Our fifth Leadership Speaker Series event featured a presentation and open Q&A session with Sanjay N. Bharwani & Anita Widjaja, CEO & Co-CEO of Bester & Co and Lily Surya & Henny Purnamawati, Partners of Egon Zehnder Indonesia, along with participation from Roderick Purwana, Managing Partner of SMDV, and Pandu Sjahrir, Founding Partner of ACV & Managing Partner of Indies Capital.
The goal of this session was to share feedback and advice to startups on how to promote agility, manage headcount, and demonstrate effective leadership during the COVID-19 crisis.
Here are our key takeaways from the session:
The COVID-19 crisis has led to businesses undertaking layoffs and, in extreme cases, permanently shutting down. Many leaders are struggling to mitigate the impact of the pandemic, as demonstrated by the large-scale layoffs and liquidations. in global markets after just a matter of weeks. Although many companies have made attempts to reduce their headcount costs through unpaid leave and other incentives, some companies have resorted to undertaking layoffs for business longevity and sustainability.
This is an opportunity for Founders to prove that your organisation can be agile. Businesses today should make the most of their operations and find new ways to be creative. Startups could consider making changes in organisational structure, negotiating more favourable terms with suppliers, exploring new revenue streams, entertaining M&A opportunities, and more, in order to achieve flexibility and agility.
There are three main phases of crisis management – managing the crisis, surviving the crisis and building for the future. First, businesses must manage the crisis (e.g. protecting employees, implement new SOP) and explore strategies for liquidity management to survive (e.g. cost reductions). Then, focus should be on building for the future through restructuring and exploring new ideas, markets, and strategies. Entrepreneurs should remain resilient and maintain cost discipline, but also monitor market conditions to adjust scenario analysis and continue to place emphasis on the future.
During a crisis, leadership and empathy is essential to strengthen culture and maintaining positive morale. Just as a pilot would focus on navigating turbulence and look for safe landing, entrepreneurs need to focus on how to manage the short-term challenges for steadiness, and then focus on what’s next in growing the business.
Crisis management typically involves changing habits as well as conserving cash to weather the storm. On a weekly basis, businesses should monitor how they are changing both external and internal processes, as well explore new ideas. The focus areas should include resolving short-term problems, making decisions quickly, communicating with team members, providing early support and maintaining team morale.
The framework below will help guide your thinking in crisis management:
Layoffs are never easy. Airbnb’s CEO Brian Chesky demonstrates strong empathy, gratitude and clarity in communicating the bad news, which is a testament to effective leadership. Chesky focused on expressing gratitude, ensuring employees feel valued whilst emphasizing that their departure is not their fault. Refer to the principals below for further support on managing layoffs:
Stay focused on the future by transforming processes. Remember that this crisis is a process that you need to overcome, but also presents an opportunity to engage better with employees, build stronger bonds and improve morale. Touchbase with your team more often and encourage team members to interact in new ways to share ideas and concerns. Find new ways to connect with existing stakeholders, such as customers and vendors.
The only way to survive is to become agile. Crisis is out of our control, but how we transform and change in light of it, is the ultimate challenge. Netflix imbeds flexibility and agility in their culture, which helped them tweak its offering to what it is today, surviving crisis in the past over the last 18 years, and becoming a household name. Crisis can provide impetus and inspiration for defining new business models or a new way of delivering value to your customers.
Here are some questions from our audience to our speakers and Q&A participants:
1. Some businesses are navigating the crisis relatively better than others. Do you have any inputs to young tech start-ups on how they could manage the crisis as they continue to operate their businesses?
For early stage companies, the immediate concern is around business sustainability. Could you continue the business in its current state? If not, it’s time to focus on cash reservation by making changes in costs, to reflect a stronger runway. The goal is to first steady yourself (like a pilot would make attempts to steady the plane during turbulence) quickly and decisively and then move on to the next steps of changing internal and external processes to cut down on any other inefficiencies.
