Two months back I visited a very big automobile distribution company which we were considering as an important prospect for our RFID solution. This company is part of a family run group of companies. In normal business scenario, this would mean family will have bigger participation in board and rest would be independent members. However, in this case, board members, top management and middle management came from the same family. Though they are distributors of top international automobile brands, I was shocked to see their primitive inventory control system where they do not even have bar codes to track the inventory. I could see a big dent smartly camouflaged with glossy sheet.
In UAE and other countries of Middle East, family run businesses and SMEs form major part of the economic structure. It would not be wrong to say that in the world's economic structure, Middle Eastern countries plays a pivotal role in the trade between Asia, Europe and Africa. As a result, role played by these businesses become pivotal too and this gives them huge opportunity to thrive in a very fertile economic ground..
In my 8 years of experience of living in Dubai, I have seen these businesses stagnate over a period of time, working with old school methods and limiting their own growth. To me it is because the top management thought process in these businesses is over shadowed by cognitive bias. I witness this influence of cognitive bias in many occasions when I visit my customers from public or private sector during my business interactions or during my interactions in social gatherings. It disappoints me to see that despite high potential and opportunities these entrepreneurs have narrowed down their vision and therefore growth.
While confining my observation to family run businesses and SMEs, business management professionals are not welcomed with an open heart in Middle East. I can manage it by myself, psych of the entrepreneurs prevents absorption of business management professionals in the business. I am not challenging the business acumen of these entrepreneurs in managing their business. However, let us accept the fact that, every human being has limitations. If professional team combines with natural business acumen of these entrepreneurs, I believe it will do wonders.
As always the most common example or reference of cognitive bias is given with regard to management skills of technical experts. It is not always necessary if an individual is a technical expert, he will turn out to be a good manager as well. At least, this is what everyone thinks about their own manager and many a times it is true when the manager is a geek. He might be a technical expert but might not be able to look beyond technical domain and understand business sense. I believe whenever a technical expert is brought to a management position he should undergo a crash course on various aspects of business management , if not full fledged MBA. However, this doesn't happen. Technical experts are rewarded with promotions to management positions. Rather than it giving a boost to business it becomes a hurdle. Training before promotion for these geeks, at least by the organizations, is out questions as in Middle Eastern enterprises do not encourage on the job training for the employees.
I have seen organizations which are wholly run by family, relatives and friends at the middle management. This is Vasta Culture of Middle East. If you know the top boss or someone in the highest management, you may not have any qualification but you will have a good job with good salary for sure. Many a times this remains confined to taking their salary and staying off from day to day business. But problem occurs when each of these wise people (at least they think, they are) meddle in day to day activities and try to achieve their own objectives, at the end making the business run like a circus. It is possible that business might survive or linger for sometime but eventually this circus like environment cannot last for too long.
It doesn't mean all the family run businesses and SMEs are plagued by same poor management techniques. Some of these organizations have taken measures. They have segregated family from day to day running of business. May be, the most important decisions are taken by the key family stakeholders but they are taken on the advise from experienced professionals.
In the modern fast moving business world decisions cannot be taken in isolation. Every human being has a limitation and there is no harm in accepting this fact. Therefore, it will be wise for these family run businesses and SMEs to come out of traditional mindset of running business and adopt modern business practices. To start with, my recommendation to these family run businesses and SMEs are -
- Separate day to day management of business operations from family interferences
- Appoint executive committees to make day to day operational and strategic decisions
- Appoint qualified business professionals in the middle management
I am sure to start with these simple three measures will give upward thrust to the growth of organization. Once these measures are in place, rest will fall in place gradually.
