Tharawat Magazine

Social Responsibility of Family Business

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The Social Responsibility of Family Businesses in the Arab World

Sudden changes in social structures and shifts in economic systems are inextricably linked with each other and naturally have a direct impact on the competitiveness of a business community. Next to governments seeking to improve business standards through regulations and creating new incentives, the business community itself can be a great engine to improve the creation of business opportunities and raising the level of commercial interaction.

Dynamic societies and their needs

Over the last months, the Arab world has been facing many new challenges and there is little doubt that the business environment for family-owned companies of all sizes has been most importantly impacted. Since family businesses in the Middle East have always been very close to their stakeholders and deeply embedded in their direct social environment, the challenges facing the rapidly evolving communities can be an opportunity for them to set an example on how businesses can deal with change. The importance of business families, as well as their vast influence in their local communities makes their role in shaping the future of the region a fundamental one. Many families have dedicated large amounts to the welfare of their communities and the environment. Even though little is known in facts and figures it is yet commonly understood that they are benefactors to the community.

However, in order for businesses to have a real impact, to contribute to overall prosperity and thus increase of competitiveness, they have to look at the main need of their immediate economic environment. In Arab economies, the two main aspects that lie at the core are undoubtedly the need for education and employment. The way corporations, family-owned or not, decide to tackle these two issues will have a great influence on improving the competiveness of the business and its environment and may well become a decisive factor in the further development of the Middle East.

What can be done for education?

When it comes to education there are several ways in which family businesses can and have contributed and see the immediate benefits this will yield for their own competitiveness and that of their environment:

Creating education funds:

Many families have created a fund to sponsor education for family members but also for people in their community. Often this addresses post-graduate degrees, however, there are only few initiatives that support vocational training. Increasing support in vocational training and technical education could expand the qualified work force for family businesses to hire from and at the same time help communities to become self-sufficient.Contributing to universities and schools:

Another way to contribute to education often undertaken by families is by adding to or building schools and universities. This increases the value of the family portfolio and the branding of the family business.

Education of family business employees:

Another immediate way of tackling the issue is by emphasising the education of employees working within the family business. It can be only advantageous for family businesses to further develop the skills of their employees, whether they belong to the family or not. This can ensure a smooth running of the firm in case of transition periods and foster in-house innovation and development.

What can be done for employment?

According to the International Monetary Fund the region needs to create 18 million new jobs within the next decade. But how businesses can contribute to the creation of employment is not a question with a straightforward answer. Looking beyond that rather classical approach to job creation, businesses could consider the following options:

Supporting SMEs and start-ups:

Family businesses can support the development of new business ventures by either investing in start-up ideas to be added to the company‘s portfolio or by setting up a family venture fund, which seeks and supports young entrepreneurs. Whilst creating employment opportunities, the return on investment for the family business, may be monetary, but will mainly be access to new and upcoming business ideas and first access to potential business opportunities.

Supporting government projects:

Many governments in the Middle East have developed projects for short- and long-term job creation. Businesses can advise as to market requirements and offer internship opportunities. Potential talents for future employment can be thus found by the family business.

Create in-house vocational training systems:

Combining the need for employment and for education, companies in manufacturing sectors, companies can accept non-skilled workforce at low wages and let them develop through an vocational training course within the company over a period of time. This would allow the companies to lower their employee costs in the beginning and at the same time gain well-educated workforce.

Social responsibility for better competitiveness

The outcomes of individual or even coordinated efforts by family businesses to boost education and employment in the Middle East can only be beneficial. The more energy is bestowed on raising the general standards of education and thus the possibilities for employment, the more competitive the markets will become on a regional, as well as a global stage. They will generate more and increasingly interesting business opportunities. After all, creating a better future for their next generations is at the heart of the mission of family businesses.

Tharawat Magazine, Issue 10, 2011