Leadership through a crisis

The memories of the last economic crisis that the manufacturing industry faced in 2008 still seem relatively recent for many of us. But this situation is truly unprecedented – as those in the public eye are so fond of saying. And they’re right; suddenly Brexit, the 2008 crash and all the recessions that went before it seem like a rehearsal. This is the big one. And it’s something that is to a degree, beyond our control.

However, in business as in the health crisis we are all facing, good leadership is key. Just look around the world: which leaders do you trust, what qualities do they have and what strategies are they using?

Confidence not arrogance

In a crisis there are some areas you can influence and others that you cannot. First and foremost, it’s important to set the right tone and ethos in your organisation. If you display an aura of calm and confidence (not be to be confused with arrogance), your team will feel reassured and in safe hands. Maintaining that mindset enables you and others to make effective, practical decisions based on rational thinking, not knee-jerk responses driven by panic.

People also respect and trust honesty – and often know when they don’t get it. So, be honest with your staff. It may not be appropriate to share all the details of the business, but clear, truthful communication with staff and customers is critical at times of crisis.

Make sure staff know they matter

I was MD at my previous business during the 2008 recession. Like my current company, we manufactured parts for vehicles at a time when automotive manufacturing in the UK was not in a good way. As a result, our cashflow was non-existent. I told the staff this, but also explained that we had a viable survival plan in place. That although they were being laid off, this was temporary and that on returning to work all the furloughed employees would have the opportunity to make up the wages they had lost through overtime before any new staff were hired. They responded well to this honesty and trusted that we meant what we said. Staff loyalty is crucial, and they need to know that they play a part in any future plans.

At my current company we have had to furlough some staff but have ensured we stay in touch by making regular calls to our furloughed workers. This enables us to ensure that they are OK and to make sure they know they aren’t forgotten. It also reinforces the message that the company is still in business and has plans to continue manufacturing - and to grow - when we re-open.

Take the long-term view

It’s easy to be side-tracked by thinking short-term during a crisis – and of course it’s important to ensure you can pay salaries and suppliers. However, this shouldn’t come at the expense of your long-term goals for the company. This philosophy stood my business in good stead in the 2008 recession. We had put together a growth plan which we adapted but maintained when times got tougher. As a result, we opened up our first manufacturing sites overseas, and invested in staff, equipment and premises which allowed us to bring certain processes in-house - and ultimately to operate more efficiently.

In fact, times of crisis and recession can be useful in forcing manufacturers to look at their operations and work out ways that things can be done better or more cost-effectively. Having worked through this process in 2008 we identified an over exposure in our UK market and diversified into other areas. As a result of the strategies we put in place during the recession, the company experienced a period of sustained and extensive growth and by 2016 was successfully floated on the stock exchange.

Fast forward to March 2020 and like many manufacturers, we have premises and equipment standing idle. Having investigated our options, we are looking into the viability of making much-needed PPE and are also offering our site as a venue for manufacturing any other materials or products that could be useful at this time. This ensures we are keeping some elements of production going as well as contributing in a small way to help those on the frontline.

Prepare for both scenarios

Of course, no one knows how long this situation will go on for or what it’s longer term impact will be. The chancellor’s latest prediction is that the economy will shrink within the next two months but has potential for a rapid recovery. So, the possibility exists that the financial package that the government has put together could actually bring about an economic boom. Whichever scenario comes to pass, the most successful business leaders will prepare for both cases, so they have a structured plan to follow enabling them to be proactive and not just reactive to whatever the future brings.

Manage the cashflow

Cashflow is important to any business at any time. While a crisis forces us to take a fresh look at our businesses, managing cashflow can be a major headache. If you were well-informed about cashflow going into the crisis, this will make the task of managing cashflow easier. If you weren’t, now is the time to put that right. Make sure you gather all the information you need to provide a full and balanced picture of the company’s position including orders, financial information and projections. Build a comprehensive cashflow plan, spend time analysing it then break it! After that, work on how you can plug the gap. Ideally, you should have robust quarterly cashflows updated and investigated weekly with forward planning over a two or three year period to provide a clear vision of any potential problems.

Ask the experts

There are also still many organisations out there offering free support. In the past, I have found schemes like the Goldman Sachs 10,000 Small Businesses programme and the government backed GrowthAccelerator programme invaluable. At the moment, I’m following key organisations in industry such as the Society of Motor Manufacturers and Traders (SMMT) as well as taking part in a range of relevant webinars – many of them free. Now more than ever, it’s important to keep networking, making connections and expanding your knowledge.

Keep the sales pipeline open

And of course, don’t forget your customers. Keep communicating with them, as well as potential customers. We still have an open sales pipeline and are holding sales meetings via online platforms. There may be less of them ready to buy at the moment, but customers are still out there. So, as soon as we are able to re-open, we will have orders to fulfil. It’s been proven in previous recessions that the businesses who keep marketing and keep in touch with clients are the ones who emerge quicker and stronger from crisis. Ultimately, your message should be: ‘We are still here; ready and willing to help you in any way’.

People keep saying the world will be a different place when we finally emerge from this crisis. Maybe that’s true. Certainly, despite their best efforts, some businesses will sadly no longer be around. Good leadership can’t make the crisis go away – but it can help your organisation not just survive but emerge ready to take on the challenges of a different economy and a changed world.