Dusseldorf Mike Zöller is often not called until late. The board of directors of the management consultancy FTI Andersch helps family businesses through the crisis and has specialized in restructuring and transformation consulting. The companies in which his advice is in demand turn over between 200 million euros and more than one billion euros. However, this often only arrives in the company much later than is necessary.
The late alarm is symptomatic for many family businesses. That says a qualitative study by the WHU in Vallendar and by FTI Consulting, which is available to the Handelsblatt in advance. More than 50 interviews were conducted with family business owners, advisors and a control group of non-family business owners on the lessons learned from the pandemic.
The finding: In many family businesses, the signals of the crisis were recognized too late – accordingly, action was taken too late. The good news: The family businesses then reacted more agilely to the external shocks caused by the pandemic.
Nevertheless, the companies could have reacted much better to the crisis, according to experts. A guide for the future:
Top jobs of the day
Find the best jobs now and
be notified by email.
1. Take the first signs of a crisis seriously
Zöller’s personal insight: In around 60 percent of the cases, the financiers sound the alarm, in 20 percent the suggestion comes from the advisory boards, around a fifth comes from other external bodies or non-family management, which is generally more open to advice.
Around 90 percent of all orders are only awarded when there are already payment difficulties. And that will increase, Zöller judges, because “refinancing will become even more important after the pandemic, since, for example, the various state subsidy programs will have to be replaced sooner or later”.
In addition, lenders are also reacting more nervously at the moment. “They want to know how structural change and Covid as well as the increasing requirements in the area of sustainability and governance (ESG) are affecting the business model,” says the consultant. “The ongoing delays in the supply chain will accompany large parts of the German economy well into 2022 and lead to a shortage of products.”
2. Act proactively instead of reactively
“When there’s a fire, we act like the fire brigade,” is the abbreviated statement of a family company in the study. The problem with that: It’s already on fire. Nadine Kammerlander, Chair of Family Business and Head of the Institute for Family Business at WHU, criticizes the fact that many family businesses reacted very quickly in March 2020, but acted too little proactively – this would also be very helpful in the event of exogenous shocks.
“Plans B and C are often missing,” she says. Especially when it comes to sustainability, you need a concept that shouldn’t be driven by opportunities, but should define clear goals and paths: What is the company’s greatest negative impact on society and the climate? How do you measure this? “It’s not enough to buy a few more environmentally friendly machines,” says Kammerlander.
3. Allow advice
It’s actually a good thing: many family businesses operate in the province, turnover is low, the employees are satisfied and loyal. But what is missing, says Kammerlander, is that fresh ideas come into the family business.
At the same time, many entrepreneurs are particularly skeptical about outside advice. She recommends: more cooperation with other family businesses, start-ups and suitable consultants who understand that employee satisfaction, but also conflicts at shareholder level, are relevant to the success of the company.
The fact that advice usually only comes to companies from banks also shows that there have not been enough diverse advisory boards in many family businesses so far, and in future they should be the ones to initiate changes earlier, not the banks.
4. Don’t see financiers as opponents
The financial and economic crisis would not have been mastered so well if the equity ratios in most family businesses had not been so good, and this has also been the case since the beginning of the corona pandemic. One company even stated that it had “been independent of banks for 150 years”.
But especially in the case of exogenous shocks such as the pandemic, it makes sense to contact the house banks at an early stage, even if you don’t want to become dependent. One finding of the study: the financiers lack transparency.
“It makes no sense to see the financier as an opponent,” says one banker who was interviewed. Those who know more can make better decisions and “recognize potential threats”.
5. Supply chain resilience
The fact that the procurement market is now coming into focus as a problem area has caught many family businesses off guard. And it looks like supply chains will continue to be strained. Even without further exogenous shocks, hundreds of container ships are currently stranded and unable to transport the loaded goods.
In fact, half of family businesses are even thinking about making production chains more resilient, consultant Zöller has found: “There are no longer any taboos, a reset button has been pressed.” to return home. Especially to Eastern Europe.
Nadine Kammerlander, however, points out another circumstance: Due to the supply chain law and compliance with the ESG criteria, procurement is becoming significantly more important in risk assessment.
6. Perceive self-image and external image
Kammerlander was most surprised that the self-image and the external image of the family business are so far apart. While many family businesses still see themselves as hidden champions and refer to their past successes, consultants, banks and new competitors take a critical look at family businesses.
“During the pandemic, you could no longer rely on the successes of the past,” says Kammerlander. The external interlocutors would have seen that much sooner than the family entrepreneurs themselves, says the researcher.
This also applies to start-ups, with which more and more family businesses are collaborating. It is still too firmly established that “one does not share knowledge,” judges Kammerlander. To do this, what has been learned from the pandemic must be better communicated within the company and also externally.
7. Keep the learning curve high for sustainability
Zöller gives the companies a minus three for their behavior during the pandemic. He acknowledges the greater adaptability of entrepreneurs, but: “More is happening at the lower hierarchical levels of family businesses than in management. That has to change, also when it comes to diversity.”
Kammerlander sees the family business at a three plus. The reason: The adaptability of family businesses has not gotten any worse, but the environment and the rules of the game are changing faster than before: “Family businesses would be predestined for agile management, unlike DAX companies.”
According to Kammerlander, two lessons are important for the future: “Family businesses need new structures, diverse teams that scan disruptive and digital developments, especially when it comes to sustainability.” And even more important: “Those who don’t learn from the challenges of digitization and the pandemic , will fail in the even greater challenge of sustainability.”
More: We are the first to produce in Mönchengladbach again.