Perspectives from ISB

Family businesses account for about eighty percent of non-oil GDP within the Middle East region, according to Deloitte Consultancy. Ninety-five per cent of all companies in the region are family owned. Family businesses are not just the backbone of these economies; they also represent an important factor of social stability, being the largest employer in the region. The history of family-owned businesses in the Gulf countries spans more than 100 years during which time the required entrepreneurial and managerial experiences have been passed on from one generation to another.

Currently, over half of these businesses are transitioning from their second to their third generation, and many are unprepared for the succession. With their management style built on patriarchal traditions with centralized decision-making, rather than on an effective corporate governance structure, most of these organizations are facing stiff competition from global companies entering the region.

As such these family businesses are fast realizing the need to hire new managers from outside the family to be competitive. Preparing for the transition to new leadership provides an opportunity for these family businesses to establish relationships with non-family business managers and in the process professionalize their company and their network.

Source: Global Risks Insights, November 14, 2015