Family Businesses

1
Family Businesses Entrepreneurship

• Presentation
• 20th September 2006
• Eng.Sobhi A J Batterjee
• President
• Family Business Academy Jeddah

2
MISSION of FBA Jeddah

• To foster family businesses creating trans-
• generational wealth and values through
• advisory services mentoring and networking
• opportunities counseling and consultancy
  contemporary educational programme

3
Family Business Academy is

• A Resource Centre for those seeking
  knowledge/information.
• A hands-on Training Centre on key aspects of
  operating a family business
• A Consultancy Centre
• A networking platform linking family businesses
  across the Middle East
• A Counseling and Mentoring facility for younger
  members of the family businesses

4
The Discussion points

• Nature and significance of Family Business
• Key elements of governance structures
• Family Business and entrepreneurship
• Islam and Entrepreneurship
• Women Entrepreneurs and Family business

5
Defining Family Enterprises

• Family Business like beauty tends to be in the
  eye of the beholder.
• There is no consensus on the definition of Family
  Enterprise.
• The common elements in defining Family
  Business can be
• Percentage of share capital owned by the family.
• Number of generations of owning families involved
  in the business
• Direct descendents of the founder having
  Management/Ownership control

6
Key Elements of Governance Structure in a Family
businesses

• Family and its Institutions Family Council
  Assembly
• The Board of Directors
• The CEO or The top management
• Happy families are alike, Every unhappy family
  is unhappy in its own way .
• Tolstoy in Anna
  Karenia

7
Global Significance of family Businesses

• Family companies employ more than half of the
  worlds industrialized workforce.
• They produce 65 of the GNP in the USA
• Worlds most famous brand are from family firms
  Marriot, Disney, Ford, Nestle
• Family firms are 5 more profitable than their
  non-family competitors.

8
Engines of the Arab Economy

• More than 95 of Registered Companies in the
  Middle East are Family enterprises.
• 95 of the GDP of all GCC countries
• 46 Major Family Businesses in GCC have a net
  worth of more than 2 trillion investments

9
Merits and Demerits of Family Businesses

• Demerits
• Lack strategically planned Management succession
• Only 30 of Family Businesses have written
  strategic plans UN Business report 2003
• Informal channels of communication
• Emotional Involvement

• Merits
• High level of respect and trust
• Continuity of Business tradition and values
• Operational flexibility in decision making
  process
• Sense of identity, pride and legacy.

10
Critical issues for Family Businesses Future

• Succession
• Participation
• Compensation and Ownership
• Harmony
• Responsibility
• Professional Management
• Succession or transition process is the
  ultimate test for family businesses.

11
Transitions The Acid Test

• Only 5 of Family Businesses in the
  world are going concerns in 3rd Generation -
  Survey by J P Morgan
• Transition involves both management and ownership
• Family firms are minefields of complex
  relationship and competing norms.
• What is the way out?

12
Strategies for success in family Businesses

• Firm Foundation
• Meritocracy
• Open Communication
• Innovative Processes
• The Implementation of the above strategies
  demands

13

• Fresh Ideas
• Innovative thinking
• Peer Learning and
• Dynamic Positive Change
• Entrepreneurship is the way out

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The success stories

• Wal-Mart, Ford, Samsung, LG, Motorola
• Should the family businesses in the Arab world
  ape them?
• No Peer learning
• The entrepreneurial trait Involving
  Employees and Customers as Shareholders.

15
Family Businesses and Entrepreneurship- The
Facilitators

• Long term Nature of family firms ownership
• Kinship-ties have positive effect upon
  entrepreneurial opportunity recognition
• Entrepreneurial activities increase
  distinctiveness of the Family Firms products.
• Family run local businesses have entrepreneurial
  advantages over large corporations.

16
Family Businesses and Entrepreneurship- The
Constraints

• Founders desire for lasting legacy
• Organizational cultures
• Ethnic heritage of the family
• Societys regional cultures and historical
  experiences

17
The Need of the Arab world

• 100 million jobs by 2020- World bank report
• Economic Development in the Arab world closely
  related to the advancement of the women- UN
  Report
• Arab world advocates that men and women play
  complementary roles in the society.

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The facilitating factors

• Substantial financial assets
• Strong resource base
• 300 million people
• History of entrepreneurship that goes back 1000
  of years- Silk route
• Strategic location between East and West
• More than 65 of the population is between 15-30
  years

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The Concerns

• Weak Financial System
• Lags direct investment inflows
• Rigidity of exchange rate regimes.
• Unstructured capital markets
• Technological advancements, Regulation, GATT and
  Transparency

20
Islam Entrepreneurship

• Islam is foundation for enlightened development
  and dynamic positive change The basic
  requirements for fostering entrepreneurship.
• The Hadeeth prescribes
• Those who would work and earn from their own
  efforts will get all the rewards from Allah.
• Lead me to the market, so that I can practice my
  own business and benefit from it.
• Family takes precedence over business affairs

21
Women Entrepreneurs in the Arab world

• The prophets wife Hazarath Khadija was a
  successful entrepreneur and therefore the role
  model.
• Lacks key managerial skills and real world
  business experience.
• Women as CEO
• Arab world advocates that men and women play
  complementary roles in the society.

22
The contemporary entrepreneurial thought

• Family Business Academy Jeddah SGH Group
  Launched September 2004.
• Baharini Society of family Businesses Kanoo
  Group
• Dubai Forum for families in Business Tamimi
  Group
• GCC Family Business forum- June 2006
• Merger between family groups while preserving
  ownership and control HH Shaikh Lubna Bin
  Khalid Al Qassimi, Minister of Economy UAE.

23
Reawakening

• Going public is considered stigma Need for
  change in perception and mindset.
• Government should modify legislation to encourage
  Family Businesses to form joint ventures with
  other family owned Firms.
• Tolerance, Sacrifice and Acceptance

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Final thoughts

• We live in an age of interdependence as well
  as independence-
• The future of the Arab world lies in an Arab
  partnership- a system of Knowledge sharing,
  Cooperation, Interdependence and Harmony.
• - Sobhi A J
  Batterjee

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What is an Advisory Board and how do I benefit
from it?
How do I optimize knowledge and skills of all
the members of my family business?
What is Family council and why do I need one?
How can we resolve conflicts among the family
members?
Seek help!!!
Find answers!!!
Be our partner in progress
How can I separate my father from my boss?
What about succession planning?
26
Family Business Academy (FBA)

• Fostering Family Businesses in the Middle East
• A Not For Profit Organization

THANK YOU