In this episode of the podcast, host Omar Al-Juraisi discusses with Professor Abdulaziz bin Mohammed Al-Subaie, a board member of Mask Company, the importance of organizing family businesses and how they can be transformed from cost centers to profit centers. The speakers highlight the challenges faced by family businesses in Saudi Arabia, where these businesses make up 80% of all companies, but 90% of them fail after the second generation. The discussion addresses how to avoid collapse through good governance and organizing family relationships, contributing to the preservation of family wealth and promoting sustainable philanthropy. Al-Subaie talks about his personal experience leading the Mask project since 2010 and how he seeks to avoid common mistakes that lead to the collapse of family businesses, making the dialogue deep and beneficial for those interested in family investment and achieving sustainability.
The Importance of Family Businesses in the Saudi Economy
Family businesses are a vital part of the Saudi economy, representing about 80% of all companies in the Kingdom. These businesses are considered the backbone of economic growth and employment, significantly contributing to job creation and driving development. Family businesses are not just commercial entities; they carry a rich history and cultural heritage that reflects the traditions and values of the family. These companies exemplify how businesses can continue across generations, but they face significant challenges when it comes to transitioning from the first to the second and third generations. According to statistics, it is estimated that nearly 90% of family businesses fail after the second generation, highlighting the importance of strategic planning and proper organization to maintain business continuity.
In this context, the experience of Mask Company comes as a model to emulate. By organizing its administrative structure and clearly defining responsibilities, it has managed to overcome many of the challenges facing family businesses. The Mask experience is an example of how to turn challenges into opportunities, as it succeeded in enhancing family relationships by organizing work in a transparent and clear manner. Other family businesses should take this experience into account and recognize the importance of planning and organization to ensure business continuity across generations.
Challenges Facing Family Businesses in Transitioning Between Generations
Family businesses face several challenges when transitioning from one generation to another, as the visions of the new generations often differ from those of the founding generation. This difference in vision is one of the main reasons for the failure of many family businesses. The first generation often possesses deep experience and market knowledge, while the new generation brings in new ideas and ambitions that may not align with existing practices. This disparity can lead to conflicts and difficulties in decision-making, threatening the continuity of the company.
Moreover, family businesses face challenges related to the involvement of women in family work. In many cultures, women are marginalized in decision-making, which leads to a lack of utilization of their capabilities and experiences. It is important to enhance the role of women in family businesses, as their involvement can promote stability and increase chances of success. Numerous experiences have shown that companies including women in leadership positions achieve greater success and are more capable of adapting to market changes.
Strategies for Success for Family Businesses
Family businesses need clear strategies to ensure their success and longevity. One of the key elements is to create a strong management structure that clearly defines roles and responsibilities. There should be clear plans for training and development for the next generation, to ensure the transfer of knowledge and experience. This not only includes academic education but also practical training and field experiences.
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Transparency in internal communication is vital. When information is available to everyone, the family can work as a team to achieve common goals. Regular meetings should be held to discuss challenges and opportunities, and to exchange views on how to move forward. It is also important to review past experiences and learn from them. Having external advisory boards may help guide families towards making informed decisions based on facts and analyses.
The Role of Family Relationships in Business Success
Strong family relationships are considered one of the key factors for the success of family businesses. When families maintain their cohesion, they are better able to face challenges. Families can work together as a team, enhancing cooperation and understanding. It is also important to pay attention to emotional relationships among members, as love and mutual respect contribute to enhancing group spirit.
Family businesses should recognize that success does not come only from achieving profits but also from maintaining good relationships. This requires continuous effort in improving communication and appreciating the values of each family member. This can help reduce the intensity of conflicts and promote a positive work environment that contributes to innovation and creativity. Ultimately, success in family businesses requires a mix of good planning, organization, and maintaining strong family relationships.
Planning for the Future and Adapting to Changes
With the constant changes in the market and the economic environment, family businesses must be flexible and capable of adapting. This requires strategic planning for the future, which should include strategies for expansion, innovation, and diversification. Companies that invest in research and development and embrace new technologies are better positioned to compete and succeed.
One successful example in this context is the use of sustainability as a growth strategy. Companies that focus on sustainable practices attract a wide range of customers who care about the environment. This can lead to enhanced reputation and profits in the long term. Family businesses must recognize the importance of sustainability and strive to implement it in all aspects of their operations.
