The worldwide COVID-19 pandemic has impacted every business in ways big and small, but none more so than those owned and operated by families. Joining us is Dr. Torsten Pieper, associate professor of management in the Belk College of Business at UNC Charlotte. He’s a founding editor of the Journal of Family Business Strategy, president of the International Family Enterprise Research Academy, and has authored many articles on the subject of family businesses. In addition, he is working on a global research project to evaluate how these businesses are adapting to the ongoing COVID-19 pandemic.
I’m Jeffrey Jones, Director of Executive Education and Professional Development at UNC Charlotte, and this is Charlotte Business Buzz.
Connecting the Queen City’s business community … From the Belk College of Business at UNC Charlotte.... This is Charlotte Business Buzz.
The worldwide COVID-19 pandemic has impacted every business in ways big and small… but none more so than those owned and operated by families - typically building customer loyalty through generations. These cornerstones of American business were already experiencing challenges through large online retailer competition -- and are now faced with a new reality.
In spite of those setbacks, there may be more resilience to these bloodline businesses than meets the eye. Joining us today is Dr. Torsten Pieper, associate professor of management in the Belk College of Business at UNC Charlotte. He’s a founding editor of the Journal of Family Business Strategy, president of the International Family Enterprise Research Academy, and has authored many articles on the subject of family businesses. In addition, he is working on a global research project to evaluate how these businesses are adapting to the ongoing pandemic.
Dr. Pieper, welcome to the program.
Thank you very much for having me, it's a pleasure.
Let's get started with getting clear about what we mean by family business. Can you define what a family business is, and maybe share with us how they differ from other businesses that we might know?
So there are several ways to to define what what a family business is and one that we typically use in our practical work is family business is any business where one family or several families have effective control over the business but also where the business contributes to the family in terms of income identity or reputation so you always have these two sides- a business where that is controlled where by one or several families but also where the business contributes to the family in terms of income identity or reputation and that can be a small mom-and-pop store - your your dry cleaner your local coffee shop, but it can also be fairly large businesses such as chick-fil-a or SC Johnson or Aldi from from my home country in Germany thatyou see here quite a bit now - or right here in town Hendrick automotive it's one one of the largest privately held companies in the state - one of the biggest auto dealers in the nation and very large public listed corporations like for Ford and Walmart fit their definition because you have a family - the Fords and the Waltons to effectively control the business and also where the business gives back to these families suppose in terms of financial but also then a lot financial wealth. There's a research that is done over over the years that shows that over a third of even the fortune 500 companies are family controlled. Everywhere, across all sectors of the economy, contribute to or to well over half of the nation's gross domestic product - sixty percent or more of total US employment, 78 or 80 percent of all new jobs, so there are significant - very important actors - in the economic landscape and that is pretty much all across the world, so it's it's a global phenomenon sort the same family businesses tend to outperform their non-family counterparts. They lay out fewer employees regardless of how they perform which is interesting in itself, they also manage more sustainably, there’s some of our colleagues that done research and they found that the family-owned businesses pollute the environment less, they so have very deep roots in their communities when it comes to innovation they have lesser investments into innovation but have higher outcomes right so there they seem to be more efficient in the use of resources when you think about it it just makes difference when your name is on the door - when it's your own - your extended family's money that you that you spent it said it's also in family business not just about the money - that's another stark difference to the non family businesses there are other non-financial aspects we call them psychic rewards from owning and running a business such as doing something that you're passionate about: building a legacy, working with the people that you love, and and these things that are often far more important than financial rewards, so those are just a few more differences that we see set the family businesses apart from from non family business.
It seems to me that successful family businesses are resilient. They seem to bounce back from adversity - whether that's online or corporate competitors, or having to deal with recessions. What resilience tools might they be able to pull out of their toolbox to help them navigate this pandemic successfully?
