Our company’s purpose is ‘sustaining life’ – we want our successors to be proud of that legacy for themselves and their children.
Mr. Abdullah Abunayyan, the founder of the Abunayyan family of companies, pioneered the importation of modern technology to harness Saudi Arabia's scarce water resources for agriculture. As a family business start-up in 1950, the company permanently transformed the nation’s irrigation methods by supplying diesel-powered water pumps to farmers. Today, the family business has an impressive portfolio of businesses covering public private partnership investments, including Vision Invest and Acwa Power, as well as products, solutions and services through its strategic business units and joint ventures that provide integrated solutions for water, power, oil and gas and construction.
The next phase in the company’s evolution has begun as it transforms from an LLC to a closed joint stock company. Khalid Abunayyan, Chairman of the Board, describes this next stage of the company’s transition in this way, “We are progressing from being a family-owned and family-run business to being family-owned – and best-managed company. Our succession decisions are focused on achieving this distinction.”
Laying the groundwork for management succession
The family of companies now includes several brothers from the second generation, and third-generation family members who are today in the business. Khalid Abunayyan considers it to be unlikely, however, that all family members in future generations will work in the business. “I don’t see my children being forced to join – or the business being forced to employ them. It has to be of mutual interest for it to work. Some children may have certain ambitions or interests to be part of the family business, but there is no automatic process for handing down the business to our older sons or daughters.”
Mr. Abunayyan emphasizes that succession planning does not begin with an imminent retirement event. For smooth transitions, succession should be approached as a clear and ongoing process that continuously assesses the rise and development of the next generation within the business and their ability to earn the family’s confidence as they progress from entry level to management positions.
To prepare for unexpected events, such as a health-related emergency or the sudden departure of an individual in a management or leadership role, Abunayyan Holding Company has obtained legal and structural guidance from external advisors. The family has documented a thorough and agreed-upon process for identifying successors to step into these roles, if necessary, and invested significant amounts of time discussing the protocol for an unexpected succession to ensure that everyone is aligned.
Preparing for future succession events
To solidify the foundation for responding to planned and unexpected succession events, the company is actively building a program in each strategic business unit so that family members, regardless of their age, can step in if their capabilities are needed. In addition to their capabilities, Mr. Abunayyan emphasizes that it is equally important to ensure that these family members understand and uphold the family values and continue to reflect them in all their actions.
Special development programs are being implemented for NextGen family members, including courses at Stanford and Harvard, external coaching and specialized leadership courses in financial management and strategy development. “My nephews are in the business, and I serve as their coach and mentor,” says Mr. Abunayyan, “We’re trying to understand their aspirations and what they want to achieve to develop customized programs that work for them.”
The continuous engagement of NextGen successors
One of the company’s succession goals is to maintain the continuity and prosperity of the children. As cousins, they will constitute the majority of the future shareholders and they are actively involved today in the business to ensure they are aware of what is happening and have confidence in its direction, regardless of whether or not the family business is their final career choice.
As Mr. Abunayyan explains, “The worst situation would be for one generation to pass away and have the children say, ‘Just give me the dividend check’. That would destroy the strength – the DNA – of the family. As ownership starts to dilute through the generations, it is becoming even more critical to keep the succeeding generations involved. Even if they don’t have a vote in the board today, they can hear the debate and learn how decisions are being made. If they have gone through the journey and listened to these debates and business discussions, they will have faith in the institution and want to remain attached to the business.”
For those who do choose a role in the business, a family protocol was developed in 2011 to address the ways in which the next generation will be engaged and developed.
- Following completion of their education, family members are required to work in an external organization for at least 3 years prior to entering the family business.
- They are treated in the same manner as all other employees. Pay and benefits are the same for family and non-family members alike.
- They cannot be hired by a relative. They must be interviewed by a team that includes HR and satisfy all the job requirements – competencies, technical skills and soft skills.
Strengthening board leadership
Board succession is on the minds of the Abunayyan family as well, particularly following the transformation of the holding company, which presents an opportunity to invite non-executive and independent members onto the board. There will be eight board members – five family, including the chairman, and three non-family independent members who are investment, audit, and industrial investment subject matter experts. The company believes that strong succession at the board level is vital to continue to steer the company and to provide direction and leadership continuity alongside family members who can engage with the public, assist with business development and interact with stakeholders.
Institutionalizing the business of the family
The company is moving toward the formation of a family council and other initiatives that will continue to strengthen the institutionalization of the family business and shield it from individual and personal decisions by shareholders. Mr. Abunayyan emphasizes that, “These approaches have been written into management science for 100 years, but that doesn’t make it any easier. Try to implement it in a family business, and you can throw all your MBAs out the window. It’s very complex, and the emotional reaction of family members isn’t always logical or reasonable.”
Securing the business and family legacy
“From a family perspective,” concludes Mr. Abunayyan, “I want to make sure this is an institution that will continue for the next 100 years. I want to leave behind a place where the shareholders and future generations are inspired and interested in being a part of it. From a business perspective, my father didn’t aspire to be wealthy. This was not his priority. He created a business legacy and culture that centered around reliability, innovation, customer centricity and honesty. Till today, these remain our core corporate values. We want to create a global business that serves our company’s purpose of sustaining life and creates long term economic, social and environmental value. This is my father’s legacy that we hope to endure through future generations of the family business. If our employees, shareholders, customers and young family members believe in our purpose, I’ve done my job, and that’s what will inspire the future generations."