Actions and initiatives analysis for entrepreneurial families as they navigate the pandemic economy.
They are known for their long-term views and propensity to outperform publicly held companies, yet family-owned enterprises could be gaining still more wisdom amid the pandemic. If entrepreneurial families have learnt anything over recent quarters, it is how to cope with the uncertainty of knowing the course of the economy and society.
The world economy is in a fragile state. Attempts to restart activity, premature or not, have led to a rise in coronavirus cases, particularly in the US where the Covid-19 pandemic drags on. Roll out of vaccines, if any works, are months away. Central banks, meanwhile, have little capacity to respond to a further downturn.
The coronavirus has unleased turmoil. As to the course of epidemiological, political, social, and economic events, predicting the future is nigh impossible. Family enterprise expert Joe Astrachan1 likens it to pachinko, the Japanese game of unpredictable chance. What to do when there are too many variables?
“A prudent course thus is to accept this as fact and organize and resource the family and organization for survival during extreme turbulence.” The lesson for families? Perfect systems that allow for flexibility in actions, for example, time spent looking at how markets are acting and reacting.
Entrepreneurial families are learning to adapt faster because they have had to, says Deloitte’s Michelle Osry2, whose clients are both suffering and succeeding depending on their industry. Those with strong balance sheets and capable of making quick decisions are pivoting rapidly, she says.
There is nothing like a crisis to concentrate the mind. As economies shut down last spring, markets went into a tailspin, forcing countless businesses to limit damage as supply chains disintegrated. Suddenly, families rediscovered their enterprising ways by pivoting into everything from personal protection equipment to food delivery. “It is very much a back to basics approach,” says Bond University’s Justin Craig3. “Those who understand that business fundamentals have not changed will be better off.”
It is very much a back to basics approach
That may require revisiting the entrepreneurial mindset foundational to their success, says Craig, and therein lies another lesson: families adapt deftly because they serve one another. By extension, they protect the enterprise. Imagine the fundamental pillars of a family business – family, enterprise, and ownership – as a three-legged stool and it is easy to see how each depends on, and enables, the other to stand up.
It is unclear whether this has become more apparent in the crisis, but if there’s a lesson to be drawn it is that family matters more a crisis. In the words of the University of North Carolina’s Torsten Pieper4, cohesion counts. With cohesion families feel as if they can recover nimbly from setbacks, and make rapid adjustments because “everyone is in alignment,” he says. “This is particularly important when circumstances are constantly evolving as we experience it now.”
Reinforcing cohesion by, say, spending time together or sharing stories of past family crises, can pay off in spades, Pieper says. “Paradoxically, a threat from the outside, such as the pandemic and the crisis that it caused for many businesses, can bring a family closer together. Little rifts are quickly forgotten when more substantial things are on the line, such as the very survival of your livelihood.”
That doesn’t mean every man for himself. Awareness of the distinguishing features of family-owned enterprises – compassion, sense of community, and so on – is arguably a propellent behind family purpose, another sort of sub-element that feeds resilience. If there is a lesson here for families, Kavil Ramachandran5 of the Thomas Schmidheiny Centre for Family Enterprise points out that, in a crisis, they are more than just employers, they are caretakers. “In general, (families) are quite concerned about the welfare of their employees and taking care of them, particularly full-time employees,” Ramachandran says. “Because family businesses take decisions quickly, including those that may have strategic implications, their responses are smarter too.”
Reinvent the Future
The pandemic and associated economic upheaval have forced the hands of entrepreneurial families worldwide to rationalize and regroup. Encouragingly, as Singapore Management University’s Annie Koh6 observes, many foresee greater opportunities to develop in areas of communications, process, and leadership. “With regard to internationalization, our business families are preparing themselves to rebuild and renew their businesses in a post-pandemic world.”
Deloitte’s Osry alludes to a resurgence of web-driven efficiencies among families looking to learn how to mitigate the risks of more traditional business models focused on bricks-and-mortar strategies. “The main shift I’m seeing is to adoption of new (remote) workplace measures and an accelerated focus on e-commerce strategies.”
What next? Barring second or third waves of coronavirus, the global economy is transitioning to a fragile post-pandemic state. Yet 2020 and 2021 will be “lost years” in terms of growth, according to the Economist Intelligence Unit. The US economy will shrink by 4.8% this year, the EIU predicts. Europe's will contract by 7.4%. Elsewhere, recovery will be halting.
Given the state of the global economy, the future looks more uncertain than ever. Ironically, that may offer a final lesson for entrepreneurial families to master. Succession planning, an often irritating but necessary chore for families, is not so much planning for the future but, rather, creating it on their own terms. That means engaging next gens frequently and in meaningful ways. Perhaps it is not surprising then that 89% of 179 respondents to a recent Family Enterprise USA survey believe passing ownership on to progeny will be vital to the sustainability of their businesses and creating more jobs.
The pandemic has brought turmoil. It has also delivered opportunities to learn.
For more information on the Family Enterprise Barometer, visit our page.
- 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
- Michelle Osry is a Partner, Family Business Advisory, at Deloitte, Canada
- Justin Craig is a Professor of Entrepreneurship at Bond University’s Bond Business School, Australia
- Torsten Pieper is an Associate Professor of Management in the Belk College of Business at UNC Charlotte, USA
- Kavil Ramachandran is a Clinical Professor and Executive Director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business
- Annie Koh is a V3 Group Professor of Family Entrepreneurship at Singapore Management University, Singapore