If you are new to the region, you may find it difficult to comprehend the overwhelming number of family-run business within the Gulf and their significance when conducting business transactions. As a non-family executive, it has been extremely difficult to penetrate into these companies, however, with a greater attention diverted to this region due to the falling oil prices and impact on the global economy this dynamic is beginning to change. We analyse the background of family businesses in the gulf and predict whether there will exist more opportunities for expats and national executives to work within these intimate conglomerates in the future.
Family Businesses Significance in the Middle East
The strong ties between family life, religion and business can constitute one of the main reasons
why family businesses are so influential within the region. In fact, approximately 90% of the companies in the Middle East are family owned businesses according to a survey done by Ernst & Young. They are also said to generate approximately 80% of the regions GDP, 75% of the private sectors economic activity, employ 70% of the labour force in the GCC (67+ Million employees) and control 98% of the oil producing companies in the Gulf. Nowhere else in the world are family-run businesses so significant and influential.
Difficult to Penetrate
The region has grown tremendously in the past couple of decades and has seen a large influx of expatriate professionals being lured by the luxurious lifestyle, tax-free income and temperate climate – among the many reasons. However, through our experience working closely with many expat (and national) executives in the Gulf, frustrations surrounding the inability to penetrate into these family conglomerates is concerning. The importance of family in business is a foreign concept for professionals coming from abroad and accepting the fact that a lesser qualified executive may obtain a position within the company purely because he is family borders on corruption to many. However, simply put, it is just how business is and has been done. Obtaining positions within these companies at an executive level is not an impossible task, but one that is no mean feat. Among the many things you will need to do, placing greater emphasis on nurturing relationships as you conduct yourself will go a long way, but you can read more about things to do here.
Globalisation in the Middle East
However, will this change due to the increased role the Middle East plays in the global economy? The maturing market, its accessibility between Asia and Europe and the influence oil prices are having on the global economy is putting the Middle East on the map, enticing large multinational companies to set up regional headquarters within the Gulf.
A Change in the Paradigm?
Globalisation is an imminent threat that these family businesses need to consider in order to stay relevant and competitive within the market. Some companies are feeling the squeeze and for the first time in its long history and are beginning to welcome the experience of foreign executives in key business decision roles. The Kanoo Group is an example of this. One of the Gulfs largest and longest running family businesses (established in 1890) has recently made the decision to bring in outsiders to take on the most important roles of the company, including CEO. Deputy Chairman, Mishal Kanoo admits it was a difficult decision, one that was met with many unsupportive family members. “The idea is to try and professionalise the company a bit more. We’re trying to reduce the focus on family and focus more on getting professionals within the organisation, to take Kanoo to the next level because there’s some limitations of the family that we’ll always [have] and that’s natural,” said Kanoo.
Potentially, But Not Completely
Despite companies becoming more likely to open their doors to non-family members, companies are not likely to give up their dynasty completely. According to PwC:
- 15% of family firms planned to sell all or part of their business in the short to medium term.
- More than a third (38%) of the 44 family businesses surveyed said they intend to keep operations solely within the family.
- 25% intending to bring in foreigners for pivotal management positions, just like Kanoo Group’s plans.
- 18% were undecided.
The PwC report indicated the key factors affecting family businesses in the next five years are scale, skills, and succession; What they will do to keep up with globalisation, where the talent will come from and whether succession will remain within the family or not.
With the market evolving, so too are family businesses. Globalisation has created opportunities for some of the best foreign executives to work in these prestigious and historical companies. Click below and get in touch with us today to hone your skills and applications to be more suitable for top executive positions among family businesses in the Gulf.