Managing the uncertainties in small,emerging organization

Coping with COVID 19 aftermath effect in small, emerging Organizations?

General Note :

This article is mainly for the Business Heads or CEO of the small, emerging organization with manufacturing facilities on dealing with the uncertainty due to COVID 19 lockdown and aftermath effect.

Since each organization is unique in terms of customer segment/demand pattern, operating cycle, working capital requirements, and cash flow cycle, I have given a generic solution approach only, and you can relate with your organization. Accordingly, you need to add/ modify the plan.

I have divided the discussion into three parts

1. Things to be done during the lockdown 

2. Managing the situations immediately after lockdown 

3. Learning and preparing for future-fit

As we are going to discuss the short term crisis management plan and future-fit in the long term with our limited experience in ever crisis, as we have seen in our generations. There may be changes in the demand, cash flow, business practices, or even business model, those things, in my opinion, we can tackle relatively easy with collective learning and collaboration. What is required at this moment for the leader is a healthy emotional balance to cope with the challenges.

To enhance your emotional strength, sharing some of the perspectives

1. You are destined to be an entrepreneur for a reason. As per one of the latest survey, only 5% of the 7 billion population belongs to the entrepreneur group. First, you need to feel proud of it. The purpose of entrepreneurship is more than money, i.e., fulfilling the society's needs at large or making a meaningful impact on humanity. You are one of 5 % of the entrepreneur population. When you realize this fact and feel the privilege that you have got in life, that brings you high self-esteem within you. That high self-esteem gives tremendous power to solve any challenges. First, feel good and feel responsible for being part of the solution provider fraternity.

2. Accept the reality that this lockdown or perceived slowdown post lockdown is not something you created, it happened by nature as a balancing act and you and I am part of it. Let us accept it. Once you accept, you are moving out of your denial, blaming Government, comparing other countries and you are in a position to take the challenge and look forward solution approach.

3. Also just reflect your past, even though we have not seen such lockdown and post lockdown scenarios in our lifetime, we have faced similar situations or helpless situation. 

 For example, we have been part of 2008 recession with a lot of uncertainty and other regional uncertainties like flood situations, demonetization effect, epidemic panic then and there in the last two decades. We faced all those challenges, and today still, we are standing tall now.

 Even you can relate some of the uncertainties you faced in your personal life, the moments you lost your dear ones in uncertain times, an accident happened at critical times, loss of employment and money, and so on. While those moments looked like dark, you came over all those challenges, and today you are still surviving. The point is when we are in the turbulent time, it looks like the path is dark and seems to be all is over. However, the time is potent and heels for everything. Those moments shall pass on.

4. We are better than those who lost their lives in this pandemic period, and those are struggling in a remote location, and we must be grateful for that. We need to have faith in our capability, life, and above all, the invisible force at this time.

The point is when you accept the reality, take responsibility for you and your people, your business, being grateful for everything in life and having faith in yourself and divine power that  will give a tremendous positive mind-shift to tackle the challenges. 

This mindset, courage, positive outlook, taking responsibility for everything, acceptance to reality is very much essential than any strategies, brilliance, and any other support from external.

With that positive mindset, let us get into managing the challenges in the short term and long term perspective

Short term  or during the lockdown period:

First , nobody knows precisely when this lockdown will be over, and normal life resumes even though different countries and the Government declares a different time frame. Assuming that this  lockdown continuous for another one or two months, as a business head, what you need to do by maintaining the balance between short term hard reality and the future aspiration and stakeholder's interest.

1.Taking care of your people:

                                                                          

It is the moral responsibility to take care of the people that are in your organization  as at the beginning of the lockdown. Ideally, you need to pay the salary irrespective of the rules or instruction from the Government. As I am fully aware of the pain of cashout situation without any revenue, I look at this gesture as a responsible citizen. 

Depending upon the size and mix of people category in your organization, you can have an open dialogue with the senior team. The people who are at the top of the pyramid shall be paid partial compensation with the understanding that dues will get paid before the end of the financial year if the business bounces back from the crisis then. Equally, the team's maturity is also essential in understanding the business situation. As a balancing act, they need to get what is minimum required to conduct the standard living at this point. 

You can initiate the discussion with the team and share your pain and work out the options depending upon the size of the organization. In my opinion, the bottom of org structure, say operating people can be compensated fully as their earning will ensure the standard living and also, the gesture will bring them emotionally closer to the organization, and this helps the organization in the long run.

