The coronavirus pandemic is putting a uniquely difficult strain on business leaders. How should they operate and plan for an economy shaped like an accordion? Like an accordion, the economy will keep expanding and contracting--social distancing is loosened, infections soar, and the government orders people back to social distancing.
I hope this cycle will end when everyone has been injected with a safe and effective vaccine against Covid-19. Until then, you must make difficult decisions--with the level of difficulty varying by industry.
Any operation that before the pandemic depended on people crowding together--such as hotels, airlines, cruise ships, concert and sports venue operators, movie theaters, casinos, restaurants, retail stores, and schools--must overcome the biggest challenges.
Companies that can operate with employees working from home are in less trouble. What's more, the pandemic has caused a surge in demand for other industries--including providers of tele-health, wireless payment, e-financial services, e-tailing, online entertainment, cloud services, and information security.
If an accordion-shaped economy is harming your business, here are the five key steps you should take:
1. Share your vision of an accordion-shaped economy.
Don't try to bluff your way through the situation. Instead, share your fears and uncertainties for the future with your people.
More specifically, share with them the details of what you think will be the timing and duration of the close-open-close cycles and how long you think these will last. Share your ideas about how the company will be able to survive these ups and downs, and ask your people to suggest improvements for your plan.
If job cuts and closing facilities are essential to keep your company alive, try to make those decisions quickly and deeply enough so that you will not have to take the demoralizing step of making more cuts in the future. If you do make cuts, do the most that you can to support those who leave. If not, you will risk losing the subset of people you need to retain.
2. Explain to customers how you will keep serving them.
You should also engage your customers in a conversation about how you will keep serving them. If there is a way to bolster your online presence to help customers during the closing phase of the accordion, you should let them know what kind of service quality they should expect.
3. Partner with employees to prepare them for pay fluctuations.
For the employees who you hope will stay with your company through the accordion, give them as much visibility as you can into how their compensation might fluctuate in the months--and possibly years--ahead. For example, you could propose to cut their pay when demand contracts during the close phase and give them bonuses during the open phases.
4. Incorporate the accordion-shaped economy into financial forecast.
You must develop a monthly cash flow forecast that incorporates the accordion pattern you shared with your employees. That forecast should take into account changes in unit volume, pricing, cleaning and PPE costs, salaries, and other fixed costs. It should also consider pessimistic, optimistic, and most likely scenarios.
5. Work with capital providers to survive the crunches.
If you have relationships with banks and venture capitalists, you should talk with them about how they can support your company though the accordion-shaped economic fluctuations. If these capital providers are willing to supply cash at reasonable terms, you should share your financial forecasts and try to find a mutually beneficial way to get their help while keeping the lights on through the pandemic's ups and downs.