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Zamil Group: family to the core

Every culture is linked to the family in some way, shape or form. The US has its founding fathers, Europe has its dynastic monarchies, while China has dabbled with allowing just one child per family in a bid to stem its expanding population. But the big daddy of them all is surely Saudi Arabia.

Named after the ruling Al Saud family who came to power in the 18th century, Saudi Arabia was formally established by King Abd-al-Aziz in 1932. Since his death in 1953, the King has been succeeded by various sons. Family is, perhaps more than with any other nation, an integral part of the oil-rich state's DNA. And this is mirrored in its business community.

The Zamil Group, a family-controlled conglomerate that has 12 sons of its own sitting on the board of directors, traces its roots back to 1897 and the small agricultural town of Onaiza in the central region of Saudi Arabia. Founder Sheikh Abdullah operated his first commercial business in neighboring Bahrain at the age of 21 and by the 1930s had established a successful trading entity. He followed this in 1959 with the construction of the tallest building of its time in Al Khobar, Saudi Arabia.

Favourable economic conditions, government support for the private sector and a well entrenched industrialisation programme provided the foundation for Zamil Group to establish a core industrial base in the 1970s. Today it is a multibillion dollar business with principal interests that include building and construction material, petrochemicals, shipbuilding and real estate. However, family values remain at its core.

"Family is the main cornerstone of our relationships and a very important entity in this part of the world," Khalid Al Zamil, managing director, Strategic Planning, of the Zamil Group exclusively tells Campden FB. "The mother and father have a special place in the house, the older brother and sister is always respected, while younger brothers and sisters are treated with compassion and love. Family is the main fabric of our society."

When the Al Zamils endured the unexpected loss of Sheikh Abdullah in 1961, the family and the business faced its first major test. The majority of the Sheikh's 17 children were still in school, so it fell to eldest son Mohammed, then aged just 23, to take on his father's mantle at the head of the company. The thought of a non-family member coming to take over was, Khalid says, simply not up for discussion.

"There was never any question it was going to be anyone other than Mohammed," he says. "He was the eldest, he was respected and he had worked with my father for about three years before he died, so he was trusted. He was the obvious choice."

All 17 siblings, who range in age from 50 to 72, are partners in the business although it's just the 12 sons who sit on the board of directors. Khalid's mother did not have any influence over the business – as he says, she had enough on her hands with so many children – and this has continued into the second generation. But while the women have concentrated on the family, the men had to work out a way to find suitable roles for themselves in the business.

Given the wide range of ages, the brothers entered the company at varying times and with varying levels of experience; some were still in university while some worked for other companies or government departments. However, Khalid says 1972 was the point at which the majority came into the business, coinciding with Zamil's expansion from a real estate and trading entity into a diversified
conglomerate.

The group formed a holding company that is privately owned by the family. Moves into industries such as air conditioning, steel and paints followed and Khalid says the ownership structure is mixed. The family owns some outright, while maintaining majority equity in other joint ventures. Some are listed (eg, Zamil Industrial Investment Company) where the holding company has 50% stake. The rapid expansion gave the business impetus, but it also ensured there were plenty of jobs for the brothers.

"Every brother took over one of the businesses. After a few years some of the brothers would move from one business to another – particularly if it was a new venture as this was very important to us at the time," explains Khalid.

Each individual business had its own board made up of three to four brothers plus three to four non-family executives. Khalid is at pains to point out that the brothers ensured that each business is treated on its own merits.

Crucially, he feels the mix of family and non-family executives is helpful to this process; in particular, the brothers' ability to take on directorships in a range of the group's businesses enables efficient decision-making, successful ideas and practices to be adopted and implemented quicker.

Carrying on the legacy

In the western world it would be expected that out of 17 siblings, there would be a few who would not want to be a part of the family business. However, this is not true in Zamil's case, the family ties proving as strong as ever. "Every family member wants to carry on the legacy of our father," says Khalid, although he admits that family ties were not sufficient on their own, competence, commitment and performance are pre-requisites also.

"It is also important to say that we have been active in risk taking – Zamil is an exciting company to work for as every year or two there are new investments and new businesses to get involved in, which is an attractive challenge," continues Khalid.

With so many businesses and so many brothers all jostling for time, attention and success, you would also expect a certain amount of conflict.

