The Art of Succession

Any business, whether you are a small startup with 1 employee or a large Fortune 500 company should think about what passing the reigns will look like.

How does it influence culture?

What happens to employees that have been with the firm for years but have become to expensive to have?

What happens to the business success from passing the baton?

For many businesses in the middle east, this means looking at what future businesses leadership will look like. According to a study by PriceWaterhouseCoopers, succession planning is documented as one of the top issues that businesses in the middle east are dealing with, and the biggest concern dealing with succession planning is conflict between family members.

One of the largest aspects we saw during our trip to Dubai was the focus of succession planning for firms. The first family business we visited was the Olayan Group, a business founded in the 1940s by Sulaiman S. Olayan and boasts over 35,000 employees. The business started off as a contracting firm and slowly moved into a large scale firm that invests for the long haul as their website mentions.

One of the fascinating aspects of the business was the competitiveness that family members experience when joining the business. When we think about succession planning, we imagine young kids joining the business in almost an entitled mindset but to my surprise developing even consideration to work in the group as a family member requires an immense level of dedication in the fields of finance.

For example, one of the family members told us about his ingenious ideas about growing the business, investment thesis, and even vast experience thanks to Northeastern’s co-op program. Overall, he seemed like the ideal candidate to be in the business, but lacked the years of work experience, and higher education degrees necessary to even receive an interview for the group.

Throughout the succession process, there were a multitude of issues in regard to passing on the business from generation to the next. One issue was retention, especially because non-family members did not hold stock in the company. In other words, people would join the company and then leave after learning all the skillsets necessary to be successful in this industry. Moving forward,

One of the biggest differences between the Olayan Group and other businesses that we visited was the rich history and number of potential family members. In comparison, Yogi Mehta, the founder of PetroChem described the challenges of starting and growing a large company. When asked about the succession plan, it was almost clear that his son, Rohan Mehta, would be the successor of the business. Even though Rohan had work experience, Yogi still made Rohan work in business development to help get his feet wet and understand the ins and outs of the business before getting and forming the companies strategy.

There are number of differences between the two firms analyzed. First, the size of the Olayan Group insures that the family members that come into the company be well positioned to succeed and grow the large organization, especially since many family businesses die out after the second generation, let alone the third. Secondly, the number of decision makers that are involved at the top that are family is also limited between businesses. PetroChem seemed to be run by Yogi whereas Olayan seemed to have multiple family members filling roles in the c-suite.