It’s been six months since Covid-19 hit the U.S. Now that the immediate crisis is over, board members are tasked with evaluating how their businesses pulled through the acute stretch of the pandemic by asking questions, such as, How did we do? What could we have done better? How do we prepare for the next crisis?
This process demands that boards grapple with great complexity in a methodical way. The goal is to assess performance to determine what capabilities are lacking, then build those capabilities in advance of the next crisis. Businesses that pull through crises do so because leadership has cultivated the ability to expect the unexpected.
As Rahm Emanuel reminded us back in 2008, “You never want a serious crisis to go to waste.” Here are several essential strategies boards can employ to not only survive the Covid-19 crisis, but capitalize on the experience.
Assess the situation.
Perspective is a function of time. We’ve hit the first benchmark where we have enough perspective to engineer our approach to the future. This doesn’t mean that you won’t get things wrong or that your perspective won’t change. But it’s important to take stock of the situation today.
Ask yourself: Did our risk management system work? If we did not have a risk management system, what did that cost us? How would we rate our response? How well were we able to communicate with our employees, customers and suppliers? Did we have enough liquidity to survive the crisis? Being brutally honest about your performance is difficult, but it is the best way to evolve your governance processes.
Analyze consumer behavior.
Businesses need a clear understanding of how consumer patterns shifted during the pandemic and which shifts are short-term versus which are long-term. Did your customers stop buying luxury items in favor of essentials? Did they switch to a different price point or delay spending?
Did you experience an uplift that correlated with government stimulus? According to the U.S. Census Bureau, 80% of American households spent stimulus money on food, while half bought household and personal care products and about 8% purchased goods like electronics and fitness equipment. If you did see a huge uplift with government stimulus, understand that probably won’t happen again.
Determining exactly what your customers did differently during the crisis will inform how you adjust your business and communicate those changes to your employees, customers and suppliers.
Adjust your marketing.
This might mean a bigger marketing spend in 2021, especially if your supply chain took a hit. If, for example, the recent aluminum shortage prevented you from packaging and shipping your product, you might spend the bulk of 2021 telling your customers why they should still love you.
Your customers will not care about issues with your supply chain; they will care about how you handle those issues. It still holds true that if you’re making excuses, you’re probably not winning. Even if your business isn’t responsible for its problems, your customers will still hold you accountable.
Adapt your approach.
Covid-19 has picked winners and losers by industry. You must understand your fate and adapt to it. If you’re in the travel and hospitality industry, you may question your ability to survive. If you’re in the grocery store business, your outlook is probably pretty good. Your path forward will vary dramatically by your industry and the size of your business. Even though the pandemic has impacted us all, there is no one-size-fits-all solution.
Plan your 2021 budget cycle.
October is when most businesses plan the following year’s budget cycle. This process usually begins by asking, “How did we do last year?” and then making the necessary adjustments. But 2020 was far from a typical year. In this case, boards may have to go back to 2019 and see which assumptions still hold, then apply the lessons they learned in 2020 to plan for 2021 and beyond.
Evaluate management’s character.
This is an important time for boards to evaluate the character of their management teams. How did they handle the immediate crisis? Did they panic? Do your employees admire them for their efforts? How has management’s response impacted the business’s reputation?
Crises build great management teams. When things are going well, everyone looks good. But when the tide goes out, you can easily see who isn’t wearing shorts. Boards are tasked with evaluating management’s performance. If it was poor, did they learn valuable lessons? Were they valiant in their efforts to do the right thing, or did they cut and run?
If management failed, despite making the best possible decisions with the available information, it might be that no one could have won in that situation. In this case, success stems from strong character and the impact it has on your employees’ motivation.
Motivation might be your business’s best asset right now. When things are bad, employees will follow leaders who demonstrate strong character. Ultimately, this kind of leadership is what separates good companies from great companies. Now more than ever, character can be the difference between which companies survive and which don’t.