The current crisis is unprecedented. And for retailers the sense of helplessness also has no comparison. However, crises of an unprecedented nature have been stalking retail since 2008. It’s time to break out the crisis chops and show some leadership. According to PwC’s most recent CEO survey, 54 of respondents say the COVID-19 outbreak has the potential for “significant” impact to their business operations. The coronavirus crisis isn’t limited to retail impact, but with business slowing to a complete halt at brick-and-mortar locations, leaders in the business can still act with purpose and proper messaging.
A particularly effective voice in this crisis comes from Harry Kraemer, from an interview he gave last week to Northwestern University's Kellogg School of Management. A former chairman and CEO of the $12 billion global healthcare company Baxter International, Kraemer is a clinical professor of leadership at Kellogg. He has led through many healthcare crises and has been offering boards and management teams a calm way forward.
“Picture your absolute worst nightmare,” he said. For him, it would be learning that a member of his family had become critically ill with the coronavirus; for others, it might be something quite different. Regardless, the way forward is clear: “I’m going to do the right thing, and with a lot of people’s help, I’ll do the best I can do,” he said. “I try to repeat this over and over again. Worry, fear, anxiety, pressure, and stress can be significantly reduced.”
He also advices leaders to tell people what they know — and what they don’t know. Without this level of communication, Kraemer said, “you’re not giving the people an understanding of what you’re doing and why, so it looks like you’re just jerking everything around and you lose all credibility. And that lack of trust creates chaos. [People] will start to think, ‘Either I’m being lied to, or the people in charge are idiots.’”
Interestingly enough one of the classic crisis management entries in the canon comes from a paper written by McKinsey analysts in June 2000 — before the 9/11 attacks and the financial crisis. It lists four levels of situation analysis to measure a crisis from Level One, where there is a clear view of the future, to Level Four, where a company cannot envision future outcomes. We’re in Level Four.
“Situation analysis at level four is highly qualitative,” the paper points out. “Still, it is critical to avoid the urge to throw up your hands and act purely on instinct. Instead, managers need to catalog systematically what they know and what it is possible to know. Even if it is impossible to develop a meaningful set of probable, or even possible, outcomes, managers can gain a valuable strategic perspective. Usually, they can identify at least a subset of the variables determining how the market will evolve over time.”
The paper recommends executives study how other markets developed. In this case, China presents the only possible comparison. By looking at strategies employed in that country, companies can get a clue as to how the market may evolve. In China, as a recent Harvard Business Review piece noted, companies at this point seem to have remained in business by shifting resources and keeping employees informed and calm.
“In a crisis, leaders must connect with, motivate, and inspire others, and show genuine compassion,” said Korn Ferry CEO Gary Burnison, writing in CFO. “In the military, for example, leaders put the safety and well-being of others before themselves. I’ve met a number of military leaders who led during periods of conflict and voluntarily told me, ‘I’ve never lost a soldier.’ This reveals a deep mindset of humility and accountability, rather than hubris and bravado. There’s nothing like a crisis or a complex problem to accelerate learning. This is learning agility to the ‘Nth’ degree — applying past lessons to new and unfamiliar situations. It really is knowing what to do when you don’t know what to do.”
Above all, be transparent. “Instead of forcing your employees to second-guess what might be in store for them, be utterly clear with them about the financial health of your firm and what goals you will prioritize” advised a March 20 report in Harvard Business Review. “These goals will not be the same for every company, and you shouldn’t communicate empty statements you don’t believe in, such as ‘we put our employees first.’ These statements can be confusing and even counterproductive when people are worried about their jobs. It’s better for you to be specific. For example, if your goal is to save jobs while meeting your bank covenants, say that. If it is to make a series of changes swiftly to shore up job security, clarify that you are prioritizing that decision over other, slower changes.”