Family businesses constitute 80 percent of the private sector turnover in Egypt; hence, having lasting family-owned businesses is of fundamental importance to the economy. Whether it is the third or fourth generation that is slated to take the reins, a well-defined succession plan must be put in place to keep the business afloat.
With all of that in mind, the American University in Cairo (AUC) School of Business organized a roundtable involving a number of participants – representing different generations of family businesses – for a discussion around how to ensure the perpetuity of the family business through the generations, how to achieve business and family equilibrium and the role of entrepreneurship in taking the business forward.
Drawing a line between family and business
Family businesses are the most job-producing sector in the Middle East. According to a survey published by Pricewaterhouse Coopers (PWC), family businesses contribute 60 percent to the GDP and employ 80 percent of the workforce in the region.
“We must first separate business and family,” CEO of Al Manar Group Ahmed Nawara says.
He elaborates that attracting the younger generations into the family business should not be the main issue. “The crux of the argument is how to sustain the business to remain viable in the fourth generation and beyond, how to make the most out of the inherited legacy and make it last in a healthy condition.” All that should be considered, regardless of the involvement of family or non-family members.
Concurring with Nawara, CEO of Mansi Eyewear Maged Mansi says that the goal is to make the business appealing to the family members and external workers alike. “The successful company is the one that can attract and retain the right employees – family members or not.”
The crux of the argument is how to sustain the business to remain viable in the fourth generation and beyond”
How can the family interact with their business?
Sewing up a consensus amongst family members around any topic is seemingly an impossible feat to pull off; thus, looking for an outside perspective becomes crucial to prevent any emerging conflicts, the participants suggest.
One of the companies present formed a non-family external advisory board to provide an impartial and objective perspective on the main grievances facing the business, for instance. Hence, with the help of the external members, a family constitution was born, serving as a repository of the family business’ values, core missions and family employment policies etc. Additionally, the top managerial spots in the business are assigned to multinational experts so that they – together with the family members – make the company competitive
Strengthening family communication and engaging family generations in the business planning processes is a rallying point in support of a shared, cross-generational vision of a lasting business, CEO of Nahdet Misr Publishing House Dalia Ibrahim says.
“Defining the roles and responsibilities of each family member and building a performance evaluation system for the family business members based on leadership qualities is crucial to prevent any ensuing conflicts,” she explains.
Prepping the younger generations to take charge
Another family businesses participating in the roundtable discussion established a corporate governance authority, whose goal is to ensure the sustainability and longevity of the company and a family-hiring policy, which sets the rules upon which a family member shall be selected to join the business. After that, the candidate is put in a fast-growing track to prepare them for a managerial post.
Rules to hire included requiring family members willing to join to obtain a master’s degree and get external professional experience from a multinational company.
On the other hand, Mansi believes that family members should not come in as managers, but rather walk through the whole path from the start. “He/she has to know everything about the business first before aspiring to be in a leadership position.”
Another way of dealing with the issue is involving the new generations in the business sphere as early as possible. Getting the family’s rising generations exposed to the business from a very young age, by having them intern at the mother company to cultivate a sense of belonging and ownership is crucial in that perspective.
Fostering the entrepreneurship mindset in the business
On the one hand, ensuring the viability of the family business is important; however, introducing the business to other horizons that align with the family ethos lies at the other end of the spectrum.
“In order for the business to remain appealing and competitive, it has to remain open to other ideas coming from the rising generations. It also has to embrace different motivations, aspirations and individual dreams,” CEO of Tanta Motors CO. Amr Aboufriekha says.
“We, at the company, are very keen on following the entrepreneurial path along with the traditional one,” Ibrahim adds. A year and a half ago, Ibrahim founded a new company that helps startups in the education field grow and scale.
“New generations’ entrepreneurial ideas can transform the whole business in a significant way,” she exudes.
Supporting new generations’ autonomy
Not every family member needs a place in the family business. Some members of the younger generations present at the roundtable made it clear that they were, for instance, not open to the possibility of joining the business. Exploring oneself and one’s passion will shine the light on which career path is the best fit for each person.
Others worked in the family business for a while after graduation, only to realize they were better off by starting their own thing which pertains to their own vision.
“Joining the family business should be a choice not a mandate. How would a person get passionate about the business and take it forward if they gets press-ganged into the business?” Mansi asks.
Founders of Capital Language School Bassam and Marwan El-Shanwany, for instance, say that their original family business is specialized in the dessert-making industry; however, they chose another path – education. “We got into the family business, but we later discovered that it is something that we do not like to do.”
However, other members of the younger generations see the benefit in starting their own business inside the family business. “Being an entrepreneur is a small feat to pull off if you have a family business, meaning that you would not bother look for an investor to fund your business, because you can do it inside the family business,” one of the younger participants exclaims.
Joining the family business should be a choice not a mandate
Last name: a burden or a blessing?
While family businesses are built on the family name, this concept can add pressure to younger generations. Employees treat the sons and daughters of the original business owner differently – mostly preferentially.
With others, the family’s legacy has greatly come in handy at the time when the offspring founded its own business, in terms of getting bank loans or utilizing the family’s connections and network.
This article is the third part of the family business series published by Business Forward. The series aims to identify the challenges facing the growth of the family businesses in Egypt and provides practical perspectives on how to overcome them.