Interview with Salah Al Wazzan
The Nafais Holding Company (KSCC) and its subsidiaries in Kuwait employs more than 2500 people in different areas, ranging across healthcare, education, construction, electronics, retail, financial services and real estate. Salah Al-Wazzan, Managing Director of Nafais Holdings speaks to Tharawat magazine of the challenges and multifarious opportunities that come with the future generations and the pressures of international competition and globalisation.
Al Wazzan Holding has experienced exponential growth over the past decades and is active in a set of industrial activities. How did the diversification of your group take place over time? How were business opportunities identified?
Our business is currently run by our third generation with the fourth generation slowly coming in. We inherited four out of our five core business activities from the previous generation and have developed them further. As of now we have no plans of divesting from any of the industries we are active in terms of diversification, we have added education to the inherited portfolio. Indeed, diversification constituted a priority in most family businesses strategy during the 60’s and 70’s. As they went along, families were adding business to their portfolio, acquiring new partners and new ideas on how to penetrate. This was the spirit of entrepreneurship and leadership at the time. It is why so many of us are so largely diversified today. In our case we leveraged on the business lines that we inherited and over time added education and financial services to it.
Your group has always stressed its involvement in education and has finally expanded onto it. Is this a family passion or a business opportunity?
Initially it started out as a passion. We had felt for some time that there was an inherent need for quality education that reflects the national identity and regional culture, which was not available in Kuwait. With this purpose in mind, we founded our first school in 90ies.Over time we gradually became more involved in the sector. We realised we had entered a line of business that had a strategic gap between demand and supply. So we decide to fully enter into the education sector and developed a strategic approach.
What are the critical success factors to stimulate your family business growth?
I think, growth for any family business, not only our own in particular, is a question of planning. Planning is something that is hard to deal with should it only be prioritised at a later stage. It is the worst thing to find yourself at a point in your business three years down the line, where you had never intended to be initially. In order to prevent such situations from occurring, one needs to understand the importance of planning and developing a clear and practical strategy. And I stress that it should be practical, because there are so many strategy statement and strategic plans, which are “too romantic”. They are not likely to work out in real life. Therefore, clear planning of practical strategies followed through by clear business plans with accountability charters for the executors is the recipe for growth. This leaves only one thing to desire, discipline. In family business you are a magnet for anyone who has, by name, a right to enter. Unless you discipline yourself to one specific strategy in the chosen lines of business you will end up having a scattered approach. You then loose your competitive edge in the market. Admittedly some may still succeed even though they are unstructured, but it saves you a lot of trouble when you discipline yourself from the beginning and focus on a certain strategy. Not to say that we have not been wrong before, and I think all family businesses have gone through this type of experience. Yet it all comes down to those that learn from their mistakes. They will see growth in a way they planned and predicted.
In the context of family business, the question of how to deal with human capital is often raised. According to you, does talent discovery and retention need to be approached in a different manner within family businesses as opposed to non-family corporations? And if yes, why?
I think the approach should not be different, and particularly not when it comes to recruitment. You approach people based on their talent and experience and you match those aspects to your expectations and requirements. If you feel that they are adequate, and that they can deliver what you have in mind then that is all you need, and this should count anywhere.
The only thing by which family businesses can set themselves apart in recruitment is the type of relationship that employees may enjoy once they have joined the company. Also, the stability that many families provide in their environment, sustained by a strong reputation and long-term orientation. The intimacy factor can help overcome some of the inhibition that new employees may have. At the end of the day they are human beings. And as we know, human beings will behave differently when their guard is down than when their guard is up and they have to beware of politics in the company. Not to say that family businesses do not have their share of office politics. But if these are governed correctly, employees will suffer much less from it than they would in a non-family business.
So, in recruitment maybe there is a difference in terms of the intimacy and trust that employees enjoy, once they have achieved success with the family. There is also the high probability that once an employee has done well in one part of the conglomerate of the family, management will likely shift him towards other companies within the family holding as well. This rotation may not always be as easily provided in other corporations.
You are now facing an incoming fourth generation. Such transitions are always considered challenging for family businesses. How are you living this experience?
We have started a program within the family business. It is, for now, a pilot program that will, at a later stage, be implemented over the whole organisation. The fourth generation has only just started, has just joined into the business. This pilot program, we call it ‘management trainee program’, offers fresh graduates from the family a training program, which provides job rotation within the company of their choice. If newcomers enjoy retail, then the retail company interviews them and if the management thinks they have what it takes, they bring them in. They then join into the rotation program where they are introduced to all facets of the organisations: HR, Finance, Marketing etc. In brief, they make the whole round. After that if they succeed, they are assigned a certain job that the company and they themselves feel will put their talents at best use and will further their development. Our initial experience was quite unique because the first fourth generation entrant was a female family member. Our approach applies to both female and male family members. The pilot was a first phase and now it is to be developed for application for the rest of the family as well.
Young people do have a lot of different offers nowadays when it comes to choosing their careers. How does a family business remain an attractive employer for the next generation?
I look at this from three perspectives: First, the incoming generation members have to feel that they are adding value to the business and the business is adding value to them. There is a level of job satisfaction that should be acceptable to them or rather to anyone active in the family business. Secondly, you have to create hope for them that they will progress; that they will achieve more and more. There is nothing more satisfying than gaining a sense of achievement in any post. If we can convince them that the family business provides them with a platform for achievement of their future dreams and ambitions, then we have broken the barrier and brought them in with enthusiasm. The third point I consider is how the message is conveyed that they will be responsible for the family fortune one day. We are all but links in a chain that protects the well being of the family. They too are part of this chain, as were their parents and forefathers. If the new entrants accept and recognise this responsibility then they are very likely committed for life.
