Family offices: Start planning your succession
One of the main concerns shared by family offices across the region is succession planning. As there are many uncomfortable and uncertain factors linked to this due to the culture in the region, it can cause much stress to the family heads who have built an empire from the ground up.
Family businesses today were the startups of the 1900s. The entrepreneurs then who learnt tough lessons trying to maintain business continuity, will also apply to the current startups that endure the toughening economic climate.
The Gulf will see approximately $1 trillion of wealth be passed on to the next generation over the course of 7-8 years, according to The Family Business Council - Gulf (FBCG). So it is time for family businesses to get past the uncomfortable questions, ambiguous relations, and worrisome expectations to ensure their wealth does not mix with the earth after them.
“Family members whom the founder didn’t think had the skills to take over the business can become owner-managers, which often ultimately leads to business failure,” says Fadi Hammadeh, author of Family Business Continuity in the Middle East & Muslim World: Betting Against the Odds.
He advises the separation of economic interest in the business from the legal ownership, much like the trust or foundation models used in the West. “You put the legal ownership of the business in a metaphorical safe so no one can touch it and distribute the economic benefits of the business – for example, company dividends – according to a pre-agreed formula.”
Succession planning is better done sooner rather than later. Get the younger generation involved and educated in the business. That’s the only way for them to understand the responsibility, know the business, gain confidence in leading and be passionate about growing the company.
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