Future-proofing the Family Business

What family-owned businesses in the Gulf can learn from Europe’s oldest dynasties

Compared to their European counterparts, most family-owned conglomerates in the Gulf are relatively young, dating back to the 1950s. Aside from a few notable exceptions, the majority are still either run by the founder, or the children of the founder. It’s rare to find any large family business over a hundred years old.

The truth is, very few businesses of any type of ownership manage to survive for anywhere near that length of time today. Recent research by McKinsey found that the average life span of an S&P 500 business today is less than 18 years, whereas it was 61 years in 1958.

Yet some European dynasties have stood the test of time and survived for over a century. So, what can family-owned businesses in the Gulf learn from these organizations? Russell Reynolds Associates partnered with Italy’s prestigious Bocconi University to undertake research into 10 of Europe’s most enduring family businesses to uncover the secrets of their survival. All of these businesses were either third generation, or at least 100 years old.

From this research, we share three key lessons that are just as apt for family businesses in the Gulf.

Lesson one: pro-active succession planning

Succession is something families don’t want to think about or discuss—either because it’s too emotionally difficult, or because it might create conflict and tension between family members. Often, there are unspoken assumptions about who will or should eventually take over, without assessing whether they have the right leadership skills, experience, and potential to lead the business into the future.

It’s important to assess potential candidates early and have honest and open conversations about who does—and crucially, who doesn’t —want to be involved in the business. And don’t just look to the next generation, but the one after that. Try to imagine how their talents and passions might fit into the family business as it evolves in the future. We’re currently working with a leading, forward-thinking Dubai family business to do this, but they are very much pioneers in this regard.

Lesson two: nurturing future successors

In the Gulf, many family businesses are conglomerates with an incredibly diverse portfolio. But, future successors within the family often reside within one of these businesses, with little knowledge or experience of the others. Then suddenly, they find themselves in charge of running an entire group of very different businesses, each demanding a completely unique set of knowledge and skills.

Rotating future leaders through the group’s various operations is essential for developing the broad expertise required to manage a complex and diverse enterprise.

Another potential pitfall is what the Germans call betriebsblindheit or ‘business blindness’. Often, family members have only ever worked within the family business, so they don’t know what ‘good’ looks like. So as well as spending time in different companies within the family’s portfolio, it’s equally important for them to gain an outside perspective—either through external work experience or by connecting with other family business executives who can provide fresh insights. For example, various European families by design send their next generation to other academy companies for extended internships to expose them to best-in class entrepreneurship, system thinking, efficient and effective governance, as well as performance management.

Lesson three: external benchmarking

The Gulf’s business landscape has dramatically evolved since the 1970s. Almost all family businesses in the Gulf began by representing international brands. Now, we’re in a new era, with more dynamic markets, homegrown brands, global competition, and foreign direct investment.

While family businesses in the Gulf have uniquely navigated their region's transformation, adopting a more proactive, externally oriented approach—as exemplified by Europe's centenarian dynasties—can help ensure their longevity. By prioritizing succession planning, leadership development, and objective benchmarking, Gulf family enterprises can future-proof their legacies and capitalize on the inherent advantages of family ownership. In an increasingly unpredictable world, these time-tested strategies offer a blueprint for enduring success.

Author

Burak Gorbon, member of Russell Reynolds Associates’ Middle East leadership team. He is based in Dubai.