A new generation is taking on bigger responsibilities in family owned businesses bringing in new thought processes and improved efficiencies, reports Mayank Singh

Passing on the baton

It took me 10 years to convince my father (Maqbool Hameed al Saleh, Chairman, OHI Group of Companies) that we should move from a five-and-a-half day working week to a five-day week,” says Amaar Maqbool al Saleh, Executive Director, OHI Group of Companies. Having lived in England for over 10 years, Amaar was conditioned to a two-day weekend; he had also seen the efficiencies that a five-day week resulted in. Years of persuasion finally bore fruit in May this year when the group decided to go in for a five-day week.

Look closer and the anecdote reflects a few important trends. One, the younger generation is bringing in new sensibilities to family run businesses – from a five-day week to improved workflow, they are leaving their unmistakable imprints on almost every aspect of business. Second, most businesses are going through a transition as the younger generation takes on a bigger role. And finally, these leaders are not just playing a seminal role within their business but are also emerging as opinion makers of society at large. Cool and confident, articulate and ambitious, suave and savvy, the blue-blooded generation next has all the attributes to make it to the higher echelons of the corporate sector.

Change agents
Going back to work processes, these new leaders are charting a new course in their respective businesses. A few examples here will be sufficient. A mathematics and computer services graduate from UK’s Richmond University, Hani Al Zubair, Member of the Board, the Zubair Corporation, felt that he was not utilising his educational and professional qualifications to the fullest as marketing manager at Hani Automotive in the mid 1990s. Hani had cut his teeth in the field of finance at Quaestus Investment Bank in Switzerland and later on at the Morgan Grenfell Bank (now part of Deutsche Bank) in the UK. He had further sharpened his finance skills as an investment analyst at Ominvest. Driven by this zeal, he set about the task of setting up an investment division within the head office. His efforts saw the division first grow into a separate department and then into Al Hilal Investments.

Hani had not only brought in an investment paradigm but also built up an additional revenue stream for the corporation. “The first generation builds a business while the second generation consolidates things to get optimum returns,” he says. Speaking about building a business, Nailesh K Khimji, director, Khimji Ramdas, was thrown into the deep pool right after he graduated from the American College of Le Rosey in Switzerland in 1994. He was asked to join Khimji Ramdas’ biscuit and cookies start-up in Dubai. He spent the next five years learning the ropes of manufacturing cookies and packaging material, and then building up the marketing strength of the business. In 2000, he took over as the CEO of the unit. The company in question is Strategic Foods of Dubai and Nailesh is credited with establishing the business from scratch to a leading postion across the globe. When Strategic Foods was sold to Britannia Industries of India (along with Al Sallan Food Industries) towards the end of 2006, it had a presence in 78 countries and stellar brands like Baker’s Pride and Nutro in its kitty. “We took these brands from nothing to around the world with the right product, design and packaging,” he says.

A western education and work experience abroad with multinationals gives generation next a first hand experience. Says Lujaina Mohsin Darwish, joint deputy managing director, MHD, “The new generation definitely brings fresh thinking into the business. They tend to look at things differently; may be it is the education or their exposure to the business world, which was not available earlier. The new generation uses this exposure to build up their own business models.”

Not satisfied with playing a role within their family business, most of them are keen to take on a bigger role in the larger civil society – their presence and influence can be seen in political forums, quasi-government outfits and social welfare organisations. Having made their mark in business, they are keen to broaden their horizons and give back to society. Probably, deep down there is also a desire to move out of the family fold and prove their mettle on a bigger stage. Thus, Imad Kamal Sultan, director, W J Towell & Co, is a board member of NBO and Director of the Omani India Joint Committee at Oman Chamber of Commerce and Industry (OCCI). He has been playing a seminal role in promoting business ties between the two countries. Lujaina was a member of the Majlis A’Shura and a member of its executive committee. She has been chosen by Forbes Arabia amongst the 50 most influential Arab women in 2004 (Rank: 42), 2006 (Rank: 13) and 2008 (Rank:21). Nailesh is an active member of the Young Presidents Organisation Middle East. Natasha Nasib, Business Development Director, Snowhite, has recently been chosen as a member of OCCI’s Women’s Committee, “Since this appointment was by a Royal Decree, it shows that I can go outside the family business and make a mark,” says Natasha.

Challenges on the way
The onus of having to prove themselves is something that the new generation faces even in their own businesses. The oft-levelled charge of occupying a position because of their lineage rather than their achievements is something that they are conscious about. “People who have never dealt with us will always say that we got to where we are because of who we are,”says Hani, “This is one reason why it is difficult for me to stand up in any forum and tell aspiring entrepreneurs, look at me and you can become like me.” Against this, he feels that people within the organisation have seen him grow through the ranks and has thus earned their respect. “Your colleagues and peers have seen you grow and they recognise your value systems and this in a way puts a stop to this issue at least within the business,” he adds.

