My finances, my projects, my life
February 2, 2023

What can Covid-19 teach small businesses about crisis management?

  Compiled by myLIFE team myCOMPANY June 15, 2021 22

Since its onset at the beginning of 2020, the Covid-19 pandemic has provided a wealth of case studies on how to respond to a crisis. It emerged unexpectedly and extremely rapidly, and has proved highly unpredictable in its fluctuations over time. Business owners have had to deal with more crises within two or three years than they would normally have to face in a lifetime. How they reacted is critical to the speed and success of their businesses’ recovery.

Effective crisis management is a means to build goodwill. Nowhere was this clearer than in the travel industry, where companies that were flexible and transparent about refunding customers for cancelled flights or journeys that could not be made for reasons of illness or quarantine have generally found travellers and holidaymakers willing to rebook, in notable contrast to those who refused to pay out in a timely way or created hurdles for customers seeking their money back. Crisis management ‘pays it forward’, ensuring businesses can pick up where they left off.

What does good crisis management look like in practice?

Be prepared, as far as you can

The pandemic demonstrated how rapidly a crisis can arise. It is rare to get advance notice, but it is worth assigning a team to tackle situations as they occur. The group needs to be large enough to be representative of the business as a whole, but small enough to be extremely responsive. When the moment comes, they should know exactly who they are and what they need to do – they will need to make decisions quickly.

Know when you’re in a crisis

This sounds obvious, but the temptation to ignore small problems can often generate bigger ones. During the Covid-19 pandemic, this was most evident in supply chains as borders were sporadically shut, reopened and shut again. British companies that lacked alternative supply options when France briefly shut its border with the UK, for example, quickly found themselves with no products to sell or lacking components essential to their manufacturing processes.

In other circumstances, it might be a public relations problem that, if left unaddressed, could cause severe damage to a business. Also in this category might be news that a rival company is about to launch a competing product or service. In these situations it’s often tempting to see how it plays out and whether the competitor can be successful, but having a strategy to deal with the problem before it mushrooms is likely to be a more effective approach.

Focus on what’s important

Just as in freezing temperatures the body redistributes blood to the torso to protect vital organs, your business needs to hang on to what it has, keeping existing clients and staff happy. Areas such as business development can take a lower priority, even if it means redeploying staff temporarily.

Poor cash flow can be the death knell of many small businesses, so shoring up a company’s cash balance should be a priority at time of stress.

Over the past three years, governments in many countries have provided assistance to companies, in many cases by helping to meet salary costs temporally to help them through periods when the pandemic did not allow them to open, in the case of restaurants, for example, or those unable to serve customers directly, such as retailers. They have also provided assistance to help companies cope with soaring energy costs. However, there is no certainty that state authorities will have the capacity to do the same again if a comparable crisis erupts in the future.

One important focus for companies at all times should be financial management. Poor cash flow can be the death knell of many small businesses that might otherwise have a promising long-term future, so shoring up a company’s cash balance should be a priority at times of stress. When are your invoices due? Which can be deferred? Are there long-term capital expenditure projects that can be put on hold? You are more likely to be able to secure emergency capital if you can present a coherent cash flow management plan to lenders.

Communicate effectively with clients

It is tempting not to talk to clients until you have something good to say – a problem fixed or an update on delivery. However, letting poor reviews and complaints build up with your customer services department or, worse, on social media without a coherent response can create a huge headache further down the line.

In some cases, a problem with an outsourced delivery supplier can become a reputational nightmare for a business. It is far better to admit you have a problem, give a realistic timeframe for its resolution, and reassure people you’re doing all you can.

Equally, you will need an external message for the public. This shouldn’t be too prescriptive – no-one wants to deal with the human equivalent of a chat-bot – but a broad public statement that explains how you are dealing with the problems and what your customers can expect will help ensure that all parts of the business are on the same page.

It is also important to listen. You may not think that criticism is fair, but customers need to feel their grievances are being heard. It should also help shape your response.

It is easy to become caught up in silos during a crisis, with everyone focused on managing their own particular area of the business.

Communicate internally

It is easy to become caught up in silos during a crisis, with everyone focused on managing their own particular area of the business. The Covid-19 pandemic has demonstrated the importance of understanding what other people are going through – for example, the impact of self-isolation and lockdown on mental health.

Effective communication is not just about ensuring that different parts of the business are operating and collaborating effectively, but making sure that employees and other stakeholders are healthy and as happy as is possible. This can be critical to rebounding successfully once the stressful conditions start to dissipate.

Rebuild

The beauty of a small business is that it can pivot. It is far easier for a lean, nimble company to change direction than it is for a large group. Crises always tend to bring opportunities, and the impact of Covid-19 has been unprecedented in its scale and breadth of disruption; it is already clear that the world emerging from the pandemic is different in varied and important ways.

People have been changed by their experience of lockdown – some have changed career, left their jobs to travel, or moved home, city or country. Working patterns are already different. Hybrid working is becoming established in many sectors, along with other types of flexibility, with vast implications for the way people eat, shop and socialise. All these developments are creating opportunities for small businesses ready to seize them.

Surveys of employees in Europe and the US have consistently found that those working remotely are not only more likely to experience an improvement in their work-life balance compared to those commuting to an office or another location, but also greater satisfaction with the work they produce.

The pandemic period saw companies innovating – neighbourhood restaurants delivering not only food and drink but toiletries to their customers, Airbnb temporarily helping to house 100,000 healthcare professionals around the world, and LVMH manufacturing hand sanitiser at its factories instead of perfume and cosmetics. With the end of lockdown restrictions, companies are continuing to develop novel offerings, in many cases drawing on the ever-increasing power and coverage of fast internet access to connect with employees and customers.

For small and medium-sized businesses, agility is a superpower. Emerging from a crisis can often be the most fertile time for companies to evolve and grow. Use it to your advantage.

Crises always tend to bring opportunities, and the impact of Covid-19 has been unprecedented in its scale and breadth of disruption; it is already clear that the world emerging from the pandemic is different in varied and important ways.