So family businesses are resilient because the families as groups are resilient. They have they have a built in in cohesion and by cohesion we mean sort of psychological glue that effectively ties your members to one another but then also to to the group and this level of cohesion that that families have is really unmatched by any other groups - maybe you can take the US Marine Corps or the Navy SEALs - they may come close in their level of cohesion but that's pretty much it. Families just have this is this natural glue with which binds them together and then this cohesion enables families and the family businesses to tolerate stress far more easily than other groups, so you can look at it this way: when you are a member of a group and you feel like everyone in the group has your back, you can trust everyone you are inline in your division that in your goals then you also feel like you can overcome challenges or whatever gets thrown in your way and that's that's a huge advantage or forgetting through times of hardship and and with cohesion you also feel like you can recover from setbacks more easily and you can make decisions and adjustments quickly because everybody is aligned. Tis is particularly important in when circumstances are constantly evolving as we experience it now. Now if you don't have cohesion, then then things tend to get much tougher so whatever can be done then to reinforce this cohesion is helpful for examples spending time together, communicating regularly, sharing stories of past crises that that your ancestors have mastered, and so forth. What's interesting too is that it is almost paradoxical that the threat from the outside such as such as the pandemic and that the crisis that it that is brought about many businesses - that can also bring a family closer together, because now little rifts are quickly forgotten when when more substantial things are are on the line such as the very survival of your of your livelihood. Another advantage that families also have - they have what we call patient capital - and so families we know families are the most important providers of startup and growth capital and they often provide money and sources of funding at the relatively low or often no cost at all. That's a huge benefit but especially in times when cash is king, but then capital is also not not only financial - it includes a human capital, social capital, and also emotional capital in terms of emotional support and safety and the families are just amazing providers of all these things so that is definitely something that can pull you through a crisis and perhaps even make you come out of it stronger.
I noticed your research shows consumers have a higher level of trust and a preference for family businesses. Are you seeing this whole true during the pandemic?
Yes, absolutely. Remember what I said earlier about about having - families having high levels of cohesion - the interesting thing with that cohesion is that it is not limited to the family it it really permeates the entire organization and even transcends it to to include customers, suppliers, and the very communities that that family businesses serve, and if you take good care of the community that you're part of, the community will take care good care of you, and this creates benefits for for everyone by enhancing trust and harmony and it boosts the morale and decreases your transaction costs. So all this taken together it creates a sustainable ecosystem around these family businesses, and perhaps it's not surprising some of the world's longest living businesses that are out there are family businesses. In my classes when I teach, I usually challenge my students to go and give them this assignment and set them out and go find a business that is still operating today that is older than 200 years and I tell them here's $20. If you find a business older than 200 years - still operating today - that is not a family business, the $20 are yours. And you guessed it - I have yet to pay those $20 - it's it just has never it just has never happened. So family influence brings an element of longevity to the organization that other companies simply have a hard time to match. You have a you have a really good example right here in town - Charlotte Pipe and Foundry it was started by by the Dowd family in 1901 and it's currently owned and managed by by the fourth generation, or if you drive a little further out to west, you go to Saluda here in North Carolina and there's Thompson's grocery store - North Carolina's oldest grocery store as a matter of fact, founded in 1890 and still older managed by descendants of the founders. There's there's a lot of continuity also coming from family involvement in business but also a good amount of humility and both of those are helpful with dealing with uncertainty. To come back to these two examples - imagine what these companies have lived through in their history - two world wars that didn't last months that lasted years, recessions, depression so in the eyes of these companies the current pandemic it's definitely tough yes but it may seem relative not compared to these events that brought years of just incredible suffering and deprivation to those companies and the families and it has forced them to two shift supply chains, explore alternative distribution channels, look for alternative sources of funding, all the things that families and businesses are having to figure out these days. And the fact that that these and many many older family businesses are still around today shows the crisis can be overcome successfully, and it makes you hopeful for the future I'd say. So we have directed our about research interest and thinking more to what the families behind the businesses so yes you have a family business but then you also have a business families because families so switch companies and even industries all the time. Take the Belk family, after whom our a college of business is named, or the Levine family - the the founders of Family Dollar Stores - both of these families have sold their the department and retail stores several years ago, but they still remain very very active in business and in many many other philanthropic activities of course but the point is some families perpetuate themselves in association with with one business, but others change businesses and industries many many times and then become family investors, and with the research that we that we do we try to understand kind of the the relationships between the family and the business - what drives the success, what might be potential weak spots, so that through our accumulated knowledge we can provide families in business with actionable insights and useful suggestions to become even better and longer lived and the college we're really fortunate to have some of the most talented researchers in family business really around the world like Franz Kellermanns, Laura Stanley, Justin Webb - they all study family business and family entrepreneurship and are just tremendously prolific in that field so we - together we we hope to contribute to our to our knowledge and really help the families and the businesses become stronger and longer lived.
When we come back on Charlotte Business Buzz, Dr. Pieper’s research plans for studying the effects of COVID-19 on family businesses.
