulating
used to keeping their books closed to outsiders.
wealth. Diversity for the sake of diversification was a sound business strategy. Indeed, a 2009 Booz & Company survey
Put simply: the old way of running a diversified portfolio
of 25 family-owned firms in the GCC showed just how
of businesses in the GCC is not sustainable. Families need
widespread this strategy is: Nearly half of the families were
to evolve their business strategies. To choose the right path
involved in five or more sectors, with nearly as many (40%)
forward, they need to address three major issues:
engaged in three or four sectors, and only 12% active in two sectors or fewer (See Figure 1).
Understanding the financials. Over the years, families have cobbled together so many companies that it can be difficult
56
But the GCC business environment that favoured this
to ascertain exactly which businesses are thriving, which
diversification strategy is changing rapidly, forcing families
are treading water and which are failing. But unwrapping
to rethink how they manage their businesses to bring more
the financials of each business unit is vital. When capital
focus to extensive operations. Competition is more intense
and management time are abundant, an organisation can
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Focus Beats Diversity
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SPECIAL FEATURES
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57
SPECIAL FEATURES
Focus Beats Diversity
FIG. 1: Booz & Company Survey, 2009
12% 38% 2 or fewer 3 or 4 sectors
sectors
50%
survey of family-owned firms in the GCC
5
or more sectors
enter into any business as long as the return exceeds its cost
low working capital. Once these capabilities are identified,
of capital—or if management even believes that it will do
a family has a blueprint for how to grow the business; in
so. However, when capital costs increase and management
other words, which businesses to focus its resources and
capacity is stretched thin, family conglomerates must focus
which businesses to exit. Over time, this process creates
on the best possible use of both capital and time. This will
what’s known as “coherence”--an alignment of capabilities,
often mean divesting some of their traditional businesses or
products and services, and methods to capturing value in
giving them less investment—which can be a difficult process
each market.
if, for instance, the founder is sentimentally attached to an underperforming “original” business. Nevertheless, a frank
Understanding the family. Finally, a family must do some
financial and strategic assessment of each unit is critical to
soul searching about its aspirations and philosophy. How
putting the family business on sound footing.
is the family evolving as the third and fourth generations grow up? How do these younger family members want to
58
Understanding the capabilities. Once families have a
be involved? Does the family business create cohesion or is
clear picture of the business’s financials, they can see where
it a source of friction and arguments? Some families worry
their strengths are. To succeed, families need to identify
that their collective identity is so tied to the business that any
what they do exceptionally well and focus on leveraging
changes could jeopardise the family’s unity. But this is not
those distinctive capabilities. In brief, capabilities are the
necessarily the case. Even if a family’s business holdings are
interconnected people, knowledge, systems, tools and
split into more autonomous parts among family members,
processes that form systems to create differentiated value to
each branch could retain shares and board seats in one
customers. For instance, a family may realise it is very good at
another’s businesses to maintain ties as well as a sense of
providing retail services, or running businesses that require
shared purpose and benefit.
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Focus Beats Diversity
Now What? After tackling these three broad issues, a family should have obtained the requisite data, as well as essential insights into their strengths and aspirations, to intelligently choose a strategic path forward. There are three primary options. Divest and focus. If there are businesses that clearly enjoy a “right to win” --i.e., the ability to engage in any competitive market with a better-than-even chance of success--based on the capabilities that the family has identified, the prudent choice is to focus on those businesses, build those capabilities, and divest
SPECIAL FEATURES
even if a family’s business holdings are split into more autonomous parts among family members, each branch could retain shares and board seats in one another’s businesses to maintain ties as well as a sense of shared purpose and benefit.
the rest. But divestitures are often difficult in a family business. Some family members may have sentimental attachments to certain businesses. Others might have practical attachments if those businesses employ them. Here the rigorous analysis
unrelated companies might make sense. It is important to
supporting a capabilities-driven strategy is especially helpful. It
note, however, that even the conglomerate model is actually
gives the divestitures context as a strategy to benefit the family
driven by a capability-driven strategy--one that’s just not
as a whole, not an attack on a particular branch.
