Explore & master
   |
EDHEC Vox
 |
Research

Ukrainian family businesses at the heart of the resistance

Rania Labaki , Associate Professor, Family Business Chair Director

While the battles rage in Ukraine, family businesses are showing their capacity for resistance and organisation, and a spirit of solidarity born of a culture of resilience constantly renewed and…

Reading time :
2 Jun 2022
Share

While the battles rage in Ukraine, family businesses are showing their capacity for resistance and organisation, and a spirit of solidarity born of a culture of resilience constantly renewed and strengthened throughout their history.

According to the European Commission’s definition, a firm is a family business, regardless of its size, if the majority of the decision-making rights (direct and indirect) belong to the member(s) of the family who created or acquired the firm’s capital, with at least one representative of the family involved in the governance of the firm. After studying the dynamics of family-business resilience, especially among Ukrainians, during the Covid-19 crisis, for a research project whose results will soon be presented to the International Family Entreprise Research Academy Conference, I have written an initial analysis of their behaviour and their perspectives during the first few weeks of the war.

In Ukraine, family businesses, usually led by the first or second generation, given its socialist history, play a dominant role in the economy. According to a  Lviv Business School study (in Ukrainian), their directors believe that values and strategic aims are more important than material and financial factors. The notion of responsibility for common goals is central to their practices. My data collection revolved around three main questions: How do these firms contribute to the resistance effort? How does their governance facilitate the restructuring of their activities? What support do they need in order to survive?

 

« Ukrainian spirit »…

The strength of a true "Ukrainian spirit" seems to be re-emerging during this crisis. Inscribed in the DNA of a population whose successive generations have gone through major crises in recent decades, it is now embodied in the determination of Ukrainian families running family businesses to continue their economic activity and to continue to grow despite all the challenges. As Rostyslav Vovk, the co-director of Kormotech, a manufacturer of cat and dog food, illustrates in the third week of the conflict, "We had a strategy meeting yesterday. We have to be ready for the future.

This spirit is built around a 'common dream', an expression used by the leaders I interviewed, around a flourishing and independent nation supported by its families and businesses. The key to this is a significant resilience that animates them and strengthens them through the trials and tribulations of war.

The resilience of a family business is defined as a dynamic process triggered by the onset of an adversity that is perceived as a challenge by family members because it represents a threat to the homeostasis (or equilibrium) of the system, which is the case of the war in Ukraine in the eyes of Ukrainian entrepreneurial families. This process of resilience develops through a gradual adaptation to adversity that is facilitated by the family business' capacities for absorption (resources), renewal (entrepreneurial orientation), ownership (historical narratives and values) and social capital (see my article on this subject published in Japan in The Family Business Yearbook 2022 by Hakutou Shobou Editions).

 

Circles of mutual loyalty

 

This "Ukrainian spirit" is driven by the strong loyalties that the members of the managing families of these companies have with each other and with the stakeholders and vice versa. Over the course of their history, these family businesses have built up intra-, inter-generational and partnership relationships that are finding their true meaning in this crisis. At the centre, the family represents a hard core around which a very strong network of solidarity revolves and is organised. And this can be seen on the ground.

The company Kormotech reveals that their partners were quick to come forward with their support. According to its director :

« They didn't just ask us how we were doing but from the outset how we could help you? »

The organisations to which these businesses are affiliated are also mobilising in support. The Family Business Network International, the world's largest network of family businesses operating in 65 countries, has taken a public stand in support of Ukrainian family businesses. The members of the network have mobilised to participate in the humanitarian efforts according to their expertise and their sectors of activity.

For example, the family business Day Lewis Pharmacy in the UK came to the rescue in the first week of the war, helping to collect medicines, medical equipment and basic necessities. Regular meetings keep network members informed, share best practice and continue this wartime solidarity effort.

The family managers, on the other hand, were quick to support their employees. On the one hand, they helped them to organise their travel to work in the family business while ensuring their safety, and on the other hand, they helped to organise travel and accommodation for their employees' families who were leaving the country for neighbouring countries. They have also made their accommodation available to relatives fleeing from other areas more affected by the war.

