Operating in changing working conditions
Operational excellence and management are highly important during and after any type of business disturbance or crisis. Your business’s primary focus needs to be on resolving the issue at hand and getting the business back on track.
• A crisis situation demands a high level of your engagement in order to successfully manage the issues that have arisen and address any possible long-term consequences the disturbance could have on your business, be they operational, financial or reputational.
• As an initial response, assess what effects the crisis may have on your business. Use this information to support your decision-making and influence how you approach several important areas:
— managing organisational risks
— actions in response to the crisis and prioritisation of those actions
— timely and accurate communication with your key stakeholders, including:
- creditors and investors
- other regulatory bodies.
• To successfully deal with a crisis or economic downturn, your business must be able to adapt to rapidly changing market conditions. In difficult times, it is essential that top management have access to accurate and reliable data that can help them make timely, well-informed decisions.
New market or business conditions arising from the crisis may demand that you adapt some of your operations accordingly. To manage your operational activities during a time of crisis, establish an awareness of your working capital requirements. Review forward orders to plan for any short-term need to expand or reduce the business. For example, are customers increasing or cancelling orders and, if so, what is the credit risk?
• Try to estimate supply and demand for inventories. Call on your current supply chains to improve the efficiency and security of supply while also finding new suppliers and routes to allow your business to diversify in times of crisis.
• Keep tight control of costs. A flexible management approach will be essential to controlling labour costs, rental costs and the cost of non-revenue-generating areas of the business. Identify where costs can be reduced to preserve cash. Across the business, eliminate or postpone discretionary spending. For more information, see here.
• Work on anticipating the needs of key stakeholders as the crisis evolves and employ the resources needed to satisfy those needs if possible. Pay attention to:
— cash flow management
— capital spending
— customer credit terms.
• After initiating early preventive measures to minimise any immediate negative effects, assess your maximum exposure, build a strong cash reserve and prioritise only the most critical activities and investments in case the crisis lasts longer than expected.
Facilitate the open and consistent flow of accurate information between key stakeholders, maintaining their confidence and allowing customers who will be affected time to prepare.
Responding to new challenges in a timely manner is essential. Consider delegating activities to key employees to speed up your decision-making process.
• Using electronic signatures to verify documents and make agreements can improve your response time.
Determine your minimum viable business model – the minimal set of processes you can use, involving suppliers that are still reliable, to supply the most important products to the customer groups that are still ordering from you. Consider both the short-term and long-term effects of the crisis on your business operations and make sure you have evaluated them thoroughly.
• Review key risks, model their impact on near-term working capital and liquidity, and prioritise contingency planning. For more information, see here.
• Long-term and short-term considerations require different resource allocation, communication frequency, and overall approaches in challenging environments.
• Consider whether you can meet future funding requirements such as payment of liabilities deferred during a hibernation period, or working capital to restart or scale operations back up. Businesses that struggle to source such funding may have to consider a longer-term restructuring plan.
Here are some of the actions you can take to address key issues that may affect your business.
• Check your contract terms with customers and suppliers. They may not be workable during the crisis. Discuss changes and amendments. Be constructive and try to avoid ‘breach of contract’ accusations.
• Work together with the parties to try to resolve issues. Good communication leading to mutually beneficial agreements helps to avoid expensive legal actions.
• Ensure your employees stay safe and have good access to computer systems. This will ensure documents such as commercial invoices can still be produced and your usual procedures can continue.
• Will you be able to cope with a potential surge in demand or a change in demand pattern? You will need to plan to anticipate changing future requirements.
Learn how to communicate effectively with your customers and suppliers during a crisis, and make your business more resilient to shocks. A crisis communication plan can help you identify any gaps you may have in relation to maintaining communications with your suppliers and customers.
When creating a crisis communication plan, think of everyone you may need to contact and what you will need to tell them. During a crisis, time may be of the essence, so you will need to work through the plan in priority order.
Your plan will need to accommodate:
a clear communication schedule clearly identifying who will communicate with each supplier and customer, and when
an emergency update plan for your web site: your circumstances may change rapidly and your customers will need to be kept up to date
a direct contact plan to enable key suppliers and customers to reach your employees if they are working remotely
a marketing suspension or replacement plan to pause normal marketing activities while your business is operating with reduced capacity and replace them with cut-down offerings if appropriate
a written record plan to ensure that when customers and suppliers communicate by telephone in urgent situations, they receive written responses by email, which you preserve
a conferencing and communications plan to provide details to all parties of any new communications channels to be used during the crisis
a business resumption plan so that if your business is suspended, your resumption is communicated promptly to customers and suppliers.
• Some of the most popular social communications tools are free for the user. These include WhatsApp, Instagram, Viber and Telegram. Check which channels are the most widely used and accessible in your country, and harness them for your regular customer communications.
Managing the transition to the new working conditions
Your old business model may need to change dramatically as a result of the crisis. Old processes or supply chains may no longer be efficient. Old sales channels may have disappeared. Old ways of working may no longer apply. Whatever the new situation is, you must adapt your business accordingly.
Transitioning to new ways of working following a crisis may be difficult for your business and your employees and it may take some time to be achieved. You should do your best to adapt your operating model to the new situation. Your agility will determine the resilience of your business.
• Learn from your experiences and document what you learn as best practices to help you prepare for future challenges.
You should assess the current situation, check your employee availability, assess your current capabilities, ensure the safety of your employees and organise your internal processes for running the business. Think about your recovery strategy and implementing your continuity plans.