obvious to the casual observer. In an age of increasingly narrow specialisation, these families will need to introduce
Create autonomy. Another option is to break the family
best practices to understand their portfolios better (with
business into smaller, more autonomous units run by
more transparent financials), manage them more effectively
different branches of the family. This strategy aligns family
(guided by capabilities and coherence), and formalise family
member expertise with business units and frees them to
governance to ensure effective delegation and separation of
pursue higher returns without being held back by other units
activities (both business and non-business related) and to
with different priorities. However, this approach raises tough
prepare for succession.
questions, such as: how to divide and value the business units, how to promote ownership among the different branches of
In the end, there is no wrong answer for how families
the family, and how to create accountability. If the family
should design their strategy, but success depends on
chooses to create these autonomous units, it could maintain
rigorous self-examination and a willingness to evolve.
cohesion by divvying up minority shareholdings among
A family may even choose to continue its conglomerate
family members no longer directly involved in the business,
structure--as long as a clear set of capabilities underpins
or to require that family members sit on one another’s boards
this strategy. But the important point to understand is that
of directors. These are all legitimate strategies as long as
diversity for the sake of diversification is no
each branch of the family is unambiguously accountable for
longer a sound business strategy in the GCC.
its unit’s performance.
Focus and expertise is how family businesses will win in the new business environment.
Keep the conglomerate. In the end, a family might decide that given its capabilities and aspirations it should retain the conglomerate structure. If, for instance, its distinguishing capability is an ability to manage businesses that need low working capital, then maintaining a collection of seemingly
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Author Ahmed Youssef, Partner, Booz & Company
Volume 10 Tharawat Magazine
59
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Centuries of history and an interview with Senior Managing Partner Jacques de Saussure.
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38 Interview with Moh’d A. Al Obaidly
Group Managing Director of the OITC GROUP, Qatar.
32 Philanthropy in Family Businesses
Philanthropic activities that increase family cohesion.
62 Toukan Enterprise
A family-owned soap factory in Nablus, and an interview with Chairman Farouk Toukan.
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SMEs
Family Business
SMEs The importance of small and medium sized enterprises in the Middle East cannot be overestimated. Their impact on job creation and regional innovation has been shown to be paramount in the further development of emerging economies. The majority of SMEs in the region are family-owned and Tharawat magazine dedicates this new section especially to their challenges and achievements. In this first set of articles we explore the history of the Palestinian Toukan family that has been managing its soap factory in Nablus for nearly a century, as well as featuring an insightful article by Dr. Hertog on the state of SMEs in the GCC.
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62 The Toukan Family business
The history of the familyowned soap factory in Nablus, and an interview with its Chairman, Farouk Toukan.
68 Small is beautiful - or is it? An indepth analysis of GCC SMEs, their development and challenges.
Volume 10 Tharawat Magazine
61
SMEs
The Toukan enTerprise
The palestinian city of nablus has been known for a long time as a historical center of the soap industry. In this beautiful city, soap makers find the right environment and conditions to prosper, as it is renowned for its abundance of olive trees and the production of olive oil, which is the key component of soap. For over a century the Toukan family has been one of the champions of the nabulsi soap makers and is till today maintaining the traditional craft in its original form. Tharawat magazine speaks to Farouk Toukan, Chairman of the Toukan enterprise about the history of the trade, the family legacy, and the making of soap.
The Toukan Enterprise
The Business of soap
T
he soap industry in Nablus has been
logo was registered as a trademark. In order to avoid
associated with the names of a few
the falsification of the Two Keys logo, the Board of
well-known Palestinian families,
Directors decided in 1940s to register other similar
such as the Shak’a, the Al-Masri,
trademarks, such as Two Swords, Two Scissors, and
and the Toukan family. The Toukan
Two Axes, and they are all still registered to the
factory is one of the most famous and oldest factories
present day. When the West Bank became a part of
in Nablus. It was built around 1910 on the outskirts
Jordan in 1950, the Board registered at the Jordanian
of the old city, which is now its heart. The factory
Ministry of Economy under the number 49; making it
was established by the two brothers Hafiz and Abdul
one of the leading companies in the region.
Fattah Toukan who belonged to the sixth generation after Ibrahim Aagha Al Shawrbaji, the grandfather of
What has not changed in the Toukan family business
all the Tuqan family branches.
is the traditional craft. The soap is made from pure olive oil, Caustic Soda, water and salt. The
62
In 1929, the soap factory became a limited liability
manufacturing process of the Nabulsi soap is divided
company under the name “Hafez & Abdel Fattah
into four phases. There is a team for cooking the soap,
Tuqan Ltd. Co.” and the Two Keys “Al Muftaheen”
another for spreading it, a third for cutting it, and a
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The Toukan enTerprise
LEFT: Stacks of soap drying at the Toukan factory ABOVE: Toukan soap in wrapping BELOW: A factory employee cutting the soap.
