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Family businesses in Yemen face continuity challenges

Business leaders hope to prevent the failure of family business, a common fate after the founding generation passes. [Ahmed Jadallah/Reuters]

Business leaders hope to prevent the failure of family business, a common fate after the founding generation passes. [Ahmed Jadallah/Reuters]

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Many small- and medium-sized family-owned businesses risk failure when management is passed from one generation to the next.

To help prevent business failure and ensure the smooth transition of power from the founding generations to the next generation, a number of economists, researchers, and family business owners in the Arab world are calling for the application of business practices that ensure the separation of ownership from management.

"Most family businesses that do not prepare trained personnel capable of leading their companies efficiently, fail upon the demise of their founders or first generations," Mohammed Abdu Saeed, head of the Federation of Yemeni Chambers of Commerce and Industry, told Al-Shorfa.

Saeed noted that 99% of the companies licensed to work in Yemen are small- and medium-size family businesses.

Sanaa hosted a conference on family business at the end of September, organised by the Yemeni Businessmen Club in co-operation with the Federation of Yemeni Chambers of Commerce and Industry. A broad panel of regional and international experts and specialists on family businesses from Saudi Arabia, Lebanon, Egypt, the UAE, and Germany participated.

The conference sought to identify the organisational and behavioural factors that lead to success for family businesses, and to enhance these businesses' ability to keep abreast of developments and challenges to ensure their cohesion, continuity, and growth.

Through the conference, business specialists recommended supporting family businesses in order to develop them into corporations, as well as encouraging them to set up laws within their businesses to ensure continuity and growth through the generations, and to recruit qualified and experienced talent from outside the family.

Saeed announced the federation's adoption of an initiative to establish a permanent workgroup to study and follow-up on the activities of family businesses.

He emphasised the importance of including the children of family business founders in training programs to qualify them to lead the business, ensuring their continuity and contribution to the local economy.

President of the Yemeni Businessmen Club Ahmed Bazara called on all family businesses to accelerate the processes of reorganisation and restructuring of their institutions, and for separating ownership from management in a manner that is fitting with each company's unique circumstances.

Bazara told Al-Shorfa that the application of the principles of corporate governance would regulate relations and lay the foundation and structures for family businesses that would reduce the number of failed experiments.

There are large family-based commercial and industrial groups in Yemen that are past their third generation, according to Tarek Abdul Wase, director of the United Insurance Company, a subsidiary of Hayel Saeed Anam Group.

He said those groups of companies have family business laws governing the smooth transfer of ownership and management, with importance placed on continued development and modernisation within the group structure, in pace with changes in economic and international variables.

According to Dr. Amira El Saeed, the official in charge of Corporate Governance Program Operations for the International Finance Corporation for the Middle East and North Africa, only 30% of family businesses in the world continue past the first generation.

"Governance is not a step, but the beginning of a journey we embark on to encourage companies to face their problems and challenges, and we assign tasks and functions separating ownership from management in the process," she told Al-Shorfa.