The Lebanese economy is dominated by family-owned businesses of all sizes. They operate under extraordinary circumstances and many of them have emerged triumphant surviving wars and recessions. What are the key facts that define Lebanese family businesses and what are the factors shaping their strategies? Dr. Josiane Fahed-Sreih, Associate Professor of Management and Director, Institute of Family and Entrepreneurial Business, Lebanese American University, Lebanon, describes the status quo and what are the drivers for growth for Lebanese family firms.
The status quo
Family businesses in Lebanon have developed a remarkable resilience in spite of the turbulent times their country and region currently face and have done in the past. They are always looking for opportunities to grow their businesses. A recent study conducted at the Institute of Family and Entrepreneurial Business at Lebanon American University has found the following facts to be true:
1. The average lifespan of family companies in Lebanon is 40 years, (as compared to an average of 28 years globally) and 75% of firms that age are presently managed by the second generation.
2. 46% of Lebanese family businesses are experiencing growth. 9% of the survey respondents have experienced annual revenue increases of over 21%.
3. 69% of the respondents interviewed anticipated annual revenue growth over the next five years. In fact, 12% of respondents predicted growth of 21% or more per year.
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4. More than 27% of those firms interviewed in the survey carry no debt, and 37% of them carry debt equalling less than 25% of their equity. This finding suggests that, with strategic management of cash reserves and perhaps new debt, many family firms will have the means to make substantial investments in their businesses.
5. Almost 64% of all family firms have potential for increased contribution to the national economy, creating more jobs and generating more revenues to the government.
6. Nearly 17% of respondents to the survey generated 26% or more of their sales abroad. They have found ways to produce and deliver goods and services that the marketplace perceives as preferable, despite a number of discouraging factors related to marketing, costing and operation within Lebanon and abroad.
Barriers and opportunities for
Confronting global diversity challenges, makes us think wider, deeper and differently. The world is constantly connected and in pursuit of knowledge and learning. The real world is complex and family businesses have to strive permanently to adapt, learn, and grow. Failing to do so leads to their demise. In Lebanon there have been many examples of families that have attained outstanding success in the growth of their business. Some measure success by the number of times they enter and conquer markets, by the degree of successful diversification, by profitability of the business, others focus on their value system and the corporate social responsibility.
There are three main considerations for the future growth of family firms:
1. Family businesses are in danger of allowing their culture and family priorities to block their ability to grow as a company. Families in business usually want their core values to be reflected in their business behaviour. The success of the business is measured not only by the bottom-line results of the business but also by the goals that go with the company’s core values. And this by itself can be the road to sustainability. Giving family businesses a unique opportunity to stand out from the crowd.
2. Sometimes family businesses prevent outsiders from playing an entrepreneurial role in their businesses. The question what talent will lead the family business to the next level becomes a crucial one. Fact is that the family firm requires change agents to drive and lead their activities into new areas. These change agents require support especially if they are non-family members. For instance, unifying the family behind a non-family Chairman, and stabilising their position by a governance structure that keeps family issues out of the boardroom is a good recipe for success.
3. Family businesses must innovate to survive which can mean questioning culture and traditions. They have to work on their sustainability, and realise that being successful today does not mean they will be successful tomorrow. Unless family businesses create a process of innovation, they will be missing out on sustained growth, advancement and mainly on competitiveness.
One size doesn’t fit all when it comes to family businesses. There is no one right way of doing things. There are only ways that seem right for both the family and the business, and ways that turn out to be good practice, even if they appear to defy the business textbooks or the critics. Family businesses are nothing if not ingenious when it comes to creating structures that suit their way of doing things starting with a common vision and a sound value system. For instance, some family businesses, apparently, aim for the best of both worlds by keeping the board a family zone while running the business by adopting best business practice and strategically cultivating family talent for the future.
The challenge that remains for family businesses of Lebanon and around the globe is to make sure the statement will remain to be true for the generations to come.
Tharawat Magazine, Issue 24, 2014