This Isn’t Their First Crisis: Many Family Businesses Are Uniquely Prepared for the Looming Recession
Skip to content
Organizations May 4, 2020

This Isn’t Their First Crisis: Many Family Businesses Are Uniquely Prepared for the Looming Recession

Even so, one of their core strengths could become a liability.

Members of a family business look over a spreadsheet.

Lisa Röper

Based on insights from

Jennifer Pendergast

Editor’s note: This is part of a series of articles based on Kellogg Executive Education webinars focused on COVID-19.

Businesses of every shape and size are struggling to adapt to the current crisis.

Family-owned businesses are, of course, no exception. Yet they have some unique strengths—and unique challenges—that should guide their short- and long-term planning, explains Jennifer Pendergast, the director of the Center for Family Enterprises at the Kellogg School. She offered her thoughts in a recent webinar from Kellogg Executive Education.

Each Thursday, Kellogg faculty are offering free webinars on how COVID-19 is impacting businesses, markets, and careers. You can sign up for upcoming sessions, hosted by Kellogg Executive Education, here.

Family businesses are likely better set up to pivot their long-term business models, she says. After all, few businesses that have been around for generations have done exactly the same thing that whole time.

Family business owners Pendergast has talked to in the past few weeks have taken comfort in this. Several have told her, “I remember my grandparents telling me about how our biz made it through the depression.”

Additionally, family-owned businesses tend to be more risk averse than your average company, she says.

“They save for a rainy day,” she says, “and then maybe they don’t get hit quite as hard in the downturn.”

These strengths seem to be bearing out, at least at the outset of the crisis. Pendergast pointed to results from an ongoing survey of family businesses conducted by Banyan Global, which show, for example, that less than half of respondents said their business was either suffering significantly or in danger of failing.

However, she notes that one of the defining characteristics of family business—ordinarily a strength—may also be a liability during this pandemic. She’s referring to their concern for a wide range of stakeholders, including employees and customers, as opposed to a single-minded focus on shareholder value.

“If you’re held to this really high standard and then you have to make some tough decisions to survive, that can really backfire on you,” she says. For example, if a family-owned company has to lay off workers, it may get more pushback than a nonfamily business that wasn’t assumed to care so much about employees.

One way to minimize this is to be in regular communication with all stakeholders and be extremely open about company information.

“They really need to double down on the importance of being honest and transparent, because it’s what is expected of them,” Pendergast says. That may mean sharing financial information that is generally held close to the vest as a way of explaining why drastic measures need to be taken to keep the business afloat. Or it may mean being transparent about the uncertainty that lies ahead.

She points to a large real-estate company whose owner she recently spoke with. The company is living in a highly uncertain market, and the owners have explained to staff that they don’t know what will happen next. But, they added, they are developing multiple potential paths forward so that they have a game plan to act on quickly once the future becomes more clear.

“Pulling up the curtain around processes and what’s going on could give people a little more confidence,” Pendergast says.

You can watch the full webinar here and see previous articles from this series here.

Featured Faculty

John L. Ward Clinical Professor in Family Enterprise; Executive Director of the John L. Ward Center for Family Enterprises

About the Writer
Emily Stone is the senior editor at Kellogg Insight.
Most Popular This Week
  1. One Key to a Happy Marriage? A Joint Bank Account.
    Merging finances helps newlyweds align their financial goals and avoid scorekeeping.
    married couple standing at bank teller's window
  2. Take 5: Yikes! When Unintended Consequences Strike
    Good intentions don’t always mean good results. Here’s why humility, and a lot of monitoring, are so important when making big changes.
    People pass an e-cigarette billboard
  3. How Are Black–White Biracial People Perceived in Terms of Race?
    Understanding the answer—and why black and white Americans may percieve biracial people differently—is increasingly important in a multiracial society.
    How are biracial people perceived in terms of race
  4. Will AI Eventually Replace Doctors?
    Maybe not entirely. But the doctor–patient relationship is likely to change dramatically.
    doctors offices in small nodules
  5. Entrepreneurship Through Acquisition Is Still Entrepreneurship
    ETA is one of the fastest-growing paths to entrepreneurship. Here's how to think about it.
    An entrepreneur strides toward a business for sale.
  6. Take 5: Research-Backed Tips for Scheduling Your Day
    Kellogg faculty offer ideas for working smarter and not harder.
    A to-do list with easy and hard tasks
  7. How to Manage a Disengaged Employee—and Get Them Excited about Work Again
    Don’t give up on checked-out team members. Try these strategies instead.
    CEO cheering on team with pom-poms
  8. Which Form of Government Is Best?
    Democracies may not outlast dictatorships, but they adapt better.
    Is democracy the best form of government?
  9. What Went Wrong at AIG?
    Unpacking the insurance giant's collapse during the 2008 financial crisis.
    What went wrong during the AIG financial crisis?
  10. The Appeal of Handmade in an Era of Automation
    This excerpt from the book “The Power of Human" explains why we continue to equate human effort with value.
    person, robot, and elephant make still life drawing.
  11. 2 Factors Will Determine How Much AI Transforms Our Economy
    They’ll also dictate how workers stand to fare.
    robot waiter serves couple in restaurant
  12. When Do Open Borders Make Economic Sense?
    A new study provides a window into the logic behind various immigration policies.
    How immigration affects the economy depends on taxation and worker skills.
  13. Why Do Some People Succeed after Failing, While Others Continue to Flounder?
    A new study dispels some of the mystery behind success after failure.
    Scientists build a staircase from paper
  14. Sitting Near a High-Performer Can Make You Better at Your Job
    “Spillover” from certain coworkers can boost our productivity—or jeopardize our employment.
    The spillover effect in offices impacts workers in close physical proximity.
  15. How the Wormhole Decade (2000–2010) Changed the World
    Five implications no one can afford to ignore.
    The rise of the internet resulted in a global culture shift that changed the world.
  16. What’s at Stake in the Debt-Ceiling Standoff?
    Defaulting would be an unmitigated disaster, quickly felt by ordinary Americans.
    two groups of politicians negotiate while dangling upside down from the ceiling of a room
  17. What Happens to Worker Productivity after a Minimum Wage Increase?
    A pay raise boosts productivity for some—but the impact on the bottom line is more complicated.
    employees unload pallets from a truck using hand carts
  18. Immigrants to the U.S. Create More Jobs than They Take
    A new study finds that immigrants are far more likely to found companies—both large and small—than native-born Americans.
    Immigrant CEO welcomes new hires
  19. How Has Marketing Changed over the Past Half-Century?
    Phil Kotler’s groundbreaking textbook came out 55 years ago. Sixteen editions later, he and coauthor Alexander Chernev discuss how big data, social media, and purpose-driven branding are moving the field forward.
    people in 1967 and 2022 react to advertising
  20. 3 Traits of Successful Market-Creating Entrepreneurs
    Creating a market isn’t for the faint of heart. But a dose of humility can go a long way.
    man standing on hilltop overlooking city
Add Insight to your inbox.
More in Organizations