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In this issue’s FamilyBusiness2FamilyBusiness case, HbN, innovative leader and 3rd generation member of a family business active in shipping, is confronted with his eldest son’s clear inclination towards entrepreneurship. He fears the day that his son will utter the wish to leave the family business to pursue his own dreams and wonders how he should react when the time has come. In the solutions section, family business leaders give their suggestions as to how HbN had best handle his present dilemma.
It is a tradition in the Gulf for each family to have their own majlis on specific days of the week. That particular evening, HbN, third generation member of a large family business active mostly in shipping, visited several gatherings of families he knew particularly well.
In the last majlis he visited that evening, HbN witnessed an intense discussion between two family business leaders. Both of them were from the same generation as HbN and he followed their conversation intently. Apparently, the daughter of one of the men wanted to quit the traditional family business, which had been in commodities trading for three generations. Instead, she wanted to establish a start up company for design and production of furniture. The two men argued about whether such entrepreneurial initiative of the young generation should be tolerated and even stimulated or not.
HbN participated only very little in the discussion and didn’t give his support to either side. He had a lot of sympathy for this young girl who had a dream to have one day her own furniture brand. Like any entrepreneurial idea, it was a dream that could become a great success or an embarrassing failure. How would she face it if she would fail? If she would succeed to convince her family and let her start the business, would they tolerate failure? And even if the family were to tolerate failure, would the business community be equally understanding? Would she be able to start over?
HbN, was reflecting on all these question when leaving the majlis. As a matter of fact, he was also looking for an answer to a specific case of a similar nature in his own family.
HbN was part of a family business that had grown very fast over the last twenty years when several ports in the region became international destinations. Governments in the region invested heavily in port infrastructure and encouraged private investors to benefit from these new facilities. Due to the very open investment policies and efficient customs processes, these ports became competitive clusters where companies from all over the world were attracted to build their regional base and establish joint ventures with local companies.
These changes provided HbN’s family business with the possibility to move from serving regional destinations to becoming a global player with representative offices and alliances in Europe and Asia
HbN became the CEO of the family business ten years ago at the age of fifty, taking over from his uncle, one of the four brothers and sisters of the second generation, who had been running the business for the last twenty years. The main reason for HbN’s election by the family council was his success in running the commercial arm of the family business. He had been able to change the structure of the activities portfolio so as to reduce risk exposure.
This was done through a series of joint ventures with European and Asian logistic companies, which allowed the family business to move rapidly from a regional to an international business. However, probably the greatest achievement was how HbN succeeded to integrate seven family members of the fourth generation into the various sectors of the family firm. These men and women were in his opinion one of the most valuable assets of the organisation and he felt very proud when he saw them competing in the market and delivering on the promises to their respective clients.
He considered them part of the strategy towards sustainability. During his childhood and his youth HbN had always believed that he would be part of the family business and he had chosen to study international trade to realise his dream of taking the family business international.
Through HbN’s passion for the family business he was asked by his father and uncles to be involved in very complicated negotiations at a young age. He educated this own children also with the aim of them taking over the family legacy one day. His hopes were especially focused on his eldest son YbH.
YbH was now going through an introduction program to enter the business after having finished his studies in computer sciences. The nine months training period exposes the young generation to the various business sectors and departments of the group. They spend a lot of time at the operational level. Their competences and behaviours are assessed in a professional system. YbH was at the end of his training and had succeeded in attracting the attention of the employees and the family members working in the group. Was he going to have the same passion as his father?
His father watching from a distance noticed that YbH was passionate about every technology driven business in the group. YbH was always talking about the latest IT progress more than about the company itself. He would run around showing people new pieces of technology and demonstrate to employees how it could help them in their daily business. This made him very popular among the operational employees in the company.
