The COVID-19 pandemic has exposed deep cracks in how corporations around the world operate. It has cast doubts on estimation models used by finance teams and raised concerns about how businesses react to crises. Speaking to Chris Wheeler, VP Partnerships at Prevedere, former Big-4 Partner in Strategic Transformation, Patrick Slattery, talked about how the pandemic threatens to erode trust between businesses and their clients. To overcome these problems and more, companies need to establish a framework that is resilient enough to not only withstand future troubles but one which will allow the businesses “to thrive in the face of adversity or challenges.”
Effects of COVID-19 on Business Organizations
Effects of the COVID-19 pandemic on businesses include a reduction in in-person meetings across the board. Companies have had to redraw their strategies in the wake of business projections being rendered ineffective.
Work from Anywhere
Slattery, who currently teaches in New York at Fordham University’s Graduate Arts and Sciences, acknowledges that remote work is not new to many businesses. “Most organizations were set up to support working remotely, but not the volume of remote work that was required when most of the workforce was working from home,” he says. In addition to the number of remote workers, these businesses have to contend with environmental issues as well.
He explains, “…if you were in retail, or if you were interacting with customers or other people, you needed to change the work environment to protect people, to keep them safe.” Social distancing protocols designed to keep people safe meant businesses needed to adopt new strategies to serve their customers.
More importantly, remote workers have to improvise a lot while executing their tasks. The control and command that existed in the traditional office are disappearing. Managers now have to find new ways to motivate their staff. Pre-existing business models and operating procedures are becoming challenging to implement.
Redrawing the Business Strategy
Another significant impact of the COVID-19 pandemic is how it affected projections that businesses had drawn up. The pandemic hit around the time of the year when companies were drawing up budgets and setting targets for the calendar year. “For folks who are doing simple trend analysis, linear trend analysis of prior actuals, those prior actuals lost meaning,” he added.
The overall hope for such businesses was that the pandemic would eventually end so that normalcy would return. They expected to chalk this up as a blip in performance that would even out eventually. But as Patrick mentioned, the coronavirus pandemic’s impact showed evidence of snowballing into the next year, at least. There is no way to “forecast the current year; let alone budget for the next year.”
Erosion of Trust in Business
Trust is the lubricant that keeps the business machinery moving. One way clients maintain trust in business is via in-person meetings. The less in-person meetings a client has with a company, the less confidence builds between the two. And thanks to the pandemic, this trust is becoming tenuous.
The dilemma is not limited to businesses and their clients alone. Even within an organization, trust builds up where one person can literally lean on the other in executing a task. With fewer interactions, the friendships that exist between coworkers could frizzle out. And the effect goes further than just in-house relationships.
Industry-level relationships are one of the most important ways by which managers gauge trends and adopt best practices. Cut down industry events, and there develops a lag between identifying innovations and taking advantage of such.
Beyond trust, learning-on-the-job can become difficult for young graduates if they work from a single room apartment they share with family. The guidance that would have come from supervisors and managers significantly reduces within a virtual world. Equally important in this new world is the redefinition of work-life balance.
Building Resilience and Rethinking the Model
Patrick mentions how the pandemic has exposed business executives to the rudimentary state of their tools and software. Financial executives especially realize that their estimation models are not as sophisticated as they should have been.
The realization seems to have offered organizations a reset button, however. What remains for senior executives and middle-level managers is learning how to take advantage of the situation to ensure they build the right business culture and employ the right kind of talent to help them navigate and avoid future crises.
Building the Right Culture
The culture that organizations cultivate can affect how effective they are at dealing with crises. For starters, it is important that an organization has the right tools to capture early warning signals of future problems. That means businesses would have to build their capacities to predict future hazards and accept that they exist. Living in denial, Patrick says, is one factor that reduces an organization’s ability to plan and to deal with the problem. The second is a lack of effective communication.
For a company to take the right steps towards mitigating a crisis, it has to be able to communicate effectively with the personnel tasked with overcoming said struggles. Thus, it is not enough to predict hazards before they occur; an effective communication strategy is essential to send the right directives to the right people to curb the devastating effects they bring.
Resilience is Growth in Crisis Time
Resilience is not just about resisting one crisis after another. Doing that leaves your organization in a reactive mode. Resilience is the ability to thrive even in the face of adversity.
Patrick explains this with how a finance executive reacts in the face of constrained revenue. When every organization in your industry is losing money, it is not enough to stop the leakage. A finance executive imbibed with the right culture sees the opportunity to increase a company’s market share. The executive identifies business moves that would help the organization stem the loss of revenue while expanding at the same time. Resilience is guiding your business to growth even when every other organization is facing tremendous challenges.
The COVID-19 pandemic has offered businesses around the world a chance to examine their existing operating procedures. While remote work has seen productivity increase in most cases, it is still incumbent on companies to develop the right culture that prioritizes effective communication in the wake of another crisis. Most importantly, businesses need to nurture young talents who will be able to sift through the overload of information to find the truths that move the company forward.
Navigate What’s Next with Economic Scenario Planning
The COVID-19 crisis has given rise to a world of economic uncertainty, with uneven effects across regions and industries. As we head into the 2021 planning cycle, every business wants to know How will the pandemic impact next year’s numbers?
Prevedere’s Economic Scenario Planning solution helps companies navigate these tumultuous times. The solution projects future business outcomes for three plausible macroeconomic scenarios under COVID-19. Companies can use these insights to sharpen 2021 forecasts and plans, improve shareholder guidance, and stay on top of the pandemic’s evolving impact.