The coronavirus (COVID-19) pandemic is having a dramatic impact on all sectors of the US economy. As most media outlets focus on industries that have been hit hard by the travel ban, like airlines, hotels and restaurants, the crisis has the potential to have a devastating impact on a group of businesses that are the backbone of the American economy – family businesses.
Did you know family businesses account for over 64% of the US gross domestic product and 62% of the country’s employment? Historically, family businesses have been able to weather financial crises due to various built-in competitive advantages of the family ownership structure and culture, such as:
Unfortunately, these differentiators may not ensure survival during these trying times. The crisis demands leadership, attention to the emotional needs of the family and employees as well as a well-crafted financial/business sustainability plan.
The Baker Tilly Center for Family Business Strategy professionals are dedicated to helping our family business clients survive and eventually prosper again. We will continue to provide advice and counsel to address the issues facing family business, their employees and families. We will address financial resilience and sustainability, workforce continuity, stress and anxiety management and government assistance available to family businesses and any other issues that present themselves as we work through this crisis together.
Our message to family businesses is to “Stay resilient”, and guide your family business with these leadership tips:
Napoleon Bonaparte said, "A leader is a dealer in hope.” Many family business owners and their employees are experiencing great anxiety driven by a fear of the future unknown. It is the leader’s responsibility to paint a picture of the light at the end of the tunnel to reassure employees, stakeholders and family members. Authentic leaders will help manage the emotional roller coaster and provide hope for the future.
We have all heard the expression “drastic times call for drastic measures.” We believe that “drastic times call for thoughtful and expeditious measures.” Thankfully, many family businesses have longer planning horizons, conservative financial management and are not at the mercy of a return-driven shareholder group. In times of crisis, we suggest that decisions be made thoughtfully, consistent with the family businesses values, but also expeditiously. Making thoughtful, but expeditious decisions goes a long way to give employees a sense of confidence, hope and safety.
Human nature leads people to jump to false conclusions in the absence of information and fear of the future unknown. In times of crisis, it is important for leaders of family businesses to communicate to your employees, family members and other stakeholders 1) What you know 2) What you don’t know 3) When you intend to get back to them with new information
In addition to providing much-needed information, communicating often and honestly will also help motivate employees and all stakeholders. Telling people what you don’t know helps build trust and credibility with your stakeholders. Well-informed stakeholders will be more willing to make sacrifices to ensure financial sustainability. Additionally, stakeholders may offer suggestions and new ideas to help weather the storm.
Successful multi-generational, family businesses are often driven by a set of foundational values that have been communicated to employees, stakeholders and even the community over many generations. During a crisis, family businesses should maintain and make visible demonstrations of their allegiance to their deeply-rooted value sets.
I am reminded of a family-owned real estate developer client during the 2008 real estate collapse. As the real estate business ground to a halt, they refused to lay off any of their employees at great financial cost to the family. The family value set included a commitment to the non-family employees. They honored their commitment and continued to make payroll.
Another demonstration of commitment to family values is continued support of charities during a time of crisis. Now is when many charities need even more support. Continued support sends a strong message to your employees, the community and all stakeholders of your continued belief in values of the family.
I would encourage all family-owned businesses and their families to continue to support those that have less and if possible step up your charitable giving to help those that have more needs.
Finally, we are all facing an uncertain future. Family businesses have been able to weather the storm in the past. At the Center for Family Business Strategy, we encourage family business leaders to lead from the front, stay true to your values and stay resilient.
In the words of Mahatma Gandhi, “the future depends on what we do in the present”.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.