As part of the IFERA series on “Family Businesses in Times of Crisis”, we are pleased to share with you the interview of Rania Labaki, Associate Professor and Director of the EDHEC Family Business Centre, with Riccardo Hosri, board member of Fernand Hosri Group in Lebanon.
With entrepreneurial roots dating back to the 1880s, the family embodies the experience of 5 generations in business. Fernand Hosri Group covers different sectors including Security and Telecommunications, Building Automation & Communication, Renewable Energy, FMCG, Office Supplies and Equipment, Distribution, Publishing and Editing, Insurance, Hotels, Restaurants and Property management. The Group operates in the local markets of Lebanon, UAE, Saudi Arabia, and France and caters for 26 countries in the Middle East and Africa.
The COVID-19 pandemic had a ripple effect on the world economies and societies. Lebanon, in particular, was already experiencing political, economic and social crises prior to Covid-19. How has your family business been particularly impacted?
The impact was terrible on our family business. Back in the second quarter of last year, the economic crisis in Lebanon escalated, gradually leading to the current monetary collapse and capital control enforcements of the banking system. Since March 2020, the Covid-19 just topped the other crises. All this makes it very difficult for any business to adapt and survive. The unemployment rate is unprecedented, reaching around 60%. Today, we live on a day-to-day basis and in a total survival mode. Generally speaking, the health crisis is well-contained in Lebanon but the economic system is a disaster. We have been going through the different phases of the confinement and deconfinement with businesses gradually re-opening with strict measures. We suffered like other companies in Lebanon, but perhaps more as a family business. We were struggling with the dilemma of taking reasonable business decisions while considering the emotional attachment to our businesses and our employees who are our second family.
We are a family with very strong bonds, clearly shared values, and formed of complementary characters. This can have its pros and cons. On the pros side, we can blindly rely on each other. On the cons side, we are sometimes slower in decision-making as we are all equally invested and have opinions that might sometimes differ. Still, reassuringly, we are all challengers, long-term aligned, and very determined, which is usually a winning combination…
How did these changes translate into initiatives or strategies?
Because of “the family factor”, the salaries of our employees have not been impacted from October 2019 to April 2020, despite the crisis and limited access to work. Unlike other countries, we did not have a stimulus package or any kind of tax or financial incentive in Lebanon. After April, we had to adapt, so we reduced the working hours and maintained a bottom line with a minimum wage. We also adapted the work format by allowing employees, whenever possible, to work from home and organize conference calls while maintaining a 20% presence in offices. Our sales and distribution staff could obviously not perform from home.
We mainly initiated changes in our business models and systems by innovating and reinventing ourselves, tackling new territories by shifting the focus on foreign markets. All this was done in a challenging financial context as our financial center was in Lebanon while the banking system was collapsing. Relocating financial transactions was one of the alternatives, however, a very tough challenge.
As a trading company, we managed to build over time reliable and long-term relationships with our partners. We negotiated with them new markets, which were already on our minds, but we never engaged in that direction before. So, this crisis was an opportunity to rediscover new territories and get ready when travel resumes normally again.
This crisis made us also realize that we were not agile enough. That was a wake-up call. So, we decided to have a more agile structure and processes by creating more efficient plans and organizational structure. For instance, as we had the advantage to belonging to a group of several entities, we decided to rethink the group in a departmental logic, which would limit the damage to our staff. Through a cross-sharing model of certain areas of expertise, we were able to control the cuts on salaries, to increase transparency among our companies, and to come-up with a loss-sharing scenario.
In addition, now that markets and sales are down, we opened-up to cater to our competitors. Many of them are also going through the hardship. So instead of letting them shut down, we proposed them to subcontract the technical part to us. Overall, we offered vertical and horizontal service as complementary to our direct business lines. We started by applying it to one company first. Since it was functional, we moved it to the group as a whole. As such, we ended up with 12 companies, including a new one that provides accounting and financial services to other companies. So, our staff members are now trained on the different business lines while becoming “group ambassadors” in their field of expertise. This also allows us to optimize and unify our database and seek to extend the portfolio of our customers by building on the trust relationship and introducing them to our other products.
We also seized the Covid-19 pandemic and financial crisis to reinvent ourselves in the medical sector which was also one of the exceptional ways for us to access our liquidities given the restrictions in Lebanon. We responded to the local market demand with a twist of personalization for the corporate clients by becoming suppliers of masks and hygienic products. We also built on and adapted our expertise in the technology field of telecom security and renewable energy by partnering to propose screen detectors of passengers’ temperature at high-density areas and public ports.
Through our network, we also found reliable partners in robotics and created a portfolio of medical equipment, including sanitization based on UV technology to kill bacteria and viruses including the Covid-19. Given the cost, we created a subdivision that provides service using this technology to high-end customers such as schools and hospitals.
All these measures were not part of our plans a few months ago but were made to create and to save jobs while maintaining the best living standards considering the current market difficulties.
Family businesses are known for their values of social responsibility, acting as ambassadors of the territories in which they are rooted. How did these manifest themselves in your country?
We are attached to our values, businesses, employees and communities. We refuse to put the key under the door. In the past, we have launched several initiatives in that respect. For more than 100 years, the family initiative Eywa is dedicated to empowering women and eradicating hunger and poverty. We created different programs to help match women with appropriate jobs, giving them the opportunity of placing their kids in nursery, and benefiting from the luxury of time through a daily dish at home cost price. As such, we make positive impact by escorting women through the social, cultural and economic changes, allowing them to be active and productive members of the society. During the crisis, my sister, Carina Hosri Boustani, decided to expand the kitchen of the nursery, which was closed, towards delivery. Through the revised business model, she managed to develop a bigger customer base and cover part of the cost while maintaining jobs. This is in addition to all the business models of our group that we reinvented or created, as I shared with you, in the spirit of social responsibility.
How are you preparing for the post-crisis phase, in line with medium or long-term challenges the family business will be facing?
In addition to all the changes taking place in our businesses, we are also considering the digital version of a supermarket that we just launched in a mountain complex to tailor to the needs of the communities living there. We will then consider replicating or adapting the model in all of our real estate underutilized properties.
At the same time, we are aware of the challenges of “being attached to Lebanon”. We are worried about the social impact of the crisis that is indirectly impacting the nature of Lebanon, that is “the joy of life”. We are worried about losing that day by day. We are struggling with our hearts and minds to make detached decisions. We are 5 generations in business, the third in this group. Our culture and education over generations revolved around patriotism and helping others. We always believed that even when we go away, we will come back to Lebanon, work for and from Lebanon. We might need to reinvent our family to serve the family business in the long-term with an adaptive model.
In the past weeks we had a good opportunity to stop and listen to ourselves. With a positive attitude, is it possible to see this crisis as an opportunity to improve our personal lives and businesses? If yes, how?
I have a plan and a wish for our family business to become a “Henokien”. I met with The Henokiens at a conference and was inspired by their resilience over 200 years. I have since that dream. A dream that I cannot accept to shut down due to the current situation. We have to sustain ourselves and make it through.
We could have said “Let’s pause, shut down, go on vacation until the situation improves”. But this is not our style. We want to do it continuously, without any pause. We will not give-up. If there is no market, we will create a market. If there is no product, we will fabricate one. If there is no money, we will find money. We adapted to the considerably harsh capital control measures in Lebanon. We have worked many more hours daily to deal with the situation. It has not been easy at all, it is still not, but we are sure to make it to the other side, and come out stronger.
I am still confident. This “Henokien” dream is a real motivator.