What is your business continuity plan?

BY PROF. ENRIQUE SORIANO

NOW more than ever, founders and business leaders of family managed businesses must move with extraordinary speed while navigating this disruptive and unfolding crisis never before experienced in our lifetimes. While the long term outlook is still uncertain, family members must now confront a unique set of challenges while demonstrating grace under pressure by making tough and painful decisions. It is now becoming clear that organizations must recognize the need to preserve cash on one hand and maintain a work force and secure talent on the other hand.

Since the crisis began three months ago, we often hear that business continuity planning (BCP) is critically important in putting the right infrastructure and metrics in the organization in order to steer the same from harm’s way. But how can a small and mid-sized family business owner possibly apply BCP to his or her organization? What is the real benefit of BCP in a business that is on the verge of collapse? In this article, I will share my most recent experience as board advisor with a mandate to set up a real working board comprising family and non-family members, provide guidance in the implementation of the BCP and challenge family members to formulate several post COVID-19 turnaround scenarios while encouraging the family to stay committed and united…all in less than two months.

Urgent intervention

The family went into a state of panic when the business abruptly stopped. Communication was key to preserve harmony within the family and presiding online board meetings became a regular event. What was at stake during the initial meetings was the need for the leadership (management) and ownership (Board of Directors) teams to come into an agreement by way of an alignment strategy. No doubt, it was difficult as it involved a delicate balancing act between preserving cash flow and workforce reduction. Decisions went back and forth but when we started reinforcing it with objectivity and information, family members in the board became less emotional and went ahead with making those critical decisions. After the alignment plan was approved, the immediate challenges were clear, finalize a working board so the directors can plan. It was an impossible mandate to recruit independent directors because of the lockdown but thankfully I ended up with a good advisory team. After engaging interim advisors with expertise covering finance, human resource and operations and after a series of zoom meetings, the team prepared “must do lists” to mitigate the impact of the crisis and the uncertainty that comes with it. I am sharing some of the measures we initiated:

* Capability and commitment of the leadership team

* Control Operating expense

* Managing inventory levels

* Compensation cuts of the senior team

* Temporary or permanent layoffs

* Elimination of dividends

* Rationalizing or deferment of capital acquisitions

* Communication plan for partners, employees, customers and suppliers

Having a non-family board level advisor is a powerful antidote to helping businesses focus on bouncing back. It is also a good platform for objective decision as non-family professionals in the board have a fiduciary role to discharge their functions bereft of any emotion usually displayed by family members who may have their own set of interpretation on how best to manage the business. Businesses in distress are running out of time. Every actionable plan we do now is built on speed, alignment of objectives and scenario testing. When conditions around us change, every stakeholder (advisor, leaders, owners, professionals and even culture) must be flexible. Organizations can never stand firm lest it fail. In my more than three decades of corporate and advisory work, I have seen so many examples of companies failing due to its leaders’ inflexibility and myopic thinking. With this unfolding crisis with no certainty in sight, we cannot tolerate leaders in high places sitting back in a self-satisfied mode, assuring one another that everything will be wonderful while the business itself is heading toward a slow death./PN