Luxembourg
14 Boulevard Royal L-2449 Luxembourg
 
Monday to Friday
8.30 am to 5 pm
 
Brussels
Chaussée de La Hulpe, 120 – 1000 Brussels
Ghent
Rijvisschestraat 124 – 9052 Ghent
 
Monday to Friday
8.30 am to 4.30 pm

Philippe Depoorter, Member of Banque de Luxembourg’s Executive Committee and Head of the Businesses & Entrepreneurs division, considers the particular features and mechanisms of family businesses, which provide useful insights at this difficult time.

The renewed interest in family businesses over the past decade has often led to their being studied as a theoretical model. Yet the current crisis seems to be providing a fresh demonstration of their ‘resilience’, as it did in 2008.

At least, that is the first impression I get from the numerous discussions I've had over the past three weeks with many of our family business clients. Amid the abundance of opinions, advice and analyses – often as not retrospective – I think it is interesting to share what families in business can teach us through their direct experience of the crisis.

Resilience is much more than a financial characteristic, it is above all an attitude. It drives the capacity to resist and then rebound, which is the goal of so many businesses in this Covid-19 crisisPhilippe Depoorter, Head of the Businesses & Entrepreneurs division

The family as an anchor

The family is the very essence of the family business model, ‘consubstantial’ even, and it is the core element of all the personal accounts we’ve received. In the face of a crisis that is fundamentally pitting us against the unknown and a feeling of powerlessness, the family is the anchor point. “When everything starts to come apart at the seams, the family becomes inversely important: it helps us get back the confidence and fighting spirit we need in the face of adversity," says one of our clients.

"My turnover has been cut by two-thirds in a week, we are down to about forty out of four hundred, but my sons have joined us since the announcement of the lockdown. And every day they come up with new ideas, motivate the teams and inspire us to keep going," confides this CEO of a business in the process of welcoming the third generation, in a sector that has been particularly hammered. I could feel their contagious energy in a photo sent to me by this rising next gen.

Looking after others

The first measures these businesses took were to look after their employees. Starting with their jobs and their pay, but also looking after their physical and mental health. This is an attitude that frequently pre-dates the crisis. "They are the beating heart of our company and have been with us for many years – we owe it to them.”

Within the family itself, looking after others is also paramount. As it is in this business, where the son, a junior manager, banned his father from visiting the business in order to keep his parents away ‘from the virus’.

It's just a short step from family to community. There are many examples of an almost innate sense of social purpose. Whether in these two large family businesses, whose employees have been made available to work on projects aimed at increasing Luxembourg’s hospital capacities or, on a more local scale, when another business leader looks after the pharmacists and all the helpers in his locality by providing them with free meals every day.

Resilience: more of an attitude than a concept

Family, looking after people, social purpose – these are very human notions in businesses generally geared to economics. It is hardly surprising that the notion of ‘resilience’ comes from psychology. Resilience is much more than a financial characteristic, it is above all an attitude. It drives the capacity to resist and then rebound, which is the goal of so many businesses in this Covid-19 crisis.

“In just one night, my son set up the payment system, which enabled us to open a new market when bad news was coming in from all sides"; "We are convinced that this crisis offers us at least as many learning opportunities as problems of all kinds: it's up to us to seize them"; "When you've lived through the War, you know just how important it is to keep faith, to keep re-thinking what we’re doing: the history of our businesses is a work in progress” – these are just some of the quotes fleshing out this attitude that I keep coming across.

Financial solidity cannot be decreed

Reading and hearing some of the statements about the financial strength or the ratios we’ll need to weather such a crisis, we might be tempted to think that we're dealing with well-trodden scientific paths, easily replicable and taught in all good business schools. But the reality on the ground is more nuanced and, what's more, there’s bad weather ahead.

The reserves that are likely to help most of our clients get through lockdown (depending on how long it lasts) will often be rooted in the tone set way back by the founder of the company, and subsequently adopted and adapted by his or her various successors. Annual reinvestments, reasonable dividends, or prudent savings are the corollaries of a value system that puts the sustainability of the company and the continuity of its stakeholders ahead of individual interests.

In this vein, one business leader told me that he had postponed a family property investment so as not to undermine his cash availability and ensure he was in a position to take a responsible approach towards his commercial tenants, adapting his rent demands to each tenant's individual situation.

However, this search for stability does not only apply to the business. It is striking to see the extent to which family business leaders are aware that they are interwoven in an economic fabric of which they are both constituents and beneficiaries. Several have told me that they are prepared, if necessary, to make temporary investments in a local family business to help it weather the crisis. This same public-spiritedness is also reflected in a common determination to resort to government support measures only when absolutely necessary.

What about the most vulnerable?

The idea that there will be a form of ‘natural selection’ and that ‘those who were in difficulty before the crisis will disappear’ is not echoed in the ecosystem of family business values or in the initial public statements that ‘no one will be left behind’. For all their abruptness, these views have set me thinking on two tracks.

With this crisis materialising through health, we are reminded that life is fragile and that fate can strike even the strongest among us. This observation should invite us to revisit our certainties, whatever they may be, and beyond the field of health. It should also lead us to avoid stigmatising fragility and classifying it as a weakness, by reminding us that it is in fact a strength when it allows us to tap into our creativity... and our resilience.

When you listen to family entrepreneurs, you realise that over and above being an economic forum, the family business is the theatre of a profoundly human adventure: the unique home for entrepreneurship... rooted in real life.

 

Article published in Paperjam.lu on 10/04/2020

Subscribe to the monthly newsletter
Receive monthly analyses of the financial markets and news from the Bank.

Check out our latest newsletter Check out our latest newsletter