Courageous Minds

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COURAGE IN TIMES OF CRISIS

On May 29, 2004, there was a terrorist attack on the Khobar compound in KSA. At that time, I was the CFO of Procter & Gamble’s Arabian Peninsula (KSA, UAE, Oman, Bahrain, Qatar, Yemen, and Kuwait) operations based in Jeddah. The news was coming in about the attack, and the company was checking on its employees. I received a call from one of my team members who was living in the unfortunate compound, and he told me that he and his family were taking shelter in a wardrobe and could hear the movement of people close to his villa. I never felt so helpless as there was not much I could do from 1,400 kilometers away. I told him to stay calm and put his phone on silent so no one could find his safe location. The government forces were active and did a great job of protecting lives. They enclosed the area, risked their lives to save civilians, and successfully cleared the compound of the attackers. The P&G organization was ready with plans to reach, help and support our people once the situation was under the control of the forces. It was a crisis that is hard to forget.

Thank God all P&G employees were safe. Unfortunately, 22 foreigners living in the compound lost their lives. The response of P&G was outstanding, a hallmark of P&G in caring for its people. Post the clearing of the compound; teams reached out to help our employees in every way possible. A few of our F&A members from Jeddah, including myself, went to Dhahran to be with the team and continued to support the business and people. I realized that in these times, the best we can do is to be with the people, enable ex-pats to return to their homes to recover from the trauma, and show by action that we care for all our people.
Sometimes adversity brings out the best in people. In those days, despite economic challenges behind low oil prices, security threats, and regional instability, the business grew double-digit top and the bottom line behind the resolve of the able local organization along with a few ex-pats who were there as they loved the country, region, and its people. In a crisis, people succumb to the pressure or rise stronger to emerge as shining stars. The choice is generally of individuals of how they deal with a situation.

In my career of 30+ years, I have seen many cycles of economic downturns and global crises. Examples include the early 1990’s recession, black Wednesday (1992), the Asian financial crisis (1997), the Russian financial crisis (1998), the 2001 9/11 attacks, the financial crisis of 2007-08, the Turkish currency and debt crisis (2018), and COVID 19 (2019-present) to name a few. I see the crisis as a natural way of attrition of inefficient companies. The problem is that good people get affected by the greed of a few – subprime crisis.

One thing is for sure the current global political uncertainty, economic turmoil, supply crisis posts COVID-19 leading to inflation, interest rates hike to bring it down to normal levels, and the subsequent threat of a recession are not the final frontiers of crisis. Once we get out of the current crisis, there will be something else. There is no perfect playing field or condition. It’s like driving a car. You cannot wait until all the lights are green to start your journey. To win, the best leaders accept the crisis as the new norm and prepare their businesses to thrive in challenges by developing offerings with a competitive advantage, a motivated organization, and executing the integrated set of choices flawlessly to create a sustainable moat. In addition, these leaders ensure immaculate financial management that gives significant liquidity, keep overheads low to achieve cost leadership in their segment through asset utilization and maintaining a robust supply chain, and, most importantly, build an organization of leaders with a courageous minds.

1. Courageous Mind. Courage is a discerning mindset that seeks possibilities by muting the noises on a crescendo in crisis, looks at problems as situations needing solutions, and continuously expands the frame of thinking to solve bigger challenges for optimal returns. In a crisis, more than ever, we need leaders with courageous minds as their decisions decide how the company will fare the crisis.

Focusing on winning strategies, excellent systems, processes, and binary measurements is essential. All great and right things. However, one aspect which is as important, or more, is the mental health and fitness of the team in difficult times. If the team is stressed and worried for real or perceived reasons, it would be difficult for them to operate in the zone of peak performance for outstanding ex*****on of the strategies to win and create superior value for the shareholders. Interestingly, in crisis management, the first reaction is to create more work and complexity by asking more questions and analysis, not sharing enough information, and allowing rumours to culminate in the crisis about its consequences.

I have had the privilege of working with many courageous minds in my career. Some of them were simply brilliant; they were like a living vortex of energy, capturing the people's imagination about the vision and bringing out the superwoman/men in them. Leaders who refused to compromise on quality for short-term profits did the right thing for the consumers, customers, and employees despite it costing millions in the short-term, spent time thinking and seeking inputs from different levels of the organization, and took the pressure on themselves, kept the noise away from the organization and cheered them to execute the well thought through plans flawlessly. The results were magical every time. May it then be Arabian Peninsula, Europe, the US, or Asia, the playing field does not matter. What matters is the ability to have a leader and organization that has a courageous mind.

The best leaders don't wait to rise in shining armor in crisis. Instead, they regularly do business health checks, including the connection of the business model and its activities with their mission and an assessment of competitiveness in the market. They do scenario planning to smoothen any crisis that comes along. They know that despite all the planning, there will occasionally be out-of-the-box crises, and they will have to be dealt with calmly when they arrive. When the crisis arrives, they make sure they stay close to the organization, speak transparently to quell rumours, simplify the processes, avoid complexity, and ask their teams what they can do to simplify the work or make it easier for them to manage work and personal commitments to lower stress. They know that a committed team with a clutter-free mind is an asset for winning. By focusing on their team’s mental health, they prevent problems from becoming an Armageddon crisis.

In life, those who are calm, well prepared, invest in themselves and are always fit to learn and grow do better than those who are ill-prepared, brooding, anxious, hoping for things to happen, and giving every possible reason for the decline—missing the most important reason for failure: themselves. Suppose things are not working; change yourself and what needs to be adjusted in the business. Remember comfort zone is the biggest enemy of progress.