While the whole family was very proud of the accomplishments of YbH, HbN was worried about the lack of focus in his son’s approach. He did not like to be locked into one project or serve one client. He only wanted to be involved in activities that had technological content and accordingly grew restless in his normal daily duties. HbN knew that one day soon his son YbH would come to his office to tell him about his own dream of opening a business.
HbN was still thinking about the young girl who wanted to leave the family business to start her own furniture business, and at the same time he thought of what would be his response if YbH would ask to leave the family business.
HbN could see various internal and external dimensions to such a decision and felt that he should be well prepared in order to give a fair chance to his son and also to ensure the continuity of the family firm.
The main internal challenge was how to respond to YbH if he wanted to become an entrepreneur without the family loosing him. Another consideration was how to not confuse those young men and women from the family who decided to work for the family. HbN was also concerned about his own children, YbH’s brothers and sister, who showed an interest to join the family business once they graduated. Would the exit of YbH confuse them and make them less determined regarding their future in the family business?
The external challenges could also be numerous. YbH would benefit from the family’s reputation, connections and brands. If those were assets, they could also turn into liabilities for YbH. Would the potential YbH customers and employees take him seriously as an entrepreneur, or would they assume that he was merely an extended agent of the family business?
How can HbN help his son YbH and at the same time lay the foundation to help future entrepreneurs in the family without jeopardising the continuity of the family?
Amro F. Al Khadra
Group Managing Director & CEO
Maju Holdings Sdn Bhd., Malaysia
The challenges that HbN is facing are ever so common within family owned businesses, mom and pop-owned shops, and even trade’s men. This is not a problem that only HbN is facing.
First, some key points I would like to mention and highlight in this case study:
· It is only natural for HbN to attend a Majlis of peers of similar age groups, and generations; it is very common to associate with the likes in the Gulf region. Family backgrounds, customs, and even traditions. A new entrant is rarely found.
· HbN “had a lot of sympathy for this young girl…..” but why? Sympathy for the predicament she is in? Sympathy for her destiny being put in the hands of someone else’s hands? Sympathy for the possibility of her failing and learning from her mistakes?
· The growth within HbN’s family business over the past 20 years may have caused a slight oversight in succession planning and the implementation of a family constitution, despite the “grooming” and training that the new generations are undergoing.
· HbN is obviously very successful at incorporating the family members within the different sectors of the family conglomerate, and is rightfully proud of their capabilities; or is it pride of his own achievements for the family? However, this all seems to be based on the continuous modus operandi of the business, and does not seem to include horizontal expansion into different market segments, or even the incorporation of possible independent business ideas of the new generations.
· It is very understandable that there are certain customs and traditions that family members are “expected” to adhere to. These customs and traditions can either be imposed by society or even be part of an un-written family constitution. For examples, should YbN step out of the family business as a result of lack of support or conflict in an attempt to realise his dreams, this incident will surely come to light within the community, and will be openly discussed despite the family’s attempt to conceal the incident. Should YbN fail at realising his dreams as a new private business owner, this will surely fuel the hype and rumours behind the incident, and even sever certain ties and relations within the family.
There are different possibilities how to deal with these situations. The family conglomerate can support YbN in his efforts of establishing a new line or unit of the family business, with resources of the conglomerate, thereby assisting in YbN’s success and individualism under the pretence of a group subsidiary. This will set an example for the ingenuity and creativity of family members to grow and expand the conglomerate, and give them the sense of individuality by working for the greater good of all. This allows all members to be within the family and avoid the risk of alienation and jeopardising the continuity of the family. Letting YbN go his own way can be risky but everyone may rest assured that there are and will be family members that are interested and surely capable to work in the family business and that will have the knowledge and wisdom of HbN.
Amro F. Al Khadra, Group Managing Director & CEO
Maju Holdings Sdn Bhd, Malaysia
Like so often in business families, HbN has to look at the question from two angles: the first and foremost angle being one of a father, who wants his son to be a happy and successful in his work. Secondly, as a business owner, looking for the best talent to ensure the growth of his business.