Resolving Conflicts in Family Businesses
Conflicts are one of the significant challenges facing family businesses, as they can lead to the disintegration of relationships among family members and negatively impact the business. It is important to address these conflicts effectively to ensure the continuity of the company. One effective solution is to establish a family charter that outlines how to handle conflicts. The charter includes provisions that specify how conflicts should be resolved, whether through direct negotiation between the parties involved or via mediation or arbitration. This approach helps reduce tension and aids in maintaining family relationships, where family ties are preserved while issues are addressed professionally.
Moreover, transparency in conflict management is very important. All family members should be aware of the standards and rules that have been established, which enhances trust among them. The rules may include mechanisms that require individuals to communicate effectively in case of a dispute, as well as defining roles and responsibilities. For example, in the event of a dispute over profit distribution, it can be specified how the decision is to be made through a general assembly or a specialized committee, ensuring that power or influence is not misused.
As successful examples of conflict resolution, some family businesses have established advisory boards that include family members and other professionals, facilitating discussions about conflict issues and leading to more objective solutions. These boards not only work to resolve current conflicts but also contribute to developing strategies that prevent future conflicts.
The Importance of the Family Charter
The charter
The family charter is a fundamental document in the management of family businesses, as it defines goals and values and outlines how the family will interact with the business. Through the charter, the foundations for family partnership are established, enhancing the sense of responsibility and belonging among members. The charter helps guide strategic decisions and defines how roles and positions are distributed among family members.
For example, the charter may stipulate that new family members must undergo a training period or work in a field outside the company before joining management, ensuring they acquire the necessary experience and skills. This can help reduce conflicts related to qualifications and competencies. Additionally, the charter can include mechanisms for periodic performance evaluation, thereby enhancing accountability and transparency.
Many family businesses that have succeeded in maintaining the continuity of their operations for multiple generations have relied on having a strong family charter. This charter is not just a legal document but an expression of the family’s values and future vision. The document serves to unify goals, allowing all family members to work together toward a common vision.
Separation of Ownership from Management in Family Businesses
The separation of ownership from management is an effective strategy in managing family businesses. This separation helps reduce conflicts among individuals and enhances leadership efficiency. By separating roles, individuals who do not possess the necessary management competencies can benefit from the expertise of professionals in executive management. This approach ensures that decisions are made based on knowledge and skills rather than family loyalties.
Many studies show that family businesses that have adopted this separation enjoy more stable revenues and faster growth. This separation also helps attract managerial talents who may hesitate to work in a family environment due to concerns about bias or favoritism. By providing opportunities for management professionals, family businesses enhance their ability to grow and expand in the market.
It is crucial to document this separation in the family charter, ensuring that all family members understand their roles and responsibilities. The policy regarding the separation should include discussions on how to select management and the criteria that must be met by individuals who will be nominated for executive positions. In successful family businesses, there is always a balance between family values and professionalism, contributing to sustainable success.
Effective Implementation Steps in Family Businesses
Managing family businesses requires the existence of an effective implementation plan to ensure the continuity of operations. This plan includes clear steps starting with setting goals and identifying appropriate strategies to achieve them. Families need to establish timelines and frame each step appropriately. It is also essential to designate specialized individuals to oversee the operations, ensuring that the agreed-upon strategies are executed efficiently.
Furthermore, family businesses should organize regular workshops and training sessions for family members and employees. These workshops help enhance knowledge of the established strategies and contribute to developing the skills necessary to achieve goals. Continuous communication among members is also a fundamental part of the successful implementation process, as it facilitates the exchange of ideas and listening to feedback.
Inspiring experiences in this context show that many family businesses that have established advisory committees combining family members and external experts have achieved notable successes. These committees contribute to enhancing transparency and informed decision-making, ensuring the successful achievement of goals. Having a clear implementation plan enhances growth and stability and ensures the continuity of operations across generations.
The Role
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Independent Members in Family Businesses
Independent members represent a vital part in shaping and managing family businesses. Their primary role is to challenge routine rules that may be rooted in family culture. The entry of these members with their external perspectives and diverse experiences enhances the board’s ability to make objective and informed decisions. Through their experience, independent members can offer new viewpoints that help improve performance and increase efficiency. For example, they may have expertise in various sectors such as medicine or tourism, allowing the company to benefit from diverse insights if there are plans for expansion in these areas.
The presence of independent members also helps achieve a balance between family interests and business interests. They are not bound by family loyalties, ensuring that decisions are made based on what is best for the company rather than personal relationships. This dynamic creates a more professional work environment and allows the family to focus on growth strategies instead of internal conflicts.
