of Middle Eastern family businesses have no succession plan in place
of Middle East respondents have seen an increase in revenues
identify innovation as a key challenge to keep ahead in the next five years
The 8th PwC Family Business Survey is the largest and most comprehensive global survey to date. Senior executives from over 2,800 firms have taken part across 50 countries and sectors as diverse as agriculture, retail and manufacturing. In the Middle East, a wide range of companies were involved, both large and small, of which the majority were either conglomerates, retail chains or manufacturing firms.
Many of the issues highlighted in the survey have remained constant since the last survey in 2014, both across the world, and within the Middle East. This is particularly true of the qualities of the family firm and the strengths and challenges inherent in this business model. The most obvious example of the latter being succession planning.
However, there is also a definite sense of evolution. In 2012, the dominant global themes were skills, scale, and succession – in other words, the practical day-to-day challenges the family firm typically faces. By 2014, this had evolved to focus on the need to professionalise: to sharpen up processes and institute robust governance, both for the business and the family. As we will see later, this agenda is far from complete, though progress is definitely being made.
Family businesses in the Middle East are a vibrant and vital part of the region’s economy, and are often much bigger and more diversified than their Western counterparts. They are successful, ambitious, and dynamic. But there are also issues they have to face if they are to fulfil their full potential. Some of these issues are external- in a recent report we looked at how the global megatrends are affecting the Middle East, and in the pages that follow we will look at these trends from the perspective of the family firm.
But there are internal challenges as well. Many of these internal challenges are similar to those faced by all family businesses across the world, but shaped by local culture and business customs in the region. The six key areas we will highlight are succession planning, strategic planning, digital disruption, professionalisation, family and corporate governance, and the role of the next generation.
At PwC Middle East, we have experience of working with family businesses to help them manage their businesses, achieve their goals, and protect and enhance their family wealth. Being able to share with you insights about the sector in this biennial survey is of particular importance to us.
"In the Middle East right now, change is fast and vast. Family firms have to be agile and flexible to keep up and be prepared to change from within in response to changes outside. The short term fluctuations resulting from the global megatrends are transforming our region. This raises big questions that some are struggling to answer. These questions include knowing about the skills required, having the right infrastructure, and where and how to compete."
It’s noticeable that half the respondents in the Middle East attach a high value to leaving a positive legacy, compared to 28% globally. This reflects the particular social culture in the region, and the importance of protecting and enhancing the family name. This reflects the particular social culture in the region, and the importance of protecting and enhancing the family name.
Charitable contributions are a big part of this, and many family businesses have their own foundations. Likewise 16% consider that creating employment for local communities is ‘very important’ compared to a global average of only 6%. This has historically been a high priority for family businesses in the region.
In 2014, 79% of Middle East respondents had seen an increase in revenues over the previous year, but that number is now slightly down to 74%, though it’s still ahead of the global average of 64%. The effect is more marked when you look at respondents’ expectations over the next five years: in 2014, 40% expected to grow quickly and aggressively over that period, but this year the comparable number has fallen to 27%. Likewise, 10% now expect their business to shrink in that time-frame, compared to just 2% in 2014.
There are five key conclusions to be drawn from this year’s survey, which require concerted and determined action:
This agenda is not easy, but is necessary. If done well and promptly, it offers familly businesses in the region a golden opportunity to punch above their weight, and fulfil their huge potential even more effectively than they already are.
For the purposes of this Survey, a ‘family business’ is defined as a business where:
Between 9 May 2016 and 19 August 2016, 2,802 semi- structured telephone, online and face-to-face interviews took place with senior executives from family businesses, in 50 countries worldwide. The interviews were conducted by Kudos Research, in the local language by native speakers, and averaged between 25 and 35 minutes. The turnover of participating companies ranged from US$5m to more than US$1bn. 32 respondents took part in the Middle East, covering Egypt, Kuwait, Jordan, Oman, Qatar, Lebanon, Saudi Arabia, and the UAE.
All results were analysed by Jigsaw Research, an independent market research firm.