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Teaching Family Business in Dubai

By: Dennis Jaffe | 14 Jun | 0 comments

 


I have just finished teaching a course in family business in Dubai, a business oasis of 3 million people, a city-state with daringly designed high rises and bustling commerce on the Arabian Gulf. For four days, this open and eager group of 75 mostly middle-eastern young men and women engaged in vigorous exchange.  Each of them wrote a personal account of their family businesses, and their stories gave me a window into the challenges of a poor and tradition-bound family struggling forward to enter a global, technical commercial world. In a generation the world of the middle east has been transformed, even as it also struggles with unrest and violence.

As I expected, I entered a world ruled by tradition, codified into family law and policies.  But what was striking was the warm, engaging and collaborative way that these young people were gently but firmly pushing against tradition, to lead their families into new and entrepreneurial directions.

Everywhere in the world, business development comes from these business families, and this was especially true of the students in my class.  Just about everyone was raised in a family business, because in growing economies that is what a family does. They were pursuing their MBA while facing a deep and consequential choice point in their lives: to join the existing family business, or create a new business on their own.  They were an entrepreneurial crew in that few expected to join existing companies. While they felt the pull of family expectations to enter the family business, they wondered if the family business would really fit their needs.

Their families started enterprises in trade, services or manufacturing. Their stories took me back to some mythic time in the US when a young person knew that education, commitment and hard work would likely lead to success, and they could pick from a wide range of possible industries, from service to manufacturing. My students represented  a vital, confident and growing middle class, a stratum that is noticeably retracting in much of the west. There, I read of concerns about growing inequality, the decline of the middle class, and pessimism for the future. Here in Dubai, the future was like the growth of high rise buildings all around—there might be ups and downs for development, but each down would be higher than the last one, so someone with patience could rise with the economic tide. I sorely miss that can-do attitude.

These young people also faced choices in their family businesses. Many of them were growing and diversifying. They came to the class to reflect upon and explore their future options. Perhaps half of them considered starting their own businesses, but wondered how to do that while also responding to the call from their family.  Several “young” people (in their 30s) had children, and their interest in the course was that they were starting businesses and wanted to look ahead at the legacy they wanted to create in their new families, rather than back at their original family enterprises.

Starting a business rather than joining one as an employee was seen as a pathway to the future. The family lesson from the family patriarch was to start businesses, not enter the one that they had. In the US, this attitude reflects the immigrant experience—starting a small business is almost the only path to success for someone without means and education. A recent study notes that in many communities, immigrants were better able to achieve economic success than long-term residents, primarily because of emotional and financial support from their extended families.

Reading the story of their families, the trajectory is very clear. Their parents or grandparents started a hands-on commercial venture, and through diligence the business grew. As it grew, they also started other businesses. Partly, this was because, sometimes with multiple wives, the families were large and they wanted to provide vehicles for several sons, and yes, daughters.  The challenge they faced was the classic one that is common to all family businesses: they created places and expectations for their children, and offered them without thinking about capability or commitment. Some family members wanted to respect the family alone, while others, like my students, wanted to create good businesses, and while they respected their parents and siblings, they faced the quandary of creating a culture of accountability within the environment of a family.

The Middle East emirates, like Singapore and Hong Kong in Asia, are city-states run by benevolent, paternalistic authorities, in many ways acting like huge family businesses. The leaders set the rules, today allowing for broad economic freedom while they set clear boundaries for behavior that should not be lightly crossed. I believe that the lack of civic engagement in governance leads to greater focus on the family as a focus of energy?  While in every culture, the young person from a family business experiences a choice—to stay and develop the business the family has, or to leave and seek employment or start another business, my students were more focused on defining their future in the family business than a comparable group in the US. A US MBA cohort would be more focused on working with other students to create start-up ventures.

The experience of the students is framed by their strong paternalistic tradition, and the internal and external forces for change. We dialogued about the roles of gender and family hierarchy, and their relation to business participation. The class had equal numbers of men and women. Their families were emerging from a tradition that prescribed--in religious and legal terms--rules for inheritance and participation. Under Sharia law there is no will, because inheritance goes to all sons equally with a half share going to women. The roles and expectations for the women are changing; some patriarchs have decided to give full shares to their daughters. Several students from Asia and the Middle East reported that their families did not allow women to work in the business.  The women observed that this was changing, and the focus of much of our discussion was on the pace and direction of change as family business modernized externally, and perhaps internally.

