A History of Family Business
When the UAE’s economy transitioned from fishing, pearl diving, and agriculture to oil, it became a diversified regional and trade center. Under the leadership of the founding father of the UAE, the late Sheikh Zayed bin Sultan Al Nahyan,
Hisham Farouk, CEO, Grant Thornton UAE
A History of Family Business
When the UAE’s economy transitioned from fishing, pearl diving, and agriculture to oil, it became a diversified regional and trade center. Under the leadership of the founding father of the UAE, the late Sheikh Zayed bin Sultan Al Nahyan, the UAE invested revenues generated by this newfound resource into transport, health infrastructure, and construction, addressing an urgent need to build schools, roads, hospitals, and international airports. In Dubai, the late Sheikh Rashid Al Maktoum set the pace with the construction of Jebel Ali Port, the Shindagha Tunnel, and the World Trade Center. Following in his father’s footsteps, Sheikh Mohamed bin Rashid Al Maktoum has continued to shape the city’s vibrance with exponential growth in its renowned construction projects, positioning the UAE as one of the fastest-growing emerging markets.
Most core businesses in the GCC region started as family businesses, and research shows that they currently account for 90% of the private sector. Historically, family businesses in the UAE have taken advantage of opportunities in the growing market and ventured into sectors that played an essential role in developing the economy. They are traditionally driven by family names, established as sibling partnerships, focused on the Emirates in which they originated, and evolving over the decades into nationalistic or cross-border conglomerates and empires. Driven by the vision of the UAE leadership, family businesses came to dominate the construction sector, built agencies based on exclusivity laws in the UAE, and introduced major brands in retail, automotive, and building materials.
When Grant Thornton UAE practice was established in 1966, our primary focus was on supporting the next stage of development in family businesses. Since joining the firm in 1999, I have seen just that – UAE family businesses’ contribution to the region’s workforce and economy. Over the years, I’ve also seen the UAE government take active measures to further support family businesses, including drafting a law to allow family businesses to list on UAE financial markets.
Where Values and Purpose Meet
Syndicating family values is the responsibility of every family business leader, as they are the driving force for a common purpose. Maintaining this interaction between values and purpose is critical, but successors face a significant challenge in aligning their business expectations with the conventional strategic vision of the core business.
To ease the transition, the new generation of leaders should first clarify their expectations, discuss future goals with their predecessors, and assess the requirements to meet them.
Successors want to build on the achievements of their predecessors and have the ambition to take the family business to new heights without losing the values and ethos of the Organization. However, it can be difficult for new leaders to drive this change if they inherit an archaic structure they wish to refine or develop.
In the 20th century, many family businesses failed to realize their potential due to a lack of institutionalization. To ensure continuity of the family legacy for generations, business leaders must implement an effective governance framework, develop a robust succession plan, divest non-core businesses or assets, and separate family and business affairs.
Since most UAE family businesses comprise of a group of companies operating in different sectors, the lack of a sector focus can be a challenge for the next generation. In addition, many of these firms had to adapt quickly to survive the influx of foreign companies through 2004-2005, which increased competition. More recently, they have faced an obstacle in changing legislation that prohibits extending exclusivity.
Older generations play a key role in passing on the fundamental history of the business, as well as its enduring goals and values, to successive generations of family members. To complete the balance, next-generation family members can play an essential role by providing a glimpse into the future – sometimes far into the future – with new and unprecedented perspectives on the business.
Every generation is defined by the generation before them – they inherit the ambitions, values, and vision that enable the business’s success. Understandably, however, family business leaders and their successors often differ on what they see for the future of the business, the management and inherited resources, and the factors that influence succession decisions.
Forced to Change
The pandemic presented family businesses with a bellwether event to test themselves. And to counteract its negativity, organizations should seize the opportunities it brought. Amidst a global disruption, leaders had to make effective and sometimes difficult decisions to keep their businesses afloat. They re-evaluated their strategies, fostered a culture of resilience, adopted unconventional measures for remote working, and adapted to new technologies. The pandemic fostered agility – businesses needed to find and express it to their benefit to thrive and recover. One example is retailers establishing e-commerce platforms to adapt to new conditions.
As market demands continue to evolve, it is essential to understand how the impact of the new ambitions that successors bring will reshape the future of businesses in the face of global challenges and equip them with tools to assess, control, and mitigate change without losing sight of values.
To prepare the next generation for the eventuality of transition, generations must collaborate to transfer the knowledge and competencies required for the business’s ongoing success.
Hisham is a sought-after advisor for family business offices in the region. He has advised numerous regional conglomerates on their succession planning, governance, and growth & expansion strategy (including IPO / public listing). His work with family-owned business groups has been a critical contribution towards UAE’s economic transformation.
Publication Date: 22-July-2022
About the Author
Hisham Farouk, CEO, Grant Thornton UAE
Hisham Farouk, CEO of Grant Thornton UAE, has over 20 years of experience leading high-profile advisory engagements for some of the largest groups in the region and has been successfully leading the firm’s offices in Dubai, Abu Dhabi and Sharjah for over a decade.
Through his dynamic leadership along with a strong focus on innovation, he has been instrumental in transforming the company as the 5th largest professional services firm in the UAE.
Hisham is one of the sought-after advisors for family business offices in the region. He has advised numerous regional conglomerates on their succession planning, governance and growth & expansion strategy (including IPO / public listing), for a transformational journey ahead. His work with family-owned business groups has been a critical contribution towards UAE’s economic transformation.