• David Grammig

Octavian Graf Pilati - 10 Learnings From Managing A Crisis In A Family Business

Updated: May 11, 2020

In 2015-2018 I had the privilege to manage a crisis in our family business. In his article I share my top learnings from this experience and hope that this will help many in the current situation.

1) Be empathetic

When you are stuck in a crisis you have to deal with several different parties. There are stakeholders, employees, advisors, co-founders or family members, regulators etc. and all these parties need to be taken into consideration when you make a decision. I learnt the hard way, that you better understand each and every one of them thoroughly. You really need to take each person’s perspective into account and try to think and feel like them. Only then will you be able to get a good understanding. Why are they doing what they are doing? What is their agenda? What are their goals? What are they scared of? 2) Define the Problem

In our crisis we did not define the problem at first, which led to wasted effort and resources. By having done your research properly and getting a good overview of all the participants (as explained above), you will be able to get to the bottom of the problem. Often a crisis is triggered by a certain event - like COVID-19, but the underlying issues are deeper than just that. In our case the fraud we fell victim to only accelerated certain processes in the family and the business, which would have come up anyway. So right now, be careful to really analyse why the business is in a crisis. 3) Time, Time and Time

Time is always the biggest problem in a crisis. One can argue why this is even an important point. Is a crisis not by itself defined by being short on time? Either way my biggest learning is that you can always “buy” yourself more time. We learnt that by being open to stakeholders, regulators or creditors you can gain time. Usually they have no interest in you failing, so go to them as soon as possible. Especially in a setting as right now anyone will understand. Be aware thou to blame your shortcomings on a one-off event. Even if it is the case, tell them you are sorry for not having prepared accordingly. The more time you can get, the better you can assess the situation, use empathy and then decide on a course of action.

The second important learning concerning time is, that you always have more time than you think. Most people cannot deal with ambiguity well and want to see action as soon as possible. Many will try to force you into fast action. You have a little error margin in crisis, which means that fast and thoughtless action can be disastrous. If you think you have one minute to decide, you have an hour and if you think you only have an hour, you probably have a day and so on. Be careful not to be pushed into action, sometimes the most difficult thing in a crisis is to decide, to not do anything for a time being. That’s called controlled idleness. 4) Be transparent

Be open and transparent about the crisis. Tell your employees and stakeholders as soon as possible.They will find out anyway, believe me, and if they find out before you tell them, the situation can get easily out of hand. Moreover, you will be puzzled by who is ready to help you. Sometimes it may be as little as giving you the telephone number of someone, who can help, and sometimes, they are prepared to advise and help extensively. We tried at the start to keep quiet and not speak about our crisis, but there came the point where I felt overwhelmed and decided to speak openly and ask for help. I got a lot of help and I really wished I had gone and been transparent earlier on. It would have made many things easier. In my case I found several Mentors who had experience in managing Crisis (either form their own family businesses or professionally) and their strategic advice and their active help really change the game for me.

5) Own, commit and defy

One very important psychological aspect is to get into the right mindset to manage a crisis. In my experience there are three key decisions you need to make for yourself. First, you need to decide to own the crisis. What do I mean by that? Basically, it’s the aspect of complete ownership. You accept that there is a crisis and that it is now your responsibility to solve it. It has become your problem.

Thus you are responsible for any mistakes and for the results. Next along is that you commit to solving the crisis ahead. Once you commit to finding a solution, there will be no questioning yourself, if you should persist in the activity of managing the crisis or not, at every difficulty. Lastly you need to defy the verdict. Usually in a crisis many people around you will have decided a verdict for the company. Often advisors, employees, creditors are confident that the company will fail. Well good for them, but you will defy this verdict and commit to proofing them wrong or rather proofing that the business has more worth. As mentioned above you have no time nor energy to keep questioning yourself, the business, or your predecessors at every turn in the crisis.

