Weathering The Storm
3rd June 2017 Alex Finnegan & Richard Meredith
When crisis strikes a family business, advisers need a clear plan, with an emphasis on honesty, to minimise reputational damage
Many businesses have been through a tough time over the past few years. Public mistrust of politicians and bankers has spilled over into wider cynicism about businesses generally. The ‘information age’ also means journalists are no longer the only people who tell us about the world; the web allows anyone to assume the role of public commentator. With so much information out there, the noise can be deafening. The writer Linda Stone describes our response to this as ‘continuous partial attention’: we never really focus in detail on anything, but we are always tuned in. For businesses with complex issues to explain, it is often difficult to get a message across to the public.
Family businesses are confronted with their own particular pressures. Private and inherited wealth have become an increasingly prominent political issue, and, in these times of economic hardship, the tax debate has become heated. Adopting a low profile is seen by some as ‘hiding something’. As for the UK media, its notion of what makes a good story has not changed much in recent years. The mishaps and lifestyles of people always make better copy than the issues of corporates. Significant moments in a family business’ history, such as the death of a founder or the transition from one generation to the next, are analysed as never before. The media has few scruples about the cost of such personal attention.
When a crisis does occur, whether the media focus on the family or the business that the family owns, these can be highly stressful times. Close media attention can call into question the management’s values and competence, and cast a critical light on the business. A crisis can erode trust not only between the business and its employees or customers, but also between family members and within the business itself. But how the family or business handles such a crisis is part of the story itself, and can often give that story longevity, long after the original issue is forgotten.
In one sense, there is no such thing as ‘crisis management’, if that implies media attention can be stamped out through clever public relations. Managing a company and a family through the media storm requires leadership, and a measured and unemotional sense of how the business’ reputation can be best protected. This requires the family business advisor to know the facts and have a clear idea of how to respond to them. Saying nothing to the media is sometimes an option, but, when silence is untenable, the advisor will need a clear idea of what to say. Hiding behind lawyers rarely works. The media, the advisor’s staff and others need to have a clear sense that the affairs of the family business are being managed with confidence, and that the advisor is in control. Reputational damage does not always finish once the media move onto other subjects. Having a long-term plan to address the issues raised by the crisis, and to rebuild trust, is vital.
Throughout, advisors need to be mindful of the views of all stakeholders. Understanding the family members’ perspectives and being seen to be sensitive to them will help the advisor to respond effectively and mitigate criticism. Managing a family or business’ reputation in advance of a crisis is the best way for advisors to protect themselves from the consequences of a crisis. Knowing your advocates, knowing your detractors, and making sure the media have a sympathetic view of the family business are all important. None need preclude a family maintaining a low profile, but having some prior information on the issues that might make a family vulnerable, and where the threats might come from, is useful preparation.
The most important point in a crisis is that everything said and done must be authentic. Corporate speak is out. Family members and the business managers need to be clear in their own words about what has happened, why it matters and what they are doing to address it. Their values and character should come through in all of their communications to employees, customers, suppliers, media and even regulators. If this is done, advisors will be able to influence and shape a crisis and have a better chance of surviving it.
About the Authors - Alex Finnegan is an Associate and Richard Meredith is a Partner at the Brunswick Group.
Reproduced with permission from the Society of Trust & Estate Practitioners
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