Women have opportunity to take on nore active role in GCC family businesses, says study

Joint study by Al-Sayedah Khadijah Bint Khawilid Center and Strategy& investigates role of women in family businesses / Transition to third generation presents family businesses great opportunity to draw from the entire talent pool

As Family Businesses in the GCC seek to address new challenges and transition to future generations, women have the opportunity to take on more active roles than before, according to a new study.

The joint study undertaken by Al-Sayedah Khadijah Bint Khawilid Center and Strategy& (formerly Booz & Company) investigates the role of women in family businesses across the GCC.  The comprehensive study is based on insights from extensive client work, publicly available information, and interviews conducted with stakeholders in 30 leading family businesses in the GCC in the past twelve months.

According to the study, in the next five to 10 years, a large number of GCC family businesses are expected to face a transition to the third generation. Succession planning is one of the most critical challenges that family businesses face but it can also be a great opportunity to draw from the entire talent pool, not only the male members of the family. As female family members become shareholders via inheritance, they tend to request a role in the governance and oversight of the business.

Dr. Basmah M. Omair, CEO of Al-Sayedah Khadijah Bint Khawilid Center, said:  “This is a propitious time for family businesses as all of the GCC countries have made female economic inclusion a top priority. The value of diverse perspectives from all members of the family is gaining more widespread recognition as most family businesses in the GCC are facing transition from the second to the third generation of ownership. As a result, there is a supportive environment for family businesses to take advantage of the contribution that their women can make. GCC family businesses are also looking at global best practices and finding that female family members are increasingly becoming a vital force within their foreign counterparts.”

“A number of other trends have contributed to women’s growing leadership over the past two decades, which include changing social conditions, such as smaller family sizes and higher average age of marriage; increasing efforts from women to acquire the skills that would make them eligible for a wider spectrum of roles in business; and growing social acceptance that encourages women to be more involved in the family business,” Dr. Omair added.

The study reveals the major obstacles to women’s participation in family businesses, which include the cultural perceptions of a patriarchal society, misalignment between the requirements of the business and the extent of women’s education or training,  women’s lack of interest or motivation to be active in the family business and fierce competition within large families for a limited number of senior roles, in which women are at a disadvantage as they must develop comparable skills to their male counterparts.

The evolving roles of women in GCC family business

Ramy Sfeir, Partner with Strategy& leading the family business platform in the Middle East, said: “In order for these companies to access their female talent pool, there is an urgent need for male family members to understand women’s aspirations and for female family members to calibrate the expectations of male members of the family. GCC women’s roles in family businesses tend to exist in two spheres: core business activities, such as management and corporate governance, and enabling business activities, such as promoting family values and preparing the next generation to join the business. Within each of these spheres, women are already playing clearly defined roles.”

Several GCC families have described their philanthropic activities as an ideal setting for women to be involved in the family. They expect women to benefit from more flexible hours than full-time employment allows and believe that women can play a better role in developing and executing the right programs to support those in need, building on their social connections and emotional intelligence, without the need for extensive financial literacy.

“Enacting a governance model and planning for succession require a carefully designed transfer of values to the next generation. Women are necessary to this intentional and essential transmission of family culture in two ways. First, women of the second and third generation must be recognized and mentored as strong contributors to the family’s success. Second, they should be acknowledged for their role as the educators and influencers of future generations, and encouraged to take on roles as mentors themselves,” added Sfeir.

In light of this broader impact, governments have a vested interest in promoting women’s participation in family businesses. Governments should continue their efforts to empower more women to participate in national development and break down social obstacles to female involvement. Governments need to lead, support, incentivize, and educate about how women’s inclusion in family firms can help these enterprises through generational transitions and in a more competitive external environment. They can also help to ensure that women have access to appropriate education and training with a focus on management and finance, and potentially consider in some cases female quotas for businesses similar to existing nationalization quotas.

