The secret of some of the Gulf’s most impressive economic success stories lays in the courage and ambition of pioneering individuals who took a chance long before iconic structures and formidable highways came to occupy precious land once the realm of expansive desert sands. Whether going it alone, fueled by little more than entrepreneurial spirit, or taking the reins at newly founded national enterprises, business leaders from Saudi Arabia to Dubai have helped lay the foundations of the region’s economic might.
However, the intrepid entrepreneurs who have led their enterprises to resounding success cannot occupy the driver’s seat forever. As many a successful CEO heads towards retirement, the looming question begs: what, or more precisely, who, is next? Shedding light on the sensitive topic of succession planning, and with Dubai as a case in point, Michael Morcos, Managing Partner of the Middle East Operations of global leadership advisory firm, Heidrick and Struggles, shares his insights.
Many company leaders that took a leap of faith by moving to Dubai a few decades ago are now heading for retirement. How do companies plan for the next step?
I think it’s a challenge. Most of them have not answered this question. Normally in emerging economies you see that the senior management of companies is quite young. But actually in Dubai, we have the opposite of that; we have a very tenured kind of leadership base across companies. If you look at Emirates Airlines, if you look at the big banks, if you look at Dubai Aluminum, if you look at Etisalat, these are companies that were tiny that have grown to become national champions and often they haven’t replaced the guy at the top. There is a loyalty to this person because he or she built the business. Most of these individuals now hold the title of Chairman and CEO which is a sign that the succession plan hasn’t been thought out.
What’s the solution?
The answer involves several things. First, identifying who the strong performers are in your organization and preparing them for succession early enough; second, telling them that they’ve been identified; and third, putting them through a program that prepares them. If you have a great marketing guy and you see he has great potential, he’s never going to be ready to become a CEO if you just keep him in marketing.
Succession planning is challenging. Some CEOs may say, ‘If I go up to my top five guys and say look, one of you is going to be my successor, I’m creating a problem immediately because then they’re all going to walk around with a big ego and it’ll create unhealthy competition.’ This is a CEO who is nervous about succession planning and who is only seeing the negatives, he hasn’t thought about how to manage that process. Companies that do succession planning very well don’t do it for the top five, it starts way earlier and it is part of the culture of the business; everybody is evaluated, everybody is rated, everybody knows how well they’re doing, and everyone has a discussion about their potential.
Who is responsible for succession planning?
Succession planning is not the role of the CEO; it’s the role of the board. Of course CEOs needs to be engaged because they know who’s good in the business, but the board needs to play a much more active role. The benefit of the financial crisis in a way is that it has allowed people to pause a bit. Things flat lined; companies had to focus on efficiency and cost savings and that was also the time when they started looking at their talent. Decision makers asked themselves, ‘Maybe we have a few too many people, so who are the good people?’ That discussion is the first step to succession planning.
How do you view the drive to provide leadership opportunities for UAE nationals?
There are a lot of complex drivers behind the desire to create economic opportunities for locals. If the place is growing and doing well and the only people benefitting from it are the expats, then the system will fail. The leadership of the country and the way that the system is set up try to help locals benefit from the situation. There is also a recognition that locals are behind the curve. The CEO of Etisalat understands that you won’t develop as much in the first five years of your career at Etisalat as you will in your first five years with British Telecom. He also recognizes that this doesn’t mean the Emirati doesn’t have the same potential. So there’s a big desire to help locals develop more quickly and progress within organizations.
What about Emiratization?
Emiratis are viewed as the ones who will be here for the long run, so people are trying to give them the keys to the car so that they are involved in the driving process. The challenge is that it sometimes results in Emiratis being promoted too early. I’ve seen some bad failures, where there is a really high potential Emirati who, if given a bit more time, would make a great leader or CEO, but they are put into the position too early and struggle with it; their confidence goes away and they become more closed because they don’t want to expose themselves. This creates a spiral of underperformance—when actually, it was a good story before. So I think Emiratization is a real challenge to get right, and succession planning is a part of that.
Resentment can also be created between expats and Emiratis (and vice-versa), who feel that they’re being bypassed. I have seen Emiratis come to me and say, ‘look, in the company I am in, the CEO is always going to be an expat, they will never trust an Emirati to be the CEO.’ Then I’ve been in the opposite environment where expats say ‘look, this organization has a glass ceiling and the top roles are always going to be for Emiratis.’ So a lot of people are getting it wrong.
How do you approach succession in family business?
Corporate governance for a family business is no different than corporate governance for any other business. You need to create a board, and if you don’t want to create a board, then I’ve seen families create a council. You need to create a group of advisors to the business from within the family or expand to bring non-family members onboard. Ultimately, the quality and caliber of the board needs to be right; people who have experience in business, people who have experience in the marketplace, people who have an understanding of the culture.
Board members are meant to see issues in advance of them happening and the reason they anticipate those is through experience. If the family doesn’t have the experience to do that, then we advise them to bring on external people and that’s critical. The process of succession planning is a long journey, and sometimes people in our companies say ‘oh I don’t have time,’ or ‘we don’t have the luxury of time,’ but in reality they do.
How can companies seperate family affairs from business?
One of the key things that can support succession planning is the concept of creating something called the ‘family office.’ Families may have a set of businesses that generate money and make profit, but they also have private assets (for example real estate, land, investments in other businesses). Separating those assets from the operating businesses is very important. Sometimes, deciding that this is not where family members need to take up leadership positions is important, because these businesses ultimately generate their future revenues. Instead, this dedicated office is where you can have relatives, because it deals with their private assets. Unless one of the best people for the job is a family member, put relatives into the family office and bring in the best people for that business.
What about the change in generations?
There is a big gap in the quality of education between the generations here. Many Emiratis in their fifties are the first people in their families to learn how to read and write. Another generation down, the education level is far superior. However, even if your education was basic, but you were still able to successfully build a business, it means you have other very good skills; it means you have great negotiation and trading skills—you do everything based on relationships. The younger generation is educated, and they make their decisions based on different criteria; everything is logic based. This clash of decision making based on logic versus decision making based on relationships can lead to clashes in families.