The need to earn a position is also important from an efficiency point of view. As a newcomer to a business, one is prone to be dependent on subordinates and managers, who have spent more years in the company and know more about the business. If a family member starts heading a company from day one, he would be vulnerable to being manipulated by his managers and subordinates. Says Maqbool Hameed, Amaar’s father, “If you bring him in as a director from day one, he will burn himself out; one needs to put him in a place where he can grow up the ladder.”

Realising this most family-owned companies insist on inducting the new generation through a gradual process. Imad worked as a trainee marketing executive at Spinney’s in Dubai in 1995 before being inducted into the company as Business Development Manager of Matrah Cold Stores (MCS) in 1995. He went on to become the retail marketing manager in 1999 and assistant general manager, MCS in 2001. Says Imad, “My father (Kamal Abdul Redha Sultan) told the manager at MCS not to treat me any differently from our the other employees.” Hani started at Zubair Automotive as a marketing clerk in 1992 going on to become the managing director of the investment and automotive divisions.

As most family-owned businesses have been established by a preceding generation, the new generation is at times seen as lacking the same entrepreneurial drive as their former generation. Says Hussain Jawad, Chairman W J Towell, “As most of these youngsters are born with a golden spoon in their mouth, they lack the level of seriousness as the older generation.” While giving due credit to their fathers and forefathers, most generation next entrepreneurs are quick to refute the allegation of a lack of entrepreneurial spirit. Says Nailesh, “If large companies remain a significant factor, this means that they have been growing. Otherwise they would have become smaller or would have vanished.” There may be some merit in this argument as statistics do prove that only three per cent of family-owned businesses survive beyond the third generation internationally. If a Khimji Ramdas or a W J Towell is into the fifth generation, then they must surely be doing things right.

While no one disputes the fact that doyens like Dr Mohammed Al-Zubair, Mohsin Haider Darwish and Maqbool Hameed al Saleh built up empires through their hard work and entrepreneurial zeal, generation next feels that they are bringing in a focused approach to businesses. “The first generation were workaholics, while the second generation wants to spend wealth, sleep more and spend time with family,” says Hani in jest.

The new generation looks at business more from an investment point of view rather than an operational point of view. Says Imad, “It is easy to make money when things are going up, but for me it is important to make money when the economy is slowing down.” To be fair to the new generation, most family-owned companies have become bigger since they have got involved. For example, when Natasha joined Snowhite in 1994 there were 20 odd retail shops, this had grown to over 40 shops by 2008. Amaar has contributed to the OHI Group’s electronics business and helped its foray into radio with Hala and Hi FM. Generation next is also driven by a strong sense of legacy. Says Nailesh, “Every generation wants to develop a line of business which is associated with them, so building something new is almost a personal goal for all of us.” Others feel that it is just a matter of time before the new generation gets its due recognition. Says Ammar, “It will take another five to ten years for our contribution to be recognised.”

Co-existence
Issues like the age difference between two generations can pose a stiff challenge at times. When Imad became a W J Towell board member in 2002 at the age of 30, the difference between him as the youngest board member and the next member was a yawning 17 years. “I had never dealt with them (his uncles) in business and it was difficult for them to accept me too, but as we went along our comfort levels increased,” reminisces Imad. In Zubair Corporation, there is a 15-year difference between the eldest member of the next generation and the youngest. This creates the challenge of aligning everyone’s priorities.

“We know what is right in the long term and how to go about it, but we still need to agree on how to do things,” says Hani. A great sense of pride in the business and family ties plays an important part in resolving any issues that may crop up from time to time – family lunches to get-togethers provide a forum for pent up feelings to be resolved. The Zubairs and Salehs of OHI try to catch up with each other over lunch. “While our parents are in town, the family has lunch together four to five times a week. If someone has a grievance, things get sorted out,” says Hani. In the Khimji Ramdas Group, there are weekly review meetings and family gatherings regularly. These get togethers work as a soft induction for youngsters into the family mould.

Such interaction also ensures that the succeeding generations grow up with the same value systems. Despite a difference in viewpoints, the new generation is as conscious about their legacy as the previous generation. “We will never take a decision that will undermine our name or image,” says Nailesh.

Transition times
Driven by this sense of legacy, the new generation is also working on restructuring the family businesses. Imad is working closely with his uncle Hussain Jawad on revising W J Towell’s family constitution, which was written way back in 1990. The revised version will take care of issues like the constitution of the board, shareholding patterns and rules of induction into the family business. The group is looking at bringing in rules for the sixth generation, like members having to gain two to three years of experience outside the family business before joining the group. Says Imad, “We are working on a restructuring of the group to bring in a process driven environment.” Khimji Ramdas went in for a restructuring of the organisation in August 2007. The group is working on a family constitution in consultation with UK’s BDO. The Zubairs too underwent a similar restructuring with family members moving to the board. The group is also putting in place a system for inducting the third generation.

Raised on the right value systems and driven by a strong sense of legacy, the new generation is sure to take family owned businesses to greater heights. Their share of voice and influence within their business and in the outside realm is here to grow.

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