Family businesses are distinct from other organizations in both structure and behavior. They are the backbone of many economies worldwide, but are rarely centered in management education.

In this episode of The Global Exchange, we hear from Hakim Meshreki, Associate Professor of Marketing at the American University of Cairo and Commercial Director of Menatec, a family-owned adhesives company his father and uncle started in a garage in 1972. Drawing on this rare dual role, Hakim explores the characteristics of family businesses: the blending of family identity and business values, the "patient capital" mindset that prioritizes generational wealth over quarterly returns, and the succession planning challenges being reshaped by AI and shortened business model lifecycles.

He outlines the ways in which traditional MBA programs fall short of meeting the needs of family business leaders and previews a promising response to that gap: a MENA Family Enterprise Hub being developed in partnership with GBSN.

View a transcript of the episode.

I was brainwashed that this business will continue forever. Most of the earnings, the retained earnings are reinvested in the business. So if I have the choice and this was installed in our brain since we were raised, if you need to buy a new car or invest your money in the family business, invest it for your future kids.

Welcome to The Global Exchange, a podcast hosted by the Global Business School Network. That's 150 leading business schools working together to address the development needs of society. This podcast features conversations with expert guests about important trends and innovations in management education with the primary objective of increasing the positive impact of business schools on global prosperity and wellbeing.

Our guest today, we’re very happy to welcome Hakim Meshreki. He's an associate professor of marketing at the Onsi Sawiris School of Business at the American University of Cairo, but he's also served as partner and as commercial director at MENA Company for Adhesives Technology, Menatec. It's a family business and actually his family business and we're thrilled that Hakim can join us. Thank you, Hakim, for joining us and it's a pleasure to have you. Yeah. And I also want to say something nice about AUC. We've had the pleasure of working closely with American University of Cairo for many, many years.

In fact, a few years ago they hosted our annual conference and that was a spectacular event. And if you ever get to Cairo, please do pay a visit to AUC. A great crew. Now let's just jump right in. I want to emphasize something that strikes me.

At least I hope it strikes others as atypical to have this dual role, both as an academic and as a senior leader in a business simultaneously. It's not unusual for, of course, people to move between them. If you could start, Hakim, by just telling us a little bit about your personal journey and how you've come to straddle both academia and business.

Okay. Thank you, Dan, and welcome everyone and it's a pleasure to be here and to get the chance to speak. Well, simply speaking, I got raised in a family and we did have a family business. Initially, my father used to be working in PepsiCo, a typical corporate, and then he resigned when he was 47 years old. At that time, he and my uncle started a business, which is Menatec. It was in 1972. And when he started the business, it was very small. Actually, it started in the garage of my uncle's father-in-law and they had only a small mixer and they used to mix primitive adhesives in that garage and carry it in their car and go sell it to potential customers at that time. The business started to grow and since then, I was brainwashed at home, me and my brother, that you have to join the family business upon your graduation.

And we were also brainwashed that we have to become chemical engineers because the business operates in chemicals and so on. When I entered, I joined the faculty of engineering. At that time, I loved electronics engineering and I joined the faculty of engineering in 1995 at Cairo University. And then I graduated from it in 1999 immediately to join the family business forced and this was like a no-brainer. I'm joining the family business as soon as I graduate. Very fun fact is that my first job when I was an engineer, my father gave me the assignment for one month to clean the restrooms of the workers. And this was his way of showing me or teaching me humility and teaching me you have to start from the real bottom and then climb up the ladder as you progress and get experience about the business.

I beared this for nine months and then I couldn't bear it anymore. I left the family business to join a typical corporate Alcatel, which is a telecom company. It's a French company and I joined it and I worked, let's call it the best couple of years in my professional life. I worked as a mobile network designer. I applied for a master's in electronic engineering in McGill. I got the acceptance letter, but on that specific day, my father got a heart attack and I had to just abandon my plan to travel and remained in the company. Studying in Cairo University did not have the liberal art aspect that is present in so many universities. So I didn't have any background knowledge about business, the business knowledge, the real how to do business, how to manage a company and so on. So a lot of my friends advised me to do my MBA at AUC.