SMEs
fourth for wrapping it in paper. Currently, the total
on a monthly basis. The company has continued
number of workers in the Tuqan soap factory is 17
in this organisational structure while training the
and all belonging to Palestinian families that have
management to cope with day-to-day business.
expertise at the respective phase of manufacturing. Now, the Board of Directors are considering the The Toukan family retains ownership of this factory
possibility of making soap in small bars for use in
and manages its family legacy. The company is
hotels , and exports to East Asian countries. The
managed by a board of directors, and one of its
possibility of mechanising the production to meet
members or shareholders is appointed as the CEO to
the demand in the new markets also exsists.
handle daily activities. This arrangement remained in force until the year 2007 when a non-family member
Because of the unique site of the soap factory in
has been appointed as the CEO. Members of the board
the heart of Nablus, it has been visited by many
of directors are Farouk Khalil Toukan, President;
dignitaries such as the historian Mr. Shakib Arslan,
Gaafer Ibrahim Toukan, Vice President; Wael Daoud
historian Mr. Arnold Toynbee, Mr. Balewa former
Toukan, Director. The Board meets regularly, but
Nigerian Prime Minister and recently former British
the Chairman continues to supervise all operations
Prime Minister Mr. Tony Blair.
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SMEs
The Toukan enTerprise
Interview
Farouk Toukan Chairman of the Toukan Enterprise
The production of soap is an old tradition in the Middle East. The city of Nablus in particular gained a reputation for the high quality of its soap and became an important center of regional manufacturing ever since the time of the Crusaders’ occupation. How did the Toukan business evolve over its long history in the region? fermentation our suppliers would bring it to us. I know of two places that are known for the
I still remember when Mithqal Pasha Al-Fayez,
manufacturing of soap made of olive oil; Nablus
a prominent tribal leader of trans-jordan, used
in Palestine and Tripoli in Lebanon. I think that
to come to our soap factory as he was the main
the main reason behind making soap in these two
supplier of “Qeli” during WWII. At the time there
cities is the quality of olive trees they have. Nablus
was no more caustic soda (sodium hydroxide) to be
is a city surrounded by olive trees. You can see them
gotten from England, which we used to buy from
everywhere and they are beautiful and old.
ICI (Imperial Chemical Industries) through the late Abdul Hadi Hammoudeh, who was the founder
Founders of our business were Hafez, my
of the largest dairy producing company in Jordan
grandfather, and his brother, Abdulfattah, followed
Alban Hamooda.
by my uncle, Daoud, my father, Khalil, my uncle, Qadri, and then my cousins, Hafez and Amin. God
Before this I also remember that we used to have
bless their souls. We are originally from Syria from
the olive oil coming from the villages on camels
the Arab Al Mawali.
and the camels used to sleep in the sabaneh. They used to put the olive oil in a “Daref” (a container
My forefather Ibrahim Agha Al-Shourbaji came to
made of the skin of goats) and then we put it in “Al
Palestine in the 16th century but our old house was
haleh”, which is the big pan that we used to cook
built around 1725. The Toukans and the Abu Risheh
the soap in. Underneath it, as a fuel, we used Al-
family of Syria came from the same tribe and I still
Jifet (Remainder of the olives after getting the oil
have a very old book about “Tel Toukan” (Toukan
out). The burnt Jifet was called “Dugg”, which we
Hill) a place in Syria.
used in winters for heating our houses and which we gave as gifts to family friends. I remember on
64
In the past, we made soap using a substance called
the winter nights, when I was still a student, we
“Qeli”; we used to bring it from the desert. After
used to gather around the “Manqal” or “Kanoun”
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The Toukan enTerprise
Our Sabbana produces one ton of soap every day, which amounts to about 360 tons every year. We work at full capacity.
