Be a realist, focus on surviving and provide stability.
These key pieces of advice are for family business owners struggling amid this pandemic, as shared by strategic advisory firm Wong + Bernstein (W+B) Advisory Group and Icon Executive Asia in the recent webinar “Leading the Family Business in Extraordinary Times.”
Specifically, being a realist, says W+B executive director Enrique Soriano III, means being prepared “to meet the worst-case scenario” for your business.
“In this case, [the worst-case scenario is] an L-shaped or a W-shaped recovery,” Soriano says. “As a business leader, you would know that your recovery would be better than others’ because you are planning for the worst.”
And because many enterprises are now on “survival mode” because of the pandemic, Soriano says that it is important for them to take care of the business, because this, in turn, will ensure that familial relationships stay intact, too.
“Most family enterprises overlook the truth behind these words,” Soriano says. “While most owners and executives think that the operational side of business—cash flow and valuation—is most critical, especially in a crisis, family business governance should also remain a priority.”
Recovering from the impact of COVID-19, therefore, should not just rely on the innovation of new products or restrategizing one’s business (although these remain essential, too). According to Soriano, there must be effective management of the family dynamics within the business, which should result in a united leadership. Members of the family should, first and foremost, be able “to set aside personal feelings to prioritize what is good for the business,” and a clear designation of responsibilities must be set in place.
The owner, for one, is responsible for providing stability—and to do so, Soriano says he or she “must set expectations for his/her short-term and long-term decisions, decide on major transactions or fundamental changes, and keep the family informed of what is going on in the business,” usually through a family council.
As for the Board of Directors, their role, Soriano adds, is to ensure compliance with government and legal regulations and policies; assess and approve the redirection of corporate resources toward aiding the fight against the global health crisis; and see to it that the family’s values are followed in whatever the business does in response to this pandemic.
“The management team is then responsible for forming crisis management task forces, setting the policies to protect employees, and keeping the company financially solvent in order to meet, or negotiate, their contractual and financial obligations,” says Soriano. “This kind of organized structure will prevent this crisis from sweeping the business toward decline, or, worse, death.”
Ultimately, COVID-19 will test if one’s family business is a house of stone or a house of cards, Soriano adds.
“The crisis and the upcoming hard landing will not wait for you to be ready. It’s time to act now to save your family’s legacy for generations to come,” he says. INQ