The changing face of leadership in regional family businesses

As we have recently witnessed in Saudi Arabia, good succession planning can make a huge difference to the direction and leadership of a nation, a government or a business.

Unfortunately, planning for succession and managing succession is often overlooked and not considered important until it is too late. A lack of succession planning can precipitate failure, for states and businesses alike, as well as increasing family disputes, corporate infighting and shareholder discord.

Guiding principles

No matter where a business is located, the principles of succession planning should be the same, even though the motivation and processes between corporations and private family business are often radically different. Irrespective of public or private ownership, well-run, suitably financed and properly governed businesses will generally thrive over those that are not.

Corporates of course have the distinct advantage that the process is made easier, more transparent and democratic, and is not based on a family generational transition. Boards of non-executives, advisors and external shareholders have a vested, objective interest in the successful appointment of a new leader. They have common and aligned goals, and most large corporates normally know who their internal and even external successors may be well in advance.

Fly or fall

For family groups and private businesses, the topic of internal family succession planning is a highly sensitive area, and unfortunately second and third generation business failure is a familiar scenario among family groups that do not take it seriously. This can result in family feuds, court cases and potential business collapse. To ensure the success of any senior succession planning exercise, it is essential that the company take a proactive approach, having at least a process in place and ideally an identified and assessed list of potential successors.

The key word is continuity, which privately owned businesses often overlook. They rarely evaluate the negative impact that uncertainty can bring when the overall direction, leadership and future of a business is unclear. Often the cost of no succession planning to a business is hidden and only reveals itself when least anticipated or welcome.

Fail to plan, plan to fail

In order to plan for the future, irrespective of the anticipated timing of change of leadership, companies should formally start to think about what the future may hold, how the business should be run and by whom going forward, and design a process of dialogue to ensure that succession planning is always on the agenda. In order to achieve this, there are a number or proactive steps a business can take:

Prior to need:

• Talk about it: Discuss it in advance with the family, advisors, and consultants. Death is inevitable and guaranteed, business continuity is not.
• Listen: What roles do other family members expect or want? Also listen equally to non-family members who do not have the same emotive agenda.
• Watch: Identify who impresses you with their skills, commitment, and attitude.
• Select: Agree on one or more internal successors, pay attention to their interests, motives, strengths and weaknesses and support them via internal and external development.
• Appoint: Put in place an assessment process or an executive search process to identify and attract external alternatives that provide you with an independent opinion.

Post appointment:

• Prepare: Have them alongside you as long as possible working in the business, let them make decisions, get involved, take the lead and set an example.
• Delegate: Relinquish power so you can give them room early to lead and make
mistakes.
• Support: Stand by your decision, be a sounding board and not a father figure.
• Guide: Coach, mentor and guide their decisions but don’t undermine them.
• Step aside: Set a timeframe for your eventual exit, depart in dignity.

The buck stops here

At all levels of government, corporation and family business, succession planning should be constantly on the agenda. Statistics show that second to third generation business survival is at most risk in the period of leadership transition. This is a challenge in the Middle East, a region where there is a lack of internal and external talent that is adequately qualified, experienced, and emotionally and culturally aware enough to be true leaders in this environment.
What is certain is that the world is changing faster than anyone is comfortable with and in directions we never imagined, so family businesses should take heed of their rulers’ examples and ensure they are well prepared and have planned ahead for every leadership change eventuality, from Crown Prince to CEO.

Matthew Lewis is partner – Middle East and Africa at Boyden Middle East