The Paradox of Peace
22nd April 2020
Over the last weeks there have been plenty of military metaphors flying around, on both sides of the Channel and either side of the Atlantic, with Presidents Macron and Trump along with Boris Johnson all talking about the war with Coranavirus and the need to work together to defeat this invisible enemy.
family business challenges in crisis
Much of the work we do as consultants can be seen as true peacetime work, such as helping families with positive and pro-active family business governance and succession planning projects. However for the greater part we are working with families in conflict. Not the tensions that are an inevitable consequence of the complexities of family business life, those that can be diagnosed, triaged and treated through the application of good governance processes. Rather everyday examples of the sort of mental health damaging, family business threatening conflict of the sort described by former IFB Director General Grant Gordon and Nigel Nicholson as afflicting high profile family business in their book Family Wars.
Whilst our clients dealing with such conflict also faced external challenges in ‘peacetime’, preparing for Brexit etc., these challenges were relative hiccups compared to the events of last few weeks, such as the closure of significant export markets, with attendant cash flow difficulties. The most significant challenges they faced could be truly described as internal and stemming from family dynamics. It might be assumed that against this background that family firms like this will inevitably be casualties in the war against Coranavirus.
Not necessarily. Over the last week we have seen signs of a quite remarkable transformation. Paradoxically, when faced with an existential crisis for their family company, working directors previously at loggerheads have begun to collaborate and communicate to an unexpected degree.
How has this happened? Obviously we would like to claim a victory for the consultancy process. However whilst green shoots of communication have been appearing over the last few months these have grown considerably over the last weeks.
family business first
Can we point to a watershed moment? No, there simply seems to have been a realisation on the part of the clients that, as they put the position, ‘we are in this together and have to get on with it’.
Is there a deeper explanation? Possibly. There is much debate as to whether business families should take a ‘business first’ approach, concentrating on the profitability and financial stability of their family business, on the basis that without this there is no prospect of looking after the family. Advocates of the alternative ‘family first’ approach argue that the long term survival of a family business requires investment in looking after the business family and the wider stakeholder in the family business concerned. In academic jargon generating socio-emotional wealth, rather than financial returns.
Other academics argue that business first and family first are fluid rather than fixed concepts and that, in a hostile economic environment, business families are likely to batten down the hatches and switch to a business first approach to ensure the survival of their family firm.
We are not aware of a mirror image concept for socio-economic wealth for those business families that seem to invest their energies in destructive conflict. Perhaps psychological emotional deficit will do. Arguably what we have identified above results from a conscious or sub-conscious decision on the family directors to invest this negative energy more positively in working for the survival of their family business. In other words moving from a family (conflict) first to a business first approach.
Can we point to similar situations in the past? Certainly, there are parallels with at least one other family business I know (although not as a consultancy client) following the banking crisis in 2008. When faced with pressure from their bank, this family put their tensions to one side and their fairly considerable private assets on the line to guarantee the liabilities of their second-generation family firm.
the Coronavirus dividend
Assuming that our clients do indeed survive the war against Coranavirus (and we believe that there is every prospect that they will do so), will we witness a permanent change in family dynamics? The term ‘peace dividend’ was coined following the end of the Cold War to account for public spending no longer required for defence budgets. The challenge for family businesses of the profile described here is to make best use, during times of peace, of their Coronavirus War dividend: the improvements in their communication and inter-personal dynamics.
Is there some magic formula or approach that all business families can adopt to achieve a similar state of focus? If only. The first draft of this article stopped more or less here. The reason being that I wanted to write an article with an essentially positive message rather than relating a cautionary tale. Unfortunately, as soon as they had weathered the banking crisis, the family referred to above squandered their peace dividend and returned to their former battles (and some) resulting in a hostile family ‘takeover’ of the family company and a family estrangement that only came to an end with the terminal cancer diagnosis of one of the senior generation.
However, we have been encouraged to share some thoughts about what family firms can do differently this time. So what follows are the ideas from the FBC team rather than a battle proven plan.
The difference between the banking crash and the Coronavirus crisis is that, at least for some of us, the lockdown has given much more time to reflect and think. So how can family business members with similar experiences to those discussed in this article make best use of any additional time? Ultimately it will probably come down to reflection and analysis. Asking questions like:
- What has gone wrong in the past? What are the communication patterns and assumptions that have prevailed in the past? How have they changed in the current crisis?
- What really matters to me? Did the fear that Coronavirus might limit my time cause me to speak or act differently?
- What is different now? Am I behaving or reacting differently? Are others? If so why? What does that feel like?
- Have positive values and emotions, such as trust, forgiveness, pride, resilience, that have may been buried suddenly resurfaced?
- Am I and are other family business members behaving authentically and in a way that is true to our family business values ?
- Do our past difficulties have an underlying structural cause (which is often the case in larger multi-generational family businesses)? If so, what is it? What can we do, by exploring governance mechanisms or otherwise to guard against future difficulties?
Also using the spare time and the eerie silence of the lockdown to capture that thinking, for future reference through discussion, emails, journaling or otherwise. For those family business members who find themselves much busier during the crisis, but nevertheless are aware of the phenomenon discussed in this article any reflection may have to be postponed until things settle down.
A lot has been written about good communication and conflict management. Is it worth investing some time in looking at some of this material?
It might be that this thinking points to the conclusion that past difficulties have an underlying structural cause (which is often the case in larger multi-generational family businesses). If so, what is it? What can the family do, by exploring governance mechanisms or otherwise to guard against future difficulties?
Nicholas Smith is a Consultant at The Family Business Consultancy. To find out more about their work, visit thefbc.co.uk