At Acumen, we are committed to standing with the poor, and the leaders of our portfolio companies share that commitment—even in the face of a crisis. But we also know that many companies are facing an existential crisis and that difficult choices lie ahead. We believe there is much to be learned from our own CEOs, as they lead with humility, thoughtfulness and compassion. With unbounded respect and admiration for these intrepid entrepreneurs on the front lines, we offer some thoughts and observations:
Pause and Assess
Before going into immediate triage mode, our CEOs and founders are benefiting from pausing and evaluating the implications of this extraordinary crisis on their business, markets and stakeholders. On a global level, health systems and economies are under assault and the conditions are ever-changing, but business leaders need to fully grasp the facts in order to respond as effectively as possible. In addition to evaluating country and region-level data, our leaders have found success in staying closely engaged with stakeholders on the ground. Kenya-based Coconut Holdings CEO Kyle Denning has been collaborating on critical decisions with his COO Nathan Gachugi, who is on the front-line managing facilities and working with their staff in the field. Denning says of the situation, “It’s critical for a CEO to not only pause and assess, but to leverage the capabilities and perspectives of their team in order to truly tackle this crisis.”
CEOs should create an emergency response team of trusted staff advisors who can stay on top of the facts, reach out to all stakeholders, identify best practices that have been developed by similarly situated companies, and craft an adaptive response and mitigation plan. By staying on top of an evolving situation and looking forward, unintended consequences can be avoided and the interests of all stakeholders can be optimized. These stakeholders include staff and board members, suppliers, customers, investors and lenders, and the broader community, who will all experience impacts on their health and financial security.
Remain Visible and Communicate
Our most effective CEOs are the ones who are visible and accessible to all their stakeholders. They share information candidly and authentically, understanding that this is a time for erring on the side of overcommunication. For instance, the team at Sierra Leone-based Easy Solar wrote a letter to their employees, customers and community to detail what they are doing to keep everyone safe. This includes providing all shops and offices with hand washing stations, increasing the frequency of regular scheduled cleanings across all facilities, encouraging all employees to follow precautionary health measures and providing a liberal work-from-home policy to allow for those who wish to self-quarantine.
Leaders should attune their messaging to three key audiences.
- Employees are looking to their leaders for accurate, up-to-date information regarding coronavirus and how their companies are responding. They are eager to be heard and understood and want timely information and context, especially as it pertains to their own health and safety. According to the Center for Creative Leadership, effective communication with a company’s staff reduces stress caused by uncertainty, provides tactical guidance, and demonstrates knowledge and a sense of empathy. CEOs have a responsibility to source their information carefully and responsibly, avoiding sources of information where the facts may be distorted, biased or shaped by a political agenda. Maintaining trust is paramount.
- Company boards, investors and lenders also need to hear from CEOs. They want transparent and frequent updates. Don’t hide the bad news. Messaging should be simple: These stakeholders want to know that the company is in good hands. It may very well be that for the company to weather the crisis, the board will need to approve additional capital raises and/or debt financings, and investors and lenders need to be prepared to respond if necessary.
- Smart CEOs are also communicating with customers who want to hear from company leaders. Customers want to know how they will be impacted. They want to know if and when they will lose access to important products and/or services. And they also want to be certain that they won’t somehow be exposed to coronavirus in the delivery of a company’s product or service.
Frequent, repetitious and simple communication ensures the delivery of a message, especially when that message includes what the company is doing about the crisis and how stakeholders can stay safe or get help. Overcommunicate. A bounded message of optimism will inspire others, even in the darkest of moments.
Care for Your Employees
Our CEOs are, not surprisingly, reporting that the health and safety of their employees is their top concern. Senior management should clearly understand national and local health guidelines and protocols, and implement them accordingly. Dr. Bruce Aylward, the senior advisor to the Director-General of the World Health Organization (WHO) said, “When you look to… Africa, for example, and parts of the Indian subcontinent you can see that [the spread of coronavirus is] just beginning. Even though they have very, very few cases, if you look carefully at that curve, it’s also in a phase of exponential growth.” CEOs around the world should understand what they are facing and what they are about to face. They should anticipate the problems and needs of their staff and prepare the right policies to address them.
