It’s no secret that the writers of the Family Business Director blog share a collective affinity for the game of golf.  Over the weekend, we enjoyed watching the final major tournament of the professional golf season, the Open Championship.  The last of golf’s four “majors” presents a unique and esoteric challenge relative to the other three majors and the rest of the PGA and LIV tour tournaments on which professional golfers compete week in and week out.

The Open, as it is often called, is played every year on one of ten courses in the United Kingdom that comprise the venerable “Open Rota.”  These courses are among the oldest and most revered in the world and include the Old Course at St. Andrews in Scotland, widely considered the oldest golf course in the world.  Aside from the Open being contested on some of the most hallowed grounds in the sport, perhaps its most distinctive characteristics compared to other majors and regular tour events are the conditions and style of play it requires its participants to navigate.

Courses within the Open Rota are situated upon the windswept coastal dunes of Scotland, England, and Northern Ireland, where players are often at the mercy of whatever Mother Nature decides to conjure up on a given day, whether that be a persistent grey mist, gale-force winds, or a nasty combination of both.  The courses themselves are also a jarring departure from the tree-lined parkland-style courses that dominate the American professional golf landscape.  Links golf, as exhibited in the Open, is void of trees and replete with rolling mounds, deep bunkers, and penal natural grasses that punish and often stymie inaccurate shots.  In summary, the Open presents a radically different test and set of questions than the other three majors and the typical courses on which tour events are played.

Technological advancements in golf equipment and stat tracking devices have created a data revolution within the game.  Pros know the yardages that they can hit their clubs to a single yard and can often adjust these yardages for certain variables (wind, turf conditions, etc.) in the relatively benign conditions they face on a week-to-week basis on the tour.  Bryson DeChambeau, in particular, exemplifies this data-driven approach that has yielded him two U.S. Open Championships.  However, the unpredictable conditions at the Open Championship often render this approach useless, as most obviously displayed in DeChambeau’s score of nine-over-par (+9) for the championship, resulting in a missed cut.  On the other hand, there are golfers who not only embrace the volatile conditions presented in the Open but thrive in them.  Winners of the Open typically fall into this category because they can conquer unpredictable conditions by understanding that “golf is not a game of perfect” and overcoming the inevitable bad breaks that come with playing links-style golf.

When times are good and visibility is clear, well-positioned businesses can often go on autopilot

With the Open in mind, we considered how family businesses can mirror this approach in today’s ultra-data-rich operating environment, particularly against the backdrop of evolving economic conditions.  We believe this thought exercise is prudent given the specter of multiple unknowns looming large in the U.S. economy.  Our post from last week highlights several of these unknowns, including the prospect of rate cuts by the Federal Reserve later this year.  When times are good and visibility is clear, well-positioned businesses can often go on autopilot, generating robust cash flows and returns on the rising tide of a strong economy.  When businesses are presented with operating conditions similar to those in the Open Championship, the uncertainty can make the prospects of generating robust cash flows and returns more precarious.  In the following sections, we submit a few practical suggestions for family businesses to successfully navigate the grey mist and pea soup fog of economic uncertainty.

Embrace and Amplify Core Values

During times of economic uncertainty, family businesses would be well-served to lean into their core values.  Whether these come by way of a mission statement or a set of non-negotiable guiding principles, core values are crafted not only to act as a north star in high times but also as an anchor and ballast in uneven times.  Anecdotally, our firm adopted a new mission statement as part of a strategic planning process several years ago.  This new mission statement has become so engrained into our firm’s collective mind that it is often the opening slide in any of our internal training presentations.  Boards and management teams define an enterprise’s core values for a reason.  During operating volatility and economic uncertainty, where results often seem arbitrary regardless of internal processes, these values should be embraced and amplified to ensure that all stakeholders are pulling in the same direction without losing sight of the mission.

Exhibit Patience

As seen again and again throughout history, bad times do not last forever.  Golfers who conquer the Open Championship and lift the Claret Jug are acutely in tune with this maxim.  The patience to brush off a double bogey resulting from a nasty lie or a bad bounce is one of the most important attributes required to win the Open.  Similarly, family business owners should not depart from their core values and management practices in the face of seemingly random results that can manifest themselves in a downturn.  More often than not, the ability to patiently grind and stack up “pars” without radically diverging from the plan pays dividends in the end, whether those dividends be in the form of the oldest golf trophy or a robust return to shareholders.

Communication and Alignment

In the face of volatility and uncertainty, the importance of constant communication within a family business is magnified.  This communication should flow in all directions—between managers, employees, suppliers, shareholders, and even competitors.  Keeping these lines of communication open will ensure that a family business has all the information required to make informed decisions in a changing and dynamic environment.

Communication between parties not only facilitates the transfer of information between parties but also creates alignment

This is not dissimilar to the golfer-caddy relationship, which becomes even more important when playing in volatile conditions like those on display in the Open.  Communication between parties not only facilitates the transfer of information between parties but also creates alignment.  Alignment regarding a set of values (strategic), course of action (tactical), or internal process (operational) naturally morphs into commitment over time.  Commitment to a plan is perhaps the most important lynchpin in hitting a proper golf shot, and this type of commitment often only arises from strong communication and alignment.  This chain works through family businesses as well, and keeping the lines of communication open in times of economic uncertainty and volatility is crucial to ensuring that all stakeholders in a family business remain aligned and committed.

Current economic uncertainties may have family businesses feeling more like they’re playing in an Open Championship than a routine PGA/LIV tour event.  While there are many ways to steer your family business through uneven times, we believe the lessons we’ve prescribed are a good starting point.  Feel free to reach out to one of our professionals to discuss further.