Thought Leadership Article by Prasad Ramakrishnan

Manufacturing Family Businesses Leading the Way Through the Crisis

by Prasad Ramakrishnan, Adjunct Lecturer, TOIM Division
May 2020

Babson’s Institute for Family Entrepreneurship (IFE) held an impactful webinar series this spring entitled “How Entrepreneurial Families Can Thrive and Lead, Now and in the Post Crisis World”. I had the opportunity to co-lead, with Nulsen Family Executive Director Lauri Union, a session in this series focused on family businesses in manufacturing industries. It was eye-opening to hear from so many participants representing businesses around the world, who shared their personal experiences in coping with this global crisis. While everyone had their unique story, several common critical path strategies emerged:

  1. Put people first. Families did this in many ways, including prioritizing employee safety ahead of demand fulfillment, using downtime to invest in training of their people, providing a bonus to help employee families, providing fast and complete support to help ‘work at home’ transitions, and, fast personalized response to employee questions and concerns.
  2. Address cash issues for the business, but also for employees. Avoid/delay layoffs – leverage subsidy packages, government schemes (e.g. kurzarbeit in Germany), and pivot to new lines of business.
  3. Rapidly adapt manufacturing operations. Address new demands (e.g. PPE, physical distancing). Rethink supply chains re: centralization vs. decentralization. Prepare for disruptive changes in Global Supply Chains – e.g. reduction in China, increase in India, and for distribution channels that have been closed off, even with strong demand.
  4. Be personally present despite social distancing and engage everybody. Pay attention to employee work-life balancing issues with everyone at home, engage all employees with a weekly CEO video message, ensure employees have access to the right work-at-home technology.
  5. Adapt to local policies. Businesses in different countries will need to find a way to deal with their governments' respective responses to COVID (e.g., operating under an authoritarian government).

It was refreshing to see family businesses everywhere finding new ways to lead during this pandemic. Lauri and I decided to learn more from the Babson network of family entrepreneurs, so we had an in-depth dialog with one of the participants – Philipp Hahn-Woernle MBA ‘06, CEO of the viastore Group, a 5th generation family owned 500-person global business based in Stuttgart, Germany, with operations in Germany, Spain, France, Czech Republic, Russia, USA, and Brazil. The company has deep expertise in Automated Material Handling solutions including design, engineering, project management, controls and software, integration, implementation, and service. Philipp joined the business in 2009, and in 2013, with his father’s retirement, became CEO. Philipp has since doubled the size of the business while spinning off the software group into a separate business. 

We discovered Philipp’s actions during this crisis to consistently be in full congruence with his deep concern and commitment to the wellbeing of his employees and their families. This spirit was very evident among all of the event participants – a sense of humility and respect for the seriousness of the situation matched by determination and repeated actioning to find solutions for the greater good. On a personal level, this was one of the most inspiring meetings I have attended since the onset of the Covid-19 crisis. Below is a quick summary of Philipp’s leadership actions and the journey of employees at the viastore Group during the Covid-19 Crisis. 

viastore Group Covid-19 Response

Initially, Philipp and his team assumed in general not much would change except for the need for more caution. They were woken from their sense of disbelief by Angela Merkel’s speech. With a new found clarity of the shocking possible impact, Philipp immediately gathered the senior team to craft a crisis response – “let’s push to get all employees to work from home ASAP.”

To ensure the smoothest possible rapid transition, the Software Development Department immediately piloted remote work for 1 week, sharing feedback on Wednesday and action steps by Friday. The next week, 330 people in Germany moved to working from their home. The one-week advance test allowed for strong support to ensure infrastructure, licenses, and suitable computers for all. Clear communication paths with a regular cadence were also established “up, down, and sideways.” Philipp started an informal weekly video update sent via link to all employees. This has been very effective and continues every week. In these videos, Philipp applied the no BS rule - keep it simple, factual, and personal “What we know, what we do not know, and what we are planning” around 3 key priorities: Cash (lifeblood), Capabilities (Transition to jobs), Customers.    

Philipp has maintained a strong focus on not losing employees. During the 2009 crisis, Philipp saw the company lose a whole generation of apprentice/trainee employees and the long time to recovery from losing just one engineer.

As the virus has come under control in Germany, the team is back in the office with a 50/50 ratio of office/home, face masks, and distancing guidelines, and is now working to understand what will be ‘the new normal.’

Philipp’s Insights and Questions

  1. This new reality will last for at least another year.
  2. There will be permanent changes – driven by customers, suppliers, employees. CEOs need to think deeply to understand and plan for future effectiveness.
  3. Single biggest current concern is humans dealing with so much uncertainty. How long will children need to continue home schooling and what impact does this have on people and their work? Personal complexity in a void of social connectivity has huge emotional impact and is exhausting for many people. CEOs will need to consider how this impacts their workforce.
  4. The present focus is on managing cash, but when should the decision be made to begin investing for the long term again? This is complicated by the concern that reducing levels of employment can have a huge negative impact on competitiveness.
  5. How will the world look like after the crisis? Now is a time for CEOs to engage with experts from varied disciplines to gain insight into future megatrends, major hurdles, burning platforms, and key opportunities for their industry, region and business.