Many family-owned and operated businesses were experiencing challenges from large online retail competition even before the worldwide COVID-19 pandemic. Today, they are faced with a new reality.
Torsten Pieper, associate professor of management in UNC Charlotte’s Belk College of Business, is one of nine researchers on three continents working on Crossing the Crisis, a global project to evaluate how family businesses are adapting to the ongoing COVID-19 pandemic.
Pieper sat down with Jeffrey Jones, director of Executive Education and Continuing Education at the Belk College, to discuss how family businesses are faring in the face of COVID-19. The interview is for Charlotte Business Buzz, a new podcast mini-series presented by the Belk College and the Office of Industry and Government Partnerships.
Can you define what a family business is?
There are several ways to define what a family business is, and one that we typically use in our practical work is a family business is any business where one family or several families have effective control over the business but also where the business contributes to the family in terms of income identity or reputation.
So, you always have these two sides – a business that is controlled by one or several families but also where the business contributes to the family in terms of income identity or reputation.
That can be a small mom-and-pop store – your dry cleaner, your local coffee shop. But it can also be fairly large businesses, such as Chick-fil-A, S.C. Johnson, or Aldi from my home country in Germany that you see here quite a bit now. Or right here in town, Hendrick Automotive; it’s one of the largest privately-held companies in the state, and one of the biggest auto dealers in the nation.
There's a research that is done over the years that shows that over a third of Fortune 500 companies are family controlled.
What resilience tools might family businesses be able to pull out of their toolbox to help them navigate this pandemic successfully?
Families just have this natural glue which binds them together. Then, this cohesion enables families and the family businesses to tolerate stress far more easily than other groups. So, you can look at it this way: When you are a member of a group, and you feel like everyone in the group has your back, you can trust everyone. … Then, you also feel like you can overcome challenges or whatever gets thrown your way, and that's a huge advantage.
What's interesting, too, is that it is almost paradoxical that the threat from the outside such as the pandemic … can also bring a family closer together because now little rifts are quickly forgotten when more substantial things are on the line such as the very survival of your livelihood.
Families also have what we call patient capital. Families are the most important providers of startup and growth capital, and they often provide money and sources of funding at relatively low or often no cost at all.
That's a huge benefit, but especially in times when cash is king, but then capital is also not only financial. It includes a human capital, social capital, and also emotional capital in terms of emotional support and safety, and the families are just amazing providers of all these things so that is definitely something that can pull you through a crisis and perhaps even make you come out of it stronger.
“Lead with intention – respond rather than react.”
Your research shows consumers have a higher level of trust and a preference for family businesses. Are you seeing this hold true during the pandemic?
Yes, absolutely. Remember what I said earlier about families having high levels of cohesion? The interesting thing with that cohesion is that it is not limited to the family. It really permeates the entire organization and even transcends it to include customers, suppliers, and the very communities that that family businesses serve.
If you take good care of the community that you're part of, the community will take good care of you.This creates benefits for everyone by enhancing trust and harmony, and it boosts the morale and decreases your transaction costs. So all this taken together it creates a sustainable ecosystem around these family businesses, and perhaps it's not surprising some of the world's longest living businesses that are out there are family businesses.
Family influence brings an element of longevity to the organization that other companies simply have a hard time to match.
You're working on a global research project to study the impact of COVID-19 on family businesses. Can you share more about this project and what you hope to learn?
While the pandemic has created huge economic turmoil, and brought tremendous disruptions for families, businesses, employees, communities and great challenges of course that could last a lifetime, it also presents a unique opportunity to learn and improve knowledge about family business that can last generations.
So together with several colleagues from around the U.S., Europe, Latin America, and Australia, we launched a global study to better understand how family businesses approached the challenges caused by COVID-19 and how they adapt to the evolving circumstances and our aim with this study is to develop useful insights and actionable suggestions on strategies that work during this pandemic so that we can derive suggestions for future crises because from everything you can read, there's a strong likelihood they will become more frequent going forward. We launched the first wave of data collection a week or so ago and plan to do regular follow-up surveys so that we can track changes and trends over time and then better understand which actions lead to what outcomes.
Many family businesses have storefronts in the local community. How might they best adapt to keep their customer safe through social distancing and other measures?
The challenges here may be similar for all businesses that are out there, but the family businesses have one key advantage that helps them greatly because they are closer to their customers and because they can make decisions faster.
Because they are aligned and have this natural cohesion, they can implement these decisions quicker, and they are therefore more nimble. That enables them to experiment more.
John Boyd was a maverick fighter pilot and strategy guru, and he used to say, “Whoever can handle the quickest rate of change is the one who survives.” Family influence enables you to do precisely that. You turn on a dime and to change quickly and that's a huge advantage at any moment but especially in times of uncertainty in crisis when there is no script.
If you had 30 seconds to give a pep talk to a family business in Charlotte, what would you say?
I would tell them three things. Look to your values and past experiences for guidance. So, think about what other challenges you have overcome in the past, and remind yourself, together you can work your way through this.
Number two, lean into your strengths. Immense resilience and families have the ability to recover from challenges.
And number three, lead with intention – respond rather than react. Responding makes you slow down and work toward common goals. Also know what goals are important, have your priorities straight and what trade-offs you're willing to make to achieve these goals. That would be my advice, briefly.
Note: The interview has been edited for clarity and space. The full interview is available through Charlotte Business Buzz.
About the Belk College of Business
The Belk College of Business at UNC Charlotte is North Carolina’s urban research business school. Accredited by AACSB International, the Belk College of Business offers outstanding business education at the undergraduate and graduate levels, along with executive education. The Belk College has been educating future business leaders for nearly 50 years. With more than 4,600 students, almost 160 full-time faculty and staff, and more than 33,000 alumni, the Belk College is one of the Carolinas’ largest business schools.
