During times of economic boom, virtually every business prospers without any special or extraordinary strategy and/or leadership. The same cannot be said during economic downturns, an unexpected turn of events due to industry crisis, political upheaval, an epidemic, a natural disaster, or a global pandemic such as the ongoing COVID-19. Any or a combination of these factors can threaten the existence of a business organisation as a going concern. How can a business survive in times of such a crisis; times of great difficulties which adversely affect the bottom line? Times, that if not properly managed, can spell the death of the business? What measures can its leaders and management team put in place not only to survive the crisis but to possibly bounce back stronger and more efficient?
It is usually a combination of measures that need to be deployed when an organization faces an existential crisis. The truth is some organisations are better prepared to cope with crises than others. There is no gainsaying the fact that an organisation that has a culture of innovation and a strategy of resilience, will cope better during a crisis than another one that lives day by day.
Cost-cutting/optimisation
The very first and maybe most important measure is Cost Cutting/Cost Optimisation/Cost Streamlining. Regardless of the semantics, the objectives are the same. During normal times and boom times, many organisations do not pay keen attention to costs. They indulge in a lot of nice-to-have expenses. To survive hard times, only the need-to-have expenses need to be incurred. The process involves a holistic review and evaluation of the organisation’s entire value chain to identify all cost elements/drivers with a view to classifying them in a pecking order of importance. All costs are not equal. Deciding question: Can we continue in business without incurring this cost at all? If the answer is NO, can we continue in business if we incur part and not all of this cost? Items that answer YES to the first question should be dropped for 100% savings while those that answer YES to the second question, should be cut in the proportion of their dispensability.
Read Also: How Organisations and Businesses can help their Employees
Re-negotiation of existing contracts
Another factor that can be a consequence of the first measure is the re-negotiation of all existing contracts. For big businesses, third party contracts can constitute a huge cost of their capital and operating costs. Some elements/clauses are built into contracts that incisive scrutiny, during hard times, will uncover some excesses or expose items that could be streamlined, re-aligned, merged, or completely eliminated. In addition to the cost savings from these, the unit costs, administrative as well as agency costs can be re-negotiated. Miscellaneous expenses that cannot be tied to specificities, should be eliminated. A lot of life-saving costs can be saved by this exercise.
One of the greatest mistakes some organisations make during difficult times is to think that sacking employees or axing much of employee benefits will save the amount of cost that can save the organization from sinking.
Galvanising employee support through effective communication
One of the greatest mistakes some organisations make during difficult times is to think that sacking employees or axing much of employee benefits will save the amount of cost that can save the organization from sinking. It is true that some costs may be saved from personnel budget lines, such is not sustainable savings. In the long run, they may actually achieve the opposite of their objectives. There is no problem if an organisation has a subsisting strategy of perpetually re-inventing itself by gleaning out poor performing, technically non-adaptable, or incapacitated employees, and hiring new hands that fit its long-term plans, discharging employees during difficult times, deprives them the capacity to foot their bills and care for themselves and families; it creates the impression of an organisation that does not care about them and takes organizational self-centredness to the highest levels. Beyond the employees, the organisation might find itself lacking critical, competitive skills when after surviving the hard times, it faces a new challenge of lack of experienced and committed key staff. The best way to approach the issue of making some savings on personnel budget lines is to carry the employees along from the onset. Laying the cards on the table through constructive employee engagement and communication can yield surprising results. Employees who see sincerity on the part of their leaders can take pay cuts, forego allowances, work extra hours without extra pay, etc. to ensure their organisation wades through murky times. Such sacrifices are most effective if the leaders lead by example. It is important that business leaders should as a matter of organisational culture, build a strategic relationship between the organisation and the workforce; such that makes the latter see themselves as joint owners of the business.
Taking advantage of new opportunities
Difficult times may pose an existential challenge to organisations but also have the potential to make an innovative one more efficient and better positioned to create value. Very hard times compel organisations to take an introspective assessment of their strengths, weaknesses, opportunities, and threats (the traditional SWOT analysis). Such unflattering analysis could point to the need for vertical and horizontal integrations such as taking greater control of the sourcing of raw materials, miminising the hurdles to access to the markets/buyers of products, mergers, acquisitions, etc.
