Best Practices from China to Guide Companies Through the COVID-19 Crisis

In addition to analysing information emanating from China, we have also been scouring news, social media data and from research organisations (such as MIT Sloan) to better understand how COVID-19 has affected the Chinese economy.

What the data shows is that there are several steps that Chinese managers are successfully taking to mitigate the impact of the virus and its disruptions. There are also several areas where a lack of preparedness has led to less than desirable outcomes.

Business owners can learn a lot from how companies in China have been coping with COVID-19. Although the below mentioned lessons are a bit late now – it does highlight what businesses need to do in the future, specifically around business continuity planning.

These coping practices include having smart policies around:

·       remote work

·       anticipating 

·       mitigating operational roadblocks and

·       addressing the social impacts of this health emergency.

Develop an Infrastructure for Remote Work

Remote working has long been integral to maintaining normal operations during a crisis. Many Chinese companies began transitioning large portions of their non-manufacturing workforce to remote working after the end of the Chinese New Year, in late January. For employees, especially those unaccustomed to remote working, raised many questions around best practices of remote working as many employees raising concern about the obligation to “stand by 24 hours a day.”

Of course, many jobs, particularly those in manufacturing, cannot be transitioned to remote working. Only 33% of Chinese small and medium enterprises, which employ 80% of Chinese workers, were able to resume normal operations by the end of February.

Using the Chinese experience as a model, we believe there are steps companies can take to maximise the effectiveness of the remote work option during a crisis.

They include these four:

  • Allow your employees to work remotely – Companies that allow for remote working will have the necessary tacit knowledge, planning and infrastructure in place to quickly transition more operations if that becomes necessary.
  • Train your leaders – Data shows that employees’ biggest complaints about remote working are about managers who lack respect for normal working hours. Leaders need sensible rules about when they expect workers to be available and when they don’t.
  • Identify employees who are most crucial to maintaining business continuity – Do they have the tools to work effectively from home if they must? Ensure that they are prepared.
  • Develop a disaster scenario that incorporates remote working. How would your organisation operate if there was a quarantine that shut down geographic areas where you operate? Use techniques from scenario planning to generate ideas about how your company could pull together the capacity to resume operations in even a limited form.

The question must be asked – when last did your company undertake business continuity planