Actions and initiatives analysis for entrepreneurial families as they navigate the pandemic economy.
Is purpose the secret propellent carrying entrepreneurial families through the coronavirus crisis?
Family enterprises, says the University of North Carolina’s Torsten Pieper1, have “built-in cohesion” – a sort of psychological glue to one another and to the group. That special adhesive, it seems, goes some way in times of stress because there’s nothing like a crisis to test the cohesiveness of a family. “When you’re a member of a group and feel like everyone in the group has your back, you can trust them, and you’re aligned in your vision and your goals. You feel like you can overcome challenges or whatever gets thrown your way.”
Arguably many family enterprises are past the crisis-management stage and in the fine-tuning phases of altered business models adapting to the new realities of a wildly unpredictable pandemic economy. Could it get worse? “A massive insolvency wave is expected by the end of the year,” warns of European Family Businesses’ Jesus Casado2 adding that families will be keen to “capture the opportunities” arising from the crisis.
Governments worldwide have thrown cash at the economic carnage – from emergency benefits for private citizens to sweeping tax relief and funding measures for businesses. But the taps are turning off and the time will come to pay the piper. Casado warns deficit-reduction measures aimed at businesses must reflect this. “Governments mustn’t forget that all taxes have a link to economic activity. Without economic activity, there’s no collection, thus taxing companies who have struggled in the crisis would offer no results.”
On the enterprise side, there is a strong argument to be made for more purposeful thinking as a tactic to ride out next elements of the storm. Management consultant McKinsey & Company ventures: “The unknown portion of the crisis may be beyond anything we’ve seen in our professional lives.” True enough. Boards feel as if they’re grappling with 5% of the issues, with the rest still lurking, McKinsey notes. Executives are fighting fires in cash management and other areas. “But boards need to add to their burden and ask them to prepare for a ‘next normal’ strategy discussion.”
The unknown portion of the crisis may be beyond anything we’ve seen
Not merely a “hope for the best, plan for the worst” strategy, McKinsey reckons managers must unearth what those mystery issues are and work with boards to ensure that the organization can navigate them. “The point isn’t to have a better answer. The point is to build the organizational capability to learn quickly why your answer is wrong, and pivot faster than your peers do.”
Indeed, resilience comes through speed. In the pandemic economy, this may be a new capability few organizations possess, and will likely need to develop. Might stronger purpose be of help? Family enterprises, particularly those with generational longevity, frequently distinguish themselves by their enduring commitment to making a meaningful difference – purpose – in some aspect of the world beyond the family and the enterprise. It may not be the core business itself, but the purpose is not dissimilar to the built-in cohesion espoused by Pieper in that it is the symbolic mortar binding the fundamental pillars of family, enterprise, and ownership.
“A family with purpose knows what it’s all about, knows why it’s in business, and knows what it’s trying to accomplish,” says Claremont Graduate University’s Kendall Cotton Bronk3. “As a result, it should approach a crisis like Covid-19 with a strong sense of direction and aim.” Families that lack this, adds Bronk, could be at greater risk.
Optimistic as it sounds, the world may be on the cusp of a more selfless age in which corporations follow more community-orientated paths akin to trailblazing family enterprises. Singapore Management University’s Annie Koh4 offers a view that hearkens back to George HW Bush’s 1988 acceptance speech in which the former US president called for a kinder, gentler nation. “This pandemic, being both a human and business crisis will require the ‘new normal’ to account for both aspects of caring for the people, as well as the profitability of the business.”
Koh’s view dovetails with Sirius Financial Services’ Susan St. Amand5 who anticipates a “renewed emphasis on family first” and a refocusing on long-term strategy in the imminent post-lockdown era. Families, she predicts, will run their enterprises with intense caution – and outward compassion: “Reduced appetite for risk, capital preservation is top of mind, philanthropy is top of mind – support for the community and the supply chain.”
But what should a company’s purpose be when the purpose of so many, right now, is survival? It is a tantalizing question. Executives have for years sought the sweet spot between their responsibility to maximize profits on behalf of shareholders and their desire to find a purpose across the environment, social, and governance themes on behalf of stakeholders and communities. Then the pandemic arrived. In asking “Are we behaving as a socially responsible organization?” Dambisa Moyo, an economist who serves on the boards of 3M and Chevron, takes a similar tack in a Harvard Business Review thought piece: “The human toll of Covid-19 and the ‘war-like’ conditions it has created have forced companies to redeploy factors of production and valuable company assets, often at cost or even free,” he states.
Some commentators argue that the pandemic has highlighted two possible business responses: profit before purpose or purpose before profit. Proving one or the other holds limited value. Balancing both is the Holy Grail. As for purpose, mature family enterprises – whether fully conscious of it or not – possess it in spades. The key is focusing on it. Indeed, it just may be the propellant that will see many clans through hard times. Says McGill University’s Robert Nason: “We know that families care a great deal about survival in any situation, because they are often carrying on a legacy of previous generations.”
Protecting legacies may ultimately be the engines powering families through this crisis.
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- Torsten Pieper is an Associate Professor of Management in the Belk College of Business at UNC Charlotte, USA
- Jesus Casado is Secretary-General of European Family Businesses, Belgium
- Kendall Cotton Bronk is an Associate Professor of Psychology at Claremont Graduate University, USA
- Annie Koh is a V3 Group Professor of Family Entrepreneurship at Singapore Management University, Singapore
- Susan St. Amand is the Founder and President of Sirius Financial Services in Ottawa
- Robert Nason is an Associate Professor of Management at McGill University’s Desautels Faculty of Management, Canada