Here, people count more than numbers

A little piece of advice for anyone leading in the Middle East: don't focus on shareholder value - instead, focus on what brings value to the shareholder.
This region is full of stories where outside executives tried to use their understanding of business metrics only to be surprised by shareholder (owner) decisions. As an example, the Saudi business where the chief executive advised the owner they could reduce their headcount by several hundred people and save another two million in costs. On the surface this makes sense - that is, if you are fixated on the profit margin.
To the chief executive's surprise, the owner asked: "Are we having financial problems that I am not aware of?"
The chief executive responded in kind: "Of course not. Our cash position is strong." Then the owner inquired: "Why do we want to let these people go?"
Here lay the crux of the confusion: the chief executive was focused on maximising shareholder value, commonly meaning increasing the wealth of the shareholders as popularised by Jack Welch in the 1980s. But the owner was interested in what brought him value, which in this instance is employing people and providing for their families. He held his benevolent responsibility close to his heart.
Businesses in the Middle East measure success by the fulfilment of a vision - not, as Wall Street routinely does, by the quarterly report. Thus, at times work moves at warp speed, and at other times it may seem to crawl at a snail's pace. Leaders have to understand and match these rhythms.
Fulfilment of a vision and the relentless pressure for quarterly results do not always unite. The vision of businesses in the Middle East reaches beyond common financial measures such as earnings before interest, taxes, depreciation and amortization (ebitda), diluted earnings per share and other fiscal metrics. I am not saying that these do not matter; they do. But for many firms, the true value is the legacy, which supersedes reporting cycles.
This is a very tough challenge for the time-weathered imported executive to understand, the cadence of whose life revolves around the quarterly cycle of earnings calls and fiscal projections. The pursuit of shareholder value simply fails as a unifying theory to produce real value in business. It turns chief executives into excellent managers of expectations, rather than tangible corporate performance.
Fortunately, in the Middle East, the ambitions that many leading companies have are not limited to these time checks on the balance sheet. In this tip, I'm not suggesting that leaders abandon fiscal rigour. Rather, I'm highlighting differing views of time, comparing the infancy of time - the short-term view that a young child has - with the impact of time as a long-term perspective. In the Middle East, western-trained executives need to look past short-term gains and quarterly results to understand time's real impact on fiscal gain. You need to think beyond your tenure with the company and value the emotional return on investment that is the owner's legacy.
What you need to understand is "who owns the business?" Most local businesses are in their first generation - owned by the founder - and still have entrepreneurial ambitions related to their future impact. Looking at family businesses in the region for a moment, we see that the founders have the same desires that founders of businesses all over the world have, which often conflict with the interests of external shareholders.
The Middle East is dominated by family businesses, which make up 90 per cent of the private sector and employ 75 per cent of the workforce. Therefore, unless you own the family business, you're most likely leading in one. By way of contrast, in a publicly traded business you rarely ever know who the owners of the shares are.
So, are you focused on shareholder value or what is of value to the shareholder?
 
Tommy Weir is an adviser on leading in fast-growth and emerging-market leadership, CEO Coach and the author of 10 Tips for Leading in the Middle East. He is the founder of the Emerging Markets Leadership Center