No industry or business sector has been untouched by the challenges of COVID-19. Family businesses are amongst those most deeply impacted by COVID-19. While Government support has helped organisations keep afloat, and helped to keep people in employment, COVID-19 has impacted cash flow and revenue for most family businesses. The challenge for family business leaders has been not only to find ways to survive the immediate, short-term impact of several lockdowns, but to potentially rethink their company’s business model to survive a pandemic which has changed the world of work and of business.
At the National Centre for Family Business (NCFB) at Dublin City University, we surveyed over 250 family business CEOs and employees over a seven-month period in 2020, capturing their lived experience of the pandemic across a wide range of industries. The research marks the first all-island study of family business practice in the Republic of Ireland and Northern Ireland, and offers lessons for family businesses everywhere.
The findings of the report, Surviving a Crisis as a Family Business, are stark, including:
83% of CEOs report their business will be negatively impacted by COVID-19;
79% experienced a negative impact on company sales and 63% on company production;
98% of CEOs report that the pandemic will change their business model going forward;
Key concerns for family business CEOs over the next six-month period include: Loss of revenue (96%), insufficient cash flow (85%) and possible loss of family control of the business (25%);
Measures family businesses had taken, or planned to take, to minimise the threat of the pandemic include: temporary layoffs (47%) and permanent layoffs (28%).
While these findings lay bare the scale of the challenges faced by family businesses at the moment, our research also showed that the characteristics of family businesses have given a certain advantage to their ability to cope and adapt.
Based on our research and testimony from family business CEOs, we’ve compiled 8 research-driven, evidence-based recommendations for family businesses in times of crisis.
Benevolent Leadership: Benevolent leaders demonstrated a values-driven, inclusive approach to decision-making. Leaders who built a reputation of trustworthiness and demonstrated concern for employee well-being were viewed in a more positive light by their teams.
Good leaders must remember to establish trust with their teams. When business conditions improve, valued employees will remain loyal to the business, in part because of the trust that has been established with them.
Communicate in a transparent manner with employees regarding how the business is performing and keep them updated as the situation progresses. Provide honest feedback.
Effective Communication: When leaders communicated effectively with their teams, it resulted in cohesive teamwork, high levels of trust, and boosted team morale.
Practice clear communication with employees at every level and with all key stakeholders of the business. Where possible, provide certainty and reassurance.
Continue to develop and nurture stakeholder relationships and communicate positive messaging across the business.
Quote:
“My employer has kept everyone up to date during lockdown with video messages of support and updates about reopening. He has asked anyone who needs his help financially or otherwise to contact him directly. All staff members felt very safe in returning to work after lockdown with all the new precautions that were put in place.”
Family Employee in Fourth-Generation Hospitality Business
Taking a Step Back: Prudent family business leaders utilised business closure periods to holistically evaluate the business through a strategic planning lens and long-term perspective.
Prepare and continuously review your cash flow statement for a weekly and monthly basis for the next six months to ensure you have sufficient cash to meet costs falling.
Review all cost items, including fixed costs. Can changes be made to standard protocols in the current environment to improve cash flow? For example, cancelling automatic stock orders.
Employee Commitment: Employees displayed loyalty and dedication throughout the crisis and often acted as ambassadors for their business.
Recognise and where possible, reward employees for their hard work and loyalty.
Embed employee wellbeing into the culture and management of employees.
Familiness: Families spent more time together during the pandemic, adopting a ‘we are stronger together’ attitude and a renewed sense of appreciation for each other.
Set expectations and boundaries early on about family involvement in the business and associated roles and responsibilities.
Take time away from the business as a family - organise annual retreats or similar activities to reflect on family dynamics.
Seeking Out Advice and Support: Many family businesses utilised governmental supports and drew upon external expertise to minimise the threat of the pandemic.
Family businesses should continue to avail themselves of government support schemes to minimise the long-term impact of the crisis and to safeguard the wellbeing of employees and all stakeholders involved in the business.
Develop relationships and connections with your local business networks and industry professionals.
Innovation and Adaptation: For many family businesses the pandemic enabled innovation, change and new ways of doing things.
Use quick and agile decision-making to stay ahead of competition and external threats.
Adapt product and service offerings and diversify into new markets where appropriate. Prioritise innovation.
Resilience: Family businesses demonstrated a resilient mindset in the face of adversity and a commitment to continuity.
Take comfort from past accomplishments and recognise previous achievements in overcoming challenges and setbacks.
Take advantage of the family ownership structure to preserve the financial position of the business in the long-term.
The study was a partnership among researchers at Dublin City University National Centre for Family Business, the Northern Ireland Family Business Forum, Ulster University and the University of Central Florida. The full report is available for download on the DCU National Centre for Family Business website, here.
Dr. Catherine Faherty is an Assistant Professor of Enterprise at DCU Business School and Associate Director of the DCU National Centre for Family Business.
The National Centre for Family Business at DCU is a leading international family business research centre. By translating world-class research into best practice insights, we empower family firms to embrace contemporary challenges and achieve continuity across generations.