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Learnings from Civid-19 for Business Families

  • May 6th, 2020

Alejandro Escribá (UV Chair and CEFUV Director), recommends being critical and objective, establishing priorities

We have been confined for 8 weeks to face the COVID-19 pandemic. In these weeks we have experienced all kinds of feelings and concerns related to diverse areas. Concern for our own health and that of our loved ones. The uneasiness of seeing our health care system difficulties to care for and heal our neighbors, friends or family. The vertigo of those whose jobs were up in the air overnight and uncertainty about what would happen in the future, both immediate and long term. The responsibility to telework for those who can, and at the same time the obligation to accompany our sons and daughters on their study and learning process without the continuous presence of their teachers to solve their doubts. The search for balances and the generation of routines that allow us to maintain a certain productivity, a family balance and our own health and fitness in unfavorable conditions.

It has also been a time for reflection, spending time analyzing the causes of the situation we are experiencing, evaluating the possible answers that are being proposed and reasoning out what the responses and actions that we should undertake in the coming months and years should be.

As director of the Chair of Family Business at the University of Valencia, one of the things that has occupied my mind in this period is the need to extract lessons and learning that can reinforce the strength, survival and long-term competitiveness of our companies. When talking about commercial companies, we know that family businesses constitute more than 88% of them, and that they are responsible for the creation of 2 out of 3 jobs in this field. We also know that small-scale companies predominate in sectors of medium or low technological intensity, although there are also large, multinational, highly technological and knowledge-intensive family companies. Given its importance in the economy of our country, this learning is critical for the return and sustainability of our economy. Businesses (and with them their employees,owners,states and territories that are financed by their taxes, and the citizens who benefit from their activity) will suffer the serious consequences of the necessary paralysis that our economy has experienced.

 

"Given its importance in the economy of our country, this learning is critical for the return and sustainability of our economy"

 

There are 4 axes on which the keys to recovery can be sustained, besides contributing to the preparation for sustainable and responsible competitiveness that we must achieve in the medium or long term:

1. Anticipate and manage risks

Just three or four months ago, almost nobody would have anticipated that the world economy could suffer a setback of the dimension that we are suffering at the moment. There were actors and institutions of diverse nature and origin who had warned of the risks of a pandemic, but most of us ignored these warnings, and very few prepared accordingly. In reality, a pandemic is only one of the possible causes of an abrupt stoppage of the economy, which can be very diverse: natural, energy, geopolitical crises, accidents, facility fires, etc.

Although its consequences and particularities may be different, any stoppage of economic activity (own or of society as a whole) has a series of common characteristics that can be anticipated and that can lead to the establishment of contingency plans. Reflections around this risk may revolve around questions such as: What financial slack would we have in the face of an abrupt stop in activity? How long can we survive without external help? Do we have the resources (technological, knowledge, digital skills, alternative supply channels) to modify or replace our usual activities in the short term? What scale of priorities should we maintain in these cases?

This same logic must be applied to many other types of risks, whether they are strictly economic, or related to other common problems in family businesses. For example, how should the company act if something happened to one (or more) of the key people in the organization? How can losing a major customer affect us? What are the consequences of delaying the transfer of leadership? What can happen if the people assigned to the positions of responsibility do not have the required capacities?

The lesson we must draw is that meditation on risks that are feasible (it is not even necessary that they are probable) is a routine that we must implement and internalize in companies.

 

"Meditation on risks that are feasible is a routine that we must implement and internalize in companies"

 

2. Be aware of our characteristics, strengths and limitations. Be self-critical and objective.

In addition to anticipating potential risks and preparing ourselves to face difficult situations, it is also necessary to be able to diagnose our current situation in an objective and critical way. Knowing potentialities and limitations of resources and capacities that we have, prepares us to have a greater number of alternatives when the circumstances require it. We have seen in these weeks a multitude of cases of companies, family and non-family, that have quickly reinvented themselves to lend a helping hand to the health system and to society. The use of logistical capacities, productive systems, engineering knowledge, redefinition of products or services, etc., made available to the state, political decision-makers, hospitals, or society in general, have been repeated in all sectors, regions and countries. In other cases, the "reinvention" has simply served to survive when the main activity had been suspended for the next few months.

Likewise, in the coming months we will see many cases of companies that will close their doors for not being able to overcome the economic downturn and restrictions on their activity. In many cases, its decline will be inevitable. In others, the end could have been different if they had recognized their potential instead of anchoring themselves to a business model without flexibility to adapt to new conditions. Mind-openness is crucial in this case, and for this to happen it is necessary to broaden the perspectives that normally form part of our decision nuclei. Discuss, debate, listen and reflect on the potentialities and limitations of the company is essential to correct limitations and find alternatives to situations that have arisen.

"Discuss, debate, listen and reflect on the potentialities and limitations of the company is essential to correct limitations and find alternatives to situations that have arisen"

 

We must remember that, according to data from GECE Observatory (promoted by Bankia and Ivie) almost two thirds of Spanish family businesses are managed by a single person (sole administrator) and, the vast majority of these, do not have diverse networks of experience or council, with advisory or expert committees that broaden the point of view and provide critical and reflections on the company. 

3. Act proactively and courageously to correct our limitations and take advantage of opportunities.

The common saying "if it works, don't touch it" is deeply rooted in our society. I do not disagree with it, but I think it is incomplete and dangerous. If your business model works, of course you must exploit its full potential ... but the reflection on how the business model could evolve, and if we have the resources, skills, and attitudes necessary to compete successfully in the future, it must always be present. Therefore, we should prepare our company to improve and to compete in the future. Being proactive to equip yourself with resources and explore new alternatives, is one of the most relevant assets to be prepared for the future.

Being a good businessman implies being brave and overcoming many prejudices to build successful projects, beyond the specific people who are in charge at a time.

 

"Being a good businessman implies being brave and overcoming many prejudices to build successful projects"

 

4.  Establish our scale of values ​​and priorities.

Lastly, although company and owern values are always present, and guide the way an organization acts, in difficult moments is where they have greatest impact on the reputation and identity of a company. family business.

What ​​identify us and how are we going to protect them? It is very important that the values ​​expressed by company are maintained in the most difficult moments. Company and family reputation takes many years to build but we can make it disappear in a very short time if we are not consistent in the moments of greatest visibility of our actions.

These weeks we have witnessed a multitude of actions by family businesses that have demonstrated clearly values ​​that have been reflected in their way of dealing with this crisis. We have seen companies that have chosen to prioritize the maintenance of employment, sacrificing potential benefits or even assuming certain losses. We have seen many cases of altruism and solidarity on the part of business families and family (and non-family) companies that have given their best to help improve the conditions of those most in need. Personally, the ones that I liked the most were all those that have occurred, and that we have not known because they have been done from the strictest discretion and humility. Perhaps from a business point of view, it makes all the sense in the world to place value on these acts of kindness and solidarity, because reputation is a strategic asset that must also be managed. But in the family business, consistency and values ​​are demonstrated in the long term, and advertising is not necessary to build a solid project.

Let us draw lessons from this situation and face the future with courage. Difficult months, or years, await us. Despite the possible aids or facilities that may be established, no one will take us out of the hole if we do not face the situation in all its harshness, if we do not make every effort to recover, making difficult and courageous decisions when necessary, and if not we learn from experience. These situations (or other similar ones) can repeat themselves, and it is better that the next time they find us better prepared.

Notícia:

Via Empresa: Lliçons de la Covid-19 per a les empreses familiars