Sam Edwards III remembers well a crisis that rocked his family’s business, Edwards Virginia Smokehouse, several years ago.
“We had a catastrophic fire in 2016,” he said in a recent MEAT+POULTRY Podcast.
An integral part of his family’s business strategy during this crippling crisis, which destroyed the company’s processing plant, was based on relying on longtime, good relationships with other processors in the proximity of the Surry, Va.-based company. Working with several fellow processors who agreed to co-process the Edwards Virginia Smokehouse products for the past four years, meant handing over coveted recipes for the company’s signature hams, bacon and sausage products and all of its other premium smoked products to other companies that compete in the same segment. It also meant the company has been able to stay in business while waiting out the insurance settlement process, which Edwards expects to be resolved in 2021.
“The country-cured ham industry is kind of a tight-knit group of family businesses that have stepped up to help us get through this process,” Edwards said.
In the interim, keeping the company afloat without a plant has been anything but easy.
“It’s like spinning a bunch of plates at one time, but it’s getting done,” he said.
Planning for the wurst
Developing strategies for all types of scenarios, from making challenging decisions about future growth, which is on one end of the crisis spectrum, to dealing with a pandemic that creates a global crisis, is critical for the survival of all family businesses.
During a 2018 tour of Milwaukee-based Fred Usinger’s Inc., a longtime North American Meat Institute member company in its fourth generation of ownership, Fritz Usinger discussed how his family made one of its most challenging decisions early in his tenure with the sausage-centric business. In the early ‘80s, demand was outstripping supply and the leaders of the family business first made the decision to expand the business adjacent to its original location on Milwaukee’s iconic 3rd Street. However, soon after beginning to build out space next to the headquarters and retail store for sausage processing, the family’s leaders agreed to tap the brakes on that project after discovering newly developed property about 1.5 miles away from 3rd Street. Knowing the company’s limitations, the next move was made with plenty of input from the family’s leadership. The family owners envisioned building and moving its processing operations incrementally to the new site while maintaining the historical building on the Milwaukee Riverwalk.
“We’re not the kind of guys who can go out and just build a new plant from scratch,” Fritz Usinger said in the 2018 report.
The first phase of the “Florida Street” project in Milwaukee’s Florida Yards business park, included the construction of a 22,000-square-foot distribution center, which was built in 1993, followed by the processing plant about a decade later. The processing portion spans about 50,000 square feet and includes raw processing, thermal processing and ready-to-eat packaging operations.
“In hindsight, it was really the right move,” said Fritz of what was a monumental decision for the family’s business and a significant investment in new facilities, all while preserving Usinger’s rich history in Milwaukee.
Prepping for chaos
The mettle of business owners and operators of all types and sizes has perhaps never been tested more than during the coronavirus (COVID-19) pandemic. While many companies may have previously had some semblance of a crisis plan in place for unlikely circumstances that could affect their business operations, almost nobody could have predicted the devastating and widespread impact a global pandemic would have. Craig Aronoff, PhD, co-founder and principal consultant of Chicago-based Family Business Consulting Group, said crisis management in family-owned businesses includes a layer of complexity that not only can make or break the company, but also threaten family bonds.
“Everything in family businesses is in some way personal,” Aronoff said.
“We’re not talking about executives that are working for boards of directors that represent hundreds or thousands of shareholders. We’re talking about folks who own the business, who interact with each other daily and feel deeply about what is going on,” he said, which includes not only profitability considerations, but extends to a genuine caring about the people side of their businesses, including employees and customers.
“All of this takes on an even greater weight because it’s more than just business,” he said.
In family businesses, almost every decision and planning process is personal to the family owners whose considerations extend to their relationships with individual employees, and even with their customers. Sam Edwards said his family business paused at the outset of the pandemic.
“We actually closed for two weeks to kind of come up with a strategy to be safe for our employees,” he said.
Part of the strategy was for the company’s two retail stores to require workers to wear face coverings and the stores only offered curbside service until late May. The stores then opened in June with 50% capacity restrictions along with Plexiglass shields at checkout and extra handwashing requirements for workers. The plan for reopening was discussed and agreed upon long before the closed sign was removed.
