Last month, AvS – International Trusted Advisors conducted a survey of Family Business Owners and CEOs across Europe to get some perspective on how the Coronavirus is impacting their organisations so far. They told us about the challenges they’ve faced as well as the solutions and opportunities they’ve identified along the way. In many cases, qualities unique to the family business model have helped them navigate the crisis, suggesting that a certain level of resiliency is inherent when a firm is owned or operated by family members, even if it’s not always expressed.
The following is a summary of the survey’s key findings:
The Challenges
- Dealing with Uncertainty: There is a pervading air of volatility and complete unpredictability. Planning can feel like guesswork.
- Mitigating Health & Safety Concerns: While some companies in Switzerland and Germany experienced low infection rates and few hospitalisations, others in virus hotspots such as Northern Italy saw much of their workforce side-lined because of illness.
- Maintaining Mental Health: Welfare, in all respects, has become critically important. One family business owner said that one of her core concerns was, “…Keeping everyone happy… Domestic problems are bubbling up, and people talk to me more now.”
- Losing Key Workers: Some businesses are struggling with their over-dependence on key workers – team members who are irreplaceable because they alone possess specific technical knowledge or handle an important customer relationship.
- Operating with Unpredictable Sales: The impact is hugely varied according to geography, industry, channel and whether a company is deemed essential.
- Procuring Necessary Goods or Services: Many supply chains have been seriously disrupted by plant shut-downs, border closures and see-sawing commodity prices.
The Counter-Measures
- Improved Communications: The owners and CEO we spoke to have all upped their dialogue with their workforce. Both timeliness and tone are important; one participant said, “You need to provide factual clarity combined with a lot of human empathy”.
- Responsible Labour Practice: We saw almost no examples of mass sackings; the majority of family businesses are actively seeking to avoid lay-offs.
- New Efficiencies: Companies are slashing discretionary spending and reducing capital expenditure. Many have pushed through restructuring that would have been more difficult in more stable times.
- Team Spirit: At one family business, an emergency fund was created to help employees in need, bolstered by bonuses and dividends foregone by management, board members and shareholders.
- Remote Working: Most companies are now working from home, and are finding that the new system, even if it was forced upon them, has its benefits.
- Refocusing on Priorities: CEOs have set aside strategic plans and adopted a short-term focus with an emphasis on maintaining core operations.
The Opportunities
- Transformational Restructuring: One participant said, “The big opportunity is to accelerate the changes we had planned, to become quicker and more e-commerce enabled”.
- Customer intimacy: Many family firms using this crisis to become closer to clients.
- Closer Owner-CEO relations: all the CEOs stated that frequency of communication with Owners has increased; one CEO said, “Now, I speak with the family every day, 7 days a week”.
- Market consolidation: Almost all CEOs expect to see drastic changes in their business environment, “…When players who lack sufficient capital and make low margins due to slumping prices go out of business”.
- Pursuing New Growth Areas: One example is a pharmaceuticals logistics business where the owner repositioned to trade face masks and disinfectants. Another family business, a manufacturer of air conditioning for cars, is researching whether their units can be made impermeable to viruses.
- The Remote Advantage: Companies are coming around to the idea that remote work is more efficient, with reduced travel costs, a lower carbon footprint and less office rent.
- Digitalisation: Accelerating shifts to digital business models. On the sales side, markets will be driven by e-commerce and omnichannel compatibility rather than conventional retail.
- Operational Insight: Many family businesses, having realised there are no back-ups for key workers, are mapping out organisational deficiencies and talent development needs more systematically to build greater bench strength in their teams.
- Worker Availability: Family businesses that previously struggled to attract talent in countries such as Germany with tight labour markets now expect consolidation to free up skilled workers.
- In-sourcing: CEOs envisage a shift towards more self-reliant models. Companies are looking to lessen risk and reduce dependencies, for example, on manufacturing in China.
- NextGen Interest: Families have used the crisis as a trigger to start education and onboarding programmes to help NextGen family members become knowledgeable shareholders.
What Do Family Businesses Think About Their Ability to Survive?
- Almost all respondents felt that their firm benefitted from inherent characteristics that made it more resilient in a crisis than their public corporate peers. They cited the following reasons.
- Long-term Orientation: One participant said family businesses have, “…A different horizon when it comes to critical decision-making”, and are intrinsically more able to take a long-term view.
- Liquidity: Many FBs do not have cash flow issues, are unburdened by heavy debt and describe their overall financial standing as solid.
- Multi-generational Thinking: Owners are mindful of the legacy they’ll leave the next generation, who are motivated and able to inject new perspectives.
- Speed: Quick reaction time and the ability to make decisions fast allow family businesses to be agile when they need to.
- Loyalty: Family businesses often have closer relationships with their employees. Owners praised workers for their commitment and how they reacted to adversity.
- Customer intimacy: Family businesses build deep roots and are more likely to develop long-term, trusted client relationships. One firm we spoke to had developed a ´supply chain dashboard´ for a key customer to help its operational planning.
- Values: Interviewees spoke warmly about what defined them and their culture. There is a purpose beyond profit, allowing family businesses to act, “…With a greater sense of responsibility”.
- Entrepreneurial Spirit: Family business owners are committed financially and emotionally to their enterprise, a reality that promotes entrepreneurial behaviour and a roll-up-the-sleeves approach.
- History: Interviewees spoke proudly of their track record, and drew inspiration from previous generations who had survived similar periods of turmoil. As one owner explained, “We have been in business for 140 years and have seen [and survived] many crises”.