When you focus on building an agile mindset as a leader, you’ll get even better at making quick decisions and anticipating changes that are required to mitigate the impact of a crisis.
2. For companies do not have sufficient cash to pay for mandatory exit packages to employees, what is the solution?
In Indonesia, exit packages are expensive, as a result of current regulations. For some companies, paying 5x of current salary will hurt the company’s bottom line drastically. Companies could potentially explore giving unpaid leave, reducing salaries and incentivizing through ESOP, compensate in other creative ways such as health benefits or insurance, or even voluntary leave.
The key strategy is performance negotiation & influencing, to perform creative and empathetic communication to employees and intensively build an urgency to support the company during survival mode.
3. What’s the view on the “new normal”? Are you expecting that companies will continue to work from offices, or have their employees all work from home indefinitely (as implemented by Twitter)?
The work from home (WFH) initiative has made businesses all over the world realise that employees do not need to always be physically present in their workplaces in order to effectively do their job. We are forecasting more of a hybrid scenario, where employees could both WFH and work in offices with their teams.
What could potentially happen in the mid-term is a rotation of employees, allowing people to work from home for a number of days a week, and communicate and work remotely for the rest of the week. This would help companies cut real estate costs through exploring flexible rental fees or partnering with co-working spaces.
In light of this, there is no doubt that Indonesia has been pushed to embrace digital. For example, the banking sector has seen roughly a 30% decline in customers going to bank branches. Through this, banks now have the opportunity to digitize, automate and simplify banking services, as well as reduce real-estate and staff costs to maintain branches.
Although businesses today have to prepare to go digital, the human factor is still essential for tasks that involve brainstorming and team-work. While we anticipate more flexibility in the workplaces and appreciation for remote working, we expect that the human interaction will still be required to build effective businesses.
Here are some additional questions from our audience that we unfortunately didn’t have time to respond to during the session however we’d like to share our responses with you now:
1. You presented the case of AirBnB and Netflix for their handling of crisis and agility. Do you have local (Indonesia or SEA) cases?
Yes, currently we are helping Manufacturing, Pharma and Financial Services companies that are trying to survive due to massive revenue reduction, long delayed customer payments and high customer churn. Thus, they have to manage their operational cost through creative solutions. Their board is now monitoring the company & people performance intensively during this time, on a weekly basis.
2. How would you suggest handling resistant employees?
The key here is to negotiate intensively, linking company performance to individual performance to ensure that enables the company to perform reward reductions. The employee will have to accept difficult conditions, as it will then also be a function of their performance. This is under the assumption that the company has a People Policy that includes performance-based rewards.
3. To what extent do you recommend sharing the extent and nature of the negative impact of COVID-19 on the business to employees? Is it better to be provide early warnings, or formalise communications from leadership until an event occurs, such as a salary reduction or layoff?
We definitely would recommend that it would be better to communicate the impact of COVID-19 on your business earlier, in order to set the expectations for the next couple of months for your organisation and employees. You could use published news to support your message. Communicating the company’s position early and effectively will put everyone on the same page and in alignment.
4. Remote working removes the ability to have signature on documents in real-time (which would typically allow for quick decisions and execution). Can you suggest solutions to this?
Based on our experience with clients, e-documents are still utilised, as long as there has been intensive communication through e-meetings or phone calls, prior to the document procedure. The key success factor here is to carry out consistent negotiation through intensive communication to influence well-scripted negotiation. Our clients faced these issues too, but what helped them become successful in delivering messages is consistent communication.
5. How do you recommended managing impact on decreasing employee morale due to a layoff event?
Layoffs will almost always negatively impact team morale. However, management accountability and attitude are essential to manage situations like this. Having clear and transparent communications is key to helping improve that well, as well as consistent engagement to continuously support employees if any concerns arise. Remind your employees that it’s what the organisation had to do in order to survive and is no fault of their own.