Family Businesses and their difficulty to adapt

A little more than a month ago I have shared with you an article called “A Heartfelt Appeal to Family Businesses”. You can read it by clicking HERE.

I still however face, on a daily basis, the difficulty for family businesses to adapt to the reality that is surrounding us.

Now is the time to adapt the management of family businesses as they are facing conditions of extreme uncertainty to ensure that family owners, board members (if any) and executives remain aligned around long-term vision, core values, financial expectations and risk management processes. Effective coordination and communication are obvious priorities under normal operating conditions, but during a crisis they become essential. Hence you first step in adapting is in accepting once and for all “that this is not business as usual” and that “we are likely never going back to the normality we knew”. That is just the first step. Secondly, if we accept that we are facing a crisis, you need a proper setup to tackle issues promptly – your can call it a crisis governance.

A shift towards a crisis governance mindset is needed to focus on areas like resilience, deep commitment to family legacy and core values and an active and nimble governance. Without this clarity and structure, how else can boards and executives manage the present complex challenges?How can a family business honour commitments to banks, suppliers and customers — upon which the family’s reputation depends — when cash is a vital resource? On what basis will family businesses determine whether to cut jobs and shut down struggling legacy businesses? Who will determine when to cut back salaries and benefits or eliminate dividends? How will the balance be achieved between making short-term sacrifices the crisis demands without compromising the longer-term viability of family business?

Unlike businesses in which shareholders are an anonymous mass of investors, engaged family business owners certainly care not only about the economics of their investment, but they are also keenly focused on the many internal and external stakeholders who have enabled their success. “Ownership” in these families is a deeply psychological experience — an identity that links this success to the fate of their customers and employees. What they normally lack is sense of structure, strategy and focus.

I have been preaching to many family business owners that, if anything, this pandemic should force the key persons of any family business to come together much closer and to push towards a higher level of governance — typically holding company board meetings and operational/management meetings more regularly. The family businesses that stand to perform better during this crisis are those whose leaders increase the frequency of their contact and the scope of their coordination while also following a “noses in, fingers out” philosophy, meaning that they acknowledge their responsibility to pay close attention to what’s happening in the business and call out issues and risks when they see them, while ultimately allowing management to run the company.

More than this, if you as a family business leader, find it hard to adapt and do all the above, do seek help. Do turn to seasoned leaders for guidance on how to adapt to these challenging condition, for help to contextualise the various strategic decisions that need to be made throughout the family business, especially when tough choices or transformational changes need to be made.

One thing that is constantly striking me in family businesses is the deep and entrenched trust issues that can be found all the time. Lack of trust amongst the family ownership. Lack of trust between the family ownership and the employees. Trust is an essential currency in the realm of governance, and this is particularly true during uncertain times. Family owners need to trust each other and also any external board director or business consultant, they have the skills to govern and advise effectively. Family owners also need to trust their management, executives and employees are effectively managing their crisis response, and that all efforts are being made to coordinate effectively within their business. I see too much energy lost and conflicts arising through the lack of trust.

Please, I utterly beg family business owners, that if you learn absolutely nothing from this crisis, you learn and change your attitude with regards the need to setup good corporate governance. All too frequently, I still come across family business owners that feel that good corporate governance is cumbersome, expensive and useless. For such family business owners, the “real action” is at the level of the operating business where “the money is made.” This is especially so when a crisis hits and most attention gets understandably drawn to cash flow and day-to-day operations. However, it is precisely at times like these when the structures and processes that families put in place to govern themselves yield the highest returns — if engaged, empowered, and utilised effectively, they can best position the business to endure the next long phase in this crisis and, eventually, to make the most of better days ahead.

At EMCS, we specialise in dealing with SMEs and Family businesses, especially in helping them setup proper governance structure, strategise their businesses and run their business in a more professional manner. Feel free to contact me on for a chat.

One thought on “Family Businesses and their difficulty to adapt

  1. Pingback: Power Centres of Family Businesses – Silvan's Business Insights

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s