Overview

Family-Run Business

SMEs and family-run businesses: good crisis and post-crisis management practices

A number of points for reflection (the fruit of our experience with numerous family-run companies that are facing the current crisis and/or have successfully managed extremely difficult situations in the past) on managing the crisis and the period following it.

SMEs and family-run businesses: good crisis and post-crisis management practices

A number of points for reflection (the fruit of our experience with numerous family-run companies that are facing the current crisis and/or have successfully managed extremely difficult situations in the past) on managing the crisis and the period following it.

These reflections (offered from a general standpoint) obviously need to be considered within their specific situation.

In essence, they involve a number of “suggestions for action” (in other words, a sort of checklist) for better emergency and post-emergency management that are also applicable in special, unprecedented crisis situations, such as the current one.

Specifically, these reflections involve the following aspects:

  1. intervene promptly in a number of key aspects (to secure the business):
    SHORT-TERM AGENDA
  2. orient the company beyond the crisis (plan post-crisis initiatives):
    MEDIUM-TERM AGENDA

 

INTRODUCTION

Here are some basic aspects regarding emergency management situations: key principles

 

 

1.SHORT-TERM AGENDA
Transformation of the organizational structure

The experience of many companies suggests the creation of the following:

a.a cross-sector coordination team, normally consisting of the head of the company and 4-5 of its top managers. This is a coordinating team that guides the different corporate sectors and proposes tactical decisions to the company’s top management (CEO/BofD), to guarantee prompt decision-making.
In situations in which the financial situation is particularly delicate, the team dedicates much attention to the management/monitoring of the treasury and assessment of current and/or planned investments on the basis of expected returns (proposing suspension, delay or acceleration regarding them);

a.a number of teams specialized in key aspects to be safeguarded during crisis situations. Based on our experience, these teams are usually specialized in the following areas: 1. Employees, 2. Customers, 3. Production and Suppliers, 4. Corporate Finances. These teams are independent of each other and are overseen by the cross-sector coordination team (see point “a.” above). Each team deals solely with the questions in its area of competence, thus guaranteeing rapid response.

In addition, in the case of family-run businesses, it is important to also assure a proper level of information/updates to partners/family members who are not involved in the day-to-day operation of the company. For this, short family meetings should be held to provide constant updates (the level of information could be different for family members who are or those who are not active in the company).

 

 

EMPLOYEES

Create a team responsible for the safety and the health of its employees that deals with: defining an employee health and safety policy (to be updated on a regular basis);

  • guaranteeing the possibility of working efficiently using smart working (providing all instruments required);
  • assuring prompt communication with all employees;
  • listening to feedback regarding the policies adopted. The team is normally comprised of at least: HR Manager (leader) and members of the HR sector

The team is normally comprised of at least: HR Manager (leader) and members of the HR sector.

CUSTOMERS

Create a team responsible for managing customer relations that deals with:

  • communicating to clients the emergency management activities and involving them when opportune;
  • understanding new customer needs;
  • monitoring collection-related aspects;
  • intervening in the event of complaints;
  • monitoring the level of attention to customers and post-sales service.

The team is normally comprised of: Sales and Marketing Manager (leader) and members of the sales and marketing sector.

PRODUCTION AND SUPPLIERS

Create a team responsible for production and the supply process that deals with:

  • guaranteeing a high level of transparency with suppliers and providing them with support by managing and rationing orders;
  • developing temporary strategies (e.g., interim supply orders) designed to guarantee the continuation of the production cycle;
  • optimizing and rationalizing logistics;
  • assessing the impacts on production processes.

The team is normally comprised of: Purchasing/Production Manager (leader) and members of the purchasing, production, supply and logistics sectors.

FINANCIAL STRESS-TEST (short-term)

Creating a team responsible for analyzing the financial health of the company that deals with:

  • developing (and periodically updating) the analysis of the economic impact on the company;
  • analyzing the individual sources of financing that are active (duration, repayment method, etc.) to evaluate the potential need for corrective action (renegotiation, etc.);
  • analyzing the financial needs of the company.

The team is normally comprised of: CFO (leader) and members of administrative, finance and auditing sectors.

The activities indicated translate into numeric economic-financial projections
(for example, weekly cash flows), aimed at fostering the monitoring of the company’s financial requirements

As mentioned, in family-run businesses, in addition to the organizational solutions indicated above, it is important to assure continuous updating for partners and family members not involved in day-to-day company operations.

 

2.MEDIUM-TERM AGENDA

In our experience, medium-term actions can be divided into four phases.

Risks (and opportunities)
  • The first phase is to identify the main economic and organizational risks (and potential opportunities for innovation) to which the company is exposed, involving:

a.market/innovation (e.g., new consumption models)

b.business (e.g., collapse in revenues from traditional channels)

c.operations (e.g., closing down of a supplier)

d.financial management (e.g., lack of liquidity)

  • Therefore, a qualitative assessment must be made: the higher risk aspects are designated as “high-risk” and those with lower risk “low-risk”
Scenarios
  • The second phase is to create specific scenarios based on the risk factors identified in the previous phase (and on any new opportunities for innovation—product, process, channel, etc.—to be capitalized on)
  • Therefore, for each corporate scenario developed, a qualitative assessment of the probability that this will occur must be prepared (high-, medium- or low-probability)
Impacts
  • The third phase is to develop a qualitative/quantitative assessment (using simulations and stress-tests) of the economic impact of each scenario on:

a.market/innovation (e.g., loss of 10 customers in traditional channels and 2 new customers in a new channel)

b.business (e.g., revenues down by 100)

c.operations (e.g., the warehouse down by 200)

d.financial management (e.g., cash flow loss of 100)

  • The organizational implications must be detailed for each scenario
  • The severity of the impact of each scenario must be assessed in terms of the effects on cash flow generation
Action
  • The fourth phase is to define the economic and organizational corrective actions to be taken for each scenario:

a.market/innovation (e.g., products with different technologies)

b.business (e.g., promotional offers/discounts)

c.operations (e.g., supplier diversification)

d.financial management (e.g., increase lines of credit)

  • Therefore, the application of these actions must be monitored constantly to verify that they conform with the scenario that actually occurred
These activities must be undertaken using a method that is rigorous, structured and promotes the involvement of company personnel in order to gather suggestions from everyone and promote true involvement in developing the implementation of the shared strategy.



Leave a Reply

The comments, personal data (name and/or pseudonym) and any other personal information included by the Data Subject in the published comments will be disseminated on the website in keeping with the request expressed by the Data Subject. See the complete information policy.
Read and accepted

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.

We appreciate your comments. We reserve the right to remove the sentences deemed offensive.