Families to control 40pc big enterprises by 2025: study

LAHORE: Around sixty percent of private companies with revenue of one billion dollars or more were family-owned in 2010 in emerging economies and 40 percent of world’s large enterprises will be family controlled by 2025.
These are the findings of a reputable American consultancy company, said Almas Hyder, who recently listed his family-owned company after 30 years of operation as a private entity.
“Even in developed economies, large corporations started as family enterprises but they are now managed by boards comprising a mix of shareholders,” he said. “Family controlled companies start basically in the domestic markets where they enjoy home field advantage.” Hyder said they know the culture of their country and operations of the local industrial sector. Most of them have a considerable influence on regulators, which emanates from personal relationship with stakeholders, he added.
Since the convention of corporate identity and commercial laws are less developed in emerging market, it is advantageous to manage a family enterprise.
Family enterprises honour their commitments as they feel more accountable to protect their reputation in the society.
Since the family business operators are not restricted by boards, they can also work fast. After all corporate world is trying to make their managers think like owners to improve efficiencies while in family business one of the owners is the manager, he added.
Owner-manager can take quick decisions without waiting for the approval from the board of directors. An owner–manager can move much more rapidly than an executive hired from outside.
The company, thus, has a greater advantage over the board-managed company in matters where quick action is required. Another advantage is that the family-owned enterprises could diversify their businesses instead of sticking to the core business as is witnessed in corporate entities and where diversification may face stiff resistance from uncooperative board.
Entrepreneur Nabeel Hashmi said that he had started his manufacturing plant as auto parts supplier but over years had diversified in packaging, manufacturing of computerised precision dies and molds, liquefied petroleum gas import and distribution, auto parts and packaging material exports.
“Mian Mansha started as spinner and is now in entire textile value chain,” said Hashmi. “He diversified into bank, power production, dairy, hotel business and banking.”
Similarly, Sapphire started with textiles and is now in power and dairy as well. Atlas started with business machines and has expanded into car making, motorcycles and power production. These diversifications have shielded these families from many sector related recession.
Hashmi said by diversifying, these families acted like stock market traders, taking advantage of access to talent and capital as well as allocating family assets across different industries. “This is an appropriate strategy for preserving wealth over the long term,” he added. The only risk in the family enterprise is succession when the founder owner dies.
Creditable research conducted over years has revealed that fewer than 30 percent of family- and founder-owned businesses around the world survive to the third generation as family-owned businesses. Since many first generation owners are still operative in Pakistan, one wonders how the successors act after his demise. History suggests that they would not survive like their peers in developed economies.
M I Khurram, who created a successful family empire in diversified sectors, said, “We are trying our best to engage in a careful succession planning.”
The generation at the twilight of their career is aware of challenges like family feuds, said Khurram. As family businesses expand from their entrepreneurial beginnings they face unique performance and governance challenges.
The trick is to prepare the next generation for taking over the command smoothly by working under the founder owner for several years.
Issues of competence or lack of entrepreneurship do arise and which must be addressed in the life of the founder.
Family business must meet two intertwined challenges: achieving strong business performance and keeping the family committed to and capable of carrying on as the owner, said Khurram. He added that some founder owners give reigns of their diversified investments to separate family members for independent operation.