The fall and rise of the family business

The fall and rise of the family business

Leaders in family run companies need to know when to let go, writes Mishal Kanoo.

Most people have little knowledge about what makes a family business successful or not. There is a notion that most people have about family businesses is that they just happen. In most cases they are right but what most people don’t know is that it takes a lot of effort and a great deal of luck for a family business to continue from one generation to another. There is a saying that I have came across many cultures that is, essentially the same. The saying goes that it takes 3 generations for a family business to collapse. This is because most of the people involved have no idea how to transform themselves from a one-man show to a proper business.

There are many key factors to the successor failure of family businesses and here they are in no order of importance:

1) Succession Planning in both the family and business 2) Governance within the family and the business 3) Conflict management within the family before it spills into the business 4) Leadership within the family that is reflected within the business 5) Estate Planning and inheritance.

I hope in the coming weeks to talk about each one in detail but let me touch upon each of them simply here.

All what I have mentioned above go hand in hand and can not be separated because in order to do succession planning and estate planning, you need to have some sort of governance that is justly applied to all involved. Of course, all of this without good leadership is null and void. Perhaps, some might argue, that leadership is the crux of whether a family business is successful or not. I would not argue against this but I would not discount the other factors because leadership without knowledge is lacking and all the above need knowledge as much as leadership. Like most family businesses in the world, family businesses in the Gulf are born to fail by the third generation not because they are inherently bad or deficient, but because they don’t try to fix their problems. We, in the Gulf, think that it is normal for things to fix themselves or not to talk about taboo issues because it bothers us. My God! If we can’t talk about our problems, how are we supposed to fix them? We are taught to leave things to fate to fix and not do serious family planning. After all, the thought goes, how are we to fight fate? Instead, we should be saying to ourselves, let’s make our own fate rather than have it happen to us.

Then we have another problem of nepotism that is so rampant, that I think it should be classified as a disease and not a problem. Most family businesses will fail in the Gulf because they put too many land mines in the way that eventually one is bound to explode. This is the problem of nepotism. Rather than looking for the ideal person for the job, we tend to go with the ludicrous tradition of the eldest son irrespective of his qualification. This is bound to hurt, if not destroy the business because he might not qualified for the job. We also place a lot of pressure on this person to perform what he might not be able to do. This pressure comes out in his irrational acts that will hurt the business.

Most family businesses in the Gulf suffer from nepotism on the one hand and god-syndrome on the other. I have mentioned nepotism, so let’s talk more about the god-syndrome. The god-syndrome is where the founder believes he is a god who will not die and is not willing to share with others because he is afraid that they will destroy all that he has worked for. Also, there is a social benefit to him. For the leader who wants to live his time and that of his successors, he has the power to control the lives of the subordinates in the business and at home. This power is intoxicating. Only the brave and the confident know when it is time to let go no matter what.

Mishal Kanoo is the deputy chairman of the Kanoo Group.

Original Article on Arabian Business