The COVID-19 pandemic has forced business families to make decisions with sweeping ramifications. Steps taken to ensure business survival have had to be balanced with precautions to avoid health risks.
“My values haven’t been tested, but my ability to live by them has been shattered,” commented one listener during an April 14 webinar presented by Family Business Magazine and CFAR, a management consulting firm.
Debbie Bing, president and principal of CFAR, tells of a family whose business was deemed essential and thus could stay open despite a state social-distancing mandate. Family members weighed the idea of paying part-time wages to employees who opted to stay home because of concerns about their vulnerability to the disease. “But then they worried in making that decision, which is very much of their values, that they might not have a workforce, and then they couldn’t continue their essential operation.”
“I’ve seen some businesses that went from growing and thriving to just stopping suddenly, and they’re not sure if they’re going to even exist anymore,” says Jeff Savlov of Blum & Savlov, a family business and wealth consulting firm.
Policies that varied from state to state, and diverging opinions about the pandemic from the political left and right, have made complex decisions even murkier.
Thomas Epperson, president of InnerWill Leadership Institute, spoke to a family in Georgia who fielded conflicting risk assessments from urban Atlanta and the rural parts of the state. “They were getting lots of mixed messages about what to pay attention to,” Epperson says. “So as a family business, they had to lean back on, What do their instincts tell them?”
“Liberal or conservative isn’t the issue here,” says Jonathan Moreno, a medical ethics and health policy professor at the University of Pennsylvania. “It’s about the best way to protect the lives of the people who work for you, and their families.”
Even employees who fear a loss of income don’t want to risk their lives or those of loved ones, Moreno points out. “If they feel they picked up the virus [at work] and transmitted it to their mom or dad, that doesn’t help their feeling about the company.”
Americans took to social media to criticize businesses, whether for laying off workers, for eschewing safety precautions or, conversely, for requiring face masks.
“What families need to consider is that every decision has its consequences, both positive and potentially negative,” says David Karofsky, a principal with the Family Business Consulting Group. “And the decisions are scrutinized even more so in times like this.”
“I would never put our men and women in the field in a situation that I’m uncomfortable being in,” says Brian Sessler, managing family member at Sessler Environmental Services. The Rochester, N.Y.-based company, which provides decontamination and environmental remediation services, has added COVID-19 remediation services to its offerings.
Sessler visits as many job sites as he can to talk with workers. “There’s communication from our managers and the family members, pretty much on a daily basis, to all the workers that are in the field battling [the virus],” he says.
Other business families debated the ethics of family managers working from home while lower-wage employees were required to work on site. “One guidepost has been thinking about [protecting] vulnerable populations,” such as family members over 60, Bing says.
“I think this is just the first wave of this set of questions,” she says. If the predicted future waves of infection and continuing economic consequences materialize, “The choices aren’t going to get easier anytime soon.”
Adversity reveals character
For business families who have discussed their corporate purpose and the social impact they aspire to have, “this is an opportunity to take action on that purpose,” Epperson says.
“This adversity that we’re all going through is revealing people’s character. For those families and organizations that are committed to making a positive difference, this is a time to invest in that and show that.”
The Nelson Foundation, the philanthropic organization of the family that owns Kemin Industries, a Des Moines, Iowa-based global company that produces ingredients for human and animal food, announced a $50,000 donation to the Food Bank of Iowa on April 1. The gift helped the food bank address the increased need in the area due to the pandemic.
“We felt the need was, obviously, immediate, and we wanted to be responsive,” says Mary Katherine Nelson, chair of the Nelson Family Council.
Typically, the foundation solicits contribution requests through June and makes decisions by September 1; checks are issued by the end of the year. As the pandemic spread, “A member of the family council suggested that we consider moving up our donation process for the year,” Nelson says.
“We obviously knew that the food bank was a need locally, and we wanted to make sure that our dollars were supporting our neighbors in Iowa.”
One of the foundation’s requirements is that its gifts be meaningful, Nelson says. “We wanted to make sure that we were giving an amount that would feed as many of our neighbors as we possibly could.”
In a separate initiative, Kemin Industries donated nearly 10,000 personal protective equipment (PPE) items to the Iowa Department of Public Health, and teams in other global locations donated PPE locally. The company also announced it would allocate $1 million to fund a bonus program to thank employees who were required to work during the pandemic.
Values as decision-making tools
Chief among the challenges of these times has been the ambiguity of the choices.
“There is the financial responsibility that we have to our shareholders and stakeholders, there is the health and safety of our people, there is the long-term result of some of these decisions, and then there is the short-term impact of these decisions. So out of all that, what comes first?” Epperson explains.
“I always encourage alignment around whatever decisions that [families] are making,” Karofsky says. That’s especially important when there’s no single right answer, he says.
Family values can help provide clarity. “Your values should really be practical decision-making tools,” Epperson says.
“The clients we work with have clearly defined values,” says Greg High, president of GH Family Business Consulting. “These values have helped to frame their discussions around how their family and their business will deal not only with COVID-19, but anything else that comes their way. By doing this work early, they have positioned themselves well to be able to calmly manage through challenging situations.
“Some clients read their mission statement and review their values at the beginning of every family meeting to keep these items at the top of their minds as they continue on with their meeting.”
Some families have internalized a set of values even if they haven’t formalized them. Jeff Kotzen, fourth-generation vice president of J.W. Lopes, a food distributor in Chelsea, Mass., and his wife, Elyssa, created a new residential delivery division after COVID-19 wiped out demand from the company’s restaurant-industry customers.
The Kotzen family has not established a written list of values, but in their new venture they’re putting their community at the forefront. Their service offers products from other local businesses in addition to J.W. Lopes’ produce and dairy items.
“We’re trying to lift up other people in the industry who are dealing with the effects of COVID-19 like we are,” Elyssa Kotzen says.
“There are so many companies in our position now that are mostly family-owned businesses who had to pivot during this situation — who are staying open, who are in the front lines — and those are the companies who we really wanted to be partners with,” Jeff Kotzen says.
Families should make decisions based on what they value most, Epperson says. “I think there’s a pretty broad spectrum in what’s right. What I think is most important is that we are authentic to what we’re all about.”
Saying one thing but doing another will get companies in trouble with customers, employees and other stakeholders, Epperson says. “People can smell that.”
When emotions are running high, Karofsky advises clients to “separate the emotion from the logic.”
He recommends assessing the potential impact of decisions on the business and each of its key stakeholders.
“This is where boards can shine. How you use that board is so important right now, and having that board in place is so critical.
“The power of the board in this case is to separate emotion from logic. And we have to live in the world of logic right now. If we’re running around making emotional decisions on what to do with this business, in my opinion it brings in a higher risk to the business.”
Leaders in the spotlight
Leaders are “always on stage,” and a wide variety of stakeholders are in the audience, Epperson says.
“They are paying a lot of attention to what we’re saying and what we’re doing. So being aware of those words and actions right now is incredibly important.
“And if you want them to be fiscally responsible, or you want them to care about other people, or you want them to value health and safety, or you want them to value relationships, then you have to act that way.“
Savlov knows of a family whose construction firm is continuing its essential projects during the pandemic. Some of the work requires employees to travel and stay in hotels.
“They’re trying really hard to be honest with their workers about what they need,” he says. “They’ve always treated their workers exceptionally well, so I think they’re trading on a credit balance of goodwill, on having treated workers like family. They’re not seen as greedy. It’s a mutual generosity — helping each other out and making it through.”
Elena West, CEO of Ohio Art, a lithography and graphic arts company in Bryan, Ohio, that’s 89% owned by her family, implemented pandemic mitigation measures early on. In addition to enforcing social distancing, the company stepped up the efforts of its cleaning crew and “doubled down” on its orders of sanitary products, she says.
West has taken the lead on managing the company’s COVID-19 prevention efforts. “I go out into the factory, and I literally take [workers’] temperatures in the morning,” beginning at 4:30 a.m., when employees start arriving for the shift that starts at 5, she says.
“What we have told them over and over again, and what we have shown them, through taking temperatures and cleaning the spaces so well and so consistently, as well as enforcing the social distancing, is that we do care, and that we are committed to this, and that we do want to stay open.
“The longer we stay open, the likelihood is we’re going to continue staying open into the future, when all of this has passed. If we shut our doors now, who knows what will happen in a month’s, two months’ time?”
An elevated level of transparency with all stakeholders is called for under these circumstances, advisers say.
It’s difficult to predict what will happen to the economy in the remainder of the year as states start reopening while the pandemic continues. If business leaders see dramatic cuts on the horizon, it’s best to be honest about the situation, Epperson says. “Begin to prepare people,” he advises.
Epperson advocates asking for employees’ help and support. “You’re building a case for involving people, helping them do their best thinking, empowering them to make decisions to act quickly and support customers and the organization.
“At the same time, you’re trying to be real with people: ‘If we have to make hard calls, we will. And here’s how we’re going to make that decision.’ ”
Open-book management — sharing financial information with employees — can work to the family’s advantage now, Savlov says. “When times are bad, people really see the kind of pain you’re willing to take.
“They can see your losses. They can see you not taking a paycheck when they’re still getting theirs. And that kind of transparency is invaluable in the long run.”
Dennis Snow of Snow & Associates, a consulting firm specializing in customer service, employee development and leadership, cites several practices of companies that implement furloughs or layoffs in a way that’s sensitive to workers’ feelings and concerns.
“They’re very empathetic in the way they’re doing it. They’re providing one-stop shopping for information. Whatever kind of benefits they can continue for X amount of time, they’re doing that. It doesn’t make it easier for their employees, but it says, ‘We care.’ ”
Snow says it’s important to be “extra appreciative” when communicating with customers and to focus on what your company can do, not on what it can’t do. He also recommends doubling down on things customers love about your company, such as a personal touch.
Companies selling scarce products in these days of supply-chain disruption should make sure prices are in line with what others are charging, Snow advises. “The big thing is making sure that you don’t get hit with that price gouging perception, because that will have lasting repercussions.”
Bing has found family interactions improving during the crisis. “So far, we have seen the softening of dynamics.”
She’s observed “a lot more transparency than we usually see” within families, “and more rallying together, even in deeply conflicted families. In a way, you could say, it’s breaking all the norms.”
Videoconferences might be drawing families together in ways not possible with in-person meetings, Epperson says. “It’s helping people to make connections that they otherwise wouldn’t.”
Today’s unprecedented circumstances have strengthened intergenerational ties in many families, Bing says. “There’s this level of vulnerability that has shaken up the traditional leading/rising generation dynamic, where the senior generation would take the stand, typically, of ‘You don’t know what you’re doing yet,’ or, ‘I’ve seen it all; you’ve seen nothing.’
“That’s being turned on its head, because this is the first time nobody can say they’ve seen something like this before, unless they were running their business in 1918,” she says with a laugh. “And so there’s a humbling there. And on the other side, rather than, ‘Get out of my way; I know what to do,’ it’s, ‘We need all hands on deck.’ ”
Bing is working with families who now want to step up efforts to build NextGen engagement and family involvement, “whether that’s the shaping of a governance structure or sorting out roles or accelerating an ownership transition.”
One senior-generation member Bing knows had been adamantly opposed to transferring ownership to the next generation. After the coronavirus struck, he executed the transfer “all of a sudden,” she says.
Yet the new living arrangements brought about by social distancing may be pushing young family members into roles they’re not ready to assume. In one family Bing knows, college students are living with their parents because their schools have closed. Ordinarily, their involvement with the family business would be limited to summer jobs.
“But now they’re home, and they’re calling in with their father to top-level strategy meetings and business discussions.
“On one hand, they’re able to [discuss] at dinnertime, ‘What are we learning about business and leadership in a crisis?’ and they’re learning more in an accelerated way. On the other hand, it’s undermining some of the things that [the parents have] said they’re committed to, like age-appropriate experiences for these kids as they come into the business, or working your way up from the bottom.”
With families being what they are, and with the economy in a downturn, it’s an open question how long the positive developments will last.
“I’ve seen more of the pulling together than pulling apart so far, but what I would predict is that the battles are going to come, because these companies are going to be so economically stressed, and family dynamics get worse when there’s less prosperity,” Bing says.
“People are in survival mode right now, but the recovery is going to, I think, invoke all the old battles.”
The dilemmas are daunting. Bing heard a business owner sum up the situation in a powerful way:
“Eighteen months from now, two years from now, five years from now, when I ask myself the question, ‘Did I do everything I could do in that moment?’ am I going to be proud of this answer? And I need to think about that now, with every decision I make.”
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