“We start with families and say, ‘look, you really need to be on the same page; you really need to understand what you’re trying to accomplish. You need to talk these things through, and you need to have a clearer view of how you relate with each other,’” Aronoff said.
He added there are advantages and disadvantages for both start-up family businesses and companies with a long history of family ownership.
“I’d say one of the great things about family businesses that have been passed from generation to generation is that they have had experiences with all sorts of circumstances in the course of their history,” he said.
Keeping a business afloat through what might seem like unsurmountable scenarios early in the history a family business can serve as a survival raft when the waters become troubled.
“I literally work with some family businesses that are over 100 years old who can talk about what they did when the Spanish flu hit,” Aronoff said, “or they’ll go back and think through the Great Depression and other circumstances like that. And that puts things in perspective, they’re able to look at the long term, understand cycles, have a sense that ‘we’ve accomplished and overcome serious challenges in the past’ and so there is a kind of confidence that ‘we will overcome and we will find a way through this.’”
He added that when it comes to risk tolerance and taking on debt, longtime family businesses tend to skew toward being conservative, many with strong balance sheets and a mentality of “cash is king” which might have been a philosophy from a previous generation owner who lived through the Depression.
On the other hand, many first-generation family businesses are entrepreneurial and don’t have a deep bench of life experiences to rely on or vast sources of financial backing to rely on through crisis situations.
“The entrepreneur is a scrambler and the entrepreneur is going to try and figure things out,” he said, which sometimes means deciding when or if pay cuts or benefit reductions need to be made and if need be, furloughs or outright job eliminations need to be made.
“So, they make those decisions, they make them as a family, and they make them with the notion of ‘we’re doing this for the long term; it’s not just for the day.’ And it’s still the notion that ‘relationships and our reputation are extremely important and we want to behave in ways and act in ways that are consistent with maintaining our relationships with our employees, with each other, with our clients, suppliers and bankers,’” he said.
When it's all over with, you know, you catch your breath and you say, ‘that which doesn’t kill us makes us stronger and what did we learn from this going forward?’- Craig Aronoff
Those responses are often more easily reached when a family-owned business has an established mission statement that serves as a guideline when challenges arise. Forward-looking companies establish an agreed upon mission statement when times are good so that when times aren’t so good, they have that benchmark to serve as a guideline to responding in a consistent manner.
Aronoff said when he broaches the topic of establishing meaningful mission statements, many clients’ eyes roll.
“But having a clear idea of why you’re doing what you’re doing, how you do what you do, what the policies are that guide you, a sense of agreement among the members of the family who are owners of the business about what the priorities are,” he said, “are crucial preparation to be successful when things get really tough.”
Hoping for the best
And when a crisis is the magnitude of a pandemic, Aronoff said family owners must assume an “all-hands-on-deck” mentality. And if the response to a crisis includes pointing fingers, shirking responsibility, or taking inappropriate shortcuts, the result will reflect that.
“Your business is going to implode,” he said. “But if you’ve got a good well-organized, well-trained team who really understands what the goals and the objectives are and the modus operandi, the way ‘we do our business,’ and you shift gears so you can deal with these kinds of things, you’re way ahead of the game. That puts you in a good position to allow you to work your way through the problems that you’re facing.”
Through it all, Aronoff believes crisis management can make a company, by virtue of having the right mindset and preparation, or break it, by exposing preexisting dysfunctional relationships. He labeled the outcomes of good planning and communications “virtuous cycles,” and those that result in contentious relationships and arguments “vicious cycles.” Reflection after the storm clouds pass in the wake of a crisis is perhaps the most telling part of the crisis-management process, he said.
“When it’s all over with, you know, you catch your breath and you say, ‘that which doesn’t kill us makes us stronger and what did we learn from this going forward?’
“The lessons that could be learned in circumstances like those impacting businesses today, could have positive impacts for a century,” Aronoff said.