Clearing issues for a generational switch
Gulf’s family businesses need to start internal communications to take things forward Special to Gulf News
he relative adolescence of countries across the Gulf has meant its markets are equally as youthful. With the wealth that comes with that type of development and growth, businesses looking towards succession planning are relatively new to the tradition of inheritance.
With no existing model of inheritance traditions in the region, the concept of successfully managing inheritance and wealth succession is unfamiliar to many. In the GCC, many of these are still “firstgeneration” instances. While they are keen to learn how to do so, they’re in need of guidance to be able to do it successfully.
However, finding the right guidance is a tricky field to navigate, one that involves more than just selecting the right expertise.
Due to the many cultural differences that have taken place in the growth attained by succeeding generations, and the vast amount of development that has occurred between the original establishment of these entities and their contemporary existence, the approach towards business — and those involved in every step of the process — is evolving just as quickly.
The difference in the wants, needs, and attitude between the generation who built the wealth and those who it is transitioning to, is vast and distinct enough to add an increasing level of tension to an existing issue within inheritance management — that of disharmony within a family, which figures show hold back the ability to plan smoothly by 11 per cent.
As the younger generation draws on the knowledge and education they’ve received overseas or from an ever-developing schooling system within the region, they seek to ensure the businesses are being run up to par with international standards, particularly when it comes to professionalism. Combine this with the evolving means of communication of the younger generation — and the effects of digitisation, technology and the subsequent impact on the way we communicate and run businesses — the gap grows ever-wider.
Consequently, as these businesses grow, the younger generations are seeking to implement new ways in which the business is run; from hiring practices, the employment of non-family members, employee management, benefit schemes, standardised pay scales and salary ranges. They might seek to introduce modernised payment systems in some cases, build on opportunities for growth and learning in terms of careers, or changing the workplace model.
Changes could also include investment in technology and innovation, both in terms of software and hardware used by the company, as well as investing in training for utilising the technology and the ability to innovate with it for staff members at all levels.
The challenges that can come with this much change in such a short time span are two-fold: one, in that the older generation has not had enough time to absorb the volume of change and may not understand or agree with the direction the younger generation is taking, leading to clashes around the future of the business.
Implementation
Another is the challenge of implementing such large-scale change in a short time period, both in terms of the long- and short-term impact on company structure, costs, daily systems, and more. Although the older generation is concerned about the loss of culture, the younger generation has made it clear that what they are seeking is a way to incorporate these changes while maintaining their culture, in a seamless transition that retains historical, familial, and business values while moving forward into the modern age.
According to the Jersey Finance research, just over a third of respondents claimed that it was misconceptions about key issues that are a large part of the problem, while just over a fifth believe clients aren’t even sure how to start the discussion at all. The survey results also indicate that both generations are striving towards the same goal, and are open-minded towards change if it enables them to retain their essential culture while working towards a positive impact.
Although they have the same ambitions, the lack of communication and understanding in where to start the discussion, let alone the planning, is a setback — and one that can easily be solved by hiring the right expertise to guide them along the way.
There is no one-size-fits-all solution. However, by working together, using a future-focused approach, there are multiple means to solving these challenges, through a unique and tailored solution that seeks to individually address every issue presented by each family and business. While there are several common themes that a majority of businesses are able to look towards, individualised advice from financial experts is the key to making these transitions successfully.
Forward thinking, bespoke counsel can also help to avoid other issues that arise from estate or succession planning, such as family disputes, or “cleaning up” from bad advice that clients may have previously been given.
Fortunately, a majority of these high net worth investors (HNW) and family businesses are aware of the scale of the issue. Both financial experts and advisers, and the HNW investors and businesses themselves, recognise that this is a pivotal time of growth for the region. They know it is vital to work with the right professionals to manage their wealth ambitions, so they can then have it all.
And that it is possible to make the necessary changes for successful growth, without having to make any sacrifices that they aren’t ready to, nor will ever want to make.