SMEs
brother went to study in Istanbul in 1910 and 1911. Because of this background they wanted things to be professional and transparent. They didn’t want it to be just a shop that sells soap; they wanted to run a professional business. That is why my father transformed the firm into a limited liability company in 1929; we were the first company in Nablus to be a LLC unlike other establishments and “Masaben” (soap factories) who undertook this
LEFT: An old image of the Toukan factory in the heart of Nablus, Palestine. RIGHT: Factory employee holding soap stamps with the two keys logo of the Toukan Enterprise.
and we used to heat the Nabulsi cheese, bread and
transformation only many years later. We started
teapots on the fire.
out this business with two shareholders and now there are 35.
What remained after using the “Dugg” we used to clean the cooking pans and brassware. We had no
We were not involved in making the soap for a
detergents then. So as you can see, the olives were
simple reason; we had other small families involved
part of our daily lives in every respect.
in each stage of making the soap. The first stage is the cooking, which takes five days, and then the
How much were you involved in the soap
spreading. The workers that attend to this first stage
business? And were any of the Toukan family
are called “Al Tabbeekha” - the cooks. The second
members involved in the making of soap?
stage workers are “Al Bassita” - the spreaders; this is actually a very delicate job: The workers spread the
I personally was not involved. My grandfather’s
liquid soap and to maintain the thickness have to
brother Abdulfattah, who is also the father of
use very primitive tools that they still utilise today.
the poets Ibrahim and Fadwa Toukan, was the
After that the soap takes two or three days to dry
businessman in the family. My father and his
depending on the weather; in the winter it takes
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Volume 10 Tharawat Magazine
65
SMEs
The Toukan enTerprise
longer. Then you have the cutters, they smoothen the surface and then they cut it into small bars using a rope called “Al Bikar”. Following the cutters, come the stampers – “Al Khatimeh”- to stamp each soap bar with our company’s logo (Al Muftaheen). Finally, come the wrappers (Al Lafeefah) to wrap the soap bars. Each stage has tended to by different families who are known to be experts in their respective field. For example, we had the Tubaily family working in spreading the soap, the Al Asy family cooking the soap and some of Al-Jawhary family working in wrapping. Till now we have people of those families working in different stages of production. Our Sabbana produces one ton of soap every day, which amounts to about 360 tons every year. We
The Ostrich) had its main market in Jordan and
work at full capacity.
remained there after 1948. The Shakaa brand (Al-Jamal-the Camel) got the south of Palestine
When the West Bank became part of Jordan in
and now is recognised in Hebron. Of course, we
1950, we were amongst the first 50 companies to
have small customers in Amman. We have started
register with the Ministry of Commerce. We also
recently to export to America. There are shops in
have other brands for soap; our main brand is the
San Diego that sell our soaps; we also send small
Muftahain (two keys) but we also have three other
amounts to Italy.
LEFT: 4th Generation Toukan family member on a visit to the old factory. RIGHT: Factory employees wrapping the soap.
brands. We use those stamps every 5 or 6 years just to keep them alive.
There was always a gentlemen’s agreement between the soap factories’ owners. The three factories I just
Has the numbers of the workers in each
mentioned have exactly the same practices; when
stage of the soap production increased or
we buy oil we all get it from the same origin and the
decreased over the years?
same counts for the caustic soda. If we run short of anything we borrow from each other. No one would
I think it has decreased, because we have wells now
increase the price of soap unless the three factories’
and we put the olive oil in them and then we pump
owners agree on it, so the price has always been
it into the pan. We don’t need workers for that stage
fixed like the price of stamps.
anymore. So it has decreased marginally. What is the biggest market for the Toukan soap?
The old Toukan workshop is still active
The markets were distributed as follows according
and working, what are the challenges and
to the three most famous soap brands in Palestine
opportunities that the business faces today?
then: Al Muftahain started out in North Palestine
66
and then brand recognition moved to Irbid and
You know, since the beginning the soap sales have
the surroundings. The Masri brand (Naameh –
always been consistent; we don’t sell more or less.