6) Persist and persevere

This may be somewhat obvious, but nevertheless it is a critical point. In a crisis you will encounter many stones on your path. Often you will have to try again and again till you succeed and often you will have to change your approach all together. You will need to persist and persevere extensively.

Persisting and persevering becomes easier if you own, commit and defy as mentioned above. Solving the crisis in your business may take some weeks, or months or even years, so don’t be discouraged by setbacks. Iteration is the key to success. What helped me was a decision that I made for myself: “I cannot screw up anything. If our business is in a crisis, there is already trouble and I can’t make it worse than it already is.” Mistakes happen and obstacles appear, be ready and conquer them one after the other.

7) Form a crisis response team

Something we also learnt, was that to solve a crisis you should establish a crisis response team. Get a team of committed individuals, who will focus on managing the crisis and turning around the business. This team should have any specialists that are needed in it. Depending on the situation it can be a family member, a lawyer, a private investigator, an engineer etc. The crisis response team should be an autonomous unit, with no operational tasks. If you take people from the business, then you should move their operational tasks onto someone else, so they can focus on solving the issue. The crisis response team should not be subject to any company or family politics. Be careful thou, who leads the response team. I can only encourage that it is not the company’s owner/patriarch or the CEO. The CEO has enough on his plate by managing the business and keeping it afloat in a crisis. The patriarch may be too old or too emotionally involved for this highly dynamic scenario. Plus he should be focused on keeping the family together. They can sit on the committee thou, that makes the final decisions on any big changes.

8) Make psychological safety a priority

People can deliver incredible results, also or especially in crisis. But for this to work well, you need great psychological safety. Psychological safety is being able to show and employ one's self without fear of negative consequences of self-image, status or career. Google studied their teams and found that the best teams have a high degree of psychological safety. We managed to get a good sense of psychological safety with our employees and that really made a difference. There are many good articles on how you create this environment, so I will not go into detail. Once you can establish great psychological safety and you couple this with Pareto’s law (focus on the wildly important) and Parkinson’s law (you can achieve more in a short deadline than you think) you can harvest amazing results.

9) Keep your personal health in mind

Once it was decided that I should lead the crisis management, I really put my work in. At 25 years old you still have a lot of energy. I maintained writing my master thesis and my job for 6 months parallel to managing the crisis. In retrospective this was irrational and after 6 months I paid for it. I encourage you to take this point to heart. Look after yourself! Eat properly, sleep enough, do sport regularly and maintain social contacts. Try to stay health. Especially in times of crisis you should take care of yourself even more than ever. There is a very simple reason for this: the healthier you are, the better your decisions are. If you suffer from fatigue and are stressed out, your “animal brain” takes over and puts you in flight-or-fight mode. In this mode your body will overreact to stressors that are not life-threatening and you will lose your ability to take complex decisions. Managing a crisis starts with managing personal stress. Do whatever it takes to stay in top shape.

10) After crisis is before crisis

This may not help you immediately right now, but keep in mind that after crisis is before crisis. Once you get through this, reflect on the crisis and make the changes needed. That the company ended up in a crisis in the first place is often the result of a failed risk management. More often than not the risk management was missing at all. Crisis prevention is simpler than you think. A simple tool for assessing a risk is multiplying the probability of it happening with the damage it can cause (in money terms). This will give you a money value of your current financial exposure to this risk. Can you stomach it? Or do you need to introduce some sort of measure against it? Thinking of crisis prevention during the actual crisis is also incredibly useful. Keep other risks in mind while navigating your crisis, you do not want additional crisis popping up amid managing your current crisis. You do not want to stumble from one crisis into the next. I hope this article can help you a little bit in the current situation. If you have any questions just get in contact. I am putting up a blog, where I share my experiences.

Octavian Graf Pilati will attend and speak at the Central & Eastern European Wealth Summit in Vienna, Austria on the 03 December 2020. Connect to event's LinkedIn page.

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