EGYPTIAN BUSINESS FAMILIES: AN AMERICAN VIEW

Sensitive Americans wince at cultural gaffes committed by other Americans traveling abroad. A film classic, "The Ugly American", dramatizes their insensitive assumption that others around the world think, act, and value just like us—or should. Some detect this in our foreign policy. My own cultural sensitivity was put to the test when I was invited to consult with business families in Egypt.

During 2000 and 2001, the U.S. government retained me to counsel Egyptian business families facing leadership change. In Cairo, I held public seminars, and facilitated a number of private family meetings. After more than forty years as an American lawyer, law professor, and family business consultant, I was working for the first time in a very different culture from my own.

Reshaping Egypt's economy

Egypt, a nation of 65 million, is the second largest recipient of U.S. foreign aid, administered by the U.S. Agency for International Development (USAID). Over the next several years, USAID plans less funding for Egyptian infrastructure—schools, hospitals, roads, water and sewerage systems—and more funding for skills and knowledge training designed to help Egyptians grow their own economy. My work was part of this new emphasis.

Egypt's culture has been shaped by its rich ancient history, French and British colonialism, Turkish occupation, recent wars, and its strategic location. For the two decades following independence in 1952, Egypt experimented with a state run economy. Major business enterprises were state-owned and decisions were centrally made. After President Nasser's death in the 1970, Egypt began a turn towards a market economy.

In the early 1990s, an economic reform program supported by USAID, the World Bank and the International Monetary Fund undertook to restructure the Egyptian economy and to encourage privatization and an entrepreneurial spirit. Reform legislation created incentives for private investment (domestic and foreign), opened foreign trade to private companies, and eliminated most controls on worker emigration. Egypt hasn't emerged entirely from its experiment with a state economy. A heavy-handed bureaucracy survives, along with state-owned banks.

Family-owned companies

Family-owned companies produce most of Egypt's gross domestic product. Many of these were founded during the entrepreneurial upsurge of the 1970s. The aging founders are now in their sixties and seventies. Their Egyptian business families are facing generational transition for the first time.

The Egyptians I met were unaware of the growing body of knowledge about family business that has accumulated in the west over the past twenty-five years. All were eager to learn. Most readily admitted me to their family circles. All were fluent in English. A number had western educations.

For the most part, Egyptian and American business families ask the same critical questions about family business. They, as we, wrestle with leadership and ownership succession, family employment, distribution of profits, inside-outside shareholder tensions, work responsibilities, accountability and governance. But cultural differences can dictate very different answers.

Family is central

Egyptians live, work, and socialize primarily with their extended families, who often reside in the same compound or apartment building. The primary purpose of the business is to provide for the extended family. The family's public face is enormously important. The company's public image is a direct reflection on the family. Welfare of the business itself seems secondary. Jobs are given to any family member who wants one. Compensation is likely to be equal among family groups, regardless of one's responsibilities or job performance.

Loyalty to family is extremely important. I found relationships between fathers and sons to be incredibly close and openly loving. They may disagree strongly, but respect and honor dictate that father will prevail. Tensions between relatives can run high. Nevertheless, the old Arab saying continues to apply: "Me and my brothers against my cousins; me and my cousins against the world."

Family managers

There is an acute shortage of trained Egyptian managers. Most gravitate to the multinational companies who are very active in Egypt. Western managers are highly desired by family companies, but very expensive. Affordable hired managers are frequently Asians, who don't speak Arabic and are unfamiliar with Egyptian culture. Hence, most managers are family members. Governance is also family. Formal boards of directors are rare. When Egyptians speak of their "board" they likely refer to informal gatherings of family managers.

Family ownership

Egypt is 90% Muslim. Inheritance patterns contained in the Koran require two-thirds of the estate to pass to children, sons receiving twice the share of daughters. It is almost unknown for a relative to sell shares in the family company, inside or outside the family. Though divorce is becoming more common, an ex-spouse would not receive company shares in a marital property settlement under Egyptian law. Buy-sell agreements and pre-nuptial agreements are rare. It's customary for all family owners to personally guarantee company bank debt.

Egyptian workplace culture

Egyptian culture subordinates individual interests to the group. Preserving relationships seems far more important than completing tasks. Time isn't fixed but an organic, flowing process. Delays are expected and deadlines can be adjusted. Harmony is valued over speaking one's mind. An Egyptian "yes" may mean "I hear you", rather than "I agree." Conformity is expected. One accepts authority and rarely questions a superior.

