The recession is all around us. What now?
In 2017, I wrote asking leaders to think about how they’d prepare for a downturn. I noted how much of leadership advice, especially during the past decade, can be overly rosy and act as if the only obstacle is willing yourself and others.
In good times, most leadership advice is about optimization and efficiency, rather than how to overcome unavoidable challenges, create solutions in less-than-ideal circumstances and help people navigate genuine fears, discomforts and distractions.
I also warned against the urge to cut, cut and only cut when under duress. I wrote then:
“What if revenue fell by 15% and your main product was being commoditized? Would you just slash costs and people while grasping at any new product? Or, would you think about a better, more sustainable way to fight through tough times and come out ahead?”
Well, I stand by that advice. However, I didn’t think about a crisis that would wipe out many businesses overnight, with no way of knowing when or whether revenue will return. Not to mention the potential of 30% unemployment and halved GDP in the US and a global recession that very well is already happening.
There’s nothing to adjust to when you’re not allowed to do business, as many organizations have become well aware. As Brooklyn ice cream maker Michael Sadler told Polina Marinova of The Profile, when sales dropped, they fell 80-90% immediately -- and right as the ice cream busy season was to begin.
How do you deal with a black swan event when you can't operate? You can’t. As he said:
"One of the ominous things is that there’s literally nothing any of us could’ve done. When a company goes out of business, people don’t really have that much empathy for the entrepreneurs because it’s just assumed that they made bad business decisions. And here’s what I’m learning as a first-time entrepreneur: even if no bad decisions are made, even if there is no mis-execution, even if there are no problems, an external factor like this can derail everything. Everything."
I don’t want to ignore the plight of these businesses, especially those in food, hospitality, travel and entertainment. But I can’t pretend to have the answer -- the widespread shutdown of businesses was a judgment call but has the weight of evidence with regard to public health and safety precautions. This weekend's extension of such guidelines to April 30 only cements the reality.
If you're one of those affected busineses, unfortunately, your main play is to hunker down, bide your time and hope you get the promised government support combined with informal aid from patrons and your community. And, after this is over and you're rebuilding, don't forget the cruel lesson that your business was declared expendable -- and will be again during the next major crisis.
What to do if you're still (sort of) functioning?
What about the rest of the economy? We're talking about businesse and organizations forced to adopt remote work, many facing near-term revenue reduction and medium-term risks, but not in mortal danger. What about businesses barely hanging on, where the next several weeks will determine their survival? What about businesses that have a golden opportunity (hello, Zoom)?
I would advise a few broad steps, keeping in mind that we’re all in uncharted territory. Here is advice to take this week from a business, financial and strategic perspective, particularly for startups. Even for established busineses, cash (and maybe credit) will be king, and HR will need to be part of some difficult decisions. That said, tailor this advice to your conditions as an employee, manager, executive and/or owner (not to mention as a health care worker, educator or other professional):
1. It's OK to spend time and money on talent, (re)training and marketing
There might be less business out there to win and fewer people to hire, but you can still acquire the best of what's available. If you have a service people need, especially now, you need to let them know. Beyond new hires or new business, of course you'll want to retain as much as possible, even if that looks costlier in the short run. You’re a fool if you think you can deliberately lose great people and good business and come out of this better off. There are always exceptions, but are you sure you're one of them?
2. How you market and sell needs to change
Business travel and old-school networking are out, and email, phone calls, text and video are getting a second look. This isn't open season for bad communication, but now is the time to be visible. If you have existing relationships, by all means check in with those people -- their well-being matters, and there is more to sales relationships than selling. If you don't have a relationship, that's fine, but don't fake it. Don’t start emails with generic COVID-19 concern if the second sentence is going to be your pitch. Don't be this person:
What are you offering besides a buying opportunity? Focus on that. As Korn Ferry analysts recently related in a webinar and accompanying article:
“To begin adopting perspective, create valid business reasons for virtual meetings. What is the customer going to learn? What expertise can you offer to clients and prospects as they reshape their businesses in response to COVID-19? Think about how you can help them and provide insights—not how you sell them something.”
3. If you need to cut, try reduced hours, furloughs and pay cuts first
I say this with a caveat: Employees will appreciate not being fired en masse, but you won’t necessarily gain loyalty here. (I was furloughed repeatedly in 2009, which pushed me to prioritize what became a successful job search and relocation.) Such actions are about keeping people from fleeing and also having the organizational and structural capacity to help the business recover.
Be clear about the terms, emphasize that unemployment can usually be collected during furlough (or a zeroing out of hours), and give an end date. That end date can shift under extraordinary circumstances, but a furlough or pay cut without a planned-for end date is just a demoralizing penalty.
4. (Good) values and behaviors still matter
I wrote last year about how the long-running bull market combined with social changes had almost every company claiming to value talent, culture, diversity and other intangible, human relationship factors. A values-based culture modeled by leaders remains a strength, especially during a time when your employees will be distracted and disrupted. A lot of how they act at work will rely on the muscle memory of the culture in place -- don't abandon it now.
P.S. Free snacks and knick-knacks are not culture, so by all means, cut them if you need to, especially if no one's physically at the office.
5. Be clear, show a path forward, and don’t pretend everything's great
I can't emphasize enough the importance of clarity and specificity. Rah-rah messaging won’t work in most workplaces, even if there are exceptions. People are stressed, worried and potentially sick or caring for ill or at-risk people. They need to hear from leaders -- especially CEOs and division heads -- what is happening, what they can do and what they shouldn’t worry about.
If there’s bad news, acknowledge it. That news won't just be about business. Prepare for how you'll communicate layoffs, yes, but also be ready to discuss the deaths of colleagues and friends.
If there’s a plan for mitigating and overcoming the crisis (revenue or otherwise), share it -- and regularly update it.If there’s no plan, figure out one yesterday.
There are many consultancies offering playbooks, and you can probably come up with something for free just by thinking through your business in terms of SWOT or some other quick analysis.
Here are a few more concerns leaders need to confront:
- Does everyone know the sick-leave policies? What they should do if they are diagnosed with coronavirus?
- How has the workday changed? What resources and assistance are available, and which people are contact points?
- How is your workplace formalizing remote working policies, practices and technologies?
- Are there changes in compensation, travel, expenses or other areas? How long will those last?
- What happens to people who are furloughed or laid off, especially in terms of medical coverage?
The world is upside down, and a lot of businesses and people are already suffering physically, financially, emotionally and otherwise. We can't undo that by ourselves, and we don't even know how long this crisis will last. But we have some measure of control over how we react to this disruption, and we can work toward a better tomorrow while safeguarding people and (some of) our business. Take time for your people and for yourself even as you keep moving forward.