It is natural for business leaders to feel paralyzed at this moment. The pandemic crisis and soured economic environment materialized so quickly. We are in the fog of a crisis. It is impossible to know how deep the social and financial wounds will be and how long they will take to heal.
But the fog will dissipate long before the economy rebounds, and it is critical to develop and follow a roadmap to successfully navigate through and get positioned for the unknowable opportunities that will inevitably present themselves.
Rethink Your Company’s Strategies
Once a crisis strikes, there is no going back to the way things used to be. The losses that your market suffers will permanently alter your buyer’s behaviors, expectations, and needs. To thrive, you need to adapt your strategies to the new reality ahead.
A Harvard Business study on business strategies during 1980, 1990, and 2000 global recessions found that the most successful companies did three things that their failed counterparts didn’t:
- Reduced costs by improving operational efficiency and minimizing layoffs. This approach yields savings while maximizing employee morale and performance.
- Invested in marketing and R&D, so they were able to meet shifting consumer needs. Successful companies developed new market opportunities that gave them a significant advantage over companies shuttered innovation during recessions.
- Retained viable assets, including factories and service centers. This ensures that they could meet demand during the recovery.
The goal is to preserve capital in a slower growth environment while still being able to invest in product and employee development, marketing, and the other aspects of your business that will position you for the strongest growth in the recovery.
Related: 6 Principles that Are Helping Me and Prialto Stay Centered During this Crisis
Act Early and Proactively
The key to surviving a downturn is managing cash flow. Before you start pursuing new business opportunities, you need to make sure that you have enough liquidity to endure a period of severe losses.
Research from Boston Consulting Group found that companies who act early and take proactive steps to protect their cash flow throughout the entire downturn are significantly more likely to be successful than those who engage in short-term reactions as events unfold.
One of the first actions you should take as a crisis emerges is carefully reviewing every single expense your company has and eliminating the ones that generate low to no ROI and do not support your strategic objectives. This includes things like perks and under-utilized software.
Even the smallest companies will find significant savings from a disciplined review of each expense on their income statement. Our team is saving some money by working from home, and I’m also finding savings from just having our office closed.
Once we’ve cut all unnecessary spending, we will call each vendor to see how we can help each other through lowered or deferred payments. One counterpart of mine is calling this exercise “radical asking.” The goal is not to squeeze your partners. The goal is to have an open and transparent discussion on how each party can get through together.
If your organization is already lean, this may not cut enough costs to improve your financial position. The next round of cuts should focus on business units that don’t contribute to your core competencies and/or have limited chances of succeeding in the long-run. If cuts need to hit employees, try to empower key players by allowing them to make choices between specific headcount reduction or shared salary reduction.
These actions divert resources away from poor-performing units and into areas that are likely to drive growth during and/or post-recession.
Upskill Your Workforce
Once you know the strategic direction you’re going to take, you need to upskill your workforce to meet the new demands. However, when budgets are tight, if not frozen, training your employees can seem impossible. Here are some free options to get you started:
- Leverage internal experts to create training. If you have employees who are great at what they do and even better at quickly adapting to new challenges, have them host webinars, write guides, and curate other content to teach your team’s new skills.
- Have employees cross-train each other. Flexibility is key to surviving a crisis. Having your employees shadow each other increases your organization’s ability to quickly adapt to new demands.
- Curate relevant open-source online courses. Sites like edX and Coursera let people audit an abundance of courses from top universities for free. They’re a great opportunity to give your team access to structured training.
In our service model, we accept that we will have excess capacity and potentially idle employees as client projects get canceled or deferred. We have committed to keeping them busy through the skill development described above. This prevents deteriorating morale, as idle employees tend to complain, and it helps better position us for later growth.
Complete Backlog Projects
Every business has a variety of projects that they’ve wanted to complete for a while, but they’ve never gotten around to. Now is the time to tackle all of those tasks so you can improve operational efficiency.
Create a list of all those tasks from simple things like updating old wiki pages to revamping entire systems. Sort them by priority and estimated time to complete then distribute them among employees who have idle time due to the slow down.
Not only will these projects improve your business, but they’ll also force your team to stay focused during a very distracting time.
We are continuing to go back to our annual plan and focus on those items that we can still complete in our new, slower growth trajectory.
Related: How to Help Your Team Stay Focused During Chaotic Times
Invest in Company-Building Projects
During crises, risk-averse leaders often cut all innovative projects while they wait to see how things go. However, Harvard researchers found that’s one of the worst things you can do.
Instead, the most successful companies put all of their focus toward a balance of innovative efforts that cut costs via efficiency improvements and develop new market opportunities.
To do this, work with each of your departments to identify the top 2-3 projects they can work on that:
- Resolve existing challenges and inefficiencies.
- Create offerings that meet new customer needs.
- Improve customer and employee engagement.
Redirecting your resources toward these three areas will help you cut costs, sustain as much revenue as possible, and position your business for a successful recovery.
After several years of annual plans focused on top-line growth, the slower business environment may be an opportunity welcomed by many employees to focus on more holistic growth realized through the execution of these business-building projects.
While it is natural for any business leader to feel paralyzed at this moment, just a few weeks into an unprecedented crisis, we all know it is vital to move forward. Treading water and reactive decision-making leads only to missed opportunities or even complete failure. But creating a clear roadmap for proactive decision making and executing on that roadmap is incredibly empowering. It instills confidence in your team and positions you for success.
About the Author: Eric Taussig is Prialto's founder/ CEO. He speaks and writes about the future of work, global workforce, and employee happiness issues. His ideas have been featured on National Public Radio and in places like Huffington Post, Entrepreneur Magazine and Inc. Magazine.