I have noticed a shift in the questions at the daily Coronavirus briefings from Downing Street. Yes, we are still interested in the statistics and comforted that we are all pulling together to save the NHS and lives. And yes, there are still plenty of anxious questions (and even more anxious answers) about who is to blame for variously: tardy interventions; lack of PPE and testing. The new questions? When will lockdown be over? What is the government’s plan for getting back to normal?
Rather than join the throng for more answers and knowing that there are some questions that cannot be answered just yet, I thought it would be better use of time to answer those questions more personally: how will I get back to operating normally on a personal and business level.
I have to recognise that there are some who will emerge from the crisis stronger than they went in. Jeff Bezos is not the only CEO that has found an uptick in their fortunes, but I guess Amazon is more than an ‘uptick’! But this article focuses on the challenge for the many, rather than the few.
I have split this problem into four:
- Will it be possible to repair the damage to our finances?
- How can we get back to viable operating levels quicker and steeper that others?
- Will the new world offer more challenges and opportunities than the old? Will there be a new normal?
- Do we need to review our business model to build in more resilience?
I have answered these questions personally and for those interested, they are attached as an appendix to this article. But the main purpose of this piece is to look at a corporate response to each question. And these responses will be different for each and these big questions will often end up as further, more detailed, questions.
Repairing the damage
Whether furloughed or not, it is probable that many will have suffered some financial hardship through this crisis. How we behaved during the crisis is likely to impact on the way people feel about the organisation and may impact on returning performance levels. If we have been seen as fair, and all ‘in it together’, getting back to full performance will be easier than if people feel an injustice. Questions might include:
- How did we keep people in touch with progress during the lockdown?
- Did we stick to our principles (values) in the way we treated people?
- Did we share the pain, or did some suffer more than others?
And how we behave on return, may also impact on the way people feel about the organisation:
- Have we recognised the sacrifices made by individuals?
- Have we captured comments and feedback from people so we can learn for the next time?
- Are we looking at repairing earnings levels, once cash flow permits?
- Can we confirm the principles (values) that we will take forward into the next stage of the organisation’s journey?
It is probable that we will have seen different reactions to being furloughed, or on reduced pay and our awareness of individual circumstances may help us to tailor our actions to demonstrate the care we take in people matters.
Many balance sheets will have been stretched to breaking point and, notwithstanding additional loan facilities that may have been proffered, there will be a period of consolidation to ensure that cash balances have been restored. Shareholders may need to factor in a period where the business will be consolidating rather than delivering the profitable growth that underpins most investment propositions.
Faster and steeper
There will be pent up demand in many sectors, combined unfortunately with a restricted capacity to pay. Getting back up and running will not always be as straightforward as picking up where we left off. But it will be a lot easier if we have stayed talking to customers and suppliers during the lockdown.
- Is our supply chain ready to deliver for our expected demand?
- Are we planning for the level of activity that may be needed to cope with immediate demand? Do we have the capacity that will be needed?
- Are we managing customer expectations? Have we prioritised customer needs to ensure we can meet their immediate needs (and can we demonstrate that we are thinking about them specifically)?
- Are we ready to apply the lessons learnt in the lockdown to provide an enhanced experience for the customer?
There is an opportunity to steal a march on competitors by being faster and more responsive than others. There may even be opportunities arising from situations where competitors have been forced out of business. But it will be important to stick to realistic delivery promises and not overstretch capacity. Restoring reliability in supply is likely to shape lasting customer relationships.
There will also be many instances of bold decisions being taken as necessary for survival during the lockdown. Our organisations may be emerging as leaner and fitter and perhaps more aware of new opportunities or areas where waste can be eliminated. It would be a pity to ‘waste the crisis’ by not fully developing those bold decisions to make a significant difference to the ongoing new way of doing business.
There are an increasing number of articles in the press speculating on whether the new world will be just the same as the old. There is an even split between those who believe that nothing will change and those who believe there will be a fundamental shift in the way that business is transacted. Whether or not corporate behaviour will return to the old, facilitated by reward systems that can be seen to favour short term performance, or whether it will move on remains to be seen but some things will change. I can be definite about this because some trends were already evident before the lockdown:
- There will be more pressure on the high street. More people have new skills in, and at least awareness of, on-line shopping and shopping in the high street may not be quite so appealing. Indeed, the pleasures of the ‘big shop’ at out of town supermarkets may no longer be as attractive as getting a delivery to your door, courtesy of an on-line provider.
