Do you think that the Family Business Leaders need to ponder on the distinctive trade-offs that guide family business decision making?
The Covid-19 pandemic and its social and economic reverberations are triggering particularly salient challenges for family businesses. The first one relates to family business succession.
We used to believe that succession is a long process that needs to be methodically planned and executed. However, the demographic challenges and increased awareness of mortality experienced during this pandemic lead to family business succession occurring rapidly and unexpectedly. Thus, family business owners and managers will have to be ready to manage accelerated and often unplanned successions.
The second one relates to internal and external relationships in the family enterprise. We know that the presence of the family in the business engenders long-lasting, personal social relationships with internal and external actors. Nevertheless, social distancing and smart working during the pandemic lead to dehumanisation of relationships ultimately jeopardising the distinctive family business social capital. So, it is crucial to re-design working processes in the family enterprises, for instance reflecting deeply on how family businesses can preserve and develop their distinctive external and internal social capital while adopting digitised working routines.
The third one relates to the long-term orientation and resilience of family firms. We have assumed that family businesses are forward-looking and intended to grow across the generations. However, negative future outlook and increasing uncertainty leads family businesses to be backward-looking, and oriented to survival rather than growth. Thus, it is important that family business leaders understand the role played by tradition
for family businesses in times of crisis, and the crucial importance of family values to direct the future development of the family business during and in the aftermath of Covid-19.
The fourth one relates to socioemotional wealth and the goals of family business owners. As we know, family-centered non economic goals and the ensuing preservation of socioemotional wealth are primary drivers of family business decision making. However, negative emotions experienced during the pandemic period, and the physical and emotional vulnerabilities of family business actors lead to tensions among different family-centered noneconomic utilities and to society-centered goals. So, family business leaders need to reflect on the distinctive trade-offs that guide family business decision making in the aftermath of the pandemic and response (eg, health vs wealth, life vs livelihood, family utility vs business utility).
Last but not least, economic downturn, cash challenges and new types of risk brought about by Covid-19 increase the salience of patrimonial and liquidity issues for families in business. Thus, patrimonial aspects need to be prioritised in the agenda of family business leaders, which also means working on family offices and family foundations.