Generational Balance in Boards of Directors
Family business boards should maintain a balance among different generations, where the new generation competes for the seats allocated to them. This competition can be a motivating factor for innovation and development, as each strives to demonstrate their competence and contribute positively. For example, there are new techniques and methods that young members might propose based on their knowledge of current market developments, while the older generation can bring wisdom and experience accumulated over the years.
By establishing clear mechanisms for identifying new members of the board, family businesses can ensure the continuity of success across generations. Additionally, the introduction of members from the new generation should occur according to specific criteria, such as academic qualifications and professional experience, which enhances the professionalism of discussions and decisions within the board.
Exit Procedures from Family Businesses
Exiting from family businesses represents one of the biggest challenges families may face. There should be a clear system for addressing this issue, including a fair assessment of shares and specific exit procedures. For example, a certain discount may be applied to the shares of the person wishing to exit, reflecting the risks associated with holding shares. This system can help reduce disputes among individuals and facilitate a smooth exit process.
Additionally, the presence of preemptive rights mechanisms for shareholders is a vital step, allowing family members or other shareholders to have the opportunity to purchase the sold shares before they are offered to external investors. This system not only protects the interests of the family but also supports stability in the company and builds trust among individuals.
The Importance of Transparency and Governance in Family Businesses
Transparency and governance are fundamental elements for the sustainability of family businesses. There should be clear mechanisms for managing and distributing information among all family members. Transparency enhances trust among individuals and helps reduce doubts and anxieties regarding business management. For this reason, regular meetings and the opening of discussions about financial and operational performance can be effective tools for building trust among different generations.
Moreover, board members should have the ability to make decisions based on accurate and objective information. Having an external reviewer or independent consultant can enhance the credibility of the data and information presented to the family. This contributes to creating a culture of accountability and ensures that all decisions are made based on logical principles and accurate data.
Sustainability and Growth in Family Businesses
Achieving sustainability and growth is one of the primary goals of any family business. Sustainability can pose a challenge, especially when it overlaps with the desires of different generations. It is important for companies to develop long-term strategies that ensure continuity. For example, by investing in social or environmental projects, the family can help improve the company’s reputation and strengthen relationships with the local community.
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adapting to changes in the market. This requires innovation and technology, as investment in research and development can be a pivotal factor in achieving growth. By leveraging new technologies and opening new horizons, families can ensure the continuity of success in the long run.
Achieving Success Through Unity and Shared Vision
Unity and a shared vision among team members are fundamental factors for achieving success in any project. Having a clear and common vision can help unify efforts and direct energies toward specific goals. Oftentimes, this unity is the element that distinguishes successful teams from those facing difficulties. The speaker notes that his team, composed of individuals sharing the same vision, was able to enter new and successful sectors, even without fully understanding them at the outset. This demonstrates the importance of working together as a family, where collaboration enhances the ability to take calculated risks and achieve returns on investments.
Success in entering new fields reflects the team’s capability to adapt and learn. The speaker also points out that the team’s size and the diversity of skills within it have enabled them to exploit opportunities more effectively. Therefore, teamwork and cooperation among individuals can lead to remarkable results, especially when there is a shared vision. This concept is not limited to the business world but can be applied in various areas of life, including charitable and social projects.
Risk Management Strategies and Diversification in Investments
Successful investment strategies require a deep understanding of risks and how to manage them effectively. The speaker indicates that their small size as a team may prevent them from taking high risks, but through collaboration and solidarity, they can better face market challenges. The ability to diversify investments is a fundamental element in achieving long-term financial stability.
When the speaker discusses their failure to diversify the geography of their investments, he illustrates how staying in a specific area may have benefits, but it also reflects the importance of opening doors to new opportunities in different markets. He also emphasizes the necessity of organizing work within the family business, where professional management can contribute to achieving success by identifying risks and developing effective strategies to address them. Certainly, having professional management means they can make informed decisions based on accurate data and analysis.
The Importance of Social Projects and Their Positive Impact
Social projects play an important role in enhancing the community and meeting its needs. Discussing social projects reflects a commitment to achieving a positive impact at the community level. The speaker highlights the importance of establishing social projects linked to their goals as an organization and gives an example of founding a charity aimed at achieving social change. The presence of these projects is part of the social responsibility of any organization, especially those wishing to achieve sustainable success.
Social investment is a modern concept that contributes to enhancing community development. This type of investment involves providing financial support to initiatives that create positive impacts on the community, such as improving education, providing healthcare, or promoting environmental sustainability. The ability of organizations to integrate these social dimensions into their strategies enhances their reputation and increases customer loyalty, contributing to long-term success.
