According to a very credible survey conducted at the end of last year; around 90% of Middle Eastern family businesses do not have a robust succession plan in place, however their revenues continue to grow. Over 70% of respondents reported an increase in turnover from the previous year. Another source states that approximately 30 businesses in the UAE will see a transition to the third generation in the next 10 years. This means that approximately $1.25 trillion in assets (excluding those offshore) will transfer to the millennial heirs.
These are astounding figures in every sense, and the UAE family conglomerates have played a big part in helping to build the country as we know it. It is therefore crucial that family groups deal with their succession planning effectively.
The ethic of entrepreneurial spirit is something that runs right the way through UAE families from the first generation to the millennials, however ways of thinking and awareness of disruptive technologies are vastly different. This can work as either an advantage or a disadvantage dependent entirely on how talent is managed within the organisation. Value creation and innovation are key to any businesses success, however these need to be harnessed within a long term definitive strategy and a strong corporate governance framework, so that there is a clear line of sight towards the company vision and cohesion between Family and Board members.
The UAE is now firmly on the map as a global hub for business and in particular a strong commercial link between Eastern and Western countries. The diversity in terms of the growing residential population provides a strong human capital resource, and new ideas and ways of working can be embraced. Many world class Executives, both local and expatriate can be attracted into the family space if they are empowered to make business critical decisions. Attracting and retaining top talent both from within the family and also externally is critical to ensuring sustainability, growth, and continued success.
From what I have seen from my clients over the last six months, there seems to be a top down trend emerging, where shareholders are recognizing the necessity for change in succession planning and creating corporate governance structures; thus taking positive action to develop in these areas. This sits well with the exciting developments in economic diversification currently taking place within the UAE and the competitive market place in which we all do business.
Innovation and embracing change is starting to become a mindset, which means that family businesses are making changes to their operating models and organizational structures to enhance their performance.
On Thursday 28th September, we will be gathering together thought leaders from our C-Suite and Shareholder network to host a facilitated workshop around “Succession to the Board”, and are looking forward to publishing the outputs from these discussions after our event.