Crisis management in family businesses is strongly impacted by their unique goals, governance, and resources. This is argued by Joyce Kox in her PhD thesis entitled Navigating Crises in Family Businesses. Kox: "In family businesses, the family has a considerable impact on the decision-making, further complicating the dynamics of crisis management. On the one hand, the family is a potential source of crisis, on the other, the family can also be a help in overcoming a crisis."
The findings of this study emphasize the impact of family events on the business, such as the death or illness of key family members. These events do not only have personal but also business implications, underscoring the need for an integrated approach to crisis management. "The interaction between family ties and corporate decisions in family businesses is complex," Kox states. "It is essential to understand these dynamics to be able to effectively manage a crisis."
Unieke aspecten van crisismanagement in familiebedrijven
What makes crisis management in family businesses unique is that crises can also be generated by family-related issues, for instance, a divorce or bereavement. Kox: "Internal and external crises have an impact on both family life and the business itself. Although family as well as non-family businesses may use similar approaches to crisis management, they execute them differently as a result of differences in goals, governance, and resources. Family businesses, driven as they are by the emotional value of the business, are more likely to show more risk-taking behavior during crises. Moreover, their organizational structure enables them to quickly make decisions and reduce inefficiency, even though this sometimes happens at the expense of minority shareholders. The family system is a source of additional resources that can serve as a potential buffer against crises."
The family as a source of crises
Kox also studied the effects of the death of a family business leader within small to medium-sized family businesses. Kox: "After such a death, the matter of succession enters an accelerated phase: in come cases, the succession process is already underway, in others it is not. At the same time, this event also marks the start of the grieving process for the family successor. This may have consequences for the decision-making within the business.
The family’s role in crisis management is therefore ambivalent and multifaceted
Joyce Kox
Following the passing of a family business leader, the business itself is part of the inheritance and thus a kind of direct connection with the deceased. Because the successor wants to honor the deceased or at least ensure the family business’ continued existence, it may be difficult at first for this successor to lead the family business in an authentic way. What you also see is that people are not ready to deal with such a big change at such a short notice. The successor’s life changes completely. This also impacts the successor’s mourning process. In some cases, however, you see that working in the family firm can be healing as well, as a result of the confrontation that forced them to deal with their loss. In other cases, the change can be perceived as overwhelming."
Risk-taking behavior during crises
As part of her PhD research, Kox has also investigated the effect of external crises, such as Covid-19. "Where strategic responses during an external crisis is concerned, we often see that family businesses tend to take more risk during a crisis. This has to do with the socioemotional wealth that the business represents for the family. Such a crisis threatens the continuity of the firm and family businesses will try to retain this wealth no matter the cost. The research results showed that family businesses with great family involvement in management tended to resort more to asset retrenchment in the first year of the Covid pandemic.
The studies on succession and on bereavement both showed that the necessary changes in a business following a crisis were also driven by emotional considerations. Bereavement made changes more difficult, whereas a crisis like the Covid pandemic made them easier. The family’s role in crisis management is therefore ambivalent and multifaceted."
