Founded in 1946, the Al Muhaidib Group is a family-owned and -operated Saudi Arabian investment company. The group began as an operating company focused on building materials and then entered the food sector in 1959. It is now a leading investment company, with stakes in such major companies as the Savola Group, which supplies two-thirds of Saudi Arabia’s edible oils and sugar, and SABB (a joint venture between Saudi British Bank and HSBC Saudi Arabia). The Al Muhaidib Group has also diversified into aluminum, hardware, insurance, private equity, power, real estate, and steel.
Based in Dammam, Saudi Arabia, the group has 15,000 employees and some 200 companies in its portfolio. Sulaiman Abdulkadir Al-Muhaidib, eldest son of the founder, is the chairman; he is also a member of the board of directors of SABB and chairman of the Savola Group. Family members, including his two brothers, hold other key positions. In this interview with McKinsey’s Ahmed Youssef, he discusses the importance of trust and how to weave together different generations.
McKinsey: What are the most important lessons you learned from your father and would like to pass on to future generations?
Sulaiman Abdulkadir Al-Muhaidib: Our father was a visionary and taught us a number of lessons, which we only came to appreciate as we progressed in our careers. Many of these lessons were derived from the way our father raised us and engaged with us at work. He got us used to a disciplined way of working.
At the beginning of my career, I used to go to the port every day at around 4 AM and wait for the first ship carrying building materials. We would have breakfast with the hardworking frontline laborers. As soon as the ship arrived, we would negotiate with the suppliers before the products were off-loaded. When the trade was completed, we would check around the port for names of agents, sources and destinations of the ships, and materials carried. And we would roam around looking for potential clues about the competition, such as product price tags. Later in the day, we would frequent the different retailers and traders and listen to their conversations; we would spend time at coffee shops where traders discuss and exchange information. In the evenings, we would be at the diwaniya—the reception area for business colleagues—pouring coffee and tea for our father’s friends and listening to their conversations.
We learned a lot from this, but we only realized that at a later stage. Several lessons stuck with me from that period. First, focus on what matters. After our visits to the traders, my father would always ask us to recount what we heard. Based on that, he would advise us to increase our visits to some stores and reduce visits to others. I realized only later that my father was encouraging us to develop stronger relationships with traders who discussed business and to reduce our exposure to those who were wasting time and gossiping.
Another lesson was about the value of rigorous discipline. There is an Arabic expression: “Fortunes are distributed before dawn.” This means that success comes to those that grab opportunities earlier than others. The fact that we used to start early would allow us to get access to the materials we needed, avoiding off-loading and storage costs.
My father believed you should roll up your sleeves. He taught us the importance of being on the front line, not staying in the office, to learn the business. We had our sleeves rolled up every day, engaging with every person involved in our business regardless of rank or status. Whether it was breakfast with the construction teams in the morning or discussions with drivers waiting to carry the loads or spending time with the merchants in their shops, every moment was important and a learning experience. We sought every opportunity to learn our business. We want to embed these values in our children and make them understand the importance of working on the front line.
The importance of building trusting relationships was another lesson. In our relationships, we didn’t differentiate between people. From senior executives to frontline employees, every person plays a critical role. Frontline employees are usually much more important when it comes to getting things done, because they know the trade. Understanding their challenges allows us to do our business better and gave us credibility with them. We were brought up to respect everyone and to develop trust at all levels.
Finally, choose the right people. “People who don’t achieve something for themselves will not achieve something for you.” My father always liked this Arabic saying. He wanted us to work with people who are hungry to develop and achieve something for themselves. This was a guideline in choosing the people we work with, the partners with whom we engage. It is also important to instill that in our children.
One more thing impressed me about my father: his foresight. He used to say that he had one wish in his life: to wake up every 50 years from his grave to see how the world and technology have evolved. He believed in investing in the future. I remember once we were considering whether to buy a fax machine, which at that time cost thousands of dollars. My father said no, we should not buy one—we should buy three for each office.
McKinsey: You mentioned the importance of people. How do you go about finding and working with business partners?
Sulaiman Abdulkadir Al-Muhaidib: Partnerships can have a highly positive compounding effect on the business, but they are not always easy. We have a few principles that we keep in mind.
First, set a clear direction and role from day one. It’s important to accept taking a backseat sometimes, while being the lead driver at other times. Sometimes, we bring the vision and direction, but we need help executing. Other times, we bring the network and market knowledge, while others bring technical expertise. These roles have to be defined and respected. They can be reviewed, if necessary.
Second, partnership is one thing and friendship is something else. Just because a company is a successful partner in one business doesn’t mean that partnership can be extended to others. We have several long-standing partners whom we respect and cherish, but they are not in all our businesses.
Third, identify conflict early and try to address it. Letting it linger and hoping that it will solve itself doesn’t usually work and can cause more pain in the future.