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The Toukan enTerprise
SMEs
Toukan Soap factory? In Palestine, I think there is a chance but expansion and growth possibilities are limited. However, there are very successful examples of small family businesses like Al Hijjawi Prints, they print cartoon boards and papers, and there are the businesses in the Taheena industry (sesame paste) like the Aloul and Ayesh Families. What do you see in the near and long-term future of the Toukan business? The soap business is very dear to my heart and I can’t see it die! It is not a matter of money. I go every month to Nablus just because it means a lot to me Today, the big demand on European soaps and
personally and to all my cousins. I am thinking to
sanitizers can be a challenge for us.
use the brand of the two keys in creating a logo for
We have two distributors; one in Amman and one in
my library. The two crossed Libras with my name
Irbid. We have been working with the same people
underneath and the two words Faith and Reason
since the beginning. In Amman, we have worked
written too.
with the same family business from the generation of their great-grandfather, then the grandfather,
We are thinking of merging with another soap
and now his sons. However, the grandsons are not
factory and to start making soap in smaller sizes
interested in the business. They went to the States
in order to export to Far East countries. We will
and they don’t want to carry on with the family
keep the traditional aspect of the industry but we
business. So the challenge for us, if we can call it a
will improve the soap bars to be a little smaller.
challenge, is to find someone else who we can trust
We might mechanise the production processes and
and work with again.
produce soaps outside Nablus. This will really make life easier for us because sometimes it is difficult to
We are very confident at keeping aloft of challenges,
export from Nablus.
for example, we have computerised our accounting system. We were the first ones to do that. It is very
Is there another Toukan family member who
detailed now and we keep a strict overview. I visit
is showing interest in the soap business?
Nablus once a month to meet with the manager in charge and I receive bi-monthly reports. The
No, not that I know of, but if necessity arises they
current GM is not a family member, he used to be
might join. We are thinking of involving some
the CFO and we promoted him later.
women from the family in the board of directors. At the present time my other cousins live abroad and
Do you see a future for SMEs in the Arab
the young generation unfortunately knows nothing
world? Can SMEs be role models like the
about the business of soap.
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Volume 10 Tharawat Magazine
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SMEs
SMALL IS BEAUTIFUL - OR IS IT?
Challenges for small and medium family companies in the GCC
Small is Beautiful or is it? It is common wisdom that small and medium enterprises are an important driver of growth, development and diversification for countries in all stages of development. Despite the GCC region’s strong entrepreneurial traditions and the large size of the Gulf SME sectors, however, there is still a great potential of sustainable diversification and job creation to be fulfilled. Dr. Steffen Hertog, lecturer at the London School of Economics and academic director of the International Institute for Family Enterprises elaborates on challenges and trends in GCC SMEs.
A
major study I have conducted
Gulf SME: what we know and what we don’t
from 2008-2010 in cooperation
Data on SMEs in the GCC are often limited to their
with the European Chambers
total number, sectoral distribution and aggregate
of Commerce, the German
contribution
Chamber of Commerce in the
contained in SME surveys in OECD countries,
UAE and the Federation of GCC Chambers shows
such as profitability, survival rate, or turnover, are
that Gulf SMEs often focus on low-margin activities
generally not yet available in the Gulf.
to
employment.
Information
and employ an even higher share of expatriate
68
labour than other private companies. To overcome
Yet, the broad outlines of the Gulf SME sectors are
the current limitations of the sector, state support
clear: SMEs constitute at least 90% of all businesses
policies as well as companies’ approaches to human
in every country of the region. A large share of
resources and corporate governance may need to
SMEs is active in the trade sector; other important
be rethought.
sectors include small-scale workshops, hotels and
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SMALL IS BEAUTIFUL - OR IS IT?
90 percent
Yet, the broad outlines of the Gulf SME sectors are clear: SMEs constitute at least 90% of all businesses in every country of the region
SMEs
restaurants as well as contracting. They are less
it is clear that despite their numerical dominance,
important in industry and other capital-intensive
the contribution of micro-enterprises with up to
sectors.
10 employees to formal employment is rather modest, providing between 10 and 30% of total
Gulf SMEs tend towards lower-margin, small-scale
formal employment in different GCC countries.
service activities. The distribution across sectors in
European micro-enterprises by comparison account
mature markets is more even and diversified.
for almost one third of all private sector jobs across the continent.
Companies with up to 100 employees employ between 40 and 63% of the formal private labour
The GCC track record is particularly weak when it
force in different GCC countries, which compares to
comes to employment of nationals: 98% of SME
about 60% in the EU. In the GCC cases where we can
employees in Saudi Arabia are estimated to be
distinguish micro, small and medium enterprises,
foreigners, while the share of foreigners in the
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69
SMEs
SMALL IS BEAUTIFUL - OR IS IT?
