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
- Demand Uncertainty
- Cash flow uncertainty
- 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.
