The most important resource every family business needs in COVID-19
Family Businesses are the backbone to the Australian and New Zealand economies – we are the largest employers by segmentation and we have the ability to adapt and innovate the fastest. We will be instrumental to supporting the economy through the COVID-19 crisis.
While there are many advantages, family businesses do have their unique challenges that other types of organisations don’t have – and they need to be actively managed. The best way to do this is with the help of a free tool that Family Business Central business advisers have developed, called the Key Family Agreement. A Key Family Agreement (KFA) covers the critical areas that families need to have in place right now so that their business can survive and thrive while the family is both supported and able to contribute in a truly meaningful way.
The KFA is designed to strengthen the ties within your family, keep everyone involved, manage expectations and tap into the inherent genius that exists in families rather than leave it to chance.
The Key Family Agreement covers the following areas to help your family business navigate COVID-19:
Family businesses have history! And it is often incredibly useful to think back to what previous generations have done when they have survived challenging and difficult times. It may not be in business and it does not have to be, but knowing and recognising that our forebears have done it tough – often tougher than us – and knowing what they did and how they coped is great learning for us. In my family, my mother and father both went through the Great Depression and my father went through the Spanish Flu. I know, I know, that makes him very old – I was a late-in-life gift/mistake! However, they both got through this and lived to fight another day, just like many others.
In this section of the KFA, it’s useful just to reflect and learn from what previous generations have done to give us hope that we too can get through this. Write it down, discuss it with the family—it gives everyone hope and possibility.
Stress and Conflict
During COVID-19, with so much going on, so much changing and so many challenges, there is a lot of stress amongst the family business. Risk levels are higher and so the risk of conflict within the family increases. As a family and a business you have to actively manage conflict to ensure it does not get out of control.
In this section we get you to think through how to manage stress and also proactively think through the potential conflict areas and how to avoid them – this is important thinking for the family and a key way to reduce conflict.
Leadership is one of the key qualities we need right now, there are some amazing examples of leadership on display and unfortunately there are some appalling examples. Leadership within a family business is critical. However, what is often not realised is that now more than ever, every single member of the family is a leader in the business in some way. All non-family staff, customers, clients, suppliers, associates and shareholders are all watching every single family member. They are all taking their cue from each family member they see and in this heightened emotional time, if they see something negative or inappropriate, it has a far greater meaning that it may have had in the past. Every family member must be highly aware that they are not only leaders, they are seen as leaders and pretty much everything they do can and will be scrutinized.
In this section of the KFA we get you to clarify the formal and informal leadership expectations and behaviours of family members. This time is potentially a huge opportunity for learning and development of future leaders in the business and is very important.
One of the great advantages that family businesses have is that they are the seedbed of innovation. Aside from their ability to make decisions quickly and to adapt faster, they have a range of perspectives, experience, age and knowledge in-built into the organisation. Usually this is embodied by the adjoining generations, for example the founding generation with the next generation. However, lately we have seen some incredible examples of granddaughters being some of the most influential members in the family and who can say things that absolutely no one in the family can say, let alone be listened to!
The challenge is to develop the combination of listening and respectful discussion between the generations. The older generation will have deep experience and hard earned wisdom while the younger generation will have new ideas, technology and brand new thinking. Neither generation has all the answers but combine this knowledge and it becomes a powerful source of new ideas and innovation.
In this section, we get you to sit down and brainstorm the possibilities around what the business can and should do. Ask good questions and challenge each other’s thinking to come up with something new and different for the business.
For most of us we are completely rewriting our strategy. This takes effort and creativity as well as ensuring that we do not throw the baby out with the bath water. We need to be realistic about our current situation, cashflow, debt, strengths etc, as well as being creative around what we can do. We also need to keep an eye out on the medium to long term – this too shall pass, and we need to be best positioned to be ready for this.
In this section of the KFA, review and go through your strategy acknowledging the challenges and constraints realistically so that your strategy is properly thought through and based on sound data and thinking.
Some family businesses have a Board of some type, some have none. Boards are incredibly useful and need to be fully tapped into by the business – after all, a Board is there to think about strategy (see above) as well as the fiduciary health of the business. If you have a Board, use them! If you don’t have one then you can set something up very quickly that while not being a proper board, provides great insight to the business and the potential things it can do – we call this the Instant Strategy Board!
In this section of the KFA, the family needs to look at how they can best use their board or set up something, even if a temporary situation, to help review the direction and strategy of the business. This is a huge support and asset to the business.
We have put together our Key Family Agreements document that is available as a free download from our COVID 19 page that covers all of the above points and more. You may well have addressed some of these issues, just make sure you have addressed the key ones for your family and your business.
And if you need to talk to a family business adviser, feel free to get in touch – we’d love to talk.