How Managers Can Weather The Impact Of The Coronavirus Pandemic On Their Businesses
Creating a culture of trust requires behaviors and attitudes based on transparency, honestly facing reality, laying the groundwork for mutual loyalty, correcting errors, good management of expectations, and a sense of accountability. In times of crisis, it is imperative to reinforce these attitudes on a daily basis.
The whole world is groaning under the impact of the rapid spread of the coronavirus (COVID-19), which has struck more than 160 countries and killed thousands of people in China, Italy, Iran, and Spain. The virus is, as we speak, aggressively spreading in France, the UK, and the United States, while other less affected countries (in Europe, Asia, MENA, Africa, and elsewhere) are rushing to take draconian measures to thwart the rapid outbreak of the epidemic. The World Health Organization (WHO) considers COVID-19, which has affected large numbers of people on several continents, a pandemic.
No one knows as yet the extent of the economic impact of the pandemic. What is certain is that the paralysis of air traffic, the shutdown of tourism activities in almost all markets and destinations, the disruption of supply chains originating from or going through China, the rush to purchase goods in anticipation of health curfew restrictions, and the possible disruption of the labor market in many countries, all of these will have a resounding negative impact on production and consumption and on global economic growth in 2020 and even in 2021.
Most businesses worldwide were totally unprepared for such a cataclysmic disruption. It is quite possible that some of them have plans to deal with crises that may arise in relation to public opinion or customer behavior, or to deal with a legal situation or a crisis of confidence in the brand, etc. But none had ever imagined a generalized as well as a large paralysis of world economy everywhere and at the same time.
Unprecedented times need well-thought solutions. Below is a set of precautionary measures to adapt to the reality of the pandemic and its impact on businesses and the economy, while waiting for the avalanche of bad news to settle down and allow us all to assess the damage. This advice is based on what we now know in late March 2020. The pandemic is still raging as we speak, and nobody can predict when and how it will end, or say for sure now what its impact is or will be. What is certain, at least as far as I am concerned, is that it will inevitably lead to an even deeper recession than the one caused by the 2008 financial crisis.
First, stay calm. Of course, it is difficult to control your nerves if you are the general manager of a hotel in Dubai, Paris, Marrakech, New York, Cape Town, Manila, or Barcelona, and you see reservations vanish like thin air, while the occupancy rate is nosediving at high speed. However, it is in times of crisis that your leadership is tested. You are the leader, and leaders, like pilots in times of turbulence, speak in a calm voice, to reassure, to inform, to lead, to set the example. Charles de Gaulle once said that "faced with crisis, the man of character falls back on himself. He imposes his own stamp of action, takes responsibility for it, makes it his own." Be the man or woman of character for the situation at hand. It’s daunting for sure, but you will come out of it stronger if you lead with force and fortitude. Remember Doe Zantamanta’s famous saying: “It is only in our darkest hours that we may discover the true strength of the brilliant light within ourselves that can never, ever, be dimmed.” Seek light within you and let it shine on your surroundings as hope; be the beacon that leads the tribe out of troubled waters.
However, as Arjen Boin, Sanneke Kuipers and Werner Overdijk have argued in an article called Leadership in Times of Crisis: A Framework for Assessment, leadership does not just mean taking symbolic action, but focusing on real issues through communication and critical decisions related to work management, production, relationships with customers, suppliers, and the public at large. Start by protecting yourself, your collaborators, your staff, and your customers. The advice of health authorities should be followed to the letter. You can rely on the WHO note, New Coronavirus (COVID-19): Advice to the General Public to establish clear protocols that apply to every transaction or contact within your business. It is true that employees, customers, and collaborators will not change their behavior overnight; therefore, the extent to which the instructions are followed should be assessed daily, and regular drills should be carried out so that health safety rules become an integral part of daily work management.
