The recent events have forced most families to impose social distancing and self-isolation. These may have been for the society at large, but most business families find themselves completely locked in with their families. This self-imposed, and later on, government encouraged captivity, if I may call it that, has resulted in different types of pressures on families.
It is at times like these that the families need to pull in together. A news report mentioned that a record number of divorces were seen once the Chinese lockdown was lifted. While this could be apocryphal, there is no doubt that such close captivity has been unprecedented and a new experience for most families.
I have been asked by a few families to help out answer the questions, what can business families do at a time like this?
We can answer this question in two parts, business and family. Let us take the business part first.
While there are the usual concerns of figuring out how to start the factories or worry about the cashflows to meet the salaries, rents, interest, etc., most smart entrepreneurs are also using this down time to re-evaluate their businesses. It is a forgone conclusion that the post-Covid era would bring about some changes which could affect the businesses and the way things are done. Family Businesses have to recognise these subtle changes and see how they can exploit these. Some of these factors are:
Working from home becomes a real possibility: Given the crazy hours that some people have to commute on a daily basis, this was an alternative that seemed utopian for many. But with the current scenario, where everyone was forced to operate from home, one is left but to wonder now, with offices now making the necessary arrangements for operating online, whether one really needs the physical space at all? One can consider re-looking at the different functions and figuring out if any functions can be done from home. Of course, there would be significant real estate freed up from all such cases, if adopted, even after providing for the need to have common sharing working areas, when all these people do come to office, is something worth considering.
Adapting Technology: Businesses will have to be aware of the latest technologies being offered and how they can be used. I advised an organisation which was considering a solution worth a couple of crores to consider and eventually use a more modern solution costing only a couple of lakhs. Thus, there can be huge efficiencies if businesses use technologies, appropriate and cost-effective ones, to reduce cost of operations and increase efficiencies. After all, with all the pressure on lowering prices, these savings and increase in efficiencies are something which should not be overlooked. Are the businesses aware of the newer tools available currently?
As a very simple example, today almost everyone seems to have switched over to Zoom, Google Hangouts, Skype for their meetings and using Google Drive or Dropbox to share files on the cloud. We did see some people making Whatsapp or Facetime calls. How many are aware of these free tools that one can use?
More specific examples are given below:
Digital Payments: I remember the earlier times when one used to issue cheques and enjoy the funds till the time the cheques were cleared. In fact, some organisations even today, work on the basis of delaying payments to the maximum extent possible.
On the other hand, efficient organisations are embracing the digital technologies and using digital online payments. These are free, thanks to the RBI making online NEFT transfers free, but this ensures more quicker transactions. Yes, one cannot use the old excuse, “Your cheque is in the mail”. But I was simply amazed when I saw during the Covid lockdown, that the domestic help and vendors had Google pay accounts, if not bank accounts. I was able to pay all of them including my office payroll, using my mobile app within minutes. The only disadvantage was that my accountants were worried about their job security and laborious processes, and wondered how long I would be doing their work!
Video conferences meetings: Working from home using video meetings had both advantages and disadvantages. The most attractive option is the ability to bring in a team of people on the call, share screens and also record the meeting. This would help collaboration amongst employees in various locations. The downside is, that one could very easily get caught in the meeting culture, as I found myself jumping from one zoom meeting to Webex to Skype during a period of a day!
Learning on the fly: The current situation has shown us that businesses and economies are fragile due to their interdependence, and may have to face unforeseen challenges. Situations like this would entail people forced to learn and adapt. I have seen admirably efforts being made by the staunchest supporters of face-to-face meetings, struggle to learn the zoom controls, before they successfully mastered it. The only lesson one can get from this experience is that the only certainty is the uncertain future, and one needs to learn fast to adapt. Charles Darwin had stated that the only species to survive is the one who is most adaptable to change, and not the fastest or the strongest. Family businesses have traditionally been the slowest to change, and this experience should influence their current thought process towards change.
Additionally, they will have to learn how to operate in the new environment. I recall speaking to a family member who had called me desperately trying to understand how to use a Webex call, with the invitation sent to him from his customer. Knowing the technology is one thing and using this into your daily activities regularly is another. Family business owners will have to learn to do both.
Cash flow reserves: The other aspect of the crisis is the economic impact on the business, both revenues and profits. The closure of business activity for more than a month has disrupted the cashflows of all businesses, bringing some of them to their knees. This is something no amount of planning could have predicted inspite of our operating in a highly unpredictable environment. But businesses will have to maybe downsize, reduce debt and maybe be more cashflow oriented. Building up reserves for a rainy day would also help to provide for such uncertain events. Businesses had been affected by reduced sales resulting from the demonetisation exercise, and the shut-down of businesses during the Covid-19 crisis was another unforeseen event. Family businesses will have to provide for such future events.
Contingency plan or business continuity plan: One will have to make one, if not made already. What will happen if something like Covid occurred again? Or something happened to the top leadership? Such crisis’s are unusual, but our current experience shows that those businesses which have asked these questions and provided plans for such scenarios are able to adjust and respond faster. Given the high risk and dependency of families on the family businesses, planning for adverse effects becomes critical. Additionally, this is also a good time to separate out the business funds from the family funds, so that there are multiple revenue streams, in case the business gets adversely affected. And one has a safety fund flow, in case the business gets impacted.
Learning to operate in the new environment with maybe newer business models: Let’s face it, the current crisis has highlighted questions like -- will my business exist post this lockdown? Will my customers still want to use what I offer? We can see that, internationally, the airlines and cruises have been affected the most during this time. There is definitely going to be an adverse impact on the entertainment, restaurant and retailing industry. The home delivery services which households have been forced to use for the almost month-long lockdown, has forced them to use and understand these services. And I read somewhere that once you do something regularly for 21 days it becomes a habit? While this could be doubtful, the fact that customers have made alternative arrangements and have been quite innovative at these, will definitely influence and change behaviours. I have got invitations for Zoom birthday parties and HouseParty events. Family businesses need to carefully understand how their customers’ behaviours and needs may have changed and adapt accordingly. I suspect that face masks, hand-sanitisers, and non-contact deliveries will become common.
Additionally, what opportunities will arise in the post Covid era? Are there competitors or customers who will not survive? Do you need to de-risk your operations by considering alternate suppliers or customers? Can you use automation or technology to increase efficiencies and reduce costs? Are there businesses or markets that you need to re-consider entering or exiting? These are some of the questions that deserve some thought.
Having considered the business aspects, let’s wait and watch out for the family aspect in the next part of the article.
Views are personal.
The author is professor - strategy and family business at Bharatiya Vidya Bhavan's SPJIMR.