Family Businesses in the Age of Coronavirus
March 24, 2020
Lisë Stewart, the leader of EisnerAmper’s Center for Family Business Excellence, discusses the impact of COVID-19 on the family business landscape, the concerns she’s hearing from clients, and things family businesses should be doing right now to help them cope over the long-term.
DP: Yes, absolutely. Obviously this Coronavirus is wreaking havoc on the economy, and you hear a lot about the big companies, the airline companies, the hotel chains and so forth. But family businesses are hurting right now, and they are undoubtedly the backbone of the economy. So what are you hearing from your clients? What are their major concerns right now?
LS: Well, it's interesting, I mean, obviously, the economy and their health and their family's health and the health of their community, these are really big worries. But I'd say that there a probably about five things that people are calling us to talk to us about.
The first is around messaging, what people say. And it's interesting to me, we've spent years trying to get people to talk more about this whole silver tsunami that we know is coming. And now what we really need them to talk about is the silver lining. How can we make the best of this?
So some of our business owners are calling and saying, "How do we message this so that we can try to instill some confidence in our employees and our family members and in our immediate community?"
So we've been talking a lot about, how can we look for opportunities to pull together, to try to talk about what is our role in helping our communities to get through these really difficult times and so on. So for a lot of people it's like, "What do I say? How do I communicate to people? And what is my role as a leader in that communication?"
I think another thing is this whole, helping family members to make some of these really top sort of ethical decisions. I got a call just recently, yesterday afternoon and this was a business owner, a small business owner, and they were trying to make decisions about their own families. Do they get their kids to come home and spend time with them so that they knew that they were sort of safe, or is that not the smartest thing to do? What about other older family members who get ill, and so on.
So I think that a lot of our clients are grappling with some of these deep ethical issues. These are things that so many people just have never really thought about. So it's really tough.
You and I were talking earlier too, Dave, about just some of the financial considerations. People are trying to figure out, what is the smartest thing to do with their money right now? They're seeing the stock market crash or it's this wild ride that we're on, and people are seeking out some guidance about some of the decisions to make.
And what we're finding is, is well from a government perspective, there's been a lot of offers. These bills that are coming down the pike, but people are not quite sure how these are going to roll out in real life, how soon money might come and how soon opportunities for loans or other things that they might be able to take advantage of. What's that really going to look at look like?
So we're seeing a little bit of skepticism, a bit of concern, too little, maybe too late, et cetera. So we're waiting to sort of see what that might really look like.
DP: Again, it gets back to the uncertainty of the situation. We just don't know how it's going to unravel.
LS: Exactly. Yeah. People just don't know. And then just the last two really are, people are asking questions about their own role. So CEOs want to know what they should be doing for their employees and for their communities. Boards, I had a conversation with the Chairman of a Board this morning and they're asking questions about, "What is the role of a board when things like this happen, when there is a big crash?"
And we talked about the board's role is to be able to continue to be an advocate for the business, to be inspiring, and to show leadership and also to make sure that they're never involved in questions that are issues that may be ethically questionable. Are they paying attention to what their fiduciary responsibilities are? But I think for the most part, it's to support that CEO.
And then finally, and Dave, you've heard me talk about this before, and that is that we encourage our business owners to make sure that they have some risk management documents in place, a desk plan or something that lets other people know if you can't get into the office, if something goes wrong, if you're sick or you're taking care of others, who have you deputized things to make sure that the decisions that need to be made are made? Can people get access to passwords, financial information, other things that they need in order to be able to keep the business up and running? Have you made sure that you've got your own estate planning documents in place?
Now's a good time to start to look at some things like that if you haven't already. We've got to make sure that we're also planning for those what ifs. We're encouraging our business owners to sit down with their key leaders and talk about what if this lasts six months instead of two? What if it gets worse? What if our supply chains are impacted and so on. So we've been supplying our clients with a list of important, what if questions to consider.
DP: Yeah, that last one is really important. It's those who fail to plan are planning to fail.
LS: Right. Yes, exactly.
DP: Well, let me ask you, Lise, so for the matriarch or patriarch of a family business, let's say they're at the retirement red zone, they're closing in on that day that they're going to enjoy the golden years and turn the business over to their children or whoever is next in line for succession. How does this pandemic now impact transition for company leadership?
LS: Well, I would say right now is not the best time to pass the baton. If you're thinking about transitioning out, if you can hold on for a bit, this could really be a very pivotal moment in your succession planning. And what I mean by that is while it may not be a great time to transition, it is an outstanding time to stand up as a leader and to serve as a role model for the next generation.
