People@Work

A viral test for leaders

KAMAL KARANTH | Updated on March 26, 2020 Published on March 26, 2020

How CEOS, CFOs and CHROs manage the Covid-19 crisis will reflect on performance during recovery

Even before the novel coronavirus effect showed on their balance sheets, many leaders acted. Indigo announced salary cuts, Tatas asserted they would pay even their temp employees during the period, the Marriott CEO posted a touching video warning employees of a bleak future. Many are still silent, but I am sure behind closed doors they are hustling to protect their businesses. What can key people in organisations do? Let’s start with the head honcho.

The CEO’s burden

Founders or CEOs would be furiously calling up their sales heads and CFOs, to get a reality check on pipeline, and the numbers. They would also have to listen to their communication advisors. CEOs would also have to connect to their boards, investors, and take them into confidence. In a nutshell, most CEOs may have different contexts, but their job would be to consult, make decisions, and communicate with all the stakeholders quickly. History would remember them for what they did and, most importantly, how. But, the leaders would likely be more worried about what.

As much as we would appreciate the leader’s transparency, speed, and clarity in communication, the impact on their team’s psyche and financial interests would be talked about for long.

From time to time, leaders have been judged by their decisions or the lack of it. This time around, the timing, the quality of decision making, and how they executed will be under further scrutiny as the unknowns are far too many.

CFO: Crucial role

The CFO and the finance team may well have the most crucial role in the current crisis. They have to build the best and worst-case financial scenarios. The whole organisation has to act on these scenarios, and hence their analysis has to be detailed. Here the finance team would rather err in favor of caution than being bullish. The critical inputs would mostly be around conservation and liquidity. Conservation could mean cutting costs in various ways, including headcounts, salaries, bonuses, increments, and travel, to state the obvious. Liquidity could mean focusing on smarter borrowing, improvising collections, and asking for discounts and maybe even delaying payments to their suppliers?

Would we deem a CFO crazy if he or she advises the board to budget a six months contingency fund for situations like this and ensure continuity for employees? Can it be treated like a Business Continuity Plan, which organisations are already used to. If not anything else, this Business Contingency Fund would undoubtedly reduce the damage to the overall reputation and the brand value of the enterprise as well as prevent psychological scars on employees who bear the brunt of these downturns!

CSO: New tests

The sales head already battling slowdown blues now faces an even bigger challenge. In difficult times, sales cycles get longer as customers tend to delay new decisions, and many even go back on their existing commitments. Covid-19 has put an additional burden on sales by preventing face-to-face meetings. Sales deals in most sectors are signed after personal meetings with customers. So getting used to the new norm and signing contracts will take longer.

Nevertheless, the sales heads have to brave the unique situation and keep the morale of their teams high. They say that sales folks are eternal optimists, but Covid-19 could put their hopeful spirits to a new test.

CHROs: People worries

HR folks are back again in the familiar territory of the global financial meltdown of 2008. If the lockdown continues, hiring will be on hold, training budgets will have to be slashed. However, the most critical action they would be dreading is layoffs. In some sectors, these may become inevitable. The initial reactions of benevolent organisations have been to hold on to their people. But if there is further softening of demand, HR will have to align with the new reality coming out of CFO’s office. How HR goes about these separations would reflect on the value systems of the organisation and impact its employer branding.

Context is King

Critics may argue that enterprises do not uniformly reward their employees during windfall profits even as they promptly impose salary cuts during tough times.

But every CEO or entrepreneur will act based on his or her context, Apple has six years of cash flow in its reserves. Hence, how it acts may be completely different to Boeing which drew out its entire $13-billion credit line last week.

How Honeywell handled the recession when it chose work sharing instead of layoffs has become a case study. Honeywell CEO Dave Cote said, “I’ve been a leader during three recessions and  I’ve never heard a management team talk about how the choices they make during a downturn will affect performance during recovery.”

There will be a recovery and we need to be prepared for it. That pretty much sums up the approach that enterprises should take.

But benevolence and business realities are difficult to balance. When push comes to shove, benevolence may have to wait.

 

 

Kamal Karanth is co-founder of X-pheno, a specialist staffing firm

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Published on March 26, 2020
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