You cannot win them over if they feel that they are just employees. However, if you give them a mission, they will understand that though today they may be in sales, in marketing, or wholesales, they one day will lead and will be able to assert themselves, fulfilling their own ambitions simultaneously. By doing so, they contribute to the descending family tree and provide for their sons, daughters, and the generations after that. It is all about providing the bigger long-term picture of things.
And on the other hand, what do you think are the leadership and business skills the next generation needs in order to be able to take over responsibilities and to sustain the business?
We always fail to realise that we are not the first ones to do this. We do not realise that there are thousands or tens of thousands of experiences out there; real family stories that one can learn from. In our last Tharawat Family Business Forum event, we met with Baron de Rothschild; it was a meeting with 250-years of family business history. If we do not learn from such stories we are wasting a lot of resources and the drive to further develop ourselves. I think there are many answers or many elements to consider in this question. I think the new entrants into the family business should bring energy, ambition, and the will to change. Often they want to come in and change the whole company according to their own vision. For the elder generation it is not easy to channel these energies, however, it is important to give young people the sense that change is happening because they have added to it.
Coming back to the questions of what skills are required to become a valuable member of the family business in the Gulf, we have led to traditional of a management style for the past 30 to 40 years. Yes, we have developed, but we have only done so because we were forced to do so by the environment around us. I hope the new family business members can bring in what they learnt abroad and spur innovation in that area. We are looking for more accountability; we have the problem of detachment between the business ownership and accountability. It is very hard around the region to find a business that holds its family members accountable and disciplines them. Nobody gets fired for a mistake or for losing a portion of the family fortune. But if it were a non family employee, he or she would be dealt with differently. That feeling of “I am the family member I cannot be held accountable” is dangerous. A sense of accountability is something that the new generation should bring in and which we have failed to implement in full force. We are hoping to introduce it more and believe to be on the right track. But this principle takes a long time to instill into corporate culture. People believe you once and then if you fail to follow up on what you say, you will not be taken seriously.
Considering the expectancy for the next generation to become future leaders of the business, do you think family businesses have to focus early on grooming their members towards the business or should they wait till they are university graduates?
Each family has a different culture, there are families I know that encourage their youth from high school onward to come to the business, the workshop, the office, or the factory, and tell them that they should be there in their vacation time. I was raised that way. I do not know if I can dictate that to my children. But what I am at least trying to do is to try and keep them excited about what we are doing; to share the overall vision. To try and explain to them what we are looking at in the future and ask them what they think about it. It is amazing how their eyes light up when we start discussing the status of the business. The feeling of belonging is a huge pull factor for the new generation. If you can allocate the time, which is not an easy thing for those who are busy with family business leaders, it pays back hundredfold when it is time for them to decide whether they want to join or seek something else.
Over time, it is natural for any larger family holding to take on board non- family employees. How do you retain non-family employees in a family business? What are the incentives-schemes that you recommend in order to provide career paths?
I think that in talent retention there is a huge difference between talking or advocating and actually putting to practice career path opportunities for non-family members. When people realise that they have a career with you, that you are treating them well, and that they are compensated fairly, they will turn out to be more loyal and stay with you longer. In family business the environment is such that you do not have to over-pay against the market to retain people. You have, however, to give them security, which is a characteristic inherent to family business. They have to feel a sense of belonging; they are part of it. These feelings can only be induced with a proper governance system. If the proper governance dictates business management,, if there are HR strategies, if there is accountability and people are rewarded and disciplined, then you provide the sort of surrounding where people can believe that they have a career. It is a very challenging exercise to explain or demonstrate especially to high-ranking members of your management that they have a career path, that maybe one day they will be CEO even though they are not from the family and that family members might not be CEO because they are not suited. It is very difficult to demonstrate, but if you can, you have won your people’s loyalty for a long time.
Where are your family priorities in the near future for both the family as well as the business strategy?
I do not think that we are different than any other family. Any family aims to maximise its wealth whilst retaining and guarding the family’s well being and unity. We could not mention any objectives and goals; however, most of them come back to those two aspects. The challenge is to balance between the family well being and maximising the wealth; for instance, would you give the family more dividend to protect their well being or would you reinvest more to expand or protect your market share? It all involves the questions arising from these two occasionally competing objectives.
In the after-math of the crisis, what are the measures Arab family businesses need to undertake in order to adapt to the new economic landscape?
Family businesses may have suffered in their investments, their holdings may have lost value, but most of the families you will find, still retain their core business and are operating with the same energy and capacity, if not more, than before. However, what we do learn from the crisis is that each family has to look inward and review. It would be wrong to think that because we are covered with our financiers and banks and because our assets are intact we can just move on. That is a huge mistake! Strategies have to be reviewed and serious questions have to be asked. Where did we go wrong? Why? Did we over-anticipate growth? We have to review and learn. Nobody is perfect! Did we lose or retain people during the crisis? Did we over-leverage ourselves? Did we give too much collateral to the banks in growth time? When things go back to normal and the banks open their lines again, should we have the same approach as previously? How did we fare when things were down? Was our cash level appropriate? A lot of questions have to be asked regarding all facts of the operations level, the family level, and the business level. The lessons drawn have to mean something for your strategy. Again family businesses tend to think that they are the only ones going through these motions, which is not true. We need to learn from others, from what they have experienced.
What instruments do you believe will be of the essence to ensure family business continuity in this new economic environment? You spoke about learning, but are there new structures, risk management tools, maybe alert systems to be considered?
I think it all goes back to adopting a professional management approach and to being practical. If the approach is not practical and does not dictate and generate a business plan, which is measurable and objective, and does not generate any accountability charter for those who are in charge, then that may signify that the business either should review its strategies or stop. For many, the absence of sustainable strategies, governance, and risk management brought about this crisis; to continue in this new world without them would be unforgivable.