Guaranteeing continuity is essential for family firms. Unfortunately, in 2020 they were faced with an additional challenge to achieve this goal: the COVID-19 crisis. As a result, family firms were put under more pressure than ever and were challenged to rethink their business operations, which is reflected in the initiation and implementation of strategic changes. In our research, we compare the years prior to the crisis (namely 2018 and 2019) with the crisis year 2020 and we find some remarkable results.
Due to the COVID-19 crisis, companies have started to attach more importance to monitoring their performance. We notice that the use of performance indicators to monitor deviations from the set objectives has increased. These performance indicators provide better insights into the situation of the company.
In addition, we also notice a clear impact of the COVID-19 crisis on the financial situation of companies. On the one hand, we see a lot of companies that have to fall back on their accumulated reserves to get through this challenging situation. Figures show that family firms build up more reserves than non-family firms, which gives them a great advantage in this crisis situation. On the other hand, there are also companies that are experiencing liquidity problems due to the crisis and are therefore in need of additional financing. The good news is that a third of family businesses say they still have no problems accessing finance. On the other hand, an increase from 13% to 15% is noticeable in the number of firms that are confronted with a refusal by the banks to provide this additional financing.
To get through the COVID-19 crisis, family firms have clearly taken a number of actions, which is noticeable in the sharp increase in the implementation of strategic changes in 2020. Family firms appear to have mainly focused on the following strategic actions:
Significant cost savings were carried out more often. While in 2018 and 2019 respectively 16% and 19% of the family firms indicated that they had implemented cost savings, in 2020 this was no less than 34%.
31% of family firms have tried to market themselves in a new way, compared to only 13% and 22% in 2018 and 2019.
In 2020, 34% of family firms started developing a new product or service, compared to 19% in 2018 and 24% in 2019.
Other strategic actions such as changing internal operations, implementing staff reductions and significantly changing the business organization were also taken significantly more in 2020 than in previous years.
The strong increase in digitization within family firms is also remarkable. No less than 54% of family firms indicate that they have made a strong commitment to this in 2020, which is a doubling compared to 2018. This can be explained, on the one hand, by the fact that many organizations also sold their products/services online during the COVID-19 crisis and, on the other hand, had to deal with the increase in teleworking. The fact that family firms have been so actively involved in all these strategic actions may partially explain what previous research has shown, namely that family firms are more resilient to the COVID-19 crisis than non-family firms.