The role of tradition was enveloped in that of respect for elders, and the expectation that one would enter the business and work cooperatively with ones brothers (and half-brothers), and often sisters. But the awareness and education of the young people was about business development, unleashing the best talent in the family, and facing the future with open eyes. We talked about the role of women as possible successors and working in the businesses, and their positive role was clear. What surprised me was now openly the families faced the issue, and how much consensus was there was that women and men would both be part of the next generation of the family business.

In many families this was a problem. The lack of capability or a work ethic in some family members was a challenge for the entrepreneurial class members. Since the families had to listen to the patriarch, conflict was often not talked about, but acted out in a passive aggressive or underhanded way. How, students asked, could they begin to talk about these issues? The most common answer was to divide the business, and here the existence of multiple businesses was very useful. We read a case of a patriarch dividing his shares separately among his sons, and the efforts of the next generation to remain together as a single, large holding company. The students were largely new to the idea of developing family governance and, since the patriarchal tradition was about benevolent rule by a single person, they realized that their father did not have a model for siblings working together to resolve issues and make decisions. They were in new territory when they introduced the idea of the siblings getting together and deciding what they wanted to do, and whether it would be together or apart.

Tradition could be deadly to their dreams. One young lady, just finishing her MBA, very much wanted to return to her African country and help her father develop his businesses. He was a trader, and ran his businesses without any written records or agreements, within a network of personal relationships. Sadly, she realized that the business fundamentals she learned at school could not be practiced in a business culture that as yet had no concept of structure and accountability. As a woman, she faced an addition hurdle in achieving credibility and authority, and asking employees to change their behavior. Every time she hired and trained a new employee, they learned from her and then left to start their own businesses. She decided not to join her parents’ business, but to remain in Dubai and with her family’s help, start her own business.

Rather than passive candidates waiting for their fathers to decide their future, they wanted to be active architects of that future. This story from one-third generation heir was echoed by many others. His grandfather started the company, with little money or education, but a vision, drive, a knack for building alliances with key people, and a bit of luck. He built a lucrative core business. When his three sons came to work, he acquired related businesses, and expanded. As he retired, his oldest son became CEO, but he remained in the background as counselor to his sons. My student was the oldest in the 3rd generation. The dozen members of G3 saw the business as a possible future, but following family tradition, they had been told very little about it. They had no conversations with their fathers about what might happen. Everyone had the idea that things could just continue, even as they increasingly entered and began to develop larger businesses that needed more professional skills in more competitive markets.  Tradition ruled, along with the expectation that things would work out just fine. They just had to select someone to run each business, and install them. The young family members were lined up and waiting their turns.

My student was not so sure. He saw the lack of preparation for the future, and the unrealistic view of the challenges ahead. The family had been hard working and lucky, but he knew that their luck could run out in the next large venture. They had no plan for the future or to develop the skills and capability of the next generation. Were they just entitled to jobs, or did they have to seriously prepare and test themselves for these responsibilities? In my course, like many students, he realized that he was the “canary in the coal mine” who had to alert the family of the need to change. Since the family had no idea of what they could or should do, he also had to educate them about what other family businesses were doing in similar situations. My young students also faced the fact that as young people, some of them women, they had no formal power and little credibility, to accomplish this task for their family.

Two themes dominated the discussion. First, the realization that the younger generation had to constructively engage their elders, not from a position of power but one of influence. We talked about how to approach the challenge of innovation and change in their families. They all felt that they could use persuasion to gently influence change. The second issue was that this could only be done through shared family discussion, and then agreements, on the rules for family employment and engagement by the next generation. This was the first time they had heard about family agreements, family constitutions and councils. But the idea had clear face validity, and helped them find a path forward in their families. Before taking the class, they knew what they wanted to happen, but they lacked a mechanism for accomplishing it. Now, the practical model of a family roadmap, with simple family agreements and a family organization offered an active and direct path forward. They could engage their families in a discussion of the future, rather than argue privately or leave in frustration.

The course dealt with issues close to home and practical. They learned about activities their families clearly needed. And they were the only ones who could bring the learning to the family. In the course, we planned for how they could return to become “champions of innovation” and bring new ideas to the family. We worked on how to present an idea to a person of power, such as the patriarch, in a respectful way that he would be likely to listen to. We talked about balancing tradition with innovation, and not expecting instant connection. We designed ways to bring the family together for discussions—by generations, about the business and the family future that would not challenge the established ways. By framing the discussions to be “about the future” they were not challenging the elders directly.

At the end of class, as each person shared what they would take home. One of the active and more conservative men who had made it clear that he felt that the participation of women in his family business was not to be considered, shared that he had revised his views as a result of the class.  

Read other posts by Dennis Jaffe

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