Value of succession plan was learnt the hard way

Sobhi Batterjee knows from experience how destructive disputes with relatives can be to a family business that does not have a sound plan for succession.

Arguments over succession and assets destroy more than relationships. They can also cause a family business to disintegrate.

Sobhi Batterjee knows from personal experience.

In the 1940s, Mr Batterjee's grandfather, a major distributor of pharmaceuticals, was considered a pioneer of modern medicine in Saudi Arabia. The family's wealth and power grew tremendously. But when his grandfather died, Mr Batterjee says, his father and uncles disputed the division of assets, the succession and the direction of the company.

The empire splintered.

"My brother, sisters, father, mother and I went into healthcare services," he says. "I took it on my shoulder that what happened to that generation would not happen with my business. I investigated and studied the subject and decided it was important to write everything down. Succession doesn't come at the death bed."

With more than 100 family members to consider, spread out among generations, Mr Batterjee insisted on drafting a constitution seven years ago to address succession, compensation for family members and general human resource policies.

Are in-laws treated the same? Who will be the company's next chief executive?

With Mr Batterjee at the helm, it took three years to answer these questions and complete the constitution with the help of an external moderator. The founding members of the board included his two sisters, two brothers, father and mother. Women, he adds, played a crucial role in the process. His mother, or "chief emotional officer", maintained the peace, civility and respect among the family members during the discussions.

Selecting Mr Batterjee's successor, or the next chief executive of the company, was the highest priority. After being put to a vote, it was eventually decided that Mr Batterjee's eldest son, Makarim, was the most qualified for the top job.

As the chief executive of Gold's Gym, an international chain of health and fitness centres, Makarim Batterjee was already an established entrepreneur in his own right.

"Starting your own business was one of the criteria in the succession," Mr Batterjee says. "These boys want a Ferrari and a palace as soon as they start with the company. But this is not possible. They have to earn it. They are expected to develop their own business in health or education and we will finance them and provide support."

In exchange, the family owns 51 per cent of the new business. The other 49 per cent remains in the hands of the founder.

Mr Batterjee believes that to keep the family together, it's important to satisfy its members as much as possible. The secret, he says, is getting everyone involved early in a positive way. "You want to arrange it so they cannot get a better deal anywhere else," he says.