COVID-19: leadership and strategy in a time of crisis

COVID-19 RESOURCE HUB | Financier Worldwide

STRATEGY & LEADERSHIP

It is often said that in times of extreme peril the leaders we need will come to the fore. This is a comforting thought but suggests a reliance on a great deal of serendipity. The reality, however, is that leadership, and strong leadership at that, requires more than good luck.

In the business world, where the decisions taken by senior management can mean the difference between success and failure, the ability to lead is a much sought after commodity – a person or persons who can establish and share company values, develop and communicate its vision, determine its mission and formulate and implement strategy.

At present, we are in a time of crisis. The coronavirus (COVID-19) pandemic – which of course is first and foremost a human tragedy – is battering sectors and industries across the globe and businesses are depending on individuals who know how to transform uncertainty into tenacious thought, dejection into durability and, ultimately, stay strong during tough times.

Leadership is perhaps needed now more than ever, as the damage COVID-19 is inflicting on business is on a massive scale. As far as stock markets are concerned, global shares have taken a huge hit since the outbreak of the virus on 31 December 2019 – the FTSE, Dow Jones Industrial Average and the Nikkei have all plummeted. In terms of unemployment, figures have gone through the roof, with the US in particular seeing monstrously high rates of joblessness. The International Labour Organization (ILO) estimates that as many as 25 million people could become unemployed, with a loss of workers’ income of $3.4 trillion.

However, it is becoming clear that we may be underestimating the magnitude of the pandemic’s impact. Consequently, leaders need to make their presence especially felt.

Leaders need to identify and implement a strategy to ensure that their business is as well-placed as possible to emerge from the crisis as a viable entity when the recovery gets underway. They must also focus on the morale of their workforce – tackling issues such as working from home, social distancing, mental health and job security, among others.

Leadership means understanding the fundamentals of crisis management. A leader needs to have the ability to rally his or her team, project calm and empathy, take decisive action and, overall, communicate effectively.

“Decision making must be clearer and more concise in a crisis than in other situations,” said Hugo Bague, group executive of organisational resources at Rio Tinto during the Ebola 2015-16 crisis, in an interview with McKinsey & Co. “There also needs to be accountability, so that even when there are different people and different departments giving input, at the end of the day, there is a single decision maker. That needs to be clear. And the whole leadership team should maintain discipline in speaking as one around a decision.”

In addition to supporting their own business and staff, leaders need to track overarching efforts to fight the pandemic. According to McKinsey & Co’s analysis of the crisis and its implications for business leaders, there are five dynamics they need to watch in the days, weeks and months ahead. First, the efficacy of the health-system surge and how it is maintained over time. Second, the scaling of traditional public-health approaches. Third, the development of antibody testing and understanding of sero-prevalence (i.e., the number of persons in a population who test positive for a specific disease based on serology (blood) specimens). Fourth, the nature of immunity. Fifth, innovation.

In terms of strategy, although the human and economic costs of the COVID-19 crisis for businesses are enormous, and likely to be even bigger than of the 2008 financial crisis, according to Stephen Wunker, managing director of New Markets Advisors, there is one positive difference. While the financial crisis had an uneven and gradual trajectory, this crisis, he believes, should have four specific phases, each with its own distinctive uncertainties and business strategy imperatives.

The first phase, according to Mr Wunker, is awaiting the major impacts. As much of the economy rapidly shuts down to prevent the spread of infection, the effects of these measures are sharp and severe, but businesses and households use financial coping mechanisms to get by in the short-term.

The second phase is withstanding the initial impact. As sickness quickly mounts, businesses run out of money or struggle to operate due to illness, and households grapple with making basic ends meet even as some government funds arrive.

The third phase is returning to normalcy. As sickness ebbs either through medical progress or as people have the virus and much of the population develops immunity, economic activity starts to resume due to both growing confidence and sheer necessity.

Finally, the fourth phase is sorting out new industry dynamics. As both B2C and B2B behaviours see lasting change, the nature of competition for many companies shifts for years to come.

“To create strategy and a crisis management plan through the coronavirus, you will need to disaggregate the many uncertainties spinning around your enterprise,” says Mr Wunker. “The four phases provide one axis along which to parse out which uncertainties occur when. By putting these phases and uncertainty types into a matrix, you can then develop a plan to think through and respond to major strategic challenges.”

Ultimately, it must be remembered that tough times do not last. One day COVID-19 will be a memory, albeit one with a significant amount of tragedy attached. For the moment, leadership, and the strategies leaders deploy, can help businesses steady the ship, remain strong, and ensure they emerge stronger and more resilient at the other end of these most calamitous of times.

Fraser Tennant