I did it. I finished my MBA and it profited me a lot to really understand how the business functions. And then I thought, who's going to teach me more? Who's going to bring me more knowledge? And I thought to do a PhD. And the area I loved was marketing. So I did a PhD in marketing in Nottingham University Business School. The choice was not, again, an open choice. I had to find a university which allows me to travel back and forth so that I can be managing the family business and doing my PhD. And I completed it in six years because of having dual responsibility. Upon finishing, I was asked by one of my colleagues who's currently the associate dean for undergraduate studies at AUC, Maha Mourad, to replace her because she had to leave on sabbatical and she had to find a replacement. So I told her I'm a full-timer in my family business.

How can I work at AUC? She told me, "You don't have to be present all the days. Only for your lectures for department meetings and for any specific tasks that are required from you." So I worked as a full-time at AUC just one semester. That was her promise in 2012, but apparently the semester got a bit longer and it's now been 14 years since I was doing the job, and juggling between AUC and the family business is not easy. Sometimes you would be in a Zoom meeting, which I'm currently holding from the family business, but it's totally related to academia. And sometimes I'll be at the office at the university and I'm holding a Zoom meeting with one of the clients or maybe speaking on the phone with a client and in front of me is a student sitting, taking some office hours as well.

So it's not easy, to be honest. I work six days a week around 14 to 15 hours a day to be able to juggle the time, but more importantly, the mindset change, the switch of mindset.

Wow. That gives us a lot to explore as we have this conversation. What strikes me immediately is the earliness of the brainwashing. It starts very early, this grooming for this type of work. But what really is interesting, I had this impression that it's something more recent where you're balancing this, but it's been your whole career where you're balancing the family business and the expectations of the family business with your academic, your specific interest in electrical versus chemical engineering. So it's a constant balancing act throughout your career. And we'll come back to that a little bit. I want to reserve also the opportunity to ask a little bit about the marketing in particular because to me, this has some interesting angles or gives us some interesting angles for how you think about family business. But forgive me, I suspect that everybody here knows more about family business than I do, but I'm going to ask the question anyway.

What defines a family business and what makes it different in particular from other kinds of businesses?

Yes. Yes. Let me talk a bit from an academic perspective. If you research… and I will talk about academic and practical perspectives because I want to communicate both. From an academic perspective, if you look for a unified definition of family business, you'll find that within the literature there is kind of no specific agreed upon definition of family business. However, there are basically two areas that define the family business. Number one, a structural area and number two, a behavioral area, or a structural side and a behavioral side. So basically, family businesses are defined or are organizations where you can find decision making that is influenced by a family or multiple families or multiple generations of family who have actually a majority ownership in the company or sometimes a big share in a company when it's a bit advanced and it's a corporate that is traded in the stock market.

So that's the structural definition of a family business. So it's a business that comprises shareholders with control and with management abilities within the business. So that's from a structural perspective. However, there was an argument that family businesses should not be only confined to this kind of structural perspective that the family members own a part or even manages a part, but it's also in terms of internal behavior of the family in the company. So basically, if we want to summarize a family business, it's a business that has family inside, who are in control, who has, in terms of behavior, a transgenerational intent to continue, for the family to continue. And finally, something very important we should notice about family business is the mix-up between the identity and the values of the family and the values of the business. There is a mixed identity here. It's not only the business values that are set by the management, it's actually the values that run in the family for years that are translated inside the business.

Juliane Iannarelli (11:34):

I'm going to go ahead and jump in since Dan isn't back just yet. Hakim, you and I have talked before about your work and especially the importance of family business within the MENA region. I know this isn't unique to just the MENA region, but could you talk a little bit about how much family business underpins the economy in Egypt and the surrounding area and why that makes this business model so essential to the community?