Leadership and people management should have a major role in all levels of decision-making which may influence the well-being and recovery of your employees. Train your employees to prepare them for new roles they might have to take on after the transition to the new way of working.
Embrace digital capabilities that can protect your supply chains against future disruption as you begin working in new ways.
Managing your supply chain in turbulent times
During a crisis, your supply chain management may encounter numerous challenges. Assess the situation and try to minimise negative effects and to resolves the crisis as quickly as possible.
• Consider whether any key customers can provide you support to enable the ongoing supply of goods?
• Are there any supply chain contractual issues that may be invoked – force majeure clauses and similar?
• Will customers pay?
• Are there any bad debt risks?
Irrespective of the industry in which you operate, your priority will be the survival of your business. However, it is important to remember that your supply chain depends on other businesses, and these might be affected by the crisis as well. One of the most important things you can do in times of crisis is communicate with your suppliers to explain your position and reassure them that you are continuing to trade.
Think about your business from their perspective. How would you describe your position to convey your resilience accurately but positively in this situation? They will ask the same questions of you that you would of them.
Suppliers may simply worry that you will go out of business. Explain the plans you have in place to ensure your resilience.
• Ability to pay
Especially in times of crisis, cash flow may be a problem for suppliers just as much as it is for you. Show them that you can pay and offer guarantees if necessary.
• Cash flow
Suppliers have financial obligations too. If you are confident you can pay on time, show them this. If you may have trouble, tell them as early as possible so that they can negotiate with their own suppliers.
During turbulent times, suppliers need reliable and predictable orders more than ever. If your requirements have changed, keep your suppliers updated as often as you can.
Continue to assess your position and that of your suppliers, adjusting your plans and communicating with them as necessary throughout the crisis. Understand the financial and operational impact of possible risks across multiple scenarios:
• Evaluate the financial health of your key suppliers to assess the potential for disruption to your supply chain.
• Conduct a value chain assessment of other risk factors that may escalate costs and impact service and inventory capabilities. For example, transportation shortages may increase cost, as transport companies see an opportunity to raise margins. Proactively address any anticipated shortages, such as possibly pre-booking freight.
Map the criticality of source materials to high-value products and revenue streams. Identify the components and raw materials that have the highest impact on revenue streams, helping to ensure scarce capacity is allocated wisely.
• Assess opportunities to diversify your supplier base. Identify geographically diverse suppliers to bring onboard in the event of emergency. Consideration should be given to dual-sourcing for critical components to introduce redundancy into your supply chain.
• Aggressively evaluate near-shore options as potential backup to shorten supply chains by increasing proximity to customers.
• Explore alternative supply chain options and suppliers to enable you adapt to new circumstances.
Customer management in times of crisis
If you face a challenging environment, your revenues may be quickly reduced by the drop in your customer purchases. This usually occurs faster than you can respond to it by lowering costs or stopping your inbound flow of inventories.
Know your customers and their circumstances. You need to understand which market segments pose risk and which offer opportunity. Be clear on how you will communicate with customers in each segment and what they need to protect themselves against financial uncertainty and risk.
Invest in client relationships in times of difficulty as this will be repaid with enduring client loyalty. Try to maintain your ethics and integrity during difficult periods in order to grow and prosper: compromising on these even in a crisis situation may cause you difficulties in the future. Outstanding customer relationships are built around mutually-shared values.
Even the most faithful customers may waver during times of crisis. Your focus will be on ensuring the continuity of your business but your customers will need reassurance that you are able to supply what they are paying for.
Your customers may be relying on you to meet their own obligations. Can you supply them as normal or will there be disruption? Communicate as early and clearly as you can to give them the confidence to proceed with their plans or make changes as necessary.
Your customers may be affected by the crisis as well. Can you offer them flexibility in terms of what they have ordered – be it quantity or any other areas? Can you allow them to cancel if their needs have changed? Helping your customers in the short-term will keep them with you in the long-term.
Cash flow is a problem for everyone in a crisis situation. Can you offer more flexible payment terms to your loyal customers? Would charging interest be appropriate?
Your customers know this is a crisis situation but they still have to operate themselves. Can they expect deliveries on time? Do you have backup plans in place to ensure that you meet delivery commitments? Implementing a robust logistics and transport plan to accommodate short-term needs may be expensive and affect your cash flow, but it may mean the difference between keeping or losing key customers.
Regardless of your business type or industry sector, during times of uncertainty it is important to reach out to customers to assure them that they can continue to rely on your business to deliver goods or services to them. Reassuring customers that you will stand shoulder-to-shoulder with them during this challenge is one of the most effective ways to build trust, and it can make a big difference towards strengthening future customer relationships.
At the same time, you should identify areas of potential non-performance with regards to supplying and servicing customers, and proactively engage with customers to mitigate potential risks. Closely monitor the market environment and plan future operations accordingly.
Try to understand your customers and their needs during difficult times to adjust your distribution model across different channels. In turbulent times, rediscover your sense of purpose, innovate rapidly and get closer to the communities you serve. Learn how to connect with customers in uncertain times.
• Respond rapidly to customer and employee needs, and government requests, and make sure you find solutions to new customer problems.
• Do your best to set, manage and meet customer expectations accurately in difficult times. Show that you are able to adapt.
• Make it easy for your customers to access information, products and services.
• Show that you care, and show emotional responses appropriate to your customers’ circumstances. Engage your employees – especially the frontline employees – and combine their input with your analytics procedures when assessing your ability to meet customer demands.