- Business travel may be under pressure. We are aware of a company that has already banned air travel for the purpose of a single meeting. And airlines, already under pressure, may see consolidation as being more attractive for a sustainable future. Whether this will have a knock-on effect on city centre hotels and restaurants will remain to be seen.
- Office accommodation may take on a new role as people seek more flexibility in working styles. With the experience of enforced home working, perhaps there will be less resistance to flexibility in office hours, particularly as we try to avoid rush hour commutes.
- There will be fewer transactions in cash. Card transactions are now seen as safer as well as more convenient and less expensive to handle.
But to get a true picture of change that may or may not impact, it will be important to ask this question in a specific business or sector manner. Some will change out of all recognition, either by choice or force; others will remain to flourish in an existing more traditional mode. The question for every business should be ‘what will new normal be for us?’
Building more resilience
The term ‘resilience’ has been hijacked in recent times by the psychologists as we explore individuals’ capacity to cope with uncertainty and change. Of course, this is important and we will want our people to be able to cope with changes that will be a constant in our businesses. But I was troubled to discover that it takes just a few weeks for almost every business in this country to reach out for government help, or significantly curtail their activities, or close.
Have the pressures on ‘balance sheet efficiency’ clouded our judgement of what is needed to handle a business disruption? Admittedly, the Coronavirus is a true ‘Black Swan’* event and could not be foreseen, but should we not have a plan for any uninsured disruption that might occur? And who would bet against another virus coming along in the next few years?
Building organisational resilience will take a number of steps and here are ten questions as a starter:
- Do we want to be able to last through another major disruption? This might sound an odd question, but it will be worth testing whether you have the resolve to build a sustainable business.
- What have we learnt from our recent experience? Can we harness hindsight to build foresight? Have we captured all the learnings available to us so we can identify what we would do differently in future?
- Will our investors allow (or will they expect) us to build the balance sheet? After years of chasing low inventories, just in time supply chains, optimising debtor (shortening) and creditor (lengthening) days, will it be possible to build in reserves, strategic inventories and similar in order to assist future survival through a similar disruption?
- Are there key partners and suppliers that we now know are critical to our survival? Can we work towards greater collaboration for future mutual security and prosperity?
- If we have a global supply chain, have we a local supplier who can offer emergency cover?
- Are our leaders being developed to react positively and quickly to the next Black Swan event?
- Does our culture provide a base for consistent and constant behaviours across the business so that it is an unseen platform to be able to face potential downswings?
- Are our people being encouraged to build their personal resilience, both psychologically and through enabling financial prudence?
- Can we develop a system to assure the currency of arrangements made with a regular review to ensure their ongoing utility?
- Can we build ‘organisational resilience’ into our reporting and disclosure disciplines?
And in conclusion
There is no ‘one size fits all’ solution. Each organisation will need to answer these questions or similar if they are to strengthen their ability to survive over time. They say that ‘what doesn’t kill you makes you stronger’, but this is only true if you choose to use the event to identify what needs to be improved.
And answering the questions personally? My responses are in the Appendix.
*Thank you Nassim Nicholas Taleb for describing an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the widespread insistence they were obvious in hindsight.
Appendix: the personal response
Will it be possible to repair the damage to my finances?
While I have been lucky enough to be able to survive financially, some learning points:
- My expense profile has been dramatically different while in lockdown. While this should not be too much of a surprise, perhaps there are economies to be made when we can get out and about again. Do I really need to spend as much in restaurants and paying bar prices for my alcohol?!
- I should probably reserve some cash for rainy days. Asset rich (sort of) and cash poor doesn’t help in an emergency.
- Thank goodness for lines of credit. Even if I don’t use them, they are useful if needed to call upon.
- That mortgage holiday? Maybe a period of overpayment to get back on track.
How can we get back to viable operating levels quicker and steeper that others?
- Am I fit for business? Have I invested in my personal well-being so that I am ready for the post lockdown challenge?
- Have I invested in a plan to ensure that I am ready to deal with priorities on return to ‘normal’?
- Have I logged my learnings from this experience, so I am a little wiser as well as older?
Will the new world offer more challenges and opportunities than the old? Will there be a new normal?
- Have I new skills that will help me to succeed in the new world?
- Home working will be an important part of my ‘new normal’. Am I proficient in the use of the technology? Is my domestic infrastructure strong enough for future use?
- Am I ready to help others in the business to adapt to our new normal?
- Are we ready to help our clients/customers to flourish in their new normal?
Do we need to review our business model to build in more resilience?
- What do I need to change to adapt to change!?
- Am I investing enough in my own development?
- Can I build personal cash reserves to ensure that I can better survive any future downturns?
- Am I still learning?