Strategic Priorities for CEOs During the COVID-19 Crisis
The COVID-19 crisis presents CEOs with a remarkable leadership opportunity. Employees and clients alike are looking for leadership and reassurance. We must all rise to the challenge. While the pandemic is something none of us have experienced in our lifetimes, the havoc it is causing bears some similarities to other major disruptive events of the past 40 years.
The impact to various business verticals has been dramatic across the board, with early impacts on the hospitality, entertainment, and airline sectors having an immediate ripple effect. Fallout is likely to continue for months to come as the ramifications across multiple business sectors filter throughout the ecosystem. Though these circumstances are unique, we can draw upon experiences from previous crises to guide us. Companies are at different places in responding; however, it is critical for leaders to focus on the following priorities to optimize their probabilities of stabilization and survival.
Take care of your people. Your team is looking to you for information and reassurance. They are hearing and reading the same news you are, and they need to know you are staying on top of rapidly changing conditions, that you know how they will impact the company, and that you are thinking about what is best for them and their families. Make sure they understand how their insurance provides coverage in a situation like this. Encourage them to continue to follow CDC guidelines. Expand upon work-from-home protocols. Let them know that you are aware of the havoc this is causing on their personal lives and that you will make accommodations where you can. Err on the side of too much communication with staff at a time like this.
The federal government has stepped up in an unprecedented way to provide a variety of channels, primarily funneled through new employer obligations, to fund working Americans impacted directly and indirectly by COVID-19. Make sure you know what those provisions are and how they impact your obligations to your employees, and that your employees know how to access them. These provisions will be an important safety net for your employees, and they need to understand their ability to access them.
Continually project and protect your cash flow. Without cash, you are in a tough position. If you do nothing else to respond to the crisis, put together a detailed weekly 90-day cash plan with realistic expectations of dollars coming in and the most conservative estimates of cash going out. Remember, your clients who owe you money are facing the same problems you are. If you are counting on sales during this period, anticipate some delays and cancellations. If your clients are more adversely impacted than you are, anticipate not being paid at some level. Restaurants, bars, hotels, airlines, theaters, event production companies, and all of their suppliers are examples of industries that have been disproportionately and immediately impacted. Energy has been devastated for reasons including but also beyond COVID-19, including excess capacity and intentional supplier price reductions. Do you have receivables from these sectors?
Defer all discretionary expenditures, defer capital purchases, and don’t pay anything before it is due even if you are passing on discounts. Make sure every payroll-related payment, including taxes, is made absolutely on time. Review and plan for the potential impact on your company of the cash obligations to staff for COVID-19 related benefits, as mentioned above. All of these benefits will be due from the employer to the employee and will be a significant unplanned cash requirement. Provisions are being negotiated to provide for relatively quick reimbursement from the federal government to employers for these new expenses, but keep in mind that you will be fronting the cash for some as-yet-undetermined time should this provision be called upon by your team. If some percentage of your income-producing staff is out on paid leave, that will create a significant unanticipated use of cash until you receive reimbursement at a later date.
Anticipate varying levels of impact on your business and reforecast to see what that will do to your profitability and cash position. Prepare a worst-case and most-likely-case scenario. This will lead to some serious strategic decisions regarding staffing levels, product release delays, suspensions of projects, hiring delays, reductions in force, revisions to capital expenditure plans, and M&A activity. Don’t overlook the strategic decisions you need to make in the immediate timeframe while you are being pulled into dealing with the myriad of tactical initiatives demanding attention. You can never recover dollars that have already gone out the door. If you have to cut expenses, including reductions to employee pay or layoffs, do it immediately and go deep. Incorporate all the rapidly changing federal, state, and local regulations into your workplace, employee expectations, as well as your reforecast. Conditions are changing daily. Likely the details of the various programs will change as implementation begins. Assess ongoing risk and course correct in your policies and operations as you need to in all areas.
Innovation is often born during times like this. Step back and think creatively about what else you can do with your resources. Invite your employees and advisors to join you in this exercise. Companies hardest hit are already pivoting to provide a different suite of services with their existing workforce and resources. Restaurants are working to provide employment for at least a skeleton crew and to maintain market presence by shifting to take-out and delivery services. Event planning and catering companies are looking at how they can provide services to first responders across the country.
Do not ignore your IT infrastructure and cybersecurity and assume it will maintain status quo. Support the necessary actions for your team to work remotely and stay remote for an extended period. That may mean moving your server-based systems to the cloud, increasing bandwidth, providing laptops, providing hotspots for remote access, and more. Emphasize the enhanced levels of cyber-attacks happening and urge vigilance for detection of phishing that will be piggybacking on crisis-related topics. When in doubt, don’t click. If you don’t have the resources to handle this internally, consider outsourcing this function to a qualified provider.
Take care of your people, protect your cash, mitigate the income impact, innovate, help your clients, maintain situational awareness, and provide resources needed for security and remote working. Along the way, above all, stay calm and project confidence, possibly beyond what you are feeling. Reach out where you can and help those in your sphere of influence who have less experience, fewer resources, or are experiencing greater consequences from events that are unfolding. Together we will all get through this.
Author’s Note: Given the rapid change of the COVID-19 response, we realize the situation may be different upon print of this publication. Please utilize this article as an initial guide and visit our website – vcfo.com – for more in-depth resources and updates.
About vcfo: For more than 24 years, vcfo has worked with 4,000+ clients to make their companies stronger. By providing an integrated suite of finance, HR and recruiting services through outsourcing and consulting solutions, vcfo helps companies improve their operational performance and optimize productivity. vcfo has offices in Austin, Dallas, Houston, and Denver.