Recession is coming! Brace for Change

By: Prof. Enrique Soriano

In any economic downturn, small businesses are often hit the hardest. Some industries are affected more than others. Budget constraints, reduced spending power and inadequate preparedness for an upheaval can make it impossible for small and mid-sized businesses to survive. In many cases, this can cause companies without adequate planning to be unable to continue operating.

With the growing animosity between the two economic powerhouses, US and China, we should really brace ourselves for impact. Recession is not far behind and VUCA, as I mentioned in my last article, is now a clear and present danger.

There is nothing constant, but change.  It happens everywhere, and it is inevitable. To family businesses, getting into changes could be a major challenge as it might become an issue that affects the traditions of the family that have long been part of every family member’s life. However, change opens up to new beginnings and opportunities that a family in an enterprise needs to embrace and accept.

What is so difficult with change?  The dignity of each member of the family is on the line. With change, tightening of belts follows and resistance to change surfaces. The following are tips in formulating a plan for the family business:

1. Clearly describe the current status of the business specially the areas of intervention that need to be changed by showing facts and figures, and explaining the options for changing and why those are necessary. Transparency is key in having family members buy into the importance of change
2. With recession almost here, open up for suggestions with regard to changes, why the need to change and discuss the pros and cons of each.  Solicit information from family members. They may have better ideas in navigating through rough patches
3. Identify the role, scope of responsibilities and capabilities of each family member that will be affected by change.

Change will affect everyone in the family business.  Each of them would have to be able to understand how the change would directly or indirectly affect their roles and line of activity.  Their skills would have to be assessed in order to see how they could cope with the change.

4. Determine how the decision making process would have to be done. Decide whether the decision about the change would be based on votation by the family members or by the founder’s word or the department heads.  Decisions could be made according to the family business’ policies or the board of directors.
5. Develop the skills of the members of the family through training. Training is highly significant during change as it would prepare the individuals being subject to it psychologically, emotionally, physically, intellectually and socially.  For example, if the family business would have to utilize sophisticated equipment and software, then the people handling it would need to accept the fact they would have to learn new ways and be very good at it.
6. Create guidelines that would have to be agreed upon by the whole family. Simple guidelines that are comprehensive with regard to the change process would have to be agreed upon by all members of the family.  Avoid assumptions and be specific.  It is important that everyone is informed and agrees to abide.

Two possible guidelines prior to implementing change, are:  it must be clear that it would have to be taken gradually, and that regular family meetings would have to be attended to, so that whatever is going wrong with the change process could be raised and addressed immediately.

 

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Prof Enrique Soriano is a Book Author, World Bank/IFC Governance Consultant, Senior Advisor of Post and Powell Singapore and the Executive Director of Wong + Bernstein Family Advisory Group, a research and consulting firm in Asia that serves family businesses and family foundations. He was formerly Chair of the Marketing Cluster at the ATENEO Graduate School of Business in Manila, and is currently a visiting Senior Fellow of the IPMI International School, Jakarta.