“We shall never surrender.”
So said Winston Churchill in 1940, facing likely defeat. Not “we’re winning.” Not “we’re about to win.” He told the truth and inspired confidence in the face of mortal danger. The British victory that followed was unexpected — but without his leadership, much less likely.
The crisis we now face might not be a military one, but it is testing our stamina like no challenge in recent memory. As we burn the midnight oil, trying to figure out how to survive each new setback, we must inspire confidence, while deep down we might feel unsure.
How do you retain the trust of your team in the face of unprecedented challenges? How do you make difficult choices and maintain morale? How can you keep your eye on the future, when the present is so distressing? There are no easy answers, but there are lessons from experience. With that in mind, I had the honour to moderate a rich discussion with three distinguished leaders, Peter Hancock, Greg Mills and Greg Fleming. We shared experiences, perspectives, and potential implications for leaders, summarized in our key takeaways below.
Market Perspectives on the COVID-19 Crisis
Fear, uncertainty, and unrelenting bad news. For those of us who lived through the dot-com bubble and the 2008 financial crisis, much of what we’re experiencing now feels familiar. Yet this crisis is different. Unlike a hit to the financial sector, the COVID-19 pandemic affects everyone directly and personally, from disruption in the workplace to the changing norms of walking down the grocery aisle. Fortunately, we can take heart from the one thing in common across all crises: they do, inevitably, end.
In assessing the prospects for recovery, however, we should not be too quick to predict the future. At the end of February, the United States economy added over 270,000 jobs, leading the world economy in its strongest position in half a century. Now, almost overnight, we are facing the likelihood of a recession. Ten million Americans filed for unemployment in the last two weeks. That’s more jobs lost than in the 18 months of the Great Recession. While we can and will rebuild our former strength, the shape of recovery is uncertain, but unlikely a “V.” Development and distribution of a vaccine will likely take a year or more, and in the meantime, we must adjust to our new reality.
Near-term volatility will remain very high as markets are constantly reading and re-reading the tea leaves to forecast long-term consequences. Can global supply chains re-adjust after disruption? Can the federal government deliver relief and pull the small business sector through this crisis? The answers, though frustrating, are that we still don’t know.
Luckily, this time around, governments around the world reacted much quicker than in previous crises. Financial institutions are holding up under crushing pressure for liquidity. And despite roadblocks, governments have moved swiftly on relief packages — although more spending will surely be necessary.
Above all, we must remain calm. In the wake of the 9/11 terrorist attacks, commentators were convinced that New Yorkers would leave Manhattan for the suburbs, that no one would work downtown again. Things don’t always turn out the way we expect. And we will make it through to the other side.
Pivoting in the Short-Term
In our rapidly-shifting environment, the primary consideration for any business should be the strength of its balance sheet. Evaluate realistically whether you have the cash to ride out a turbulent period that will likely stretch well into 2021. Keep in mind that there will be limited access to capital, and the vast majority of those seeking capital will be price-takers. If you don’t have eighteen months of runway, make tough decisions sooner rather than later.
The world has changed overnight, and so must your business plan. Forecast for best and worst-case scenarios, reassess your strategy, and create realistic operating and financial plans. While large institutions are put on the defensive, startups with enough runway have the opportunity to pivot. Reconsider your value proposition. What was it that you were trying to deliver to your customers? Does it still apply? How can you reorient your business to deliver during this crisis? Focus your energy on your core customer base to understand new challenges and anxieties and how you can be a part of the solution.
The Leadership Imperative During a Crisis
Unprecedented challenges call for flexible and decisive leadership. We might learn from retired Army General Stanley McChrystal, who likens this crisis to the early days of fighting Al-Qaeda in Iraq. Soon after arriving on the ground, McChrystal realized that the terrorist organization was not a traditional enemy. It was self-propagating. It was amorphous. It was constantly adapting. At the risk of over-extending the metaphor: it was a little bit like COVID-19. Just as fighting al-Qaeda in Iraq required a different way of operating and leading armed forces, COVID-19 demands new rules of engagement for business leaders.
Start by establishing the “ground truth,” a shared understanding of the current reality of your business, customers, balance sheet, and team. In a crisis, a leader must ensure that everyone in your organization has the best possible information on what is working and what must change. On the ground in Iraq, McChrystal connected his forces every 24 hours to constantly reassess the situation and apply resources most effectively. In the first year after the 2008 financial crisis, the board of AIG met 120 times — once every three days. Dispense with formality and accelerate the rate of learning.
In all communication, candour is essential. As anxieties run high, it can be tempting to soften bad news or to sugarcoat the severity of the challenges we face. But in an information vacuum, negative narratives will inevitably circulate, chipping away at morale and distracting your team from its goals.
A great leader will reassure a team not by minimizing challenges, but by being straightforward and honest. Think of Winston Churchill. The truth is, people can handle bad news — if it is put into context and backed by transparent analysis. Be clear about why your business strategy is sound, and translate your analysis so that employees understand how the plan will affect them individually. Take out the uncertainty, and your team will stay fully engaged and committed to your goals.
Handling Tough Decisions
Inevitably, leaders must make tough decisions to manage losses and increase chances of survival. As gut-wrenching as it can be, it is better to cut deeply and quickly, rather than to keep your employees on edge at the prospect of more layoffs. Your company cannot function unless employees are coming to work focused and ready. Do not make promises you cannot keep.
When handling transitions, exercise the utmost care and empathy. Focus on the employees that remain, but treat those leaving with compassion. In his recent video message to employees, Marriott’s President and CEO Arne Sorenson demonstrated exceptional humility and strength in communicating difficult news to his employees, shareholders, and customers.
If you’re running a startup, you may face the real prospect of failure. It is not uncommon for startups to fail for any number of internal and external reasons, and today’s crisis may render certain businesses unviable. Pivot if you can. But prepare to liquidate and restructure if that becomes the only realistic option. Folding at the right time is better than clinging to an idea that has become obsolete.
Remember: creating category-defining company is inherently risky and hard. Failure isn’t personal. How you deal with adversity and failure — how you communicate with employees and stakeholders to address matters fairly and compassionately — will determine your reputation and your ability to bounce back in the long run.
Opportunities on the Other Side
We will emerge on the other side of this crisis. But what exactly will that other side look like? Beyond our adaptation to an increasingly remote workforce, isolation may accelerate our transition to a cashless or nearly-cashless society, while the value of commercial real estate may decrease. As we reckon with the effects of the virus, we are likely to see increased government intervention and regulation, both on producers of essential items and perhaps with regards to data privacy. Whatever the outcome, technological innovation will continue to play a larger and larger role in the economy and play a starring role in the recovery.
A disproportionate number of category-creating, enduring companies are born and forged during economic downturns. Uber and Airbnb were born during the Great Recession; Facebook, Tesla, SpaceX, Amazon, and Google all cut their teeth during difficult times. This is not coincidental. A-talent is easier to attract and retain. Teams can take a longer-term orientation and focus on what truly matters. And the best entrepreneurs separate themselves in tumultuous times by solving a problem that is personal to them in a unique and durable way, adopting a “burn the ships” mentality and demonstrating grit to bounce back from inevitable setbacks.
As you keep your eye on changing needs, stay agile and ready to capitalize on strategic opportunities to strengthen your company. Prepare for acquisitions and mergers that can bolster your effectiveness. As the failures of businesses, both big and small, put human capital on the market, look for opportunities to invest in talented, open-minded individuals who are ready for a new collaboration.
With a calm approach and new rules of engagement rooted in candour and clarity, you can navigate this crisis and emerge a more dynamic, innovative team on the other side.