Family firms drivers of growth

A recent research report finds that family firms outperform non-family firms by an average of 15 per cent.

The unique strengths of Bahraini family firms hold important insights for economic forecasters, policy planners and business leaders looking for growth. Family firms represent around 75 per cent of the private sector economy in the region, so their continued success is a vital contributor to overall GCC growth.

Oxford Strategic Consulting (OSC) research found that Bahraini family firms possess particular advantages that give them a unique competitive edge. Firstly, 50 per cent of Gulf-wide family-owned firms are involved in more than five sectors, which means that they spread risk, are more resilient to downturns in one sector, and can rapidly move into growth markets – although they can be spread too thinly.

Family companies also benefit from a distinctive leadership style OSC terms the ‘Bahraini Leadership Style’. OSC research found that this leadership style focuses on relationships and loyalty, which positively impacts employee engagement, productivity and retention.

The most successful family firms are also unusually integrated with the government and consequently more aligned with their country’s objectives. Much of their economic success is related to providing stability and a strong cohesive link between national and private sector strategies and objectives.

Yet Bahraini family firms do face challenges. For example, a typical family business in GCC must grow at a rate of 18 per cent a year in order to maintain the same family wealth across generations. Family firms also face difficulties when assessing family members, which can be a touchy subject, and ultimately determining a successor. Similarly, family firms often struggle with how to ‘fast-track’ sons into important leadership roles. It is clear that not all Bahraini family firms follow strategies as they appear in traditional business textbooks.
 
A family’s business strategy may, for example, be more concerned with preserving the family name rather than generating profits. It is precisely the unique qualities of these family firms that enable these companies to continue to defy expectations and serve as key drivers of regional growth.