Better business through generations [Archives:2007/1029/Business & Economy]

March 1 2007

By: Faisal Al-Safwani &
Raidan Al-Saqqaf [email protected]

Family firms provide jobs for 80 percent of Yemen's total workforce, but they still face a lot of problems, according to analysts. The First Conference of Family Firms in Yemen stressed the necessity of transforming the family firms into institutions, working according to the government systems, caring for quality, separating between ownership and executive management and opening units for studies and researches in every company.

The two-day conference brought together businesspersons from the United Arab Emirates, Oman, Saudi Arabia and Egypt, with the majority of people taking part in the conference coming from the second generation of the family firms.

The conference discussed the reality of family firms in Yemen, containing family disputes and organizing the mechanisms and methods of transferring power from one generation to another.

Domestic disputes between family members were among the persistent problems posed to the progress of these companies, in addition to excluding women from the executive posts in these firms, individual ownership and the control of these companies by the founding men from the first generation. Problems can occur when power shifts from that founding generation to the successors.

The conference disclosed that the family firms contribute to the gross domestic product by 95 percent in the Arab countries, 20 to 90 percent in the Americas, 70 percent in Europe and 80 percent in Spain and Italy. The family firms provide jobs for 80 percent of Yemen's total workforce, 75 percent of the workforce in the Gulf Cooperation Council states, 57 percent in the U.S.

These firms constitute up to 95 percent of the overall number of companies in the Arab Gulf and exceed 85 percent in the Middle East and North Africa.

The family firms are characterized by the fact that their capital isn't divided into shares and ownership is integrated with management most of the time. These firms may be small or large enterprises.

Participants arguing

Participants talked about their personal experience in establishing and running their firms and explained with high transparency the persistent difficulties posed to their businesses.

A study, presented by Dawood Al-Hedabi, University of Science and Technology Rector, revealed that the most persistent problems threatening future of these firms is that people of the first generation are not ready to transfer the executive posts to the second generation's individuals. The most important thing is the strong correlation between the job and management.

Al-Hedabi argued that private establishments in Yemen number up to 110,938 constituting 99 percent of the total number of establishments working in Yemen. The private sector provides jobs for 80.5 percent of the total workforce.

The study recommended separating ownership from management and making available a legal system for the firms to settle any domestic disputes and suggest suitable mechanism to ensure the bond of generations and transferring power easily from one generation to another.

Ahmad Hassan Bazara'ah, Chairman of Shamil Bank of Yemen and Bahrain, said the conference is significant due to the conditions and challenges experienced by family firms. He indicated that these firms are due to expire as the second generation ends.

“Only 15 percent of these firms are to survive after the second generation ends because of the disputes that are bound to appear between members of the third generation. This makes it very difficult for these firms and their managements to take any strategic decisions necessary for developing firms and helping them survive,” according to Bazara'ah.

Tareq Sa'eed Abdulwase', one of the third generation members in Hayel Sa'eed Group of Companies, confirmed that the mutual respect between members of the second and third generations in Hayel Sa'eed Group help tackle any disputes between trade families.

“The charitable works offered by the group have a great role in making families stronger and helping firms to survive,” he added.

Economic observers and people interested in the private sector's affairs expected the conference to come up with positive results with regard to situations of the private sector's companies. These results are due to be reflected on the local economy's situations, as several people hope that the conference be held every year or every two years.

Regarding members of the family, the conference emphasized the necessity of training individuals, enhancing the teachings of Islam and respecting seniors. Also, it recommended inviting eligible people from outside the family to run family firms.