Companies in the Gulf Cooperation Council (GCC) provide a large-scale example of a problem that plays out in all kinds of family-led businesses worldwide. Family-run enterprises constitute 75% of the private-sector economy and employ 70% of the labor force in the region. Over the past 30 years, as the GCC has risen to prominence on the economic stage, many of these family-run businesses have progressed from small-scale trading operations to international conglomerates spanning the globe. This evolution now poses a challenge. When first- and second-generation leaders of these companies reach the end of their tenures, family enterprises must select future leaders and equip them for success.

The problems of leadership selection and development are far different for a family enterprise than they are for a typical corporation. Family-run enterprises face unique challenges balancing traditional family succession planning and what's best for the future of the company. Decision rights tend to be complicated with blurred lines between family authority and business governance. Further, a lack of planning can exacerbate a lack of objectivity.

Because of this balancing act, family businesses may neglect formal succession-planning processes and leadership development, resulting in poor decision making. Leadership succession is not a one-time exercise but a continuous strategic direction that the highest levels of the organization must assess, tailor, and revisit constantly over a significant period.

Hone in on strengths and performance

Understanding the strengths of the current leadership talent bench in a company and the current environment for developing those leaders is key to ensuring a smooth leadership transition. Regardless of heritage, senior leaders should be able to identify and understand potential successors' innate talents and use this understanding to develop them with an end goal in mind.

Businesses can also hold potential successors accountable on key performance metrics. By coupling companies' existing performance metrics -- such as growth, profit, revenue, customer engagement/retention, and employee engagement -- with measurement tools focused on leadership talent, current leaders can much more accurately predict how a candidate will perform. These insights allow organizations to develop each leader in a way that is specific to existing skills and gaps, creating a clear expectation of when these leaders may be ready to take the reins.

Leadership development also offers organizations the opportunity to reflect on the environment they are offering future leaders. Companies must consider whether they are setting the correct expectations and path to develop and grow new leaders, ultimately providing an environment for success.

Leadership talent can pay dividends

Despite challenges, family enterprises have a unique opportunity to evolve and grow. And they have an expanding pool of potential leaders to choose from. For instance, a company founded in the 1950s by an individual and managed in ensuing decades by several of that individual's children may now have a dozen or more contending third-generation successors.

Family businesses need to view leadership talent as a corporate asset -- one that must be managed as diligently as cash flow, inventory, or intellectual property. Now more than ever, family businesses need an objective, structured, and quantifiable way to identify and nurture leadership talent.

Considering every family member's role is a key strategy for success. It is essential for family members to have opportunities, including the right education to thrive in a modern business environment and the right exposure in the organization. Implementing a plan in which family members start gaining credibility in the business and work with a mentor to progress quickly through the hierarchy to a senior position will lead to success.

With a constantly evolving financial climate, family enterprises are still the backbone of the GCC economy. With careful planning, these valuable organizations can continue to drive economic growth and set the standard for corporate leadership and development -- in the GCC and beyond.

How do we Empower the next-generation leaders within a Family Business Structure?

A cultural shift within the organization to focus on cultivating employee engagement, identifying managerial talent, and promoting leadership development. Providing both the culture and processes to turn engagement and leadership development into common language within the organization, ingraining it into the employee journey for every member of the team, and holding Managers accountable for their teams development.

• WHAT ARE THE KEY ELEMENTS FOR PERPETUATING FAMILY BUSINESS GROWTH?

In the Middle East, the key to perpetuating growth - for all organizations, but especially for family businesses which may lack fullydeveloped human capital processes - is hiring and retaining talent. Family businesses must factor in how talent is hired, engaged and retained within the organization and focus on entrenching an impactful talent, engagement and leadership development strategy which is coupled with existing performance metrics such as growth, profit and revenue.

Family businesses need to view leadership talent as a corporate asset -- one that must be managed as diligently as cash flow, inventory, or intellectual property.

• WHAT ARE THE BEST PRACTICES ON SUCCESSION PLANNING TO CREATE AN EFFECTIVE GENERATIONAL TRANSITION?

Now more than ever, family businesses need an objective, structured, and quantifiable way to identify and nurture leadership talent. Considering every family member's role is a key strategy for success. It is essential for family members to have opportunities, including the right education to thrive in a modern business environment and the right exposure across various levels of the organization. Implementing a plan in which family members start gaining credibility in the business and work with a mentor to progress quickly through the hierarchy to a senior position will lead to success.

• HOW ARE FAMILIES MANAGED IN A FAMILY BUSINESS WITHOUT CREATING NEGATIVE SENTIMENTS, JEALOUSY AND GREED?

Primarily gaining credibility within the organization over a period of time by each family member being exposed to many different functions, departments and teams within the organization before taking a senior position.

• HOW CAN FAMILIES DECIDE BETWEEN TRADITION AND INNOVATION WHILE STAYING TRUE TO VALUES?

By defining the businesses mission, vision and values and ingraining these as part of the business culture for every member of the team, regardless of heritage. The mission, vision and values provide the base for defining growth and innovation strategies, building on existing traditions and values.

About The Author
Jessie Gubbins is a Senior Consultant at Gallup. Jessie advises public and private sector clients throughout the Middle East, Africa, Europe, and Asia on strategic human capital development, specializing in employee and customer engagement, leadership development, and succession planning. Jessie also works with government leaders across the region to develop data-driven solutions for socioeconomic challenges from unemployment and workforce nationalization to sustainable development and economic diversification.

Prior to joining Gallup, Jessie worked for a major strategy consulting firm, advising clients throughout the Middle East and Africa on education policy reform, government performance management, economic development financing, international expansion strategies, and corporate investment priorities. She also served as an outreach coordinator and a researcher for organizations promoting education and understanding between the U.S. and the Arab world.

© Capital Business 2013