The “Family” in the Family Business: Anchor or Life Jacket?
by Michael Braun
As we close out Annus Horribilis 2020, the small business community continues to reel from the unprecedented upheaval brought on by Covid-19. In response to shutdowns and related supply chain disruptions, owners and managers find themselves inhabiting a world of dilemmas — choices to situations whose outcomes are equally painful or undesirable. Decisions around hours of operation, workplace safety, and the retention of employees have proven to be a Pandora’s box, each one giving way to an entirely new set of problems.
Businesses that are family-owned (FBs) may well find themselves dealing with further entanglements. Adding family dynamics to already trying daily operations, FBs are experiencing an entirely different set of complexities — some good, others not so much. This past spring, a Banyan Global Family Business Advisors survey on the state of family businesses indicated the impact of Covid-19 on FBs was split: 29% had seen some negative impact on family relationships, 24% had seen family relationships positively impacted, with the remained unchanged. After months of additional hardship, the instability and uncertainty surrounding day-today business is bound to further strain relationships among and between family members. As tensions persist and escalate, they can set off self-reinforcing feedback loops, spilling over into day-to-day operations and, in turn greasing the skids to another round of conflict. With the vital symbiotic relationship between family and business grinding to a halt, the probability of the family business making it to the next chapter dwindles.
Given today’s real risks of FB survivorship, the question of whether the family will be an asset or a liability to the business is more important than ever. Research has shown that the family can imbue its enterprise with more efficient decision-making and implementation, a longer-term management approach, and a risk appetite that balances both financial and non-financial objectives. These qualities or characteristics, in turn, enhance FBs’ business resilience, competitive advantage, and even financial performance when compared to their non-FB counterparts. Yet bringing the family and business sphere into harmony is easier said than done. Having advised, studied, worked for, and worked with family businesses for the past 25 years, I offer some guidance to initiate the process of synchronizing ‘family’ and ‘business’. While in the short-term these recommendations can help stabilize the daily reality of running the family business, they may also help to secure continuity and legacy for generations to come.
Recommendation #1: OPEN UP COMMUNICATION CHANNELS
During this period of extreme ambiguity, neither guts nor glory will be achieved by suffering in silence. Now is the time to open up channels of communication among family members, as well as up and down the ranks of the organizations. While difficult conversations may have to unfold, the resulting transparency and trust can sharpen the lens on day-to-day operational needs while also clarifying who will be responsible for what. In addition, re-engaging with non-family employees can create opportunities for cross-training, upskilling, work flexibility, and other work arrangements to retain and optimize talent throughout the family business.
Recommendation #2: ACTIVATE FAMILY + BUSINESS NETWORKS
Business, at its core, is a deeply human endeavor, and FBs may well be the most human of all. As such, FBs would do well to take stock of the skills, capabilities, and networks available to them. Both among family members and non-family employees, the younger generation can serve as a wellspring of innovative ideas: with their finger on the pulse of upcoming trends, they can provide crucial insights and guidance on shifting customer preferences, digital and social media marketing approaches, as well as prospective technologies. Matching this human capital with the wisdom accumulated by the older generation from having gone through tough times before can make for a formidable combination.
Recommendation #3: LEVERAGE THE FAMILY BRAND
In a recent interview (NYT, Dec. 18, 2020), chairman of Ford Motor Bill Ford shares that “…our employees, our dealers, even government like the family involvement because they know there’s someone accountable.” Indeed, accentuating the familial facets of the business can raise the reputation, emotional connections, and feelings of trust in the marketplace, thereby boosting customer acquisition and retention while simultaneously strengthening ties with suppliers, vendors, and even the financial community. As the current economic climate diminishes the scope of doing business, regionalized and localized relationships based on trust give FBs a unique edge over their non-family counterparts.
Recommendation #4: FAMILY BUSINESS + BUSINESS FAMILY
It is not uncommon for a family business to suffer from lack of professionalization. This challenge is largely rooted in the dual DNA strands: family and business. When considering what underlies these two strands, it comes as little surprise that family can quickly overwhelm business. Under circumstances of economic uncertainty and duress, this complication can amplify half-baked decisions — often without much-needed buy-in, role ambiguity among family members, and actions that favor the family at the expense of the health of the business. Calling on and catalyzing the ‘business family’ to prioritize critical systems, structures and processes can bring family and business back into balance.
Recommendation #5: AN EYE ON THE PRESENT, THE OTHER ON THE FUTURE
The Covid-19-related demand shocks surely took even the most professionalized family business by surprise, forcing a reprioritization of decisions in both the short- and long-term. FBs often exhibit a lower risk propensity compared to their non-family counterparts, so families may rank order their immediate well-being at the expense of competitiveness down the road. But we know from the twelve recessions since World War II that economic recovery, when it arrives, happens quickly. Moreover, investments in innovation made during the economic downturn can translate into competitive advantage for decades to come. Calibrating risk-return appetites while scanning the horizon for emerging demand signals will be especially important for FBs.
If there ever was a time for the family business to activate its superpowers, it is certainly now. With FBs contributing 64 percent of gross domestic product and responsible for generating 62 percent of the country’s employment, we need the family business more than ever. As family-owned enterprises endeavor to navigate the treacherous waters of the Covid-19 recession, one question will help chart the right direction: Is ‘family’ going to be an anchor of a life jacket?
For additional insights on Managing the Family Business during Uncertain Times, listen to my interview, along with Business Coach Emily Benson and Psychologist Michael Klein, on Montana Public Radio’s Can Do: Essential Business Lessons — link: https://www.mtpr.org/post/can-do-how-family-businesses-are-navigating-covid-pandemic