Government support critical

The study highlights that women in the GCC have succeeded in overcoming the gender gap in both primary and secondary schools. In the UAE, where schooling is government-funded to the bachelor’s degree level, the gender gap in enrollment in secondary schools is insignificant. In higher education, women outnumber men in percentage of graduates across the GCC, and they are beginning to venture into fields traditionally dominated by men. This will create better alignment with their family firms in the future. Contrary to stereotypes, women are increasingly choosing to pursue degrees in the sciences, business, law, and engineering fields. Their educational advancement is bolstered by scholarships to study abroad, which more women are receiving.

Although GCC countries have made significant strides in education for women, the participation in the labor force still lags behind developed countries at around 30 percent, compared to 70 to 80 percent for most Organisation for Economic Co-operation and Development (OECD) countries. More importantly, according to a recent study conducted by the International Labour Organization, wide disparities in female workforce participation within the GCC exist, with 18.2 percent of women in Saudi Arabia entering the workforce, 28.6 percent in Oman, 39.4 percent in Bahrain, 46.6 percent in the UAE, 43.4 percent in Kuwait, and 50.8 percent in Qatar.

“Financial literacy has become an increasingly important skill, and perhaps nowhere is it more important than within a family business. However, nearly 50 percent of female interviewees cited a lack of financial skills as one of their key challenges. Accordingly, women need to focus more on developing their financial skills and business acumen so that they are able to make more informed decisions on the management of money. Family business leaders need to support this development by providing women with proper training which will prepare them for roles in the business. In addition, governments should take a step further by sponsoring and promoting training courses for women on relevant topics such as finance and management,” added Dr. Omair.

The study also states that the rationale  for  gender diversity in family businesses is often driven by the founder’s objective of restricting the company’s board seats to family members, including his sons and daughters. However, despite female family members’ elections to boards, the research suggests that few women are actively participating or providing input during board meetings, which could be due to the lack of preparation for the role or their limited integration into the organization.

Taking into consideration these challenges, the study outlines three important trends that can support an increase in women’s participation in GCC family businesses: (i) the high level of female education; (ii) the gradual growth in women’s labor participation and entrepreneurship and (iii) family firms revisiting their governance and planning for succession.

The study suggests that senior family members and more importantly, the government, will need to undertake initiatives for these three trends to have the desired impact in terms of giving family businesses the competitive edge that comes from incorporating women. Family business leaders can take advantage of these trends by ensuring that all members of the family supplement their formal education with the training that will prepare them for roles in the business.

“Governments’ support of women’s employment is critical and has had a positive impact on promoting a more active role for women in their family businesses. For example, women are expected to take on more senior roles at an early stage of their careers, or become entrepreneurs who develop new ventures within or outside their family businesses. When national economic trends became more supportive of women’s employment, this reflects positively in the family business. Previously, there was no foresight to include or develop female members of the family,” added Sfeir.

A harbinger of things to come

“Although the participation of women in family firms is a nascent trend in the GCC, the confluence of these trends will increase the likelihood of women becoming more involved in family businesses. Their interest, skills, energy, and enthusiasm — if properly channeled with training, mentorship, support, and good communication — will strengthen their businesses and their families,” concluded Dr. Omair.

About Al-sayedah Khadija bint Khuwailid Center

Al-sayedah Khadija bint Khuwailid Center was founded in Jeddah’s Chamber of Commerce and Industry in November 2004, corresponding to the month of Rajab 1425H. Its Board of Directors is chaired by Her Royal Highness, Princess Adelah bint Abdullah bin Abdulaziz. Its purpose is to connect the private and government sectors with women (be they businesswomen, working women or new investors) with the goal of removing the obstacles facing them economically so as to increase their participation in national development. This is achieved by studying the job market, its related laws and regulations and the resulting constraints. It is achieved by submitting proposals to modernize these regulations which shall then be discussed with decision-makers to support growth and development. Moreover, the Center seeks to raise social awareness on the importance of female participation and the importance of providing her with new and varied job opportunities to help her find the right balance between her familial duties and her career ambitions.