Wearing many hats
When our MLR Media team — including Family Business and my colleagues at Directors & Boards and Private Company Director — began working from home because of the COVID-19 pandemic, I started wearing hats to our videoconferences to amuse team members, who these days see me only from the neck up. I select the headgear from my collection of chapeaux and ballcaps as well as silly Halloween costumes. I like to keep everyone guessing what look I’ll be sporting when I log on.
Those who are familiar with the landmark “three-circle” model of the family business system, developed by Harvard Business School’s John A. Davis and the late Renato Tagiuri, know all about hats. Davis and Tagiuri’s model illustrates the overlapping roles and responsibilities of family business owners, managers (or employees) of the business, and family members. In discussing a nettlesome issue, participants in the conversation must clarify whether they are wearing their “owner hat,” their “manager/employee hat” or their “family member hat.”
Knowing which hat you’re wearing can aid in decision making. For example, if a NextGen needs an infusion of cash to buy a new home or pay for a child’s schooling, it’s more appropriate for the funding to be given as a gift from parents or grandparents (family hat) than to be awarded as a distribution from the business (ownership hat) or a raise in salary (employee hat).
During the COVID-19 pandemic, members of the extended family who have not been active in the family firm or in family governance may have worn business or ownership hats they had never tried on before.
Family members in the medical field, for example, may be advising managers of their family’s business on safety precautions for employees returning to work. NextGen digital natives may be helping older relatives get comfortable with videoconferencing technology. In financially strapped companies, family members who don’t hold jobs in the business may be volunteering their services.
Some family business owners are discovering that their requirements in this crisis go beyond a change of hats — what they really need are some new heads. People from outside the family or organization can offer the benefit of their experience as companies consider how to move forward. Independent directors or professional advisers can suggest options that business leaders might not have considered. Alternatively, they can point out flaws in plans on the drawing board. Strategies that have been successful in the past may not be viable in these unusual new circumstances.
Companies that gamed out supply-chain disruption and an economic downturn before the pandemic, and those that had cybersecurity systems already in place, were able to adjust more quickly than others. Those who have borne the cost of reengineering facilities to accommodate social distancing have seen the advantages of avoiding debt and taking minimal cash out of the business.
I tip my hat to everyone for making it through this difficult year, one day at a time.
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