After the Disaster: Rebuild, Retool or Retire?
By Bernard Kliska
The devastation of Hurricane Katrina reminds us that sometimes natural or other disasters can suddenly destroy even the most solid business plans and healthiest family enterprises. Just as generations of deep roots may not always save mature oak trees, family businesses are not immune to catastrophe. Hurricanes along the Gulf Coast and eastern seaboard, earthquakes and wildfires in the west, tornados in the Midwest virtually any business may someday face natural or man-made disasters that affect not just the business but often the family s homes, roots and entire way of life.
Family businesses are particularly hard hit by crises, because these kinds of losses require families to make difficult business decisions that will affect not just income, but family identity and sometimes tradition as well. And to make decision-making even more difficult, disasters can leave a backwash of trauma and grieving precarious mindsets for making rational decisions. So how do you begin to recover from the physical and emotional devastation? How, after the initial shock wears off, do you answer one of the most fundamental questions: Where do we go from here?
Taking time. The first rule is to give you and your family some time. Emotional turmoil takes a while to subside, and it's important to respect that. Ngo Van Nguyen fled Vietnam 40 years ago, started a single-boat family fishing business in southern Louisiana, and eventually saw his 30 boats, icehouse and shrimp shed destroyed overnight by Katrina. Those kinds of losses take time to digest. About 20 percent of people exposed to trauma go on to develop post-traumatic stress disorder (PTSD), which may lead to erratic decision-making. Even without PTSD, there's grieving to consider. Most experts believe that normal grieving lasts between one and two years, and while you needn't wait that long to make a decision, you should probably wait at least a few months to adequately understand what your emotions are and how they are influencing your thought processes. Sometimes disasters and grieving unite families, but they also can create enormous stresses among family members. It's vital to take enough time to regain emotional perspective and equilibrium.
Taking time also allows you to assess what's going on in the community and in your markets. Disasters can alter the social and economic landscape. Before making any decisions concerning the family business, it's good to have some sense of what's going on within yourself, among family members, in your community and in your marketplace.
The basic decision, once the emotional backwaters subside, is whether to rebuild or to walk away. That's a particularly difficult decision for a family business, which often represents not just a livelihood but a familial way of life. Such decisions take time. A decisive, quick decision is neither inherently wise nor ill-advised. On the positive side, you can decide to rebuild out of good intuition, an accurate assessment of how things will be once the community and your family recover, or by using the same shrewdness and business acumen that led the business to originally succeed. Likewise, the decision not to rebuild may be based on solid economic or personal reasons. On the ill-advised side, the decision to rebuild can come out of blind stubbornness or an inability to accept that things have irrevocably changed. Deciding not to rebuild may be based on temporary emotional reasons arising from depression, fear or anger, instead of sound decision-making.
Let's look at Ngo Van Nguyen. With disaster relief loans readily available for small businesses, he might immediately decide to begin rebuilding his fleet. But what about the ecological damage to the Gulf? Will there be shrimp to catch, and will they be edible or toxic? Even if the shrimp recover, will the rest of the country shy away from eating them because of fears of toxicity, and what will that do to the price for which he can sell his catches? These are questions that will require some time to think about. By taking time to make the decision whether to rebuild, he can sort out the emotions and help ensure that he's making the best business decision.
Re-examine recent trends and your previous business plan. Prior to Katrina, the shrimping business had been in a gradual decline. Was the downturn cyclical or a harbinger of continuing decline? What plans had Ngo Van made for the future before Katrina struck? Had he been hoping to hang on a few more years until he could comfortably retire? Had he been thinking about diversifying or transitioning? In light of the present circumstances, do his previous plans for the business's survival and/or growth need modification?
Seek advice. In times of emotional upheaval, an outside consultant or an active board of directors can be invaluable. Check with your insurance company to see if they have a specialist who has advice for rebuilding; they've likely been through more disasters than you have.
Don't forget family meetings. Family meetings in the wake of a disaster serve several functions and remind everyone that you are both a family and a business, and are there for support, collective wisdom and planning. It might be a good idea to hold the first family meeting as soon as possible, with the agreement that no decisions about the mid- or long-range future of the business will be made. On the agenda: decisions that absolutely must be made right away, such as payroll, layoffs, or safeguarding equipment and product. Are the records secure and salvageable? What insurance protection do you have, and when can you count on receiving it? Can you get extended terms or commitments from your suppliers and customers? You may wish to set a date for when the family will make the longer-range decisions. This helps set a structure and a timeline, which are often useful during times of emotional turmoil. After the immediate business concerns are addressed, it might be a good idea to set aside business considerations and air out the emotions, such as fear, anger, confusion and grief. It s imperative to keep from making business decisions during this part of the meeting. End the business part of the meeting and then begin to deal with emotions.
Deciding on the future. When it's time to make business decisions, there are several practical considerations to keep in mind. If you decide to rebuild, be mindful that you not only face great challenges but significant opportunities as well. Natural disasters usually devastate the land in the short-term, but they re also part of a process that leads to longer-term renewal. In terms of business, disasters bring opportunities that include low-interest loans, disaster grants and other aid, goodwill and a chance to rethink the entire business. Family businesses must adjust to the new realities but also can correct previously ignored problems or deficiencies that may have been beginning to slow down the company. Some questions and/or opportunities to consider: Should you change the business model? What s happened to the customer base? Has the surrounding devastation created new needs or opportunities for your business?
Finally, family businesses have a unique opportunity to be part of the community rebuilding process. The Napoli family, for example, has five businesses in the New Orleans area, including a restaurant and an antique shop in the French Quarter and a popular bar near Tulane University. They have firmly announced that they are returning. As integral members of their communities and economies, by returning and restarting, family businesses help seed the hopes of everyone in the community, offering feelings of determination, normalcy and optimism. That's not only healing for both the family members and their community but it helps to build and maintain a strong customer base.
For more information on rebuilding after a disaster, the National Center for Appropriate Technology is an excellent one-stop center for dozens of guides from nonprofit organizations. Most of the guides are available online for free. Start at the site's Business Recovery page, found at http://freshstart.ncat.org/business.htm, where you'll find a variety of guides covering disaster recovery planning, restructuring for sustainability and financial assistance programs.