Families Summit of Minds: New Thinking and Bold Initiatives for Enterprising Families.
When family business expert Joe Astrachan1 kicked off Families Summit of Minds last week he asked a family enterprise owners’ internet audience a powerful question: “Why do so many people minimize real threats?”
He was talking about the pandemic which, a year ago, many took lightly. We know how that turned out. The outlook has since brightened. For that, Astrachan had another message: “Never confuse faith that you will prevail in the end with the discipline to confront the most brutal facts of your current reality, whatever they might be.”
In other words, family businesses must face facts and get on with business in the most prudent and progressive fashion as possible. As the senior family enterprise leader said, “Covid-19 is not a structural factor that will have a long-term effect on the economy. But it’s important to look at its impact.”
For those looking to public markets for signs of a wider recovery, it is important to understand that stock markets comprise large companies, entities that have been subject to valuations based on their discounted cash flows. As vaccines emerge as a solution, a stock market recovery is indeed taking place.
“What we don’t see in the stock markets is the general effect on small- and medium-sized companies, many of which have had to shut down,” the business leader said.
“Many are small to medium family businesses, which constitute about half of the Canadian economy. They have a dramatic effect and long-term impact on the economy. The stock markets reflect one thing, but the reality for half of businesses reflects a totally different situation.”
The imminent arrival of vaccines is offering hope to business leaders that next year will finally usher in the beginning of the end of COVID-19. In the interim, family enterprises are wasting little time putting their affairs in order.
Said the same family business executive, “We will basically position ourself for acquisitions towards the latter part of 2021 into 2022 . . . work on our margins and investing activities, it’s deleveraging to the maximum extent, having a clean balance sheet, and doing all of those things that will enable us to seize opportunities as they come up as we start recovering.”
With a 50-year investment horizon and no plan to monetize the company through divestitures, this is a classic family business in “business as usual” mode, in spite of the crisis.
Yet “business as usual” is changing, according to a family foundation executive. Business leaders are beginning to address “moving away” from the Milton Friedman ethos of shareholder capitalism, which leaves behind regard for societal and environmental impact, towards a new era of stakeholder capitalism or “one that moves from risk and return to risk, return and impact.”
Family enterprises may, by nature, be ahead of the curve by virtue of their values and principles being deeply rooted in communities whose wellbeing they hold dear.
“Not all businesses embrace this kind of capitalism,” the foundation leader cautioned. “Business has traditionally embraced CSR for decades and in doing so they have embraced corporate citizenship. But this is giving away a portion of their profits rather than fundamentally changing the way they do business.”
Will business leaders ever move beyond this, beyond capitalism as we know it, to rethink old structures and legacy challenges that may be holding them back?
Halla Tómasdóttir2 has a few ideas. She believes businesses are ready for change. “In the face of all the challenges that existed before COVID-19 hit, but have been accelerated by COVID, we’re continuing to do business the way we have always done it, in spite of knowing we’re now on a burning planet with a broken social contract.”
Tómasdóttir says she now encounters CEOs who ask, “Tell me how?” The 'how' is what tomorrow’s leaders could look like. Her team has created what it calls a leadership compass that reflects its principles of sustainability, equality and accountability.
“But you have to put humanity at the centre of organizational purpose, no longer shareholder wealth maximization,” Tómasdóttir explains. “And now humanity is in the perfect storm.” Tomorrow’s leaders will need more humility too, “Because we cannot do it alone . . . this calls for radical collaboration between the private sector, the public sector and civil society.”
Future leaders of this paradigm shift will be digital-native Millennials. “They are purpose-driven and poised to receive more than $30 trillion of inheritable wealth in this next chapter,” a Families Summit of Minds participant pointed out.
As a result, they will be a major force in shifting the way money is invested and spent. “In fact, Millennials are investing in organizations that prioritize the greater good more than any other previous generation.”
There is a learning curve for families. When the American philosopher Matthew Crawford said universities were the last place to search for new ideas, he had a point. But, as David C. Bentall3 of Next Step Advisors asks, “What is the role of business in rethinking tomorrow’s business education?”
And can academia deliver on the new leadership skills – ethical sourcing, empathy, circular economy management – that will be needed to run our businesses responsibly in the future?
The answers are not straightforward. Yet Bentall’s co-panellist, Harvard’s Christopher Robichaud3, could be on to something in moving away from case-study analysis – where students are “theoretical” fixers learning to evade the pitfalls of their case families – to fictional (and low-cost) simulations to observe and put to the test what students can actually do.
It’s about “Getting the participants' hands dirty,” says Robichaud. “Have them do something rather than just analyze.”
In a real world with real problems, that sounds like it could be a step in the right direction.
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- Joe Astrachan is Professor Emeritus and past Executive Director of the Cox Family Enterprise Center at the Coles College of Business, Kennesaw State University, USA
- Halla Tómasdóttir is CEO of The B Team, CSR consultancy USA
- David C. Bentall is Founding Principal of Next Step Advisors, Canada
- Christopher Robichaud is Ethicist and Senior Lecturer in Ethics and Leadership at Harvard