Khalid says the Al Zamils avoid conflict negatively impacting the business thanks to that old fashioned family value: respect. In particular, it is eldest son Mohammed who is the lynchpin of the family and the business.

"Everybody respects him," explains Khalid. "He handles the board meetings in a cool way, he listens to everybody, gives everybody a chance to speak and then gives his own point of view. We try to reach a consensus, even if that means spending several hours or more convincing each other of our points of view."

Communication is key – as Khalid recalls, there has been a lot of discussion in the past 35 years and the brothers have learned to agree on many things – but it all comes back to the importance placed on the family entity and their
personal relationships based on respect and love.

As such, family relationships don't begin and end at the office door. "We don't socialise to the point where we see each other every night, but we see each other a few times a week," he explains. For example, after Friday prayers the family might congregate in one of their houses for a cup of tea, something to eat and plenty of discussion.

Continue to be competitive

One topic that is getting everyone talking at the moment is, unsurprisingly, the global recession. Saudi Arabia has escaped the worst of the problems caused by the economic downturn. Zamil, which has part of its business focused on the oil and gas sector, has done better than most. "We have seen a slow down but we have not been hit very hard, in part because we are a diversified group," says Khalid, who adds the petrochemicals group has been the worst
performing.

The Saudi government is also helping businesses like Zamil by embarking on a $400 billion construction programme over five years. Although some projects have been delayed as a result of spiraling costs and the financial
climate, Khalid says very few have actually been cancelled – a positive sign. Indeed, he believes the country has done well overall and is in good shape moving forward.

"We don't know what will happen in six months or a year, but I'm optimistic and I think things will get better," he says. "Our challenge is to make sure we continue to be competitive and develop our people who are our critical resources." Unsurprisingly, Khalid says he sees a very bright future in oil, gas and other energy related industries.

On the family side, it's all about getting the third generation into the business and training them so that they can take over, according to Khalid. "We have around 20 of the third generation that have done very well and are already heading up companies within the group," he says. "The challenge is also to ensure the youngest ones are interested in the business, are willing to learn and want to take on the
responsibility of being future leaders."

With this in mind the Al Zamils established a talent committee, whose mandate includes taking care of succession issues. In particular, it is charged with overseeing the third generation's education, assessing where they would fit best into the business, and dealing with any business-related problems and challenges they may have.

The Al Zamils officially formed a family constitution in 2007 after gaining approval from the board of directors. The process had taken two years to perfect. The document focuses on family values, conflict resolution and succession planning. It also separates family matters from business interests, defines the family council and covers many other areas of business
management and ownership.

With regard to the next generation, the constitution states that third generation members must work outside of the business for at least a year before they can join Zamil Group. Teaching the difference between ownership and management is also a key strategy, as is ensuring that new owners are aware that they are not guaranteed to lead the group or even become a senior member of the group in the future.

"You have to prove yourself through quality of work, professionalism and dedication," says Khalid. "It is very challenging, but we have had some success in the last two or three years."

Composed of both family and non family members, Khalid says it is "very important" that the talent committee succeeds in its role. "We want to continue as a family business, and the only way forward is to sustain the interest of the new generation in the business, to mentor and coach them to act as responsible leaders and good corporate citizens".

With the average family now having "just four or five" children, the increase in new family members will not be as sharp in the future as it has in the past generation. However, the Zamils look to have the will and structures in place to ensure that the family and the business will be one of Saudi Arabia's most successful business-owning families. 

Improving US-Arab relations

President Obama was in Egypt in June making a speech aimed at mending America's difficult relationship with the Arab world. The business community is, unlike its political counterpart, often able to override cultural differences, as Zamil's joint venture with family-owned US chemical company Huntsman demonstrates.

Huntsman has been making headlines for all the wrong reasons in the past 12 months as it battles to restore confidence in its business following a disastrous flirtation with a private-equity backed merger.
 
In December 2008, Huntsman settled out of court for $1 billion after merger partner Hexion announced it would be pulling out of the proposed deal because, it claimed, the new company would be insolvent. Huntsman then pursued investment banks Credit Suisse and Deutsche Bank for multibillion dollar damages.
 
"We know the Huntsman family and we have a very high regard for them. They come some times and meet with the brothers here – we have a very good relationship with them," says Khalid. "This is business and sometimes you have a tough time, sometimes you have a good time."

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