Evolution in the Family Business Field

The Evolving Perception of Family Businesses in the Middle East and North Africa (MENA)

There will be few today who would not agree that family businesses are of chief importance in shaping the future of the MENA. This was not always the case, and only a decade ago perceptions were quite different. In this article we explore how and why the perception of the family business in the MENA has evolved and the directions we hope the field will take in the future.

Past Perception

When we began our work with family businesses in the MENA more than ten years ago, we quickly realized that most of the knowledge available was based on assumptions that were influenced by foreign and often Western theories. The impact of this perception was that family firms were pushed towards becoming more like multinational corporations rather than leveraging their unique regional competitive advantages. “Keep emotions out of the board room,” and “Separate the family from the business,” were the standard solutions presented to business families. Advice that was often impossible to implement in societies that were, and still are, of a collective nature and advice that also eliminated key advantages and inherent success factors that family businesses in the MENA have established over decades. There was also a lack of differentiation between family firms from the various sub-regions, even though their differences with regards to business practices, family structures, age and growth opportunity are fundamental.

Many years and a few financial crises later, this attitude toward family firms has fundamentally changed. The focus has greatly shifted — from being blamed for nepotism and unprofessional behaviour to, more often, being praised for their longevity and resilience.

Today’s Views

Today, thanks to the realization of their importance and impact on regional economic growth, the awareness around family businesses is heightened across the MENA — and to varying degrees in its sub-regions. The Arabian Gulf countries have clearly recognized the potential and the future necessity of family companies and are investing in governance and succession planning, as well as governmental incentive schemes to support the growth of family-owned companies.

In the Levant and North Africa, the situation is slightly different. These countries face much economic and political instability, and there is currently a much less structured approach and fewer open efforts to support family firms. When speaking to family businesses in Egypt and the rest of North Africa, it becomes increasingly apparent that their own focus today lies less on understanding family business dynamics and more on successfully navigating day-to-day business. However, in Levantine countries like Jordan and Lebanon, there has been early attention to the family business topic. Hence the academic environment is more advanced than in other Arab countries.

Fortunately, awareness around family business topics is on the rise in the MENA and academic interest advances in all three sub-regions. The post-crisis economic situation and resilience of family enterprises have not gone unnoticed by major consultancy firms and banks. We have seen a significant increase in service providers surrounding the family business model. There are also more and more family business reports, surveys and thought leadership articles surfacing, which, however, tend to focus on ultra high-net worth, large conglomerates mostly from the GCC (Gulf Cooperation Council), neglecting the more important, diverse, and numerous SME sector and the non-GCC countries in the region. While an increase in research is to be welcomed, the definitions of what the central questions are for MENA family businesses seem to diverge greatly.

Future Evolution Possibilities

What influences efforts in the family business field negatively is the general situation of the Middle East region, which is one of instability and uncertainty for many of its countries and populations. There is, however, a great contrast between this current disheartening amount of conflict and the region harbouring highly innovative economies that invest great amounts of money into bringing new industries and opening new opportunities.

As in many other fast-growth regions around the world, the shift in perception is a great step in the right direction and focusing more attention to family-owned enterprises is crucial. However, this should be done for the right reasons, and support systems should be created organically and with the family business’ best interest at heart. Family firms are key to addressing the region’s unemployment problem, which lies at the heart of much of the instability currently experienced. Family-owned businesses have never shied away from entering difficult industries with long-term growth perspective, and the MENA, with increasing food security and water security challenges as well as a fast-growing young population with low income, requires sustainable solutions, products and services for its citizens. There are many other reasons why MENA family businesses are essential to this region’s future, and understanding those reasons should impact a shift in perceptions and actions that will follow.

The future of the family business in the MENA lies very much within the family businesses themselves as well as in the vision of the governments in charge of their institutional environment. Before more advice and thought leadership is dispensed on good management, governance, and succession practices, it seems advisable to take a ground-up approach and do some necessary homework.

There are many unanswered questions when it comes to the family business field in the MENA, which is due to a lack of reliable data. How many family businesses are there? What industries are represented? How big is their contribution to the GDP? How are they contributing to job creation? We know that the answers to these questions will be significant and will help the family business researchers and academics develop structures that can substantially support family enterprises, especially now during times of volatility, distress and war.

Much focus should be laid on developing solutions and support for family-owned SMEs as they represent untapped potential for exponential growth. Their priorities lie with the growth, diversification and internationalization of their companies, but they often lack professional, visionary support and access to relevant thought leadership. In the words of the family business we recently spoke to: “Let’s talk about succession in a few years, once I know that I still have a business.” For advisors, this may mean combining an approach to structural and governance advice that includes knowledge about growth opportunities and new industries which families will have to face in the near future. There is, in spite of everything, a huge and exciting potential in the MENA and its future rests in the hands of vision and business acumen of enterprising families.

About the contributors

Farida F. El Agamy is general manager of the Tharawat Family Business Forum, a network dedicated to the sustainability of Arab family firms. She can be reached at info@tharawat.org.

 

 

 

Ramia M. El Agamy is a manager of the Tharawat Family Business Forum and is editor of Tharawat magazine. She can be reached at editor@tharawat-magazine.com..

 

 

 

Shereen N. El Agamy is manager of strategy & innovation of the Tharawat Family Business Forum. She can be reached at info@tharawat.org.

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