Set up an ad-hoc committee to monitor the situation. The committee should include representatives from all relevant departments. The composition of the committee varies from sector to sector, and new members can be included as needed. The mission of this committee is to collect data, monitor the evolution of the situation on a regular basis, and inform top management decisions. Assessment must be regular and continuous, especially that government decisions, affecting your business, change on a daily basis. As Edwards Demming once said: “3% of the problems have figures, 97% of the problems do not.” Getting data for the problem is your best way to monitor the situation and to make informed decisions.
Work to build confidence in times of crisis. As Stephen M.R. Covey explains in his famous book, The Speed of Trust: The Factor That Changes Everything, creating a culture of trust requires behaviors and attitudes based on transparency, honestly facing reality, laying the groundwork for mutual loyalty, correcting errors, good management of expectations, and a sense of accountability. In times of crisis, it is imperative to reinforce these attitudes on a daily basis, especially that employees and customers experience anxiety and fear as they live through the unnerving experience of shutdown, restrictions, and lower productivity. The toll on confidence may be far-reaching if you don’t act on reinforcing trust. Even if you make difficult decisions about staff, it should happen in an atmosphere of openness, transparency, and mutual trust.
Communicate regularly. Tell your staff, your partners, collaborators, suppliers, and customers all the news. Give them a real sense of the damage. There is no use in hiding or delaying the publication of some news, as everybody everywhere knows that businesses are bleeding. Make sure everyone is informed of the decisions you have taken, no matter how painful they are. Keep everybody informed as the situation unfolds. Be the first to tell your bad news and your good news. Own the situation, despite the fact that COVID-19 is not of your own making. Remember that “rumors,” as Paul Barton said, “are created to fill the information void.” The “void” is a space that is normally yours, but you choose to leave it empty for others to occupy, if you do not communicate. Make sure also you tell all stakeholders of your plan for recovery once the storm settles down.
Keep your employees, don't fire them. At times of distress, the values of solidarity must prevail. Preserving employees' livelihoods at a time when job opportunities are almost non-existent is an ethical question, of course. But it makes good business sense as well. Protecting human resources is an investment in the future. If you downsize and things go back to normal in a few weeks, you will be wasting valuable time looking for new talent at a time when what you need are people with already a good knowledge of customers and products to help you quickly restore your position in the market. Always remember the famous saying by Doug Conan, former President and CEO of the Campbell Soup Company, “to win in the marketplace, you must first win in the workplace.” To come out of a crisis ready to “kick back,” keep and protect your best ambassadors to your customers, i.e. your employees.
Shawn D. Moone and Sue Dathe-Douglas in their book, The Ultimate Competitive Advantage, Why Your People Make All the Difference and the Six Practices You Need to Engage Them, said that Western Digital faced a real crisis when a devastating and prolonged flood struck Thailand in the summer of 2011 and almost destroyed the Bang Pa-In Industrial Park north of Bangkok where its production units were located. While most companies downsized and waited for the waters to recede, Western Digital mobilized all its staff to use their hands and any kinds of tools they could find to clean and prepare for the post-flood period. Some staff members rowed on boats to report to work and help with the cleaning. When the waters receded a few months later, Western Digital was ready to go to business, its workforce more motivated than ever before; they were proud they did not give up when their company did not give up on them.
Create a flexible plan that takes into account all possible scenarios. The McKinsey Institute, in an article called COVID-19: Implications for Business, describes two scenarios for epidemic development based on how different governments are managing the spread of the pandemic. Either a progressive control of the pandemic by mid-April starting from East Asia, then Europe and North America, or the pandemic worsens and the situation remains unchanged until May or June. On this basis, McKinsey experts have developed two different scenarios of the economic impact of the pandemic. First scenario: "large-scale quarantines, travel restrictions, and social-distancing measures drive a sharp drop in consumer and business spending until the end of Q2," which, in turn, will lead to an economic recession. Low consumption and plummeting consumer confidence will continue through Q3 of the year, and it will have a negative impact on business and could lead to workers layoffs (ibid.). Central bank interventions will continue with "quantitative easing" (buying guaranteed bonds to infuse money into the market), but their effect will remain limited.
