Message from the Executive Director
From the IFE Newsletter, Spring 2020:
How Entrepreneurial Families Can Lead – Now and in the Post Crisis World
In this time of crisis and rapid change, entrepreneurial families are particularly well positioned to lead, both now and in the post crisis world. Why is this the case and what impact can entrepreneurial families have?
Entrepreneurial families, through their businesses large and small, drive at least 70% of global GDP. These families, particularly within our entrepreneurial Babson community, are perhaps the greatest force for growth and positive change on the planet. With such a large contribution to the world’s economies, these families have tremendous capacity to create economic value, social impact, stronger communities, deeper family ties, and ultimately to be a major driver of the positive changes needed as we emerge from this crisis.
Entrepreneurial families have a unique combination of assets that positions them to have this impact.
Decision making guided by multigenerational values
Values based decision making is not unique to family businesses, but business families are uniquely positioned to pass their values from generation to generation. Rich stories about how the family has made values-based decisions that benefitted multiple constituencies can inform current and future decisions. Case Study: Professor Les Charm shared the story of a family in Argentina that was faced with an existential challenge. Their business has only one customer, and that customer demanded continued product flow. At the same time, with infection rates rising, the family worried about the health of their employees. With a long history of treating their employees as they wish to be treated as a family, they refused to call employees back to work until their safety could be ensured. Doing the right thing based on their family’s values was more important than their only customer’s demands.
Ability to invest for a triple bottom line
Business families can choose how to measure their returns and often choose to include their impact on their community, employees, and environment in their measure of success. Many family businesses have been investing in their community and employees for generations and it is at times like this when those prior investments can help a family business, even as they are continuing to pay it forward. Case Study: At Organization Beckhoff, a Venezuelan family business founded in 1952, all employees in the construction and automotive divisions are furloughed. In addition to continuing to pay the employees, Bettina Beckhoff shared that the company is providing classes in topics including cyber security basics, digital marketing, wellness, and English as a second language for employees to improve their skills coming out of the crisis.
Opportunity to catalyze the energy of next generation
Family businesses, due to their close personal ties, have a unique opportunity to blend the life experience of the older generation with the ideas and energy of the next generation, and through this process, create pathways for innovation grounded in experience. Case Study: Giuliana, Jorge, and Viviana Faraj, third generation members of the family that owns Diunsa, Honduras’ largest department store chain, stepped in to transition their business fully online. On the day their stores closed due to the country-wide lockdown, the company had virtually no online presence. With ingenuity, reliance on the tech tools they use every day, and an ease with tech innovation, these siblings brought the company’s website, fulfillment, and distribution functions up to speed in just 30 days.
Networks that foster collaborative entrepreneurship
Business families often have deep relationships with other business families. These trusted relationships, which sometimes transcend generations, can form the basis for innovative collaborations. Case Study: When the Ragini family’s 4th generation jewelry business in Jaipur, India was shut down due to COVID-19, the family sprung into action to find new entrepreneurship opportunities. Through their relationship with the Bansal family, who have a chemical business, next gen family members Vaibhav Goyal and Prateek Bansal hatched a plan to enter the fumigation and sanitization market. Starting with their shared connections of banks and other businesses that were still open, within days they started a new company called Health and Hygiene Pro Services. As other companies reopened, the cleaning business grew rapidly. Now the two families are considering other collaborations.
Ability to pivot quickly
Family businesses with tight ownership structures have the ability to make decisions rapidly, which allows them to innovate and pivot in response to changing conditions. Case Study: Matt Boyd’s 3rd gen family business, Boyd Technologies, produces single use medical devices. When the COVID-19 crisis exposed a shortage of domestic medical masks, the Boyd family immediately moved to pivot their business to fill this need. In the short term, they are making masks to fill the shortage. Meanwhile, they are already pivoting their business model and preparing to contract with a major brand manufacture masks for them.
Family entrepreneurship has the capacity to foster values-based leadership grounded in the concept of stewardship – responsibility for community, employees, and environmental impact. At the same time, family entrepreneurship has the capacity to be nimble, make quick decisions, and invest for the long term. Closely held family businesses do not need to answer to quarterly profit expectations or short-term investor returns.These families can take measured risks to invest for the long term, creating real value for all of their constituents. When values-based leadership is combined with nimble, long term decision making, unique opportunities arise for the creation of value of all kinds and long-term positive impact is created.
As we look ahead to the aftermath of this crisis, the world, more than ever, will need people and businesses who create real value of all kinds – not financial engineering that pumps up asset prices and rewards the few, but real value that strengthens communities, strengthens families, treats employees with respect, makes decisions about what is best for the long term, and thinks about legacy and impact over immediate rewards. Entrepreneurial families are positioned to do this. Our mission at Babson’s Institute for Family Entrepreneurship is to inspire families to create value of all kinds and amplify their capacity to bring their ideas to fruition. We invite you to join our ongoing series of curated online conversations with Babson faculty and entrepreneurial families from around the world, designed to share stories of challenge and leadership and inspire entrepreneurial families to lead the creation of a better post crisis.