Bertschi-Michel, A., Sieger, P., Wittig, T., & Hack, A. (2023). Sacrifice, Protect, and Hope for the Best: Family Ownership, Turnaround Moves, and Crisis Survival. Entrepreneurship Theory and Practice, 47(4), 1132–1168. https://doi.org/10.1177/10422587221118062
Summary
In their 2023 article published in Entrepreneurship Theory and Practice, Alexandra Bertschi-Michel and co-authors dive into how family-owned businesses respond when facing a dire financial crisis—one so severe it threatens their very survival. Unlike earlier studies that looked at family firms dealing with strategy hiccups or profit dips, this research zeroes in on liquidity crises, where cash shortages could lead to bankruptcy. The authors ask: What moves do family owners make to turn things around, why do they choose them, and how do these choices affect whether the business sinks or swims?
The study builds on the idea that family firms aren’t just about making money—they’re also driven by “socioemotional wealth” (SEW), a fancy term for the emotional and social benefits owners get from the business, like pride, identity, or passing it down to the kids. These noneconomic goals shape decisions, especially when the stakes are sky-high. The researchers argue that the more family ownership a firm has, the more these emotional factors steer the ship during a crisis.
They break turnaround moves into four types: operational (e.g., cutting costs or laying off staff), portfolio (e.g., dropping products or selling assets), financial (e.g., injecting family cash), and managerial (e.g., replacing the CEO). Their big theory is that family owners weigh two kinds of SEW: normative (social ties and reputation, easier to rebuild) versus instrumental (control and legacy, harder to regain). In a survival fight, they’ll sacrifice the normative stuff to protect the instrumental stuff—think of it as letting go of short-term goodwill to keep long-term control.
To test this, they surveyed 209 turnaround managers (TAMs) from German banks who’d handled severe crisis cases between 2014 and 2015. These TAMs worked with firms sized between €10 million and €500 million in turnover—think mid-sized players, often family-run “Mittelstand” companies vital to Germany’s economy. The data showed some clear patterns:
- More family ownership, more action: Higher family stakes meant more operational moves (like layoffs) and portfolio moves (like axing products). Owners also poured in their own cash (financial moves) but rarely swapped out the CEO (managerial moves).
- Cash is king: Only financial moves—like adding family money—cut the odds of bankruptcy. Other moves didn’t show a strong link to survival.
- Survival edge: Firms with more family ownership were less likely to go bust overall, hinting at some hidden resilience.
The authors suggest family owners follow a “sacrifice, protect, and hope for the best” playbook. They’ll stomach layoffs or product cuts (hurting reputation) to save control and legacy, betting they can rebuild goodwill later. Keeping the CEO—often a family member—preserves that control, while dipping into personal savings shows they’re all-in to avoid losing everything.
Why does this matter? Past research focused on milder crises or big public companies, leaving family firms in do-or-die situations understudied. Here, the context changes the game: a liquidity crisis isn’t about tweaking strategy—it’s about drastic, urgent action under time pressure. Family firms act differently from non-family ones because losing the business isn’t just financial—it’s personal.
The findings challenge the stereotype of family firms as “nice” employers who avoid harsh cuts. In a pinch, they’ll slash jobs to survive, prioritizing legacy over loyalty. The study also ties into broader ideas like corporate entrepreneurship (CE), suggesting that crisis moves might flip typical family behavior—say, shrinking portfolios instead of growing them—when survival’s on the line.
The authors back this up with stats and real-world chats with TAMs in 2021, who confirmed: family owners get ruthless with cuts when pushed, but they’ll dig into their pockets to keep the reins. One TAM noted a case where grandkids chipped in cash—not just out of duty, but to secure a future stake. Another said families resist firing the CEO, even when fresh blood might help, to hold onto control.
For business owners, this research offers a roadmap: tough calls can save the day, but cash injections are the real lifeline. It’s not about being heartless—it’s about knowing what you can rebuild versus what’s gone forever if you lose the firm. The study’s German focus and bank-driven data add rigor but raise questions about applying it elsewhere—still, the core logic feels universal for family businesses facing the brink.
10 Practical Insights for Business Owners and Managers
Here are 10 straightforward takeaways blending academic findings with real-world advice to help you navigate a cash-crunch crisis:
- Cut Deep When You Must: If cash is drying up fast, don’t shy away from layoffs or dropping unprofitable products. It hurts your reputation, but survival trumps sentiment—employees and customers might forgive you if you pull through.
- Protect Your Control: Keep the CEO—especially if they’re family—unless they’re truly the problem. Replacing them risks losing your grip on the business, which is harder to get back than a tarnished image.
- Put Your Money Where Your Heart Is: Dip into family savings or assets to boost cash flow. The data says this move cuts bankruptcy odds more than anything else—think of it as buying time to fight another day.
- Know What You Can Rebuild: Reputation and staff loyalty can recover post-crisis—control and legacy can’t. Sacrifice the stuff you can fix later (like goodwill) to save what’s irreplaceable (your family’s stake).
- Act Fast, Not Fancy: In a liquidity crisis, there’s no time for long-term strategy tweaks. Quick, hard moves—like slashing costs or selling assets—stop the bleeding better than slow plans.
- Lean on Family Strengths: Family firms survive better overall, maybe because you’ve got grit or extra resources (like free labor from relatives). Tap that edge when the chips are down.
- Don’t Bet on Everything Working: Cuts and sales might not guarantee survival—only cash infusions showed a clear link to avoiding bankruptcy. Prioritize moves that bring in money over ones that just trim fat.
- Talk to Stakeholders: When making tough calls like layoffs, explain it’s to save the firm. Employees and partners might cut you slack if they see it’s a last resort, softening the blow to your rep.
- Plan for the Bounce-Back: After the crisis, rehire staff or rebuild ties you cut. The study says family owners bank on this—prove them right by showing loyalty once you’re stable.
- Hope, but Don’t Just Hope: “Hope for the best” is part of the game, but pair it with smart moves. Pouring in cash and keeping control give you a fighting chance—don’t leave it to luck alone.
These insights are grounded in the article’s data and theory, and focus on balancing tough choices with what keeps your firm yours—practical steps to weather a storm and come out standing.