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The Role of HR in Family-Owned Businesses: Challenges and Solution

Updated: Mar 26

Samer discusses the unique challenges and opportunities in managing HR for family-owned businesses in the GCC, drawing from his time as Group HR Director at Al Fardan Group in Qatar and as CHRO for El Seif Investments in Saudi Arabia.

Family-owned businesses constitute approximately 90% of the private sector economy in the world and that also applies to the GCC as they greatly contribute to the region’s gross domestic product and thus are one of the main pillars of the economy. Even when you focus on larger organizations ($1b+ in revenue) the percentage is up to 70% of all GCC companies being family owned.

So why does there tend to be a stigma associated with working in a family-owned and operated business in the GCC? As someone who has worked in multiple organizations in both large conglomerate family-owned and operated businesses and multi-national companies I can share my perspective on the matter with a particular focus on the unique challenges and opportunities in managing Human Resources in this context.

Many hiring managers can probably attest to this when trying to recruit a prospective candidate for an opportunity within a family-owned and operated business where when initially highlighting the opportunity you often get an initial pause or awkward moment of silence where one feels compelled to immediately preface it by indicating that the organization has the right corporate governance or aspires to have it in place in the near future to mirror what is typically standard in a publicly run multi-national organization for instance. Everyone has heard of the horror stories associated with some family-owned businesses being essentially run by moody owners and their loyal henchmen operating with impunity and instilling a culture of fear and retribution.

Unique challenges include:

  Rescinded employment offers after contract signing and resignation,

  Being caught in the crossfire of family feuds & politics,

  Being disciplined (up to and including termination) w/out due process,

  Having your passport being held w/out permission,

  Lack of clear direction or continuous change of direction,

  Lack of clear succession plans,

  Works scope often can sometimes include domestic family issues,

  Lack of confidential channels to escalate Code of Conduct issues (i.e., whistleblower),

  Culture of retribution if ideas and actions deviate from the norm, etc.  

To be fair, it’s not all doom and gloom within family-owned and operated businesses as many owners really do have their heart in the right place and often take steps to instill the right corporate governance and let their management team operate the business with minimal oversight and intervention – This usually comes after trust is earned and with that often comes a unique employee value proposition that will make your colleagues in the public multi-national companies fill with envy.

Unique opportunities include:

  pension as a reward for life-long service,

  monetary and non-monetary awards can be well above market/industry ceilings,

  fast track career advancement opportunities,

  owners know you personally and ad hoc awards/gifts are given for professional and personal milestones,

  employment opportunities for family members are commonplace,

  benefits like company cars, housing, and air passage that are often above market grade level standards,

opportunity to contribute impactfully and leave a legacy is more prevalent,

empowerment and support in delivering board mandates (i.e., open budget), etc.

If you notice many of the pros and cons center around human resources related issues so the mark of a positive working environment versus a negative working environment often has a direct correlation to whether the Human Resources function has a seat at the table, instituted progressive HR policies, procedures, and systems, and the courage of their convictions to intervene and influence when necessary. Unfortunately, in many organizations that display a culture of fear & retribution the root cause often goes to systemic issues involving the HR function where as a function they are not valued or empowered (i.e., report to a span breaker like Finance) or in the absence of this are viewed as being skewed towards (a) Being an employee advocate at the expense of the business or (b) Being an employer guardian at the expense of the employee. Being seen as favoring one side over the other without adherence to past precedents or existing policies and frameworks will not end well for the HR function as they lose credibility on both sides of the fence.

Strategic Pillars of the Family Business

Drawing upon my experience with two large conglomerate family-operated businesses (Alfardan Group in Qatar and El Seif Investments in KSA), where I spent nearly 7 years working on efforts to drive professionalization across three phases (see below diagram).

In both organizations, I worked closely with the board, executive leadership team, and outside 3rd party management consultants (McKinsey was brought in within both organizations) to deliver on this mandate.

In both circumstances, the activities and process steps was generally similar as both board’s mandate was to ultimately enhance the organization’s effectiveness through a reorganization to address issues of growth or performance, institute the right governance to allow them to delegate to the leadership team, to attract new leaders to supplement the existing core leadership teams and ultimately infuse new ideas and ways of working, and to elevate the HR function to lead the transformation towards professionalization.

Looking back, these roles were my most challenging and rewarding as I was able to make an impact and leave a lasting legacy to this day. While I had opportunities within multi-national organizations it was generally limited to my immediate team or function as opposed to an entire organization. In both organizations, the key was convincing the board to implement the right HR operating model and to transition away from a decentralized personnel organization to a more strategic centralized HR operating model that leveraged:

(i.) Centers of Excellence (to develop standardized policies, procedures, systems, and standards),

(ii.) Shared Services (to deliver on high volume transactions efficiently and as per the defined SLA), and

(iii.) HR Business Partners (to build strong relationships within the business and deliver the group standards on the ground and escalate issues when needed).  

