Darren McDowell: Surviving a crisis as a family business - are family firms more resilient?
IN our series looking at the recent survey conducted by DCU Business School on family businesses across the island of Ireland, this week we turn to the resilience of family businesses.
BEEN THERE, DONE THAT
When it comes to overcoming turbulent times, multi-generational family businesses have an advantage. By their very existence, they’ve demonstrated the ability to overcome significant hurdles and evolve to meet changing markets and demands—often while honouring past legacies and maintaining the family’s core values.
Of those CEOs who were involved in the recent survey, many viewed Covid-19 as another challenge that can be overcome, citing previous hardship and troublesome times as “inspiration.”
Family businesses in the study reported surviving world wars, turbulent industry cycles, global recessions, interest rate hikes, overdraft squeezes, among other significant events. One retail company even recounted “surviving regular bombings” of their premises during the Northern Ireland conflict. “Resilience was crucial in order to survive that difficult period,” recalled the third-generation CEO.
Family businesses are known for taking a long-term approach to decisions. Leaders often invest with a 10- or 20-year horizon, planning for their children and grandchildren to own the business in the future.
This perspective is often shaped by leaders who have a great depth of knowledge and experience due, in part, to the longer average tenures of family business CEOs. Chief executives who participated in the study reported an average tenure of 24 years, compared to an average CEO tenure of six years in a multinational.
Family businesses have a commitment to continuity and demonstrate a resilient mindset in the face of adversity. The findings support global research which finds that family businesses outperform their non-family counterparts during economic downturns.
Family-owned enterprises can also be more patient when it comes to financial returns—they are not under the same pressure as public firms who report to shareholders on a quarterly basis. Furthermore, family businesses with leaner cost structures are less likely to have to do major lay-offs. This tendency to put the long-term interests of the business first can help family businesses ride out the storm.
In our experience of advising family firms, owners grow up with the sense that the businesses money is the family’s money and as a result they often do a good job of keeping expenses under control. Those businesses who show true resilience take advantage of family ownership structures to preserve the financial position for the business in the long term.
ADVICE FROM OTHER FAMILY BUSINESSES
The DCU business school survey asked family business CEOs across Ireland what one piece of practical and motivating advice they would give to other family firms during a crisis.
“How To Cope With The Business Challenges Brought On By The Covid 19 Crisis” includes words of wisdom from 40 CEOs across areas including leadership and management, strategy and finances.
You can download your free copy of this e-book at https://www.harbinson-mulholland.com/ where you can also find out more about our work with Family Businesses and the NI Family Business Forum.
:: Darren McDowell is senior partner at Harbinson Mulholland (www.Harbinson-mulholland.com) and has been advising family firms for 20 years.