If you look at family business, you'll notice that it represents a big portion of the GDP in the MENA region. Some very quick statistics, family-owned enterprises generate approximately 60% of the GDP and employ around 80% of the private sector workforce in the MENA region. Now more importantly, what's currently happening is there is a kind of a transition that is happening, an intergenerational transition that is happening worth approximately one trillion in US dollars, one trillion US dollars. Also, family businesses contribute to up to... in Egypt only, they contribute approximately 85% of the national non-oil income and roughly 60% of our private sector activity, which gives a lot of value and weight of family business in our region.

Yeah. And you mentioned the intergenerational transition and family businesses have unique challenges when it comes to transition and succession planning. It's a different model. Like you said, you were identified early on as somebody who would come in and eventually take on a leadership role within the company. What are those unique challenges related to succession planning and family businesses? And how do you see it from your academic lens as you work with family businesses to help them be sustainable?

First of all, there is a very important kind of notion that we have to do. When we speak about MENA family business, everyone treats MENA as one building block and that's not always accurate when you treat the MENA region, but rather the MENA region could be divided into three blocks when it comes to the size of family businesses, the nature of family business, and actually the behavior of family business. You'll notice all the time that when I speak about family business, I'm not going to only speak about structure of the family business only, but I'm also going to speak about behavior within the family business. So the three blocks are as follows. The first block is actually the Gulf area. The Gulf area, and when I speak about the Gulf, we speak about the Gulf countries, God bless this area these days and wishing them all the best, but the Gulf area or this conglomerate is comprising large families very heavily rooted and they span multiple kind of industries.

So each family spans or controls several industries. So you will visit a family and you'll notice that there is a holding company which owns 10 or 15 other companies working in different industries, car trading, food and beverage, manufacturing, and so on. So that's a very big characteristics of the Gulf region and they have a very big governance challenge different a bit from let's say the Levant and Egypt. By Levant, I do mean Syria, Lebanon, Iraq, Egypt, and so on, which is characterized by family businesses that are either trading oriented or industrial oriented with different sizes. And the challenge here is more of institutionalizing or formalizing the processes where family interact inside the company. And then we have another building block towards the west, which is the, we call it the Maharib or the North Africa to the west of Egypt. I'm speaking about Libya, Morocco, Tunisia, and Algeria.

And here the family business is shaped by tribal culture. This area, the Maharib area or the West area of North Africa is very much characterized by tribal attitudes. So family businesses are not managed from a business perspective, but rather there is a lot of informal kind of governance that is in the game due to family protocols, tribal protocols that manage this business. So if we want to look at the map, that's the map of family business or talking about your question, which is the succession. Currently or usually what happens in the case of succession. Now, usually succession happens when one generation decides that they're either going to retire or in my situation, my father passed away a few years ago and automatically what will happen will be that there is a successor. So historically and from an academic perspective, succession occurred with the passing away or decision to retirement of the first generation and comes the second generation or the second generation and comes the third generation.

So it was very tied to the lifecycle or the generation and cycle of people in an organization. But what's currently happening is as follows. We've been hit in 2022 with AI. What did this AI do? It shortened the business model lifecycle. So instead of me inheriting a normal working business, the business model might be already invalid while still the two generations are interacting and usually the new generation is more technologically comfortable than the first generation. However, the first generation possesses a lot of relational and knowledge more about the business itself. So instead of the passing from the first generation to the second generation of knowledge, now we have a two-way communication that has to take place, communication from the first generation to the second and a communication between the second to the first. So instead of just having the first generation, the incumbents managing and the others are following, now there is a two-way communication that needs to be tackled and addressed due to this half lifecycle model that I'm talking about.

So issues of successions are no more how to peacefully and smoothly do the succession and plan for the succession. It's more of how this two-way communication is going to take place in light of the short-term lifecycle of the business model. And this brings us to the idea that in our region, there is one trillion of intergenerational transfer coinciding. So if this issue is not addressed and it's still a gap in the literature, there will be a lot of trouble or problems and a lot of conflicts, intergenerational conflict that's going to take place.

