Expanding the business family: lessons from exciting family businesses

Panelists and moderators from the second session. From left to right, Dr. Ashraf Sheta, Maged Ezz El Din, Ismail Seddik, Dr. Mohamed Mahfouz, and Adnan Khorakiwala.

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Running a family business does not have the same processes or dimensions as operating a standard business. There are complicating factors that—depending on business governance, philosophy, and management—can be its greatest strength or weakness.

To understand what goes behind the success of a family business, Business Forward AUC chose the issue as the theme of its annual #IMovedMyBusinessForward campaign.

The campaign organized events and discussions and published a series of articles on family business which culminated in the closing event.

The event took place on June 7 and invited industry and family business leaders to discuss their experiences and best practices achieved in the areas of governance, succession planning, and more.

Organizing two panel discussions, the event spanned several hours and was host to valuable conversations and insights.

While the first panel was composed of the companies chosen by judges as examples of family businesses implementing best practices, the second was voted on by the audience as promising companies in their field.

This panel hosted J-Padel co-founder and CEO Ismail Seddik, Mahfouz Pharmacies CEO Mohamed Mahfouz, and director of Monginis Adnan Khorakiwala. It was moderated by Ashraf Sheta, CEO at AS for Consultancy and Training and adjunct assistant professor of entrepreneurship and family business at the AUC School of Business, and Nabil Diab, Partner and Chief Operations Officer, PwC Egypt and adjunct faculty of accounting at the AUC School of Business.

Opening the discussion, Wafaa Sabry, senior director at the AUC School of Business noted that all the family business stories selected were “very inspiring, very informative, and very touching.” Sabry added that “in addition to the business aspect of it, it’s got a very important family-human element to it.”

Lessons learned and areas for improvement

When asked by Sheta about the one thing to be applied from the best practices presented by the first panel—composed of El Araby Group, Nahdet Misr Publishing House, and Al Manar Group—Seddik was “very impressed” with El Araby Group’s organization of a family council.

“The difference between us and big corporations is that they’ve been around for 30, 40 years,” Seddik, whose company was co-founded by both the first and second generations, said.

“We’re working on succession planning as we speak and working towards opening up to investment outside of the family,” Seddik said.
On his part, Mahfouz said that he “learned to avoid the pillow talk,” stressing the importance of separating the house from the workplace, which was another important remark Mohamed El Araby, COO of El Araby Group, made.

Khorakiwala, on the other hand, emphasized the importance of succession planning. He liked the idea of laying the groundwork for succession planning through organizing competitions for children to develop their capacities and affinity to the business—also a practice put forward by El Araby Group.

When asked about what panelists are proud of and what they see as areas of improvement, Mahfouz said he is “proud of the Mahfouz family,” explaining that the concept of family extends to employees, who feel that they are part of the family. “I have some second generation employees who are older than me and have been there for thirty years,” Mahfouz explained.

On the other hand, Mahfouz said that he needs to change the governance and financial structures to formalize decision making—likely an important step for many family businesses seeking prominence in their industries.

Khorakiwala signaled the importance of “the belief that united we stand, divided we fall” as a strength of the family. “Businesses come and go,” he said, “but the family has to be one.”

In terms of improvement, Khorakiwala said that the family needs to plan more outings. “If a family stays together, the business will stay together.”

Seddik, on his part, said he is proud of the delegation between governance and finance being handled by his father and technology and innovation by himself, where he is given “full autonomy”. He noted that they would like to work on succession planning.

Constitutions and conflict resolution

When asked by Ezz El Din how they address disagreements, Seddik revealed that “the business is actually bringing me closer to my dad,” the J-Padel co-founder said, adding that “we may have conflicts on the personal side, but because we work together, there is a stream of communication that is continuous between us that actually melts down tensions and brings us back together with minimal effort.”

For Khorakiwala, it’s important to follow “the spirit of the constitution” which is “more important than the words that can be written in a book or on a page” as “it’s impossible to write everything in a constitution.”

“Our constitution is based on trust,” the Monginis director highlighted. “As long as trust increases, tensions decrease,” he noted.

Khorakiwala continued to say that wealth management is a very important factor in the family’s constitution, posing questions such as: how does the new generation enter the business, and what will their remuneration look like? What is the exit policy in case a family member does not want to continue in the business? How does the family pool work, and what gets spent from it?

Khorakiwala emphasized the importance of equality of lifestyle for family harmony.

Succession planning and the future of the business

“I’m preparing myself for external investment; it is a dream to expand. There are changes in the healthcare system in Egypt and you have to address them. If you don’t grow, you will die,” Mahfouz said.

The Mahfouz Pharmacies CEO explained that the company has a board of directors made up of his father, himself, and his brother. He only “started to consider the business a family business” when his brother got involved, as before that it was just himself and his father making decisions. Now, however, there is a “multiplicity of opinions.”

Despite this, there are certain core tenets to the business, set by his father, that are non-negotiable. One example is not taking loans and relying solely on equity.

“I love pharmacy, I love this profession. This is what I’m trying to relay to the [upcoming] generations,” Mahfouz said, adding that “success is contagious.”

Khorakiwala, on his part, advised to “have emotions, don’t get emotional” and “have sentiments, don’t get sentimental” when it comes to succession planning.

“If you give the love of the family to the professional outside the family you have, and if you give the training to the family member to make him a professional, your business will boom” he said.

Sheta explained that there are three types of people from the younger generations: the revolutionary who wants to demolish the old system completely—a “hopeless case” according to Sheta—and someone who is very passive and doesn’t change anything, which leads to a lack of innovation. The third type is someone who introduces gradual changes—the most reasonable path of action.

There are two types of people from the younger generation: the revolutionary who wants to demolish the old system: hopeless case

In terms of the future, Seddik noted that hosting international tournaments in Egypt, as J-Padel is doing, helps the market, creates brand loyalty, and makes the sport sustainable. This is especially important as “the padel market is a very competitive market right now, as it’s proven to be a trendy sport” with many countries and individuals investing in padel, according to Seddik.

Business education

Sheta emphasized the particularity of businesses, noting how each case is different than the next. This is important to keep in mind to avoid generalization or misadaptation of concepts and case studies.

Sheta also noted that there is a misunderstanding between running family businesses and running a business as usual, explaining that “family business has an extra dimension. Issues Issues related to family or family business continuity, encompasses governance, strategy, innovation, dynamics, ownership, professionalism, and entrepreneurship.”

“I want to move from a family business to what we call a business family. A business won’t continue without innovation, without the entrepreneurial spirit of the founder,” Sheta said.

Sheta further explained that teaching at the AUC School of Business is not only to tutor students, but to “teach the first generation” indirectly through inviting successful family business leaders, such as people from El Araby Group, Nahdet Misr Publishing, or Al Manar Group, to share their experiences.

From governance to succession planning, and from constitutions to business education, the second panel of the #IMoveMyBusinessForward campaign closing event had something for everyone who participates in a family business.

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