FIG. 2: Sectoral breakdown of SMEs
KSA
SMEs
SMEs
Commercial and hotel 47% Construction 27% Industrial 12% Other 8% Social Services 6%
Source: Standard Chartered
Europe
UAE
SMEs
Trading 60% Services 35% Manufacturing 5%
Source: Standard Chartered
Manufacturing 11.6% Construction 14.3% Trade & repair services 31.8% Hotel and restaurants 8.5% Transport 6.1% Realty business activities 27.6% Source: EIM/European Commission
Saudi private sector at large is closer to 90%.
Challenges
There is very limited data about Gulf SMEs’
Many SME development issues in the Gulf
contribution to the national economy. But as SMEs
resemble those of the developing and developed
on average pay lower wages and run less capital-
world more generally; others are more particular
intensive and lower-margin operations than larger
to the Gulf.
companies, their share in private economic activity is lower than their share in private employment,
One well-known generic problem is getting
possibly as low as 30% – considerably less than in
financed: According to a study by Dun and
the EU, where the share is closer to 50%.
Bradstreet, banks in the UAE in 2008 rejected 5070% of credit applications from SMEs due to the
70
There are many impressive individual stories
higher risk and due to applicants’ failure to meet
of innovation and growth among Gulf SMEs.
loan conditions. 55% of SMEs were unable to get
Yet, a large share of the great mass of SMEs
the credit they required. In the EU, by contrast,
still contributes fairly little to diversification
despite the recent economic crisis, over 70% of
and national employment. What are the factors
companies got all or part of the bank loan they
that hold back Gulf SMEs’ role in economic
wanted, and only about 15% were fully rejected
modernisation?
according to a 2009 EU-wide survey.
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SMALL IS BEAUTIFUL - OR IS IT?
SMEs
There are many impressive individual stories of innovation and growth among Gulf SMEs. Yet, a large share of the great mass of SMEs still contributes fairly little to diversification and national employment. What are the factors that hold back Gulf SMEs’ role in economic modernisation?
Business behaviour in the Gulf also tends to be fairly individualistic, with limited cooperation on purchasing, supply chains and marketing by SMEs of all sizes. A lack of business planning and low margins One of the reasons why local banks may avoid SME
can also mean that access to talented manpower is
exposure is the relatively larger administrative
limited. SMEs tend to offer low wages and no career
effort. More often, however, loan requests are
plans and long-term prospects for their employees.
rejected for good reasons: Accounting skills of
70 percent
In the EU, by contrast, despite the recent economic crisis, over 70% of companies got all or part of the bank loan they wanted
many SME managers are rudimentary; business
SME management also continues to spend much
and feasibility plans are frequently lacking. The
energy on dealing with local bureaucracies: While
enforcement of collateral in local courts, moreover,
the investment environment in the GCC has become
can be slow.
smoother for larger investors, it often remains cumbersome for smaller players. This makes
The delegation of daily operations to expatriate
business less predictable and hence works against
managers – especially in the smaller and richer
long-term investment. A study by the Riyadh
Gulf countries – tends to limit innovation and the
Chamber of Commerce shows bureaucracy as the
acquisition of skills among SME owners. As long as
most important obstacle to SME development in
a regular stream of income can be created with low-
Saudi Arabia:
margin activities and low effort from the owner’s side, reluctance to innovate and take risks will
Governments have taken up the challenge of SME
remain widespread among small companies.
development. Numerous support programs have
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71
SMEs
SMALL IS BEAUTIFUL - OR IS IT?
FIG. 2: Most important obstacles to SME development according to RCCI survey
70% 60%
65%
50%
53%
40% 30% 20%
41% 32%
59%
44%
33%
10% 0% Information- managerial related
technical
workforce- marketing financing related
bureaucracy
Soure: Riyadh Chamber of Commerce and Industry
been rolled out during the last decade. They remain fragmented, however, and few follow-up studies and systematic evaluation of policy outcomes are undertaken. The innovative models of incubation and business services developed in some regional institutions, could be done better justice by creating
Almost all SMEs in the GCC are also family companies; SME challenges, hence, are family business challenges.
such reports. One could criticise that too many support programs
management, building succession plans, separating
still provide direct subsidies financing viable and
family from company finance and many more.
non-viable ventures without discrimination; some of them also offer services that would be more easily
Family dominance can make it hard to attract qualified
provided by private business service companies.
non-family managers. The centralisation of power in many family businesses can also push talented family
SMEs as family companies
members to leave the company, further complicating
Almost all SMEs in the GCC are also family
SMEs’ human resource quandaries.