As a father, at the end of the nine months training, HbN should start a dialogue by talking to his son and sharing with him his vision for the company’s future. He should also encourage YbH to open up about his experience in the company and his own dreams.
The discussion can show that YbH might be very interested to join the company, but would like to focus on the technology side for now, but it is also possible, that YbH is indeed thinking about opening his own business.
In any case, the conversation will give HbN more insight into what he might expect from YbH and how the young man sees his immediate future.
As a businessman, on the other hand, HbN has to make sure that he objectively identifies talent within the family and the potential of each member to become a future leader. In case YbH wants to stay in the family business, HbN might consider proposing him to start up a new activity within the company – either for example a small internal technology centre to support the different divisions of the organization to increase efficiency through new technologies.
In case his son is serious about opening his own business, HbN could envisage several possibilities. Being a businessman, HbN should ask his son if he has a clear business idea, or if it is still only a vision. If YbH has a clear idea for a future business, his father might advise him on how to proceed, maybe by introducing him to some professionals that can discuss and challenge the idea. YbH could be encouraged to present his business plan to the family, which opens the opportunity for them to think of providing him with start up capital or even propose to take the business model under the roof of the family business.
Should YbH, however, only have a vague idea, HbN, both as a father and a businessman should encourage his son to spend some time in a high-tech company outside the family business. This will allow him to learn and to be exposed to a different environment, which could shape his ideas and give him practical experience with professionals.
Whatever decision is being taken, it should be clearly explained to the other members of the young generation. In case that YbH were to decide to develop his own business initiative, HbN has to expect that other members of the family might come up with their own business ideas. This can be a great opportunity for the family company, which should be used to innovate and stimulate the entrepreneurship within the family business. However, HbN should find a way to institutionalise this development into a system capturing entrepreneurial ideas and initiatives from the family for the family company.
In today’s competitive environment, it is critical that talent is retained and stimulated, as it is the driver of the growth of any enterprise – and family businesses are no exception.
A 3rd generation family business member of an egyptian family business.
Salah Al Wazzan
Nafais Holding (KSCC), Kuwait
3rd generation of the Al-Wazzan family
In my opinion, HbN does not face as many problems as he is currently worried about. Having a young entrepreneur in the family does not necessarily pose a threat to the continuity of the family business and what happens is entirely dependent on how the situation is handled.
Personally, I believe that it is best to deal with such situations from a business perspective, rather than treating it as a family issue. From a business perspective I would have the following reflections: It is perfectly fine for someone to have an entrepreneurial streak and wanting to live and develop their own vision, however, I do not think that the family business should get involved in these projects. See, whoever leaves the family businesses dissociates itself from its activities and strategy, be it as a family or non-family employee. In the case of family members venturing out on their own, you can hope that they will maintain the values and integrity that the family has told them and that as name-bearers they understand their responsibilities.
This simultaneously appeases HbN’s fears of what may happen if the young entrepreneur fails; I personally believe that the financial community, and society at large, is more than apt to make a difference between a long established family business name and someone that just started a business and who, through his or her own mistake or circumstances, fails. This way, even if the new business fails due to a lack of good business sense or even the lack of integrity, it would be at a rather small risk for the family business.
However, the one apprehension that is justified, is that letting one family member venture out on his own, could have a sort of a contagious effect on all others of the same generation. This is why I believe that there should be no actual investment from the family business’s side so as to not give the impression that the family business is a financing pool and a platform for all the young generation’s entrepreneurial plans. It is ultimately the goal to attract as many family members to stay with the business as possible. However, a vocation is a vocation, and young entrepreneurs should not be held back, and if it is a good business idea they should by all means set to realising it.
Therefore, I believe that HbN should talk to his son and see how far his ambition reaches and then give fatherly advice and personal support while at the same time clearly separating his son’s possible venture from the family business.
Tharawat Magazine, Issue 9, 2011