Professionalization comprises three phases

As illustrated in the diagram above, the professionalization journey often starts with the infusion of new leadership – particularly HR, Finance, IT, Operations, Governance, Risk, & Compliance. When I joined at Alfardan Group, a new Project Development Director joined as well and we both worked in parallel on the Board’s ambitious plans for him in Real Estate Development and me on People Development.

The next few months my focus was primarily on recruiting senior level leaders in Business Development, Legal, Governance, Risk, & Compliance, Finance, and so on to drive similar professionalization standards in their respective remits as we positioned the group for growth into new markets (i.e., hospitality, marine). Some of these recruits thrived and are still there to this day while others crashed and burned. Where they fell short, they lacked the right level of emotional intelligence (EQ) to navigate the political landscape often found in family businesses. This was an important learning for me and I began focusing on recruiting talent that possessed personality traits that would allow them to be effective in our working environment.

As I began to deliver on the board priorities and objectives I enhanced my own personal brand and garnered the right level of trust across the board to eventually pave the way to centralize the HR function under my direction and really elevate the organization’s reputation as an Employer of Choice in the country.

It was never easy and along the way I had a great deal of resistance and push back on the ideas I was introducing but the board. The board members essentially comprised of 3 brothers who were actively managing the core business, a sister who was a prominent national symbol for woman’s rights and contributed in this space in business development, and their father who was of course a legend in the country and built an impressive business empire and successfully transitioned to his children who were now building on that success – all great business leaders but more importantly great people that inspired their respective employees. My challenge was to work with each and deliver on what was important to them as each had their own set of unique challenges. Each was of course surrounded by an old guard but by and large they all understood that I was there to help and embraced the changes eventually. Fast forward on this multi-year journey and much of the heavy lifting had been completed and my role became more of a ‘run and maintain’ set up and I decided to ready my successor to allow me to transition to another challenge where I can continue to build my competencies and grow professionally.

The Group went on to have significant growth and prosperity and although they have reverted back to a decentralized HR operating model, many of the principles, frameworks, policies, and systems that I implemented are still being used to this day.   

During my time at another family group, the journey was eerily similar just on a much larger scale with a workforce size of 50,000. I joined along with a CFO and between the two of us, we jointly began working towards professionalizing the organization and infusing talent across the various functions and business units.

The board mandate was to redirect the performance of the contracting business which was struggling with on-time and on-budget project deliver, nationalization, and the two brothers who essentially were actively managing their respective businesses wanted to prepare the next generation who were willing and able to take on the transition and if not be able to have the right corporate governance to have the optionality for an IPO/Joint Stock Offering.

The two brothers did not always see eye-to-eye on priorities – for example, one was future focused and a big believer in systems and automation whereas the other was a huge proponent of people and ensuring we have the right skills to deliver on projects as this was what had gotten them to being the 2nd largest contractor in the kingdom. One was a morning person and the other was a night owl so you can imagine what that dynamic was like to try and bridge the divide. Fast forward again on the multi-year journey and we were able to deliver on much of the mandates we set out to deliver upon.

Like prior, the board supported the introduction of a similar HR Operating model that we were able to nationalize from 60% to 95% within my tenure. The young nationals we developed, coached, and mentored have seen their careers and earnings progress significantly in the years since and one of which lured me back to the region in an advisory capacity which is a validation in and of itself at the accomplishments we had on the ground.

Does any of the above insights around challenges and opportunities resonate with your own experiences in your organization(s)?

About Author

Samer is seasoned HR Management Consultant with an extensive background in Human Resources across six countries (USA, Qatar, UAE, Oman, Iraq, and KSA), Mr. Khatib has significantly contributed to various sectors, including Banking, Luxury Retail, Real Estate, Oil & Gas, Construction, and Government.

Currently leading a prominent national entity in Saudi Arabia, Mr. Khatib is responsible for overseeing their comprehensive human resources and organizational design. As the former Group Chief Human Resources Officer (CHRO) at El Seif Investments, he was instrumental in introducing transformative HR models, advancing digital transitions, and optimizing manpower resourcing. His efforts were key in improving El Seif’s Nitaqat status from ‘Red’ to ‘Green’, aligning with Saudi's Vision 2030.

During his tenure at Shell, Mr. Khatib played a pivotal role in integrating ERP systems like SAP Success Factors and supported Iraq's state privatization through strategic HR initiatives in a new joint venture, ultimately serving as the Global VP of Talent & Development for the Integrated Gas & New Energies division.

At Al Fardan Group, as the Group HR Director, Mr. Khatib centralized HR practices, introduced global standards, and laid down foundational HR strategies that facilitated the Group's growth.

Starting his career at Morgan Stanley, he advanced to AVP, HR Manager, where he laid a solid foundation in recruitment, performance management, and employee relations, establishing himself as a key HR figure in emerging economies.

Mr. Khatib holds an MA in Organization Psychology from Columbia University and is recognized for his mentorship, guiding numerous professionals towards success.


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