My finances, my projects, my life
September 25, 2021

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

  Compiled by myLIFE team myCOMPANY June 15, 2021 10

The Covid-19 pandemic will provide many case studies on how to respond to a crisis. It emerged quickly, was unexpected, and has been completely unpredictable. Business owners have had to deal with more crises in 12 months than they would normally have to face in a lifetime. How they have reacted is likely to determine 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 on refunds have found holidaymakers willing to rebook, in notable contrast to those who refused to pay out 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

The pandemic has demonstrated how rapidly a crisis can arise. It is rare to get advance notice of a crisis, 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 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 often generates bigger ones. During the Covid-19 pandemic, this has been 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 manufacturing components.

In other circumstances, it may be a public relations problem that, if left unaddressed, causes severe damage to a business. Also in this category might be news that a major player is about to launch a competing product or service – it’s often tempting to see how it plays out and whether they can make it a success, 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 pause, even if it may mean redeploying staff temporarily.

Poor cash flow sounds the death knell for many small businesses, and shoring up a company’s cash balance should be a priority.

The same is true for financial management. Poor cash flow sounds the death knell for many small businesses, and shoring up a company’s cash balance should be a priority. When are your bills 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 becomes 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 problem 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 shown the importance of understanding what other people are going through – the impact of self-isolation and lockdown on mental health, for example.

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.

Rebuild

The beauty of a small business is that it can pivot. It is far easier to change direction for a nimble, smaller company than it is for a large group. Crises always tend to bring opportunities, and the impact of Covid-19 is unprecedented in its scale and breadth of disruption. The world that emerges is likely to be very different. People will have been changed by their experience of lockdown: they may want to change career, to travel the world or to move house. Working patterns will be different, as will the way people eat, shop and socialise. All of this will create opportunities for small businesses if they are ready to seize them.

A recent survey by KPMG in the US found that employees working remotely were more likely to report an improvement in their work-life balance (74% versus 57% of those still travelling to an office or other location), as well as satisfaction with the work they produce (73% compared with 66%). This trend is unlikely to be reversed once socialisation becomes easier again. Agile working is likely to become a permanent way of life, with a knock-on effect for, among others, local restaurants, videoconferencing providers and clothing retailers.

We have already seen companies pivot: some neighbourhood restaurants have started to deliver not only food and drink but toiletries to their customers. Airbnb temporarily helped house 100,000 healthcare professionals around the world, while LVMH began to manufacture hand sanitiser at its factories that normally produce perfume and cosmetics, for which demand had slumped.

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

Crises always tend to bring opportunities, and the impact of Covid-19 is unprecedented in its scale and breadth of disruption.