So is that changing the governance structures that the businesses are looking at in order to accommodate that parallel or collaborative leadership model?

Probably it would require a different governance structure because it needs to accommodate that the new generation has to have a voice a bit earlier than it used to be.

Thanks, Juliane, for stepping in. I want to approach this delicately because I know you've talked about succession. One of the things that I wanted to raise, and I think they're related is about sustainability. We had a guest for Global Exchange not that long ago who talked about intergenerational ideas, but one of the things that he emphasized was that he thinks we can learn a lot about sustainability from family business. And I'm wondering if you could expand on that a little bit for us Hakim, given the work of your family business, for example, and the way it thinks about today versus the future.

First of all, we need to know that family businesses are not sustainable by accident or they don't happen to be sustainable by accident or by our virtue actually. They are sustainable because of several things. Of course, first thing speaking about sustainability is their capital structure, the way they are structured from a capital perspective. Most of the funding of the assets comes from the family equities, or most of it is equity-based. You look at a lot of structures of family business, you'll notice that equity represents the majority of the family. So leverage in family businesses is very small. Also, time horizon, the time of investments in family business. And finally, the fact that I mentioned it when you were not here, it's actually the mix-up between the identity of the owners and the identity of the business. Let me now share a little bit of a practical experience on this.

Again, like I said, I was brainwashed that this business will continue forever. There is no notion that selling will come to the game or exit is coming. This is not even in the culture. So most of my money, most of… we don't pay dividends or the portion of dividends that is paid is minimal. Most of the earnings, the retained earnings are reinvested in the business. So if I have the choice and this was installed in our brain since we were raised, if you need to buy a new car or invest your money in the family business, invest it for your future kids. We had always this notion of reinvestment and reinvestment. Even if the business is currently losing, put your money in the business. This notion is built in when you join the family business. At least this was my side of the game or this was my experience.

So most of the time, even my wife keeps asking me, when are we going to feel the benefits of being in a family business? When are you going to ... feel that you are, let's say, financially relaxed or financially independent while most of your retained earnings are going to go to the family business. A joke she always tells me, "How much profit did you make this year?" And I tell her the profit, she tells me, "Okay, that's great. The family business will profit from all of this and we'll profit from nothing." So that's always a notion. So this kind of capital that is called academically “patient capital,” a capital which does not follow the normal return on investment lifecycle because here the investment does not follow the normal financial rules that we look at. So it's not only investing to get money, it's investing for the family future.

It's investing to find a job to the kids. It's investing to secure a better future to the kids. It's an investment because I have non-family members, employees whose lives depend on this work.

Yeah, that's very helpful. I want to maybe just push this a little bit further because the conversation that we often have is similar about this generational change. It's the idea that the resources that we use today we need to maintain for the future. The last Global Exchange we had a conversation about business and biodiversity and how business over time depends on nature and also impacts nature. But the idea that you not only want profits for the future, but you also want to maintain the business and its impact on nature into the future is something that we're often struggling with. Do you think family businesses have a longer term perspective as it relates to their impact on the earth, climate, and other environmental questions?

Yes. Actually in our business, for example, we started an initiative, 10 years ago actually, to be a complete recycling factory in Egypt, which is not common usually. And after 10 years, now I can confidently say today that we have zero liquid emissions to the environment, 100% recycling of liquid. We have zero toxic emissions to the environment. It took us a lot of discipline and we decided this not only because we want to have a certificate of being environmentally friendly or anything, but also because we care about the wellbeing of our employees who are becoming part of the family. So we decided to drop some final products which used to generate high profit margins just for the sake of not harming the environment. It sounds very idealistic, but it's actually what we did.

Yeah. And it sounds to me like part of the values of being in a family enterprise because it's those future generations that you're caring about, not only of your own family, but your adopted, if you will, family of the business enterprise. But I want to just jump right into the business education piece a little bit. I want to shift gears if that's okay and ask about whether you think a typical MBA, a standard MBA, if you will, is appropriate for family business professionals. Is it aligned with the kinds of needs of family business? Could you comment on that a little bit?