      2.Engaging people:

As you are aware that habits die hard, whether it is good or bad. When people develop the new habit of staying home without many routine tasks, professional responsibility, and spending time in low productivity activities, bringing back to normal life, will take extra momentum. 

Also, the employees need to  be made understanding that this lockdown is a lifetime opportunity to reflect, learn some new competencies which will help them personally and professionally in the long term.

We can ask them to enroll in online courses related to their personal and professional development.I also shared some of the learning resources last week.

Alternatively, you can engage them by conducting or sharing some technical, behavioral, leadership development sessions through online thanks to technology. Some apps are offering a free or lowcost subscription for conducting webinars like zoom, GoToMeeting etc. In this process, your team members who are having an interest in teaching can take the lead and conduct short duration sessions.

Also you can ask the team members to present their functional knowledge to colleagues. This will help to improve the communication of your team members and improve cross-functional understanding.

Also, now you can develop the strategies, roadmap for improving your marketing visibilities, people development process, cost optimization potential projects , and similar activities which you have been thinking and postponing due to time constraints during regular days. You can ask your team to do the analysis and action plan in their respective areas, and you can review, facilitate in a cool manner. This way, you are making out your plan ready in your business and functional areas, and also, the team is engaged well during lockdown times. This planning process will help you once you resume the operation.

I have been insisting in my client organizations and some organizations have initiated marketing planning during the lockdown time

    3. Take a timeout for self-introspection on your leadership style :

 As a business head, your organization growth depends on your mindset, thought process and business practices as most of the time, you are the person influenced significant decisions, either good or bad, in the past. Your organization had grown to this level, predominately because of you. Now, this is the right time to think about your mindset related to you, your business, customer, process, and people. Now, this is the right time to practice new habits in your daily management, which will bring a positive culture in your organization.

I had recommended some of the resources last week which may be useful to you during this time to polish your personal leadership style.

 In fact, the working of the cashflow the requirement for the next 6 months in the different scenarios can be worked out, and the various options of mobilizing the cash can be figured out during lockdown time. This planning and risk mitigation work will give clarity of managing the reality when the operation resumes.

Immediately After lockdown:

When we resume the operations, the most likely concern area for most of the small business is in dealing with the following

1.      Demand Uncertainty
2.      Cash flow uncertainty
3.      Resources availability especially manpower

Let we understand each uncertainty in detail, and we discuss the workable solutions approach.

You need to relate with your organization and accordingly add/modify the solutions approach, as you may have all the data about your organization.

Demand Uncertainty:

The concern on the demand side is whether the demand would be similar to pre-COVID period or not?

Most likely the demand would not be prior to COVID period unless you are in the the business of FMCG product manufacturing or in essential items manufacturing category. However, the order will be picking up  gradually, and you need to think about how you can RAMP UP in line with demand. The timeframe is beyond our control, but ramping up in line with demand is still in our influence or control and with little planning, going in detail in all aspects, we certainly manage it.

How to manage the ramp-up in case you are in other than essential products?

•      First one or two weeks, you need to consume the existing RM and liquidating the current FG stocks. We need to watch the demand trend very closely, according to the pattern, we need to order the supply. Considering the lead time of your supply base, you can order within a few days of operation. The timing and quantity need to be worked out as critical action. This decision will vary for each organization as it depends on the existing stock situation, your customer segment, and the demand pattern.
•      Instead of running all the shifts and all the machines, try to go for a single shift for a few days or week, then look for shift expansion depending on the demand pattern and people's availability.
•      Instead of working six days, consolidate the demand requirements and complete in 4 or 5 days working pattern. This consolidation will help you to reduce your other manufacturing expenses by running idle as we accustomed to spread for working all the days.
•     Close coordination is required between the customer, internal planning team, procurement team, accounts team, and the business head in understanding the trend carefully and making timely decisions. Since everyone is anxious about the demand and urge not to lose the given order, there is a tendency for not going into detailing and planning on material and equipment. 
•     However, good coordination and team working, timely decisions will help the organization to come out of initial ramp-up challenges. As a business head, you need to include all the people in this process, and you need to anchor them, which seems to be new for you, and this delegation and minute reviews, facilitation need to be adopted at this point. 

Cashflow uncertainty:

This is one of the most concern/aspect of the business head in small, emerging business.

Unless  the organization is cash-rich  and  debt-free or having the discipline of parking 6 months working capital in short term investments, this period is challenging to manage, however, when you have faith in your long term health of the organization, you can manage through by taking some bold decision to mitigate the risk, and you need to learn the financial discipline from this crisis.