Employees will have different needs based on their ages, experience-levels and personal situations, and they should be given an opportunity to express those concerns and needs. At a minimum, employees should receive up-to-date information on coronavirus risk factors and protective behaviors, and the personal protection equipment required to do their jobs safely. Since every organization is different, with access to different resources and facing different circumstances, no one response fits all.
Of course, employees aren’t only thinking about their health, they’re likely fearful for their jobs as well, or losing income while sick. This is the time to be as empathetic, as caring, and as fully transparent as possible, so that the employees are well positioned to make informed plans for themselves and their own families, no matter how financially or emotionally challenging those plans might have to be. We’re proud of the action taken by PEG Africa CEO Hugh Whalan. Whalan announced that Ghana-based PEG is setting up an emergency fund for employees that will allow advances on their pay so that employees can pay for unexpected needs. PEG is also offering employees extended sick leave “to accommodate general sickness that might arise from stress, as well as sickness from COVID-19.” Cutting costs in a crisis is understandable, and possibly the most responsible decision a CEO can make. But as we have seen from some of our leaders, the pain of cost-cutting can be shared across a diverse group of stakeholders.
Control What You Can
It’s unclear what lies ahead. We’ll have a clear picture only in retrospect. But with thoughtful planning, some of our CEOs have already taken hold of the reins and reestablished a certain amount of control. This has the co-benefit of reducing uncertainty for stakeholders, and in turn reduces fear and anxiety. These leaders have generally created some form of a mitigation plan. For example, CEO Jonathan Cedar of U.S.-based BioLite has forecasted various sales scenarios for the year and determined how to tighten operating costs accordingly. The key concepts in such a scenario analysis are the following:
- Cash Management Plan: Cash will be more precious than ever in the weeks and months ahead, and CEOs need to move quickly to assess cash positions and needs. They should review overall spending, with a focus on limiting non-essential expenditures and deprioritizing unnecessary investments. Cash flow forecasts should be revised and stress tested as often as the changing circumstances require, and revenue and cash should be tracked almost daily in order to monitor liquidity. Since most organizations will be cash-strapped, extending payables and accelerating receivables may be difficult, but worth considering. Leaders should be thinking about the reduction of their cash burn, negotiating where possible, for example, with lending institutions, landlords, suppliers and senior executives. Investors should be prepped if they will be needed for additional capital. Some impact investors are already collaborating to create emergency funds to assist their portfolio companies during the crisis and should be contacted for more information.
- Continuity of Operations: Plans should be made for staff to work remotely where possible. Understand the productivity consequences of working remotely and the incremental risks that stem from employees working from home (including data risks and communication failings). Plan to mitigate these risks. Continuity plans around the most critical personnel and team members should be considered in the event that they get sick.
- Business Continuity Plan: Plans should be made for backup vendors for IT, remote banking and critical supplies, inputs and services. The disruptions to services and supplies that are crucial to business may be larger and last longer than expected — think many months, not weeks. Shift resources to highest value use where possible (e.g., physical sales to online, longer-term relationships and business development). A plan should identify which parts of the business should be prioritized over others in order to maintain optimal operations.
We are humbled to witness the extraordinary leadership demonstrated by our CEOs during this crisis. By taking into account all stakeholders in developing their mitigation plans and in trying to plan for unexpected and unintended consequences, they are leading with values that make us proud. Our CEOs are finding creative ways to be part of a solution to the challenges this situation creates, generate revenue and minimize adverse impacts on customers and rural communities. We’re proud to be standing with our business leaders as we all work together through this crisis and carry a hard-edged hope into the months ahead.
Additional Resources
EY: COVID-19 and Pandemic Planning: How Companies Should Respond
Harvard Business Review: Lead Your Business Through the Coronavirus Crisis
Harvard Business Review: Special Coverage, Coronavirus: Leading and Working Through a Pandemic
Miller Center for Social Entrepreneurship: Crisis Management Resources
Sequoia Capital: Coronavirus: The Black Swan of 2020
Wharton: Coping with Coronavirus: Five Strategies to Mitigate Business Risks