New Trends in Employment and Collaboration with Partners
Partnerships with other institutions are an essential part of the success strategy for any organization. The speaker discusses the importance of working with other partners and how this collaboration can strengthen the institution’s position in the market. Collaborating with partners can provide new opportunities for expansion and growth, as well as contribute to the development of new projects that enhance the institution’s standing.
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When discussing partnerships, the focus is on the importance of choosing partners who share the same values and vision. The presence of successful partnerships reflects the organization’s ability to adapt and evolve in a rapidly changing environment. These partnerships are not just mere business relationships; they are considered strategic relationships that help achieve common goals and enhance competitiveness.
Challenges and Opportunities in the Saudi Economy
The Saudi economy is undergoing a significant transformation, as the Kingdom’s Vision 2030 seeks to achieve sustainable and comprehensive development. The speaker highlights the importance of leveraging the opportunities available as a result of these transformations. The economic changes and new opportunities provided by Vision 2030 require companies to be flexible and capable of adapting to rapid changes. Here, the importance of internal organization and effective work procedures that enable organizations to achieve their goals under these changing circumstances becomes apparent.
Awareness of current trends and the ability to exploit available opportunities are essential parts of any organization’s success. Understanding the challenges that companies might face in a changing economy can help in developing effective strategies to adapt to those changes. Certainly, success in this context requires commitment from all individuals within the organization, and following a systematic approach to achieve the desired goals.
Sustainable Model for Mosques and Public Facilities
Developing a sustainable model for mosques requires considering various aspects of design and operation. The speaker emphasizes the importance of improving resource-use efficiency in mosques, which contributes to reducing waste and increasing sustainability. Focusing on designing mosques to take into account the needs of the surrounding community is a positive step towards achieving a better environment.
Utilizing solar energy and providing green spaces in mosques is a good example of how sustainability can be integrated into the design of public facilities. Additionally, providing multifunctional facilities within the mosque enhances its social role and makes it a vibrant center serving all segments of the community. Certainly, these initiatives reflect the organization’s commitment to benefiting society and promoting sustainability in all aspects.
The Mosque Organization Experience and Its Impact on the Community
The experience of organizing the mosque by establishing a charitable company represents an interesting model of connecting the local community with the sacred place. By providing multiple services such as a kindergarten, grocery store, and pharmacy, the space surrounding the mosque has been utilized for the benefit of local residents. This idea not only provided services but also contributed to strengthening social ties among neighborhood residents. Instead of being solely a place for prayer, the mosque has become a center for social and economic events, improving the experience of worshippers and encouraging interaction among residents.
The kindergarten experience, for example, had clear positive effects on families, helping alleviate the burden of childcare during prayer times. Additionally, the pharmacy established within the mosque became a reference point for patients, as many prefer to visit it due to its proximity to their location. This type of connection between services and the community shows how space can be effectively utilized to achieve multiple benefits.
Furthermore, educational and awareness programs have been implemented in collaboration with organizations such as the Red Crescent Society, adding a new dimension to the role of the mosque as a center for learning and awareness. These activities not only enhance social ties but also contribute to improving health and educational awareness in the community, reflecting the significance of the mosque in individuals’ daily lives. All these efforts demonstrate how the concept of sustainability can be applied in religious and social contexts to achieve mutual benefits for all.
Successful Experiences in Social Entrepreneurship
The experience of the “Watin” project in managing blood banks is another successful model in social entrepreneurship. This initiative started as a charitable endeavor but developed into a comprehensive model that manages blood banks and ensures the needs of hospitals and communities are met. Through collaboration with companies and hospitals, “Watin” has been able to provide effective and reliable services, reflecting the ability of social projects to achieve financial sustainability.
The transformation
Shifting from reliance on donations to a sustainable business model requires a clear vision and effective strategies. When “Wateen” began to focus on providing a distinguished service and achieving sustainable income, it managed to attract support and sponsorship from companies. This kind of thinking demonstrates how social enterprises can have positive impacts on the community while building a strong business model at the same time.
It is also important to clarify how “Wateen” utilizes modern technologies in managing its operations. By using smart applications, “Wateen” has been able to enhance the donor experience and facilitate the management of donations. This highlights the importance of innovation in the social sector and how technology can make a significant difference in improving the services offered.
