Career

GCC Family Businesses: Ensuring Business Continuity Through Succession Planning

30 May, 2019
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"Legacy and succession planning are becoming an increasing concern for the GCC as many businesses stand in a position to pass the baton over to the next generation."

There is no doubt that family businesses are prominent across the Gulf Co-operation Council (GCC) in various industries. From small to renowned multinational corporations, family owned and managed companies are the foundation of the modern country.

Many of these businesses have been in existence for five decades and still exist today. As the first-generation of individuals begin to step down, we're seeing a shift to second and third generation ownership. It is estimated that, in the Middle East, approximately $1 trillion in assets will be transferred to the next generation of family owned companies over the next decade.1

The transition from the first to the second generation, and increasingly, the second to third generation, will have tremendous implications on the sustainability and growth of these companies. As a result, legacy and succession planning are becoming an increasing concern for the region, as many businesses stand in a position to pass the baton over to the next generation.

While existing leaders prefer to keep the business within the family, there are many challenges that can arise if there is no preparation done well in advance of the transition. This lack of preparation is common, as it's easy for leaders to be so involved in the day-to-day running of the business that they lose sight of longer-term, more strategic priorities. The penalty for failing to tackle leadership or ownership changes can be significant. Lack of a clear, strategic succession plan can cause disruption, conflict and uncertainty within the business, making it vulnerable to an acquisition or takeover.

The long-term survival of a business and the preservation of the wealth that has been built, will likely depend on getting ahead of those changes through legacy and succession planning.

Have a Strong Internal Talent Strategy

 

Planning can have many benefits. The priority is to ensure leadership continuity, which is an important factor in keeping employees engaged and ensuring retention. It also allows time to hire internal candidates for key positions, therefore avoiding the cost of external searches. Internal candidates know the organization better and tend to have a better chance of success than external hires. Additionally, promoting internally helps retain good people, because they see opportunities for growth and will stay on to pursue them.

A strong talent strategy can also fill leadership positions quickly, not only avoiding the potential cost of unfilled positions and errors from a lack of leadership, but helping to circumvent legal consequences from potential missteps.

Evaluate Your Operating Structure and Execute in Phases

 

Leaders often first look at the current reporting structure and organizational chart to evaluate who the next leader(s) may be. However, it is also important to think of an organization's operating structure and how it may change over time. Leaders must consider how functional activities will evolve as the business grows, while also looking at the experience of the shareholders during this significant change. These factors need to be reviewed before selecting the people who will take over the function.

As part of this process, it's critical that succession planning is done in phases. Firstly, it is important to identify the roles critical to the business and the pool of successors that best fit the organization's requirements. Ensuring the right assessments to determine readiness levels can solidify the next generation of company leadership. Multiple assessments methods are suitable, including looking at historical measures of performance, 360 leadership behaviors tests and predictive measures of potential.

Involve Executive Leadership

 

Lastly, executive leadership involvement is essential in the succession planning process. The organization's top leaders should be fully on board with the plan to bring in the next generation and meet frequently to discuss strategic talent management issues.

The ultimate results of a business succession plan depend on the adherence and commitment to it from the organization. It requires a high level of engagement and continuous efforts to keep the succession moving forward over time, despite inevitable interruptions of operational needs and unexpected changes.

To learn more about succession planning for family businesses, visit us here.

1Augustine, Babu, "Middle East's Family Businesses Get Serious on Sustainability" Gulf News, November 7, 2015,https://gulfnews.com/how-to/your-money/middle-easts-family-businesses-get-serious-on-sustainability-1.1614502.

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