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What do you do, dear business owner, when you’re 68 years old, have two sons and three daughters, and your annual profit, in present times, can no longer be divided by five? Has your mild-mannered son-in-law married your beloved daughter with the sole purpose of succeeding you? Is your family treating themselves to an ’emotional motivation’ seminar in Bermuda while you toil away for 12 hours a day at work? Does your youngest son care little about your ancestral furniture business and is more interested in studying ethnological theories about Australian Aborigines?
If you find yourself pondering any of these questions, then you are afflicted with the Family Business Syndrome. You spend your time alternating between hypertension medications and meetings with your Harvard consultants, specialized in ‘Family Business,’ all in an attempt to limit the damage.
The matter of family businesses in Lebanon, and likely worldwide, is a recurring topic. Over 90% of our businesses are family-owned, with all the advantages and disadvantages that come with it.
Many economists have delved into this issue, but why look far when we already have specialists in Lebanon? Leading the charge is Josiane Fahed Sreih, a professor and researcher at LAU who is the founder and director of the Institute of Family and Entrepreneurial Business (and theoretically connected to a thriving family business, Fahed Supermarket).
Her contribution, along with her colleagues, covers a wide range of family business issues. They have identified the advantages: flexibility and quick decision-making, emotional and financial commitment in times of trouble, a culture of hard work and integrity, and loyalty from a close-knit staff.
But they have also noted the risks of the family system: the patriarch who refuses to yield at 82, the son who has found his path in classical music, another son who feels frustrated at the lack of trust even at 50, sisters-in-law who bicker at every family business office meeting, the blurring of family and professional dimensions and the challenges of inheritance, among others. As a result, 86% of family businesses do not survive beyond the third generation. The average lifespan of our businesses is 40 years.
All of this is not new. We see the consequences with the abrupt closures of once-thriving businesses or with their continuous fragmentations: numerous Mouzannar, Maktabi, or Hallab businesses that may maintain the same professional quality but at a smaller scale. They lose size, along with the potential for international expansion.
Yet globalization is the best way to grow a business, create value and diversify risk, especially when you are in a tiny country that has a habit of going through adolescent crises every now and then, whether it’s to defend the rights of the Zulus, glorify a Persian master or empty the treasury of a state that’s not really a state.
You end up admiring small countries that have produced giant multinational companies like Nestlé (Switzerland, 8 million inhabitants), Nokia (Finland, 5 million), or even equipment manufacturer Hilti (Liechtenstein, 39,000 inhabitants), which operates in 120 countries and employs 30,000 people worldwide.
If all this is already known, what is so new that compels us to write about family business? We are in fact reaching now a critical phase of this story. We know that emigration has tremendously increased since 2019, particularly taking the younger generation with it. Family businesses are feeling the impact. If “family office” meetings are still being held, they now have to be conducted via Zoom, accommodating four different time zones. Next phase, the interest of the heirs will be waning as they pursue new directions in their adopted countries.
This has resulted – and will result – in the disappearance of century-old businesses, a loss of ancestral knowledge for a country that only has the expertise of its children as natural resources.
However, three solutions are possible if they were considered:
- Appoint a specialized CEO from outside the family to develop the business on behalf of the shareholders.
- Open up the capital and bring in a partner by selling a portion of the company. This broadens the company’s horizons. Alternatively, invite specialists to sit on the Board of Directors.
- For businesses of a certain size, list a portion of the shares on the stock exchange, even if our bourse is far from being up to international standards. There is a need for a special court and a sanctions system, as stipulated by law but never implemented. This reflects our legendary mismanagement.
However, all this hinges on the founders or their heirs being willing to set aside their pervasive ego in the local business scene. It also requires that the official busybodies at the top cease to engage in empty talk while making life even more difficult for entrepreneurs.