The second scenario is prolonged recession throughout the year, and a sharp drop in demand, and the emergence of a deep crisis in the labor market (due to massive layoffs), and persistent and sharp volatility in the financial markets. Only the banks will be spared this time because they have a good capitalization and are subject to strict prudential supervision (ibid). You must therefore clearly study the impact of these possible changes on the sector in which you work and develop an adequate plan. The first thing to do is to get everyone interested in post-crisis work. Staff should remain in close contact with customers and explain the measures you have put in place, and keep lines of communication open with them throughout the crisis. You should also take advantage of the period of low demand and production to repair internal systems, straighten value chains, perform internal reconfigurations, and prepare everybody for the recovery period.
John F. Kennedy, who lived through the Bay of Pigs (1961-62) crisis that almost developed into a nuclear war, had said that “the Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger- but recognize the opportunity.” It is at the time of crisis that you get ready for the post-crisis period; when things get back to normal, it will be too late to plan and prepare.
Study your needs in capital and insurance coverage. The American Small Business Association published a note called Coronavirus: Guidelines for Small Business containing a series of recommendations, consisting of assessing the need for capital to compensate for the lack in liquidity, reviewing insurance contracts to fit the new reality created by COVID-19, and assessing the risk of disruption in the supply chains. The disruption could come from customers as well. In so many countries, consumers have rushed to market stores in huge numbers “overbuying” in fear of a possible shortage in food and other consumer goods. This could put you under pressure as a producer, distributor, or service provider (hotel or restaurant) whose business depends on the same goods coveted by nervous citizens these days. You must diversify your sources of supply to be able to make up for shortage or meet temporary higher demand for your products.
Finally, as Martin Reeves, Nicholaus Lang, and Philip Carlsson Szlezak confirm in an article published in Harvard Business Review called Lead Your Business Through the Coronavirus Crisis, you should now think about the lessons you could learn from the crisis, and prepare already for the next crisis. It means not only psychological and intellectual preparation, but a real planning for the possibility of it happening at any time. In 2017, Microsoft co-founder Bill Gates, in an op-ed in Business Insider, warned that the next epidemic could be "a super contagious and deadly strain of the flu," and said that epidemics are the biggest challenges the world would know in the next few years. The international community should devise mechanisms, tools and protocols to deal with pandemics without shutting off the economy; the same goes for businesses; they must consider epidemics an inevitable risk, just like other risks. Are you epidemic-risk-ready?
An Arabic version of this article was published by Harvard Business Review on March 18, 2020, for the same author, Lahcen Haddad.
Lahcen Haddad has been Minister of Tourism with the Government of Morocco between 2012 and 2016. As Minister, he has overseen the shift of Morocco towards becoming a leading destination in the Mediterranean, Africa and the Middle East and a reference country with regards to sustainable tourism.
Before joining the Government in January 2012, Dr. Haddad worked as an international expert in strategic studies, democracy, governance and development, and as a certified expert in strategic planning, monitoring and evaluation, diversity and entrepreneurship. His involvement in programs and studies of national and international importance endowed him with a mastery of geostrategic issues, economic development, public policy, international relations and issues of governance at local and international levels.
Haddad also taught as a university professor for over 20 years with institutions such as Indiana University, Saint Thomas Aquinas College in New York, the School of International Training in Vermont, Mohamed V University in Rabat and Al Akhawayn University in Ifrane. At the World Learning School of International Training, he was for ten years the Academic Director for the SIT Morocco Program and area thought leader for the Academic Directors community.
Haddad’s publications in English, Arabic, French and Spanish, both academic and journalese, span the topic areas of geo-strategy, social sciences, development, entrepreneurship, communication and management as well as topics of general interest.