The Importance of Organization and Governance in Family Businesses
Family businesses represent a large part of the economy, but their success relies on good organization and governance. Establishing a family charter that outlines principles and regulations for managing the business can greatly facilitate operations and prevent disputes. By setting clear rules, families can ensure that all individuals involved in the business know their roles and responsibilities.
Additionally, creating a family council helps to enhance cooperation and communication among members. The role of this council is to discuss important issues and make decisions related to the business. It can also support members who are not necessarily involved in daily operations, ensuring that everyone feels connected and concerned about the success of the company.
Speaking of organization, the family office plays a crucial supportive role for its members. It provides a range of services, from assistance with personal matters to offering financial consulting. This type of support enhances family cohesion and reduces the pressures that may arise from working together. By addressing personal and professional issues in a balanced manner, families can focus more effectively on achieving their economic and social goals.
Developing Financial Awareness in Children
Teaching children the principles of financial management is vital for ensuring their financial future. Projects that focus on increasing financial awareness among children are an important step towards building a solid foundation of financial knowledge. By providing specialized educational programs, children can acquire the necessary skills to manage their money effectively.
Providing educational games and interactive programs helps capture children’s attention and make learning enjoyable. By creating a creative learning environment, children can explore concepts like saving and investing in an interactive way. This type of learning is part of a broader strategy aimed at raising financial awareness in the community.
Furthermore, collaboration between financial institutions such as the central bank and these programs reflects the importance of supporting financial education. By investing in children’s education, a generation capable of better handling financial challenges is built, contributing to strengthening the national economy in the future. These initiatives emphasize the importance of teaching financial awareness as part of comprehensive child education.
Conflict of Interest in Family Businesses
The issue of conflict of interest is a sensitive matter faced by family businesses, as problems arise when board members have personal interests that conflict with the company’s interests. Regulating these issues is an essential part of business management, where members must disclose any investment or business that may compete with the company. Therefore, the company’s charter plays a vital role in regulating these relationships and defining responsibilities. It is important to separate members who are involved in management from those who are not, where non-managing members are given the right to pursue their own investments, but without competing with the company. If one of the members crosses the agreed boundaries and starts competing with the company, the shareholders’ assembly can intervene and decide to buy their business or investments. This model of management enhances trust among members and ensures the continuity of the business in a professional manner.
The Role
Transparency in Building Trust
Transparency is a fundamental factor in building trust within family businesses. Often, one of the significant benefits of disclosing information related to investments and new projects is that members can communicate better and be aware of what is happening around them. It requires that each board member has the ability to disclose any investment they wish to make, which contributes to improving the work environment and creating trust among partners. When there is clarity in transactions, members can feel secure and understand that their interests are protected, which in turn enhances the chances of attracting talents and human resources capable of driving the company forward.
Challenges Facing Family Businesses
Family businesses face many challenges, including internal disputes that may arise among members. These conflicts can lead to the disintegration of the company and negatively impact its continuity. It is important for family businesses to implement effective strategies to avoid these problems, such as establishing a family charter that defines the rules and procedures to be followed. This charter should include mechanisms for resolving disputes and defining responsibilities, ensuring smooth operations and company stability. Additionally, the general economic environment and market changes are influential factors affecting the performance of family businesses, requiring them to adapt and develop flexible strategies to deal with these changes. Family businesses that succeed in building a solid organizational structure and providing the appropriate environment will be in a better position for success and growth.
The Importance of Principles and Government Legislation
Principles and government legislation are crucial in supporting family businesses, as the government works to provide a legal environment that helps companies succeed and develop. In many countries, governmental entities collaborate with family businesses to establish policies and legislation that support their growth and reduce the challenges they face. For example, national centers have been established to support family enterprises, aimed at providing consultancy and assistance in organizing work and offering financial support. The presence of such governmental initiatives boosts the chances of family businesses to expand and grow, reducing waste resulting from disputes or organizational chaos. Family businesses that benefit from these systems and legislations often find themselves in a stronger position in the market.
Lessons from Global Experiences
Many successful experiences exist worldwide in managing family businesses, from which lessons can be learned and applied in the local context. For instance, companies like “Hyundai” and “Samsung” in South Korea are successful models of family businesses that achieved significant growth through organizing family work and achieving transparency. These companies have been able to build strong organizational structures based on cooperation and effective communication among members, allowing them to be among the leading companies globally. Learning from these experiences can help family businesses in Saudi Arabia overcome current challenges and reach new levels of success, especially in light of Vision 2030, which aims to enhance the national economy and increase competitiveness.
The episode was summarized using artificial intelligence ezycontent
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