Egyptian workers don't climb the ladder. They find their place on the ladder and protect it. To fortify his place, a worker may withhold important information from co-workers, or avoid teaching them vital skills. Stringent labor laws reinforce a paternalistic workplace environment. The employer must provide workers with daily transportation between home and work. It is very difficult to discharge a worker for any cause. Except in upper levels of the multinationals, trendy management styles aren't in vogue. Egyptian managers rely upon shouting and surveillance.

One notable exception is the western manager of my Cairo hotel, who ingeniously taps the Egyptian work ethic through enlightened management. The workplace environment is egalitarian. All employees, including the manager, use the staff entrance. The manager calls each by name and they use his first name. A staff dining room, where the manager also dines, prepares fresh food to staff tastes—no banquet leftovers. A staff lounge offers popular reading and Internet access. The hotel employs four full-time English teachers. Each staff member spends one hour per day in English class. There are frequent staff parties and soccer matches in which the manager strenuously participates.

Testing cultural assumptions

To understand another culture, try testing some basic assumptions—yours and theirs. Americans assume their environment can be reshaped to fit human needs. Egyptians are more resigned to accept life's uncertainties, less inclined to question events. They don't share American restlessness for change, or the American obsession with planning, scheduling and control. Quality of work life and relationships on the job are more important than completing tasks. A family sales manager complained to me that his office was so confining that he was unable to make customer calls. "Why not shut the door and leave", I asked. "I couldn't do that", he replied, "that would offend my friends who come there to socialize?"

Women in business

By western standards, the status of Egyptian women seems to be improving. Women are taking important roles in family businesses, though seldom as CEO. They are determined pioneers in an ancient culture. In Bahrain, I spoke to the first annual meeting of the Council of Arab Business Women—over two hundred delegates from seventeen Arab countries. None wore veils; perhaps a third covered their hair; the rest were in western dress. All but the half-dozen who donned headsets appeared to understand my English. The Egyptian representatives to the conference were the most numerous and quite vocal. In some Arab countries, women have only recently won the right to vote.

Pragmatism

The Egyptians seemed comfortable with my Southern American dialect at about two-thirds speed. Though I tried to steer clear of confusing idioms and buzz words, they laughed loudly at our dubbing accountants as "bean counters." However, questioning hands rose when I used the word "pragmatic." They seemed puzzled with my working definition, "Do what works." I groped for a familiar illustration.

I recounted how the French began construction of the Panama Canal using the same engineering assumptions earlier employed at Suez: remove all the rock and soil between two bodies of water. The French failed because a mountain range traversed the Isthmus of Panama. It was impossible to remove all the rocks and soil between the Atlantic and Pacific Oceans. Successful completion of the Panama Canal fell to an American railroad engineer who, pragmatically, did what worked. His design permits ships to climb the mountains through a series of locks, towed by railroad engines.

I'm not sure my Egyptian audience grasped my illustration of pragmatism, or the concept itself. "Do what works" is unsettling. Pragmatism challenges their traditional ways of doing things. So does the global economy and its pressures for modernization and change.

Cultural confusion

Egyptians themselves can be confused by cultural diversity. I was trying to help siblings break a pattern of intense disagreement about their family company. To start a quiet conversation, I introduced a list of perceived differences between American and Egyptian business cultures. Their young dynamic business leader had earned a masters degree in business from a prestigious American university. Suddenly, he smacked his forehead with the heel of his hand. "My God!" he exclaimed, "I was educated to run an American company! I've been using American assumptions to manage our Egyptian company, and it isn't working! No wonder I'm so frustrated! I haven't shifted gears from America to Egypt!"

Some insights

Egypt has been in serious economic recession for several years. For business families, these are very hard times. With their backs to the wall, Egyptian owners are forced to retrench, to economize, to become more productive, to cut wherever possible, despite strong cultural traditions of generosity to family and mandatory job security for employees.

Egyptians have always found ways to do business abroad, and I respect them for it. The global economy is demanding more and more from them, faster and faster. Successful transition of business leadership from Egyptian founders to their younger generations is both very delicate and critically important.

Only towards the end did I begin to grasp some of the subtler differences between Egyptian and American business cultures. Refusing pork and alcohol is only a beginning. No doubt I made numerous cultural blunders that my Egyptian hosts generously forgave, or at least overlooked.

My experience is limited to Egypt and to those business families who sought my counsel. Those doing business in other Middle Eastern countries would be wise to check for any significant regional differences. Europeans will easily adjust my American observations to their own.

The Egyptians I counseled were polite and cordial, with wonderful senses of humor. I genuinely liked them. They were exceedingly forthcoming. In most families, everyone participated in the discussion. One founder's wife thanked me profusely for inviting her to the family meeting. In more than fifty years of marriage, she had never before heard her husband talk business.

I was honored by the opportunity to help.