Want a look into how the economy might affect your business? The Barings/UNC Charlotte Economic Forecast provides quarterly economic updates, covering national and global economic issues. Since 1981, Dr. John Cannaugton, forecast director and Belk College professor, has offered insights into employment, energy, trade and government spending and their effects on the region’s economy. Learn more at belk college dot uncc dot edu.
Welcome Back to Charlotte Business Buzz.
I mentioned that you're working on a global research project to study the impact of COVID-19 on family businesses. Can you share more about this project and what you hope to learn?
Yes, certainly. So while the pandemic has has created huge economic turmoil, and brought tremendous disruptions for families, businesses, employees, communities and great challenges of course that could last a lifetime, it also presents a unique opportunity to learn and improve knowledge about family business that can last generations. So together with several colleagues from from around the US, Europe, Latin America, Australia we launched a global study to better understand how family businesses approached the challenges caused by COVID-19 and and how they adapt to the evolving circumstances and our aim with this study is to develop useful insights and actionable suggestions on strategies that work during this pandemic so that we can derive suggestions for future crises because from everything you you can read there's a strong likelihood they do they will become more frequent going forward. So we launched the first wave of data collection a week or so ago and plan to do regular follow-up surveys so that we can track changes and trends over time and then better understand which actions lead to what outcomes.
Are there certain sectors of family-run businesses that can withstand the economic effects of this pandemic better than others?
It's a difference well it depends I would say of course. It's a difference if you are a hairstylist who owns their own salon does not have to pay rent, and has little to no mortgage to pay - in that case you can you can close shop more or less easily and wait great things out. If you have responsibility for several dozen or even hundreds and perhaps thousands of employees the the challenges increase exponentially. So it may not be so much in an industry-specific aspect because everybody has been hit hard, and more a matter of of how your business is is set up from an organizational and financial point of view.
I notice that many family businesses have storefronts in the local community. How might they best adapt to keep their customer safe through social distancing and other measures?
The challenges here may be similar for all businesses that are that are out there, but the family businesses have have one key advantage that that helps them greatly because they are closer to their customers and because they can make decisions faster, because they are aligned and have this natural cohesion, they can implement these decisions quicker and they are therefore more more nimble that enables them to to experiment more. There's a researcher out there his name is Vaughn Tan - he has a pretty interesting blog called the uncertainty mindset - and and he says there's no tried-and-tested playbook for responding to the coronavirus - so what is means is that companies shouldn't wait for validated strategies and solutions to become available before they take action. That's too far down the road and very, very uncertain because things change all the time. Instead, companies should make lots of small, fast, low-cost, and yes perhaps sometimes uncomfortable moves that enable them to explore, evaluate, and learn what works and what doesn't, and then you make adjustments - you test again what happens - if it works great, it not change again, test again and so forth and the quicker you go through this cycle is the faster you learn and the better you can adjust your orientation and what you do to reality and give your customers what they want. To borrow a quote of John Boyd - was greatly influenced my colleague’s thinking. John Boyd was maverick fighter pilot and strategy guru and he is to say whoever can handle the quickest rate of change is the one who survives and family influence enables you to to do precisely that. You turn on a dime and to change quickly and that's a huge advantage at any moment but especially in times of uncertainty in crisis way there is no script you don't know of the times you explore things and invent yourself from a new and that requires change and that ability to change is very endemic to family businesses.
If you had 30 seconds to give a pep talk to a family business in Charlotte, what would you say?
I would tell them three things. Look to your values and past experiences for guidance. So think about what what other challenges you have overcome in the past and remind yourself together you can work your way through this - that would be number one. Number two, lean into your strengths, immense resilience and families have the ability to recover from challenges lean into your strengths would be number two, and number three - lead with intention - respond rather than react. Responding makes makes you slow down and work toward common goals - I also know what what goals are important, I have your priorities straight and what trade-offs you're willing to make to achieve these goals. That would be my advice, briefly.
Thanks so much for your time today, Torsten.
Thank you for making the time and thank you for asking such great questions
Dr. Torsten Pieper is an associate professor of management in the Belk College of Business. To learn more about Dr. Pieper’s research project, visit belk college dot UNCC dot EDU slash buzz (B-U-Z-Z). For more on UNC Charlotte’s initiatives for small and family-owned business in the Charlotte region, visit partnerships dot UNCC dot EDU.
Until then, this is Charlotte Business Buzz ... Connecting Charlotte business through one-on-one interviews with UNC Charlotte faculty, staff, alumni and industry partners… and is presented by the Belk College of Business, the Office of Industry and Government Partnerships and produced in association with University Communications.