companies; SME challenges, hence, are family
72
business challenges. The converse is also true:
Fluid, low-margin company structures mean that
SMEs face the typical family business issues of
often there is little to hand over to the next generation.
sorting out the distinction between ownership and
Family links provide trust, but when they are supposed
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FIG. 3: External Financing of SMEs
SMEs
overcome in order to achieve this goal. Some of this change has to come from within businesses; but on some levels, governments could help, for example by: Designating national lead agencies to coordinate and
70%
50-70%
Approved
benchmark
SME
support
policies,
consolidate available information, and make it
Rejected
publicly available. Focusing support policies exclusively on sub-
EU 2009 In the EU, by contrast, despite the recent economic crisis, over 70% of companies got all or part of the bank loan they wanted, and only about 15% were fully rejected according to a 2009 EU-wide survey.
UAE 2008 2008 rejected 50-70% of credit applications from SMEs due to the higher risk and due to applicants’ failure to meet loan conditions. 55% of SMEs were unable to get the credit they required.
sectors with higher value-added that can provide national employment. Orienting SME support programs towards the provision of an enabling environment for SME growth rather than subsidised credit and free business support services. Fostering cooperative structures among SMEs in marketing, procurement and the sharing of infrastructure and business services. Measuring the performance of existing support
to substitute for formal governance structures, the
programs, notably through controlled trials, and
result is often the demise of the company as soon
publishing the results.
as family circumstances change. The average age of
Establishing dedicated SME support windows in
Saudi SMEs is 7 years, reflecting a low survival rate.
government agencies.
Governance reforms in Gulf SMEs are recommended not only to move them towards higher value-added
Under the right circumstances, small Gulf business
production, but also to preserve family wealth.
families can become the main drivers of diffuse diversification and national employment. In Europe,
85 percent
In Europe, companies with up to 250 workers contributed a full 85% to employment growth from 2002-07
The need for higher value-added
companies with up to 250 workers contributed a
The challenge for Gulf SME sectors is not aggregate,
full 85% to employment growth from 2002-07. An
quantitative growth – that has been achieved with
enlightened SME policy is a crucial ingredient for
ever-growing imports of foreign labour, with
stemming the socio-economic challenges the young
relatively small long-term benefit for the local
and underemployed populations of the
population. The challenge rather is qualitative
GCC will face in coming years.
growth into technologically and managerially more sophisticated sectors that allow for product differentiation, higher returns and salaries that are sufficient for national employees. The current paradigm of SMEs that are all providing the same low-margin services and products should be
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AUThorS Dr. Steffen Hertog, Lecturer at the London School of Economics and Academic Director of the International Institute for Family Enterprises
Volume 10 Tharawat Magazine
73
reviews
Facts and Figures
Facts and Figures
Science in the Arab World UNESCO Science Report 2010
t
he Arab world, once the cradle of the world’s scientific innovation, today sees itself at the bottom of the list, when it comes to Research and Development, according to the UNESCO Science report 2010. The report covers the years 2005-
2010, with most statistics coming from before the financial crisis and covering several relevant areas, such as the overall investment of countries in R&D as a percentage of their GDP, Science and Technology policies, the number of researchers and their support systems, as well as R&D output such as the number of
patents reached or scientific papers published. The main indicator in the report is “GERD”, the Gross Domestic Expenditure on Research and Development, which is calculated as a fraction of the Gross Domestic Product (GDP).
Key indicators on world GDP, population and GERD 2002 and 2007
1.7%
1.7%
2.2%
2.3%
2002
0.8%
World 46 272.6
66 293.7
Developed Countries 29 341.1
38 557.1
1.0% 0.2%
Developing countries 16 364.4
2007
26 810.1
0.2%
Least developed countries 567.1
926.4
0.2%
0.2%
All Arab States 1 557.9
2 386.8
GDP (PPP$Billions)
Main research areas of relevance to the Arab world The report finds that the main areas of focus for Arab research are:
Water security
74
Energy security
Tharawat Magazine Volume 10
Arab countries have seen a low GERD as a percentage of GDP spanning over the last four decades. It varies from 0.1 to 1.0% of the GDP, whereas academically leading countries spend over 2.5% of their GDP on R&D.
