This is no ordinary recession. Rather than sliding into a downturn as economic activity and confidence gradually ebb away, this time it seems we are heading into a deep recession, complicated and fuelled by a global banking crisis involving staggering – and currently still unquantified – sums of money.
The special and uniquely damaging threats facing family businesses struggling in a recession arise where the family lacks a coherent and unified approach to the business they own. In a trading downturn, with gloom in the air, nerves soon become frayed, and a poor family governance culture quickly leads to stressed family relationships compounding the deteriorating trading outlook.
Imagine a company run by one cousin branch of the family, where other branches are not engaged in the business. If these branches do not get along well, then guess who is blamed for poor financial performance, even if the situation is outside the control of the cousins working in the business?
The pain of unresolved family issues becomes more acute in a recession. For instance, family members promoted beyond their talents stand out like a sore thumb when economic pressures push the possibility of staff redundancies up the agenda.
However, family business leaders can take advantage of the recession by using it as an excuse to deal with family issues that have been pushed under the carpet for far too long.
Strategies in these dark days should focus on maximising family business opportunities and minimising the threats. Looming recession is the time to institute a family governance healthcheck that underpins family alignment and improves the chances of business survival.
A clear strategy is required to manage family shareholder expectations and ensure that communication channels (eg, family councils and other governance structures) are open and effective. Everyone needs a clear understanding of where the company is going and their role in the process – in short, a shared vision allowing the family to speak with one voice.
If you do not, the risk is a double whammy – appalling trading conditions made worse by deteriorating family relationships. But while it's clear that very tough times are ahead for family businesses, we know that well-organised, values-driven family enterprises that minimise their weaknesses and maximise their strengths consistently outperform the competition.
Therefore, in a recession, family businesess should pull together and make the most of their "familiness". Family-based values of loyalty and collective responsibility allied to high levels of trust and commitment – both to employees and to customers – should be reinforced.
Recognising that good employees are scarce and valuable, family businesses should be more reluctant to let people go. While recession-hit non-family firms may be slashing budgets to satisfy creditors and shareholders, family companies should maintain strategic expenditure and reinvest in order to build a strong business for better economic times ahead.
Even during the recession itself, well-managed and funded family firms can react quickly, taking advantage of shifting consumer preferences and failing competitors. By underlining all this familiness, family members know that it's their own business they are tightening their belts for, and they are more likely to make the sacrifices without quibbling.