Abdulrahman al-Attiya, secretary general of the Gulf Cooperation Council (GCC) that groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, noted at the time that family businesses control 98 percent of commercial activity in the Gulf region compared to rates of 65 to 80 percent elsewhere.
Such businesses, which have a turnover of billions of dollars, also dominate the region’s services sector.
No kidding! Only 98%? I would have thought that it was more like 99.999%, but hey, we know politicospeak when we hear it. But both figures seem wrong as all governments in the Gulf also own a sizable piece of the commercial activity in the region.
We knew this since we were toddlers, maybe even before. I don’t for an instant begrudge these families’ wealth. They have worked hard for it no matter how you think about it. And I’m not a socialist to say that they have to share their wealth. It’s theirs’ not anyone else’s, and if they deem it fit to open up their empires for public participation then all power to them.
Looking for a moment at a bigger picture than this, how does the future bode for these families if they chose (as it seems they have chosen now) to remain closed? In the macroeconomics of the Gulf it probably won’t matter. They own the banks who lends them money to expand. But for how long? Ultimately globalisation and integration will come regardless of these families’ wishes. Will the international banks look upon a closed company with secret accounts and accounting practices – where a few individuals make all the decisions for the conglomerate – as a viable business opportunity? How will they ensure that their loan and its interest is paid without getting full and unfettered access to the family business’ accounts?
What of their longevity? The successful families in Bahrain at least have been going on for over 100 years, ergo the Kanoo empire. But how long will it last?
There is an English proverb that says “clogs to clogs in three generations” which means that the grandfather works hard at creating the nucleus of family wealth from poverty or near-poverty, his sons then take the mantle and increase that wealth, yet their children squander all the resources, hence go back to clogs. This obviously does not apply to the families I’m discussing here as they have been foresighted enough to see this situation happen and have put in controls to perpetuate their positions, yet others have gone down that route. A plan that might save these families is without a doubt opening their enterprises and hiring the right people for the right jobs and give these managers the authority to run the business as they see fit. This is very hard to do. And I guess one reason why these families are not adopting this is because they feel that they would lose control.
But lose control they do and we’ve all heard rumours of how families split and the complications brought by family considerations. We have ample examples here in Bahrain, going as far as changing the English spelling of family names in order to distinguish the branches and their businesses.
I remember not long ago I approached one of my uncles with the question of why don’t we consolidate all of our family’s companies into a group and float some shares in order to solidify our position and grow? That was in response to him wanting to buy my father out of one of their shared companies. I asked him why can’t we be like Kanoo or Al-Moay[y]ed or any one of the other shining examples we have locally in Bahrain? His response was “but they’re kings! How can we even approach their status?”
My reply was, well, by consolidation and mergers and full family participation. Needless to say he didn’t agree with me, and we went to court the next day to dissolve the company. Don’t hold your breath that the Al-Yousifs will amount to much in the next few decades, that is, unless I get a few million to start buying all the family businesses and floating them!
Still, these families should come to their own conclusions themselves on how to open their businesses up and when. I personally think it will be sooner than later. They know themselves that to continue to succeed they have to include as much of the community as possible in order to get from within that community not only the funds needed to grow, but also to tap the human resources available.
Comments
Family Business
Westerners no longer really understand the concept of clans or how extended families form the real power bases in a tribal society. Our families have become so fragmented that only the immediate nuclear family unit, which has no power except in the cases of the most wealthy, survives. Our allegiance is to an artificial government we given complete control over us all, instead of to the Family and clan. Once a society has gone that route, there is no going back.
Family Business
It sounds like most of these are actually family-managed businesses, as opposed to simply family-owned. In the US at least, there are numerous family-owned businesses, including some enormous ones (Walmart, Ford, Dupont), at least in the sense that the founding family owns enough shares/votes to control the Board of Directors. It is quite rare for companies of this size to have more than a few family members in the management hierarchy. Most bigger companies have long since moved away from family control, although even these often have significant family holdings. I’d figure that professionalizing the management – and taking the family out of actually running the biz unless they actually have something to bring to the table other than genetics – is how American family businesses avoid the “clogs to clogs” problem.
At the “small to medium biz” level (ie, less than 1,000 employees), family managed businesses are far more common – and are much less likely to survive multiple generations.
How many non-family professional senior managers are typical in a bigger ME family-run business? How do you deal with the inevitable difference in talent, motivation, etc?
Re: Family Business
You’re right, most “family” businesses are managed by members of the family. Although having said that, the very big family businesses tend to follow modern management practices and do employ skilled upper-level and mid-level managers to operate the business, however, the board of directors which in most cases are members of the family have the final say in everything.
I think that part of the reason that Arab families are so big (with children from 6 – 10 or over per household) is in the hope that they will all cooperate and create something for themselves. I don’t subscribe to this idea, but I’ve got 3 uncles with 10 or more children each! My parents stopped at 6, while my brothers and I have stopped at 3.
I share your view that it is virtually impossible to find individuals with the “right stuff” to handle a business, especially large ones, from the same gene-pool, hence the fear of their disappearance.
If these familiy run/owned/operated businesses were to suffer and collapse, there would be untold damage on their local economies.