Nanotechnology
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Facts and Figures
reviews
How many scientific publications did the Arab world produce?
Libya
147.2
152.2
Kuwait Bahrain
Egypt
Qatar
5.1 4.0
uae
Oman
1.3 2.4
2.5 3.5
1.6 2.4
Ksa
Sudan
Yemen
Djibouti
Number of Publications/Mio population
2008
1.8 4.7
100%
95.4 113.1
Jordan
Mauritania
2002
68.7
63.2
Iraq
Lebanon
91.1
126.4
191.9 222.5
157.1 2.4 6.0
5.8 9.6 101.4
80.0
76.4
Tunisia 7.5 15.9
Algeria
61.6 70.8
Morocco
Syria 35.2 48.6
36.3 36.9
15.4 37.5
140.9
196.2
The report analysed the number of scientific publications per million population in the Arab world in 2002 and 2008:
Comoros
The next steps Whilst globally the situation has certainly further worsened by the recent financial crisis, several Arab states are still working towards improving the situation at governmental level, with new science and technology strategies. National, regional and pan-Arab initiatives are being launched to define research priority areas and for example Saudi Arabia already adopted a national plan for S&T back in 2003 and 2006, whilst Qatar implemented a fiveyear plan to increase GERD to 2.8% (from 0.33%). Bahrain, Morocco, Qatar, Saudi Arabia, Tunisia, the United Arab Emirates, followed more recently by Jordan and Egypt, are tackling this issue by setting up science parks.
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The private sector contribution
Tunisia 36 Qatar, UAE 42
Jordan 96 Egypt 99 Syria 108 Bahrain 119
However, despite all these efforts to improve the current situation, due to missing links between public and private sector R&D, innovation still tends to be scarce. Private sector spending on R&D is minimal and the UNESCO finds that out of 131 countries studied, Tunisia ranked 36th in terms of private companies’ expenditure on R&D. Qatar and the United Arab Emirates both ranked 42nd, Jordan 96th, Egypt 99th, Syria 108th and Bahrain 119th.
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reviews
Book Review
Jamie Oliver and Tony Goodwin
How they blew it
S
hould you wonder what a cookery book might be doing here – do not be alarmed. The Jamie oliver who wrote this book is a renowned British business journalist, who together with his co-author and entrepreneur Tony Goodwin set out to collect the stories behind some of the most prominent entrepreneurial failures of recent history. The book promises an insight into the lives of famous businessmen, who took incredible risks, won - and then lost it all. A book about men, who were entrepreneurs to the core, not only because of the money and the fame but because entrepreneurship determined, who they were. The authors recount the stories of sixteen entrepreneurs of international repute. It follows them from their often modest beginnings to the height of their success and to the depths of their fall. As varied as their backgrounds, professions and motivations might have been, one of the common traits of all of the portrayed businessmen was that they all had their “eureka” moment at the right time and were able to seize it. Equally common was
76
Tharawat Magazine Volume 10
reader would wish for a slightly more in-depth analysis of some of the business decisions and their ramifications. Certainly impressive is, however, the depiction of the dazzling steps these entrepreneurs took. The authors succeed to show how decisions that look rather mind-blowing from the outside might actually seem quite plausible to the decision maker.
J. Oliver and T. Goodwin Jamie Oliver is a renowned and controversial British journalist and author. Tony Goodwin runs the international recruitment business Antal and has over 25 years of experience.
their subsequent tendency to going into overdrive: From the former head of Lehman Brothers, Dick Fuld, to German Industrialist Adolf Merckle, Ken Lay of enron, all the way to Zhou Zhengyi, the Chinese tycoon – they all overestimated themselves and underestimated others. The stories that sometimes read more like a thriller or a James Bond novel than a journalistic piece are entertaining, yet at times a little superficial. The savvy
Concluding the book are several recommendations by the authors of “how not to blow it” and advise entrepreneurs to stay humble and not overestimate their own strengths. These maybe obvious suggestions but according to the biographies of the portrayed businessmen not always taken on board. Overall, the authors’ style is agreeable and easy to read and the book certainly makes for a light, entertaining and informative read. in the end, even though one might be left with a certain admiration for the shrewdness of some of the main characters and for their drive for more, bigger and faster, one is at the same time experiencing a bitter aftertaste, thinking of the many lives that were gravely impacted by the drive of only few, who famously went from rags to riches – to rags.
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