Ukrainian family businesses also continued their actions in the patriotic field by participating in the creation and promotion of funds intended to support the army in its war effort but also to provide aid to affected populations.

Speech by Rania Labaki at the 9th International Family Business Congress (27 March 2022).

Thus, all the stakeholders of these family businesses are united: the distinction between shareholders, managers, customers, suppliers, employees, communities and government disappears. All these circles must unite or even merge to help each other and defend their principles in order to regain a homeostasis similar to that of the pre-war period, or a new homeostasis, which will enable them to realise the common dream.

« Business as usual »

Agility at the heart of the business model characterises these family businesses facing the challenges of war, with governance as the key facilitator. It allows to convey long-term family values, to promote patient capital and to provide key competences, especially in terms of risk management, necessary in times of crisis.

Specialising in pork-based food production, the family business Barcom LLC near Lviv with a chain of shops across the country, illustrates this well. From the first weeks of the war, the company faced both financial and supply difficulties: feeding animals and paying for goods in the context of a severely disrupted international financial and credit system. Like most Ukrainian family businesses, Barcom is young and agile. Its governance experience, though recent, enabled it to bounce back effectively when the invasion of Ukraine was launched. As its director, Oleg Baran, explains, the company quickly developed its risk management system, which was initiated during the Covid-19 pandemic, and adapted it to the current crisis. The risk map, which has been extended and refined, has led to strategic actions to be implemented according to different scenarios, from the most pessimistic to the most optimistic in terms of impact. The company continues its activity by gradually adapting it according to the evolution of the context thanks to this risk management matrix. The company has been able to quickly review its business model, in terms of key partners for financial resources and other sources of supply, in order to remedy difficulties related to payment and financing and to maintain production activity.

Kormotech also continued its business by revisiting its business model. It helped to create Save Pets of Ukraine, which aims to save dogs and cats suffering from the war. In just two weeks, it delivered more than 93 tonnes of food for animals in need. More than 200 shelters or volunteers have received humanitarian aid. By capitalising on foreign donations through the foundation, the company allocates the necessary products to the foundation which enables it to carry out its mission. In this way, on the one hand, the family business is maintained and, on the other hand, it helps save lives in the animal world.

The surge of solidarity with Ukraine was also perceptible in other European family businesses, and this from the first two weeks of the war. Some, such as Hermès, Ikea and Swarovski, were quick to publicly show their support for the Ukrainians and took decisions to stop - at least temporarily - their sales and/or production activities in Russia while showing continued support for their local teams.

Companies that are sometimes less exposed in Ukraine and Russia contribute in other ways. For example, the British bank C. Hoare & Co. has drawn up a list of trusted philanthropic organisations that their clients can use to provide aid to the Ukrainians. Medium-sized family businesses have also set an example, such as Heppner, where employees have initiated a spontaneous mobilisation of solidarity, making available the logistical transport system to bring aid to Ukraine.

Other European organisations dedicated to family businesses were also mobilised. The Institute of Family Businesses in Poland brought family businesses together at an annual conference on 28-29 Marchhttp://kongresfirmrodzinnych.pl/ and invited experts including myself to pass on their knowledge to help them cope with these times of hostilities and war.

Meanwhile, just under two months since the war began, these companies continue to lead the way as resilient organisations with their agile and interlocking business models around developed and developing stakeholder loyalties.

 

Article écrit par Rania Labaki, Directrice de l’EDHEC Family Business Centre et Professeur Associé à l'EDHEC. La version française est republiée à partir de The Conversation sous licence Creative Commons. Lire l’article original.

 

Photo by Max Kukurudziak on Unsplash

Other items you may be
interested in

15.02.2019

When Giants Stumble

  • George Tovstiga , Professor
13.09.2019

Family Businesses-Suppliers Relationships: Standing The Test of Time

  • Rania Labaki , Associate Professor, Family Business Chair Director
12.07.2019

Recruitment in the digital age

  • Manuelle Malot , EDHEC NewGen Talent Centre Director