Tough economic times create stress across the system. To weather an economic downturn, families must build a strong infrastructure and stick to it.
Atlanta, GA (PRWEB) August 23, 2009 -
The Family Business Consulting Group, Inc. ® (http://www.efamilybusiness.com), has published Tough Economic Times Put Family Businesses to the Test, an article by FBCG senior associate, Dr. Mark Green. In the article, Green provides tips on how a family business should address an economic downturn.
According to Green, business-owning families across the country are concerned about volatility of oil price fluctuations and the global economic slowdown. For many, the demands and tensions of tough economic times highlight even more clearly the need for trust and open communication between family members. These demands and tensions also emphasize the need for economic discipline, clear policies, and well-established systems of family and business governance.
"Managing the intersection of the three systems present in family business--family, business, and ownership--is a key to family business success," says Green. "Tough economic times create stress across the system. To weather an economic downturn, families must build a strong infrastructure and stick to it."
Tips for addressing a downturn
1. Build or return to sound business management practices.
Tracking and enforcing responsibility for financial results is important in good economic times, but it is essential in a downturn. Creating a realistic budget to ensure that revenues will cover costs is also imperative. This exercise should consider what areas can be cut back if revenues shrink substantially. Once the budget is complete, create a process for tracking performance against the budget so that any changes in the environment faced by the business are identified quickly. Developing solutions in areas that are not tracking against the budget and then holding management accountable for delivering results (or alternative solutions if budget expectations are no longer realistic) are a natural outgrowth of the process. Last but not least, it is critical in uncertain times to hold regular management meetings where the team can discuss changes in the business environment and also develop plans to address them.
2. Be prepared for lower distributions.
A business that has prospered over the years and has always paid generous distributions or dividends to its shareholders may find it difficult to meet these payouts during today's challenging economic times. A family shareholder group that has taken the time and effort to learn about their business and the factors that make their dividends possible will be in a much better position to anticipate and adapt to changes in their dividends than a shareholder group that has just accepted their dividend checks without any effort to understand what lies behind them.
3. Stick to your employment policy.
Many families require members of the next generation to work outside of the business for several years before the next generation can work in the family business. However, when the economy slows and a well-paying, desirable job is tough to find, the family may be tempted to ignore its employment policy and hire young family members right out of college. The family may ask, "What good is having a business if we can't help the kids during tough times?" A valid question--but perhaps the members of the family would be wise to remember why they created the policy requirement in the first place. Most family members are able to make more significant and enduring contributions to their business after having a chance to learn in other work settings. Just because it's very difficult to find work, is that requirement no longer relevant? Rather than simply ignoring the established policy, a family must seek ways to help young, inexperienced family members without abandoning its stated policy. There are many ways to accomplish this, and each family will find its own way. For example, the family business can help family members with résumé development, interview preparation, or even introductions to possible employers.
4. Honor the succession plan.
A father or grandfather who has turned management of the business over to members of the next generation is often tempted to jump back into action during tough times. The family may welcome and encourage their involvement because of Dad's or Grandpa's history of success under pressure. Will the family allow the current leadership to lead or will there be too much fear for the family to place its trust in the next generation's leaders?
An "either/or" solution is not the answer. Finding a way to access the wisdom of the senior generation without cutting off the junior generation at its knees will be imperative. Combining the wisdom of the past with the talents of the present will be the key to success in these tough times.
About The Family Business Consulting Group, Inc.:
Headquartered in Atlanta, Georgia, The Family Business Consulting Group consists of world renowned consultants committed to helping family businesses prosper across generations. Their experienced consultants and advisors have founded several family business programs at university and non-profit organizations, won awards for their educational, consultative and research activities and, combined, are the most prolific authors in the field.
For more information about The Family Business Consulting Group and its services, contact Ken Bosshart at 770.421.0110 or visit efamilybusiness.com
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