2. Cash is King. The term is used to signify that cash is better than all other assets, especially during a crisis. Liquidity helps to pay the interest, supplier commitments, debt repayments, etc. The inability to pay the liabilities led to companies filing for bankruptcy; examples include, Six Flags, which raked up $2.7 billion in debt and could not pay. In addition, General Motors filed for bankruptcy post the 2008 financial crisis and was rescued by the government. The list of companies that filed for bankruptcy during COVID-19 is long, but some notable ones include J. Crew, Dean, Deluca, Hertz, Neiman Marcus, J.C. Penny, and GNC.
Leverage is a two-edged sword and should be used in a well-thought-through manner. In the stock market, people leverage themselves (I have even heard 10 X) for a higher return, especially when borrowing costs are low. However, a fall in the market has a leveraged impact on the losses as well. Therefore, the leader should focus on liquidity during a crisis through excellent cash management. Examples include inventory reductions, faster collections by offering discounts, working with suppliers to delay their payments (even with interest), slowing, or stopping capital-intensive projects, and reducing or eliminating the perks (depending on the gravity of the situation). However, companies should be astute to avoid choking innovation, which is the lifeblood of any business. This takes me to the next point.

3. Crank up innovation. In its July 17, 2020, article, “Innovation in a crisis,” McKinsey and Company shares data that companies that invest in innovation did better by 10% during the crisis, and post the crisis, such companies did 30% better than the market. It’s a compelling case for innovation and understandable as we can see that COVID-19 has changed the rules of playing, requiring a change of go-to-market (increased digital engagements), products and service offerings (direct to consumers instead of restaurants in food service), rise in digital behaviour (use of videoconferencing, telemedicine, remote working) and importance of mental health (79% people think it is imperative).
Net, the priority should be to support innovation, crisis or no crisis, as it is the lifeblood of business growth.

4. Crisis is an opportunity to get fit for growth. Crisis brings a wake-up call by exposing the inefficiencies and slackness in a business or personal life. For example, a financial crisis affects unsuspecting investors in the stock market who invest on hearsay. They discover painfully that investing requires knowledge and strategy just like anything else. Likewise, companies may recognize that their technologies, go-to-market, or business model needs to be adjusted or they have become too thinly spread with a heavy organization structure and, in the process, have lost their competitive advantage and find themselves in a difficult situation.

Many companies have thrived in crisis. For example, J.D. Com and Ali Baba emerged as global powerhouses post the SARS pandemic of 2003. Likewise, Starbucks and American Express turned to digital operations during the 2008–2009 financial crisis, dramatically raising shareholder value.
Leading is not about risk-taking; the best leaders create high value with low risk. Positioning for a competitive advantage, understanding the market, consumers, and customers, unwavering focus on the business model, winning strategies, and flawless ex*****on can enable a high return with low risk. Conversely, stretching the forecast with no reserves, spreading the organization thin, and making too many changes results in inefficient use of limited resources leading to suboptimal results.
The best leaders are constantly reviewing their company’s health by looking at the financial metrics and objectively assessing if there are changes in the market dynamics. How can they affect the competitive landscape? if the company is maintaining its competitive advantage? is it competitive on cost or differentiation? what initiatives are needed to prepare for the coming change and can be accentuated by a crisis?

5. Cultivate a Culture of Startup. In startups, there is a big idea, and the entire organization works to bring it to life and put it ahead of everything else. The same culture is also needed in bigger companies so they can organize around the big ideas and value pools and focus the resources on bringing the ideas to market in the best way through their massive ex*****on machinery. The problem is when bigger companies get too consumed with the processes, systems, and functional silos instead of keeping the big idea or their purpose at the center of everything. The systems, processes, and activities all support the ex*****on of the big idea. By creating a culture of startups, you value how every resource is used and if it serves the big ideas to make them bigger. Companies with a startup culture manage the crisis well, using short-term pessimism to prepare themselves while maintaining long-term optimism.

6. Crisis Management. Crisis can be different, and not all are global or economic. Some are specific to a company, and many companies have a good crisis management strategy to deal with such events. Crisis Management is a corporate strategy that aims to help organizations deal with a negative event. A negative event can be anything from a small PR crisis on Twitter to an incident involving serious injury or death. Managing a crisis involves developing a plan and coordinating resources to address the needs of the affected parties while also repairing the brand’s reputation.

Let’s look at an example of good crisis management shared on Smartsheet website. In April 2017, Pepsi launched a new ad campaign with a commercial starring Kendall Jenner. Over the next 48 hours, the “short film” received nearly 1.6 million views on YouTube. The world was treated to Jenner leaving a modeling gig to “join the conversation,” which she and her fellow marchers seem to “win” after she hands a police officer a Pepsi. The backlash was immediate and fierce, but in Pepsi’s defense, so was its corporate crisis management. The response of Pepsi was that it initially released a statement defending its campaign by saying, “This is a global ad that reflects people from different walks of life coming together in a spirit of harmony, and we think that’s an important message to convey.” However, less than 24 hours later, the soda company pulled the ad and paused the campaign entirely. A second statement followed: “Pepsi was trying to project a global message of unity, peace, and understanding. Clearly, we missed the mark, and we apologize.” The response was heralded for its speed and straightforward nature, and Pepsi was continuing post-crisis successfully.

Conclusion

The world is constantly changing, and COVID-19 has expedited the change. Companies that were not ready for the change are struggling to adjust, which is an existential crisis. Change is the norm, and change is happening faster than ever before as the world is interconnected. As a result, there is a need to revisit business models and strategies, and organizations have to develop leaders with courageous minds. Leaders with a flexible frame of thinking to anticipate change, keep the organization agile and find new possibilities for growth in the changing operating dynamics of the world. A crisis for some is an opportunity for others - those who are nimble and prepared. Preparedness and agility are the keys to preventing and coping with a crisis.

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