Also, I’ve spoken about trust. My father held himself to a high standard. He emphasized that trust needs to be earned with every person. During the days at the port, we built strong trust with small buyers by keeping our commitments. Sometimes after the morning rush, traders would lower prices to complete their inventory. We used to promise our clients we would match that price the next day so that they would not miss out. We kept our word. Building trust requires commitment; it means keeping promises, not just making them.
McKinsey: You and your brothers are the second generation. There are more than 30 members of the third generation, many of them already influential in the business. And the fourth generation is growing up. What are you doing to ensure that they are ready to be the future custodians of the business?
Sulaiman Abdulkadir Al-Muhaidib: We have invested significant time and effort working with advisers, executives, and friends to find ways to engage the next generation and to make sure they are equipped to lead the business. We have encouraged the right third-generation members to take roles in our diverse businesses and investments. We are also encouraging them to take risks and be more entrepreneurial. There are a number of other things that we have done and that continue to evolve.
For a start, we exposed the third generation to the world outside Saudi Arabia and equipped them with the right education. Success in our country and region requires interactions with many different nationalities, cultures, and types of people. Hence, we focused on providing them with the exposure that we didn’t get when we were kids. Most went to the US, Canada, or Europe for schooling and university. In fact, many of the cousins lived and studied together, starting in their high-school years in Montréal. This exposure to the world from an early age will give them an advantage as they become leaders. We don’t leave this to chance.
It’s also important to understand where their passion lies and where they can be successful. We have established a formal structure, through our education and development committee, to capture the younger generation’s interests and capabilities. We administer standardized tests and we speak to their direct managers, for those employed in or outside the business. We also have sessions with them, with siblings available for consultation, and try to get an understanding of where they can be successful and happy as we slowly guide their careers. Sometimes, for example, starting their career in the family business may not be the right thing. In this case, we help them find roles with banks, consulting firms, investment firms, or in companies that operate in industries we are interested in.
We don’t shy away from creating new businesses where we feel the third generation can deliver results. Our father taught us to take risks very early on. My siblings and I remember wanting to enter the wood business. My father didn’t challenge us. He just requested that we spend time with the wood traders and the carpenters to understand the business. Then, he let us sink or swim.
We are using the same approach. For example, some third-generation members were successful in investments and are passionate about expanding into venture capital. We believe the market is ready and they are ready. So we are supporting them.
Finally, family unity is critical for us. It is important that our children feel close and feel some attachment to the family. We have a yearly event where we invite all family members, even newborns. Every event has a theme, and the aim is to keep that family unity. As an example, during one of the events, we encouraged and financed young family members to run their own project for charity. It was wonderful to see all the ideas they came up with. In addition, the cousins and siblings organize their own events and trips, mixing fun and professional development. This is managed through the family council, a forum for second- and third-generation members to discuss such issues as the development of the younger generation, philanthropy, and the like. It is similar to a shareholder council.
McKinsey: What is your main wish for the family and the business?
Sulaiman Abdulkadir Al-Muhaidib: I wish for a smooth transition to the next generation. This is the real test. We will do whatever it takes to make this work. Success in the business and the family will come from that.
We have done most of the structural work to prepare the third generation. We have set up the right governance structure. Our board includes both the family and highly respected and experienced external board members. We have established governance within the holding and for our businesses. Our family affairs are in order, and we have an effective family council. Our shareholding structure is solid, and we have started transitioning ownership to members of the third generation—they already hold 20 percent—so they can feel like owners.
This is important, because some members are executives. But being a shareholder is different; it is a much bigger thing than being a manager. Shareholders tend to have a longer-term point of view; they need dividends, not just income. They see the business as a whole, where an executive concentrates on a specific business unit.
Looking ahead, we need to ensure that we select the right leaders to succeed the second generation and that we maintain one another’s respect. By that I mean respect in absolute terms and also respect for our traditions. This will allow us to manage the succession and to deal with our conflicts.
We are confident that we are doing the right things. We have a lot to learn, but my brothers and I are committed to making this transition a success.
McKinsey: What is your biggest challenge in that transition?
Sulaiman Abdulkadir Al-Muhaidib: I am not so much concerned about the business. We are doing our best to build capabilities that allow our companies to compete. The business environment in Saudi Arabia is favorable, and our national products are increasingly attractive. We are also building our human capabilities—not only of family members but also of executives and employees in our portfolio companies.
The challenge, then, can be expressed as a question: How do we transmit and immortalize the values of our father? My brothers and I lived with our father and mother in the same house. We experienced the stories. Our children and grandchildren have not. At our last retreat, we told family stories, and our kids loved it. It was inspirational. We want this feeling to last with them and across generations. We are considering a book about our father. Maybe this will help. We are open to ideas.
This article originally appeared in Perspectives on Founder- and Family-Owned Businesses. To download the full compendium, visit McKinsey’s Private Equity & Principal Investors site.