Case Study Details

Background: A family business in Saudi Arabia is one of the leading manufacturers and distributors of dairy products in the country. The business was founded by the grandfather of the current generation, who passed away 10 years ago. The business is now owned and managed by his three sons, who each hold a 33.3% share of the company. The sons are in their 60s and have 15 children among them, who are also involved in the business in various capacities. The sons want to plan for the future of the business and ensure its continuity and growth after their retirement or death.

Objective: The sons need to devise a succession plan that will address the following issues:

• How to distribute their shares among their children and grandchildren, taking into account their individual interests, skills, and contributions to the business.
• How to select and prepare the next generation of leaders who will take over the management and strategic direction of the business.
• How to preserve the family values, culture, and vision that have guided the business since its inception.
• How to avoid or resolve any potential conflicts or disputes that may arise among the family members regarding the succession plan.

Process: The sons follow these steps to create a succession plan for their family business:

• Hire a professional advisor who specializes in family business succession planning. The advisor will help them assess the current situation of the business, identify the goals and expectations of the family members, and design a customized plan that suits their needs and preferences.
• Conduct a family meeting with all the stakeholders involved in the business, including their children, grandchildren, spouses, and key employees. The meeting will be facilitated by the advisor, who will ensure that everyone has a chance to express their views and concerns and that the discussion is respectful and constructive. The meeting will cover topics such as:
• The history and achievements of the business and the family.
• The vision and mission of the business and the family.
• The strengths and weaknesses of the business and the family.
• The opportunities and threats facing the business and the family.
• The roles and responsibilities of each family member in the business.
• The criteria and process for selecting and grooming the successors.
• The valuation and allocation of shares among the successors.
• The governance structure and policies for the business and the family.
• The communication channels and mechanisms for feedback and conflict resolution.
• Draft a written succession plan that reflects the consensus reached by the family members during the meeting The plan will include:
• A family constitution that defines the values, principles, and rules that govern the relationship between the family and the business.
• A shareholders’ agreement that specifies the rights and obligations of each shareholder, such as voting rights, dividend distribution, share transfer, exit options, etc.
• A management succession plan that identifies the potential candidates for key positions in the management team, such as CEO, CFO, COO, etc., and outlines their qualifications, responsibilities, performance indicators, training programs, mentoring schemes, etc.
• A board of directors succession plan that determines the composition, size, selection criteria, term, rotation, evaluation, and remuneration of the board members, who will oversee the strategic direction and performance of the business.
• Implement the succession plan with the help of the advisor, who will monitor and support the execution and evaluation of the plan, and provide feedback and recommendations for improvement. The implementation will involve:
• Communicating the plan to all the stakeholders, including employees, customers, suppliers, partners, regulators, and competitors, and explaining the benefits and challenges of the plan.
• Transferring the shares to the successors, according to the valuation and allocation methods agreed upon by the shareholders.
• Developing and empowering the successors, through education, training, mentoring, coaching, and Exposure to different aspects of the business.
• Evaluating and rewarding the successors, based on their performance, contribution, and alignment with the vision and mission of the business and the family.

Outcome: The sons successfully create and implement a succession plan for their family business that ensures its sustainability and prosperity for generations to come. The plan also strengthens the cohesion and harmony among the family members, who share a common vision and goal for their business. The plan also enhances the reputation and competitiveness of their business in the market, as it demonstrates their commitment to excellence and innovation.