They will be looking to you as a business leader to figure out what should they be doing. So this is a great time to really think about the timing and the quality of your communication, perhaps your ability to impart a sense of rational, calm, reassuring your family, your team, your customers, demonstrating to the next generation the importance of using real data to make key decisions, and helping them to work through not only the decision making process, but also the expected outcomes of that.
And then also this is a great time to be on the lookout for any potential positives and opportunities when the market is going to be shifting. And while misery does love company, this is a time for leaders instead to look for opportunities to improve the business, opportunities to get closer to employees. Perhaps if you're looking at this virtual workplace that we're all facing right now, how can we rise to the occasion and really try to help to improve communication and connection amongst people?
So while we may not be transitioning, this is a great chance to be truly a positive and powerful role model in a time of crisis.
DP: So because we don't know when this crisis will end, Lise, what is even short-term or long-term planning at this point? We can't even put a number on it. But are there certain things that businesses, family businesses should be doing right now that can help them going forward?
LS: Yes, absolutely. As I said, let's look for those silver linings and see what improvements we can make. So I would say number one, be prepared to learn from this as an opportunity. As difficult as this is, try to sit down and say, "What are we missing? What would have made it easier for us to be able to work our way through this. Do we have our risk management documents in?"
And that includes that personal desk plan that tells people what to do, but also your cybersecurity planning, as we know there's more phishing going on than ever. So this is a chance to stop and look at that level of risk planning.
Your supply chain options, when supply chains are disrupted, do you have some alternatives? If not, what do those look like, and many others depending on what the industry is that you're in. Take some time with your senior leaders to look at what are your learning opportunities from this?
The second thing is we're really trying to encourage our businesses to have a recovery strategy ready. You know this is going to pass. As you said, we don't know how long it's going to be, but it is going to pass. And so be prepared with a strategy to rise from the ashes.
So what are some of the things that you might be able to do, that would place you at the front of the pack? Take a look at your strategic plan. What are some of the things that maybe need to change? What are some of the things that you can do to start to prepare your messaging to start to make sure that you have got your workforce in place and ready to go. So don't just focus on the tragedy at hand, but also what you're going to do when it starts to get better.
DP: So Lise, what are a few other things that businesses should be looking at now to help them in the future?
LS: Well, I think that this is a good time for business owners to pay attention to their messaging, as we talked about earlier. But also to think about how that messaging is going to work for them in the future. For example, how are you going to talk about the role that you played in this crisis, so this can be part of your marketing.
I was working with one company that talked about their role in the supply chain, getting supplies out to hospitals and to people who really needed things. So they were going to start to think about how they were going to position themselves using that kind of marketing language later on. Just, this is a tough situation. Let's try make the most of it. Let's talk about ourselves as really good community citizens. So make sure that you can be really proud of your behavior and be able to share that with other people. Share your story.
The second thing is just to really pay attention to when you need outside help, when should you be talking to your financial advisors, so that you can understand your options and your best strategies for protecting your company and for your family. So this is a time to stay connected to people who can help to guide you through some of these really tough financial decisions, because that's going to have an impact on how you come out of this.
And then finally, and this may seem a little draconian, but as we do come out of this in the months, maybe the years ahead, but there are going to be some opportunities out there for people who can financially afford them. So that may be acquiring distressed companies, it may be investing in upgrades, it may be implementing a range of performance improvements in your own companies, whatever it might be.
So right now, starting to think about how should you be looking out on the horizon at what some of these opportunities that might arise, what interests you, what's going to serve your strategic needs in the future, and be ready for them.
And again, try to focus on what it is that you're learning through all of this, and how can you take advantage of the opportunities and those learning experiences. And then we can all get through this together.DP:Sounds like very prudent advice.
LS: I hope so. I think we're working with a lot of really wonderful clients, and I think that if we're all working on this together, then I think that we are going to be able to find those silver linings. And hopefully most of our people will survive this, and end up thriving. So, that's our wish.
DP: Well, great advice from a family business expert. Lise, thank you so much for your time and your valuable insights today.
LS: You're welcome. And I think there's just so much more that family businesses can do as they enter this stage and do this planning. So we want to remember that we're here to help. There's a lot of experts on the team. There's a lot of experts at EisnerAmper, so we're really interested in helping our clients to get through this.
DP: And thank you for listening to the EisnerAmper Podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast, when we get down to business.