By: Katie Beavan and Keith Michaelson
Family businesses are the backbone of the American economy. There are more than 5.5 million family businesses in the US, accounting for 64% of Gross Domestic Product (GDP), 98 million jobs, or 63% of the workforce, and 78% of all job creation. Congress committed $349 billion to the SBA loan program in the initial coronavirus rescue bill in late March and the Treasury began seeking a further $200 billion just three days into the program’s existence. It’s as if we are seeing family businesses put on ventilators, with their prognosis dependent on underlying financial health conditions.
Unlike a local natural disaster or an act of terrorism, the Covid-19 pandemic is not a single, bounded event. We may be in for energy-sapping waves of infection, social distancing and non-essential business closures until enough of the population has immunity, testing for both the Covid-19 virus and the antibody is widely available, or a vaccine is developed, probably sometime in 2021. We may still be in the first phase of this crisis.
The uncertainties are great and the stress may become overwhelming for some. A number of family business owners we serve feel they are looking over the edge of an abyss, with the possible loss of everything they have worked so hard to create, for some over multiple generations. We want to offer a few practical suggestions both for surviving the immediate moment and for emerging stronger in the post Covid-19 world, as a new normal emerges.
1. Develop your “negative capability.”
Family business owners can feel doubly afraid in this pandemic; their families and their businesses are simultaneously threatened. And for many of us, reacting to immediate threats means choosing from a limited set of behavioral options learned long ago as children: we fight, we take flight or we collapse. Whichever course we habitually take, it is likely to lead to unproductive action, which adds to the anxiety around us.
Isolation or quarantine can add to our emotional stress and our sense of time can become distorted as weekends and weekdays merge. January may seem to be a lifetime ago; summer seems far out on the horizon. And we don’t know how or when this will end.
How do you hold on to the emotional balance required to face our challenges with patience and creativity? The poet John Keats identified a characteristic of great writers that he called negative capability. He says this important resiliency factor is active “…when a man is capable of being in uncertainties, Mysteries, doubts without any irritable reaching after fact and reason.” Negative capability involves allowing yourself to remain unsettled by a situation while accepting feelings of uncertainty, confusion and not knowing. It is not a passive acceptance of difficulties but rather the suspension of reactive fight/flight/collapse behavior, the pausing of the demand to perform long enough for new options and opportunities to emerge.
How do you nurture your negative capability? Perhaps one or more of these suggestions will appeal to you:
2. Create and follow a flexible, emergency business plan based on the hard facts
We are in uncharted waters and many family businesses are being forced to take drastic action in the face of temporary closure or reduced customer demand. The immediate task is to develop a Flexible Emergency Business Plan (FEBP). We stress the word flexible because you will need to revisit it as the situation changes. One of our clients has begun communicating a “three-day plan” to all employees, acknowledging the limits of their planning horizon. In the New York State Covid-19 response plan, the focus was first on making sure there were enough hospital beds; it then shifted to the acquisition of personal preventive equipment (PPE) and ventilators; then it was on to finding enough health care workers to staff makeshift hospitals; and now the focus is on testing capacity. Professor David Deeds has proposed a list of ten steps that family businesses can take to weather the storm.
It’s also best if you can stick with the hard facts. It’s not uncommon to cope with a crisis through magical thinking, imagining that what we want to happen actually will happen. It’s hard not to want to wish ourselves back to a more normal existence. We see examples every day in coronavirus updates: warm weather will kill off the virus; the economy will quickly rebound once we end social distancing; this unproven drug is an effective cure. We see it when religious leaders continue to conduct services with assumption of divine protection and when young people, feeling invulnerable, ignore social distancing measures.
But magical thinking won’t get your family business through this crisis. Seek out advisors whose opinion you trust. Engage your board members more regularly. Talk candidly with family members and, most importantly, keep communicating your evolving plans to employees and all family stakeholders. In a crisis, people seek an authentic leader who communicates with clarity and empathy. Connect via video, in writing and in person frequently. People need to hear the same message, with real facts, repeatedly before that message sinks in; and the required number of repetitions increases under stress.
3. Mobilize your hidden reserves of resiliency and adaptability.
Much of the advice offered to family businesses during crises focuses on the financial, the operational and the practical. However, it is our experience that every family business, from the billion-dollar, multi-generation enterprise to the small, founder-led firm, has resources that can be drawn upon to navigate the crisis and ensure that the family and the business can respond with resilience and adaptability.
By resiliency we mean stepping up to behaviors that bring the family together and provide a buffer in the storm. These include: remembering your purpose statement, working collaboratively, supporting each other’s growth and development, giving and receiving affection and feedback and committing to the achievement of the single most important priority the family has defined together.
By adaptability we mean the capacity to adjust family relationship patterns and behaviors during this time of stress, and recognizing that this difficult time might provide the opportunity to honestly confront and resolve long-standing relationship difficulties.. This is particularly important for relationships between the generations and between siblings leading a business together. Try hosting a brainstorming session with a cross section of stakeholders. Allow all ideas to flow without any judgement or criticism. Thank everyone for participating and see if you can find an adaptation to serve your customers in a new way.
“May you live in interesting times” is the often-quoted Chinese curse, and the one thing we do know is that the coming months will be very interesting. Following this three-point plan may help you navigate the unchartered waters of the Covid-19 pandemic and emerge stronger, as a family and a business. We wish you good luck and are available to help as needed.