•     First, we need to get the data of outstanding payables and receivables. Assign your relevant team from accounts, sales, or any other related function depending upon your organizational structure as a Taskforce team to improve the collection and paying to the suppliers. (You need to consider your supplier also as they are small and in difficult situations on cashflow than you).
•      Parallelly, we need to work it out for the next 3 months with ramping up of demand, what would be the working capital required at the worst-case scenario, and an optimistic case scenario. This working will give you clarity on whether you can manage with the internal collection and payment method or should you go for the external debt assistance for pumping the money. This call needs to be taken at the earliest , and you need to make a bold decision as this will pay off once the situation improves. If you are not serving the exiting customer due to your own financial issues, you will get into the trap of losing the existing customers and at the same time paying your internal expenses without any returns.
•     This is the crucial time to meet your demand requirements and be on the flow of increasing the demand and getting the benefits. Any delay or wait and watch mode may put a risk of losing the existing order, and the future cashflow also gets worsen.
•    In fact, the working of the cashflow the requirement for the next 6 months in the different scenarios can be worked out, and the various options of mobilizing the cash can be figured out during lockdown time. This planning and risk mitigation work will give clarity of managing the reality when the operation resumes.

Resource availability, especially operating level manpower:

As discussed in the demand flow pattern, you can not expect full attendance from week1  and this also to be planned and monitored  inline with demand pattern as part of the up ramping process. Even during the normal period also, sourcing the right manpower was a challenge for small organization and post-COVID, this challenge will become severe. As most of the resources are migrant people, bringing the people to the organization by giving job security, a healthy environment, becomes an additional burden.

For some months down the line, we need to ensure social distancing, providing personal protection and other preventive measures inside the organization, which is new for most of the small organization. This will be a good measure for the individual and organizational health perspectives. Unless we give confidence to the working people on job security and the health preventive measures, ramping up the attendance would be difficult.

As mentioned in demand readiness and ramp-up, a special cross-functional to be formed to mobilize the  people from various agencies and need to be monitored on personal hygiene and protective measures for some time until normalcy restored at least.

During the first to the third week, managing resources and ensuring availability and meeting the delivery requirement would be a  prime task, and the key team must work closely, and the business head must focus only on this task.

All the above issues are look like common across all the organizations, the severity will vary between the organization depends on the existing process, customer, and internal realities. When you are mentally prepared in those critical areas, you can think and develop multiple options now.

Focus areas once normalcy restore:

The time frame we may not exactly know. However, once you are comfortable with the ramp-up, the focus must be given on reflecting the learnings and starting a new paradigm the way you are managing the business.

Key focus area must be

• Being "lean" in all aspects of business
• Bringing financial discipline 

Being lean in all aspects of business:

Irrespective of any crisis, the safest and responsible way to manage the business is " Working on the principles of CONSERVATISM".

We need to look at each business process and to eliminate and reduce the waste as much as possible. The question we must ask ourselves is whether we are using minimal resources and maximizing the output.

In some of the organization, with growth prospects visibility, we have developed the complacency in our attitude, and we got into the situation of

Excess equipment and investment

Excess debts

Excess manpower

Excess Inventory

Excess administrative expenses

While large size organizations are prudent on the expenses and conservative on the investments, return on investment, being small, emerging organizations, the way we are looking at the resources utilization needs to be relooked and re-engineered for the sustainability of profitability and growth.

We need to relook at our business processes and to re-engineer as going forward, the opportunity will be for those who are open for being smart and flexible to the demand of the external environment. 

Bringing Financial discipline:

Some business head is inherently very disciplined in financial management. When I speak to them, it seems that they are comfortable for the next 6 months, even when there are no operations. That should be the proactive practice, and this must be the focus for each business head irrespective of the business nature. If we are working only on survival mode, then there is something problem in our business model or practices or with the segment or customer, we are dealing with. This needs to be seriously relooked and re-engineered.

Financial discipline includes

1 Bringing a structured process on cashflow management

2.Bringing the culture of cost-consciousness in every activity

3.Driving cost projects as a culture

4.Debt restructuring and aim for zero debt

5.Reviewing P&L every month and analysis

To sum up,

I have just outlined the likely scenario and the solutions approach and I am sure as a business head you might have thought about all the scenario and my perspective might have helped to refine your thinking process a little bit to manage the short term uncertainty and to become a strong business on a long term basis.

Pl let me know your practical challenges and let us discuss the solutions approach.