I'll start with my experience and then pass to what I found missing and speak a little bit about this. For me, an MBA was a value adding program because I came from an engineering background with no business background whatsoever. So whatever I was grasping from my MBA was useful, beneficial, helped me in the day-to-day activity. But across my MBA experience, I did not cross any family business course at least at that time. There was no family business course. I came with my rigid view of, for example, finance and I used to fight with my parents, my father and my uncle about the fact that our return on investment, we need to focus on ROI. We need to focus on the things we learn in a finance course. They kept telling me, "You need to be patient." And they were telling me about patient capital. They didn't have the right expressions, the right academic expressions, but I did not relate.

And then I did not even have in the education anything related to, for example, governance, anything related to succession in the MBA. All MBAs are based on corporates, on big corporates, on large organization, which are non-family. And the dominant objective that we learn from day one in any business course or business strategy course is shareholder maximization, which is totally based on agency theory. But in family business, there is a different theory here. There is this kind of stewardship theory that speaks about things. So the stewardship theory views managers as stewards because they belong to the family. They are people who will keep a business for forthcoming generations and forthcoming generations. This kind of knowledge we did not get in any MBA and I did not find any MBA. I only get this or we speak about topics of succession, governance, stewardship and so on. When we go and study or go to take a specific course of family business, ironically speaking, when I researched all family businesses offerings in our region, at least, there is no one single dedicated program that offers MBA for family businesses. Maybe part of a program, maybe a course, maybe a track, but not a full program that deals with family businesses, though the size of family businesses in our region is substantial.

Thanks for approaching it that way. I don't know if I ever shared with you, Hakim, but I'm an economist by training. One of the areas I studied was in the broad area of game theory, principal agent theory. I always seemed to me like corporations struggled to address this principal agent problem where the managers have different interests than the owners. It always seemed to me quite natural in a family business where the owners are the managers that this particular issue is less important. I'm glad you addressed it from that way and that your dual role as an academic and as a professional really shine in this discussion. Thanks for sharing that. But your point about not having a single MBA program geared towards family business also reflects some of the diversity that you referred to in the way people think about family business in different parts of the world, but also I think opens up an opportunity, doesn't it?

And that opportunity is one that we're trying to pursue together, GBSN and you and other institutions, your institution AUC, but also MSB and others by creating a family enterprise hub. And I wonder if you could tell the audience a little bit about some of our initial thinking about the potential value of such a hub.

I'll take it actually from the angle of what we're currently aiming at AUC. Recently we've put family business at the center of our attention at AUC and I became a bit responsible of this initiative within the school of business at Onsi Sawiris. By the way, Onsi Sawiris after which the school got named is one of the biggest family businesses in Egypt. That's why we're just putting a lot of focus on this area. Now the GBSN or the Family Enterprise Hub, the MENA Family Enterprise Hub matches a lot of what we want to do with this initiative – courses that are taught across the new network, joint research that we can have, competitions that we can have in family business together, faculty exchange that can take place so that knowledge is exchanged whereby faculty can get a lot of knowledge about different areas and different cultures, different way of doing family business and so on.

And it opens the potentials for many sort of cooperations, hoping that maybe one day it will switch to become a big... From my perspective, I do hope that it becomes a program that spans many universities under the leadership of the GBSN and it can be a unified offering, of course, within every region's specificity, but it could be a unified offering. And actually I used to be the CEMS academic director from 2017 till 24 at AUC. And if you look at the history of CEMS Consortium, which started with only four universities, and I think it's now approximately 33 universities, some of which appear here. I think Los Andes is one of the universities in this consortium. Why not we can become a consortium specialized in this area?

Thanks for sharing that. This straddling the academic and the practice side, that was one of those things that I think we've fully benefited from in this conversation. But I think the unexpected thing to me, and I guess it comes with the territory of being a family business is how much of your family and your own personal experience that you've shared with us. And we can't thank you enough for opening up that in very meaningful ways that help us to understand family business.