Adding to the well-known challenges that families in business together have always faced are the hardships created by the COVID -19 pandemic. Only time will tell how long these obstacles will remain in place, but there is no doubt that many family businesses have had to deal with a sudden, unexpected and often dramatic decline in their revenue. The field of positive psychology offers some suggestions that can be applied to help families through these tough times, including the following:
Turn to your core values. Studies have confirmed that a great company culture enhances employees' energy, creativity and commitment, which in turn leads to greater success and higher profits for the company. Take the time to make sure your family and employees understand your core values. Consider how those values help create a culture that energizes employee performance, and how they can help your family prioritize objectives and determine what “tradeoffs” make sense in the current environment.
Revisit governance. Research on how we think reveals that we are not only irrational, but predictably so. Family business leaders, now more than ever, need to do everything possible to ensure that the choices they make are based on careful analysis. The quality of decision making can be enhanced by establishing good governance — through both a thoughtfully structured family council and an effective board of directors. Even if you have these governance structures in place, it may be a good time to revisit how they are working. Should you add new members or replace the ones you have? If you don't have independent directors, consider how your board might benefit from an outside perspective.
Invest in the future. Psychologists describe our ability to think about the future, including potential alternative futures, as “prospection” and liken it to mental time travel. The ability to envision the future — and make decisions based on a contemplated future reality — is critical to any business. Without continual innovation, a company's products and services are at risk of becoming obsolete, particularly in a rapidly changing world. Consider how much — and what type of — support your family business has allocated to encourage innovation, including cash, introductions to helpful connections, etc. Developing a system to distinguish promising opportunities from “half-baked ideas” will be helpful.
Intentionally nurture emotional support. A crisis like the pandemic can be frightening and destabilizing, causing tempers to flare, communication to break down and conflict to erupt. Because sharing feelings can be therapeutic, you might begin meetings by acknowledging the emotions and stresses being felt. Make sure you take measures to foster optimism, as that will facilitate collaboration, creativity and productivity. It might also be helpful to discuss the family's history, including how previous challenges were overcome and what lessons were learned from those experiences. Institute “team-building activities,” such as virtual dinners together, a family book club, watching the same movie and discussing it in a video chat, and celebrating important events together.
Promote healthy lifestyles. The link between feeling healthy and positive performance has been repeatedly confirmed by a number of researchers who have found, for example, that physical fitness produces increased energy that leads to higher engagement and better work results. While it is always important to encourage your family members and employees to take time to exercise and recharge, doing so now may be more important than ever given the challenges of 2020-21. Consider joining the ranks of companies like Google, Goldman Sachs and Spotify, which have instituted exercise and mindfulness programs.
Review your succession plan. Leadership succession is widely recognized as one of the biggest challenges facing family-owned businesses. Given the increased mortality risk for senior citizens because of the pandemic, revisiting your succession plan is critical. Succession planning is not easy. Developing, training and supporting potential successors takes time and requires families to ask themselves hard questions, including whether the candidates have the right qualifications, experience and character to assume leadership. For family businesses without a succession plan, there is no time like the present to develop one. For those that do, it is important to continually reevaluate how and when control should be transferred.
Assess your estate plan. Regardless of whether the owners wish to keep their business in the family or sell it, careful planning can help ensure that the business and family will be protected from large and unexpected tax liabilities. Because the pandemic may have significantly (even if only relatively temporarily) impacted the value of your family's business, it's important to revisit your estate plan with your advisers to either take advantage of a reduced valuation or review how an increased valuation might affect liquidity when you pass away.
Find your own path
All families and their businesses are unique and are experiencing the effects of the COVID-19 pandemic in their own way. Therefore, strategies must be customized to fit those individual circumstances. Insights from positive psychology can be used to increase happiness and satisfaction within the workforce that, in turn, can enhance a company's bottom line. With challenges come opportunities, and this may prove to be a great opportunity for your family to rally around each other, your business and your community.
Scott E. Friedman is chairman of Lippes Mathias Wexler Friedman LLP, a law firm in Buffalo, N.Y. (www.lippes.com), and co-founder and managing director of Varia Ventures, LLC, a management consulting firm (www.variaventures.com).