Succession plan ‘key to family businesses’
Manama, August 2, 2012
Family-owned businesses in the region have started looking at succession planning to manage and preserve their wealth for future generations, a report said.
A research study by executive search firm CTPartners highlighted succession planning as one of the key issues when it comes to wealth management and family-owned businesses.
The Arab region is enriched with countless family-owned businesses that slowly transformed from small trading firms in the early 60s and 70s into regional and global conglomerates, it said.
CTPartners believes that regional family-owned businesses, which constitute at least 75 per cent of the private sector economy and employ more than two-thirds of the labour force in the Arab region, need to ensure sustainability beyond the founding fathers and their immediate offspring.
"With this sector forming the backbone of the economy, sustainability of businesses become important, both for the families in question and for their countries," the report said.
"Both PricewaterhouseCoopers and Booz & Company research suggest that regional conglomerates are ahead of their western counterparts when it comes to succession planning.
"What lies as a strength in the Arab region is that family businesses are far more dominant than other countries. Regional businesses are already taking measures to streamline operations, recruiting non-family-member chief executives and standardising governance and constitutions," it added.
The CTPartners' study, 'Succession Planning at Family-Owned Businesses', points to a paradigm shift in the leadership mentality of family-owned businesses, as regional conglomerates diversify their geographical footprint.
The leadership is moving from autocratic control to becoming more inclusive and participative with signs of a more professional approach to managing business affairs.
According to CTPartners, shareholders are increasingly emphasising to the management the importance of succession planning in their business strategy, and the need to adopt proper compliance structures and implement appropriate risk management approach.
Families too are going for a documented future plan. They have a clear business vision and are open to the idea of bringing non-family members on the board for more transparency and innovation - signs of a more professional approach to managing business affairs.
The study by CTPartners states that while most family conglomerates would prefer to keep things within the family, it is becoming increasingly harder to convince shareholders that the founder's son, daughter or relative will be as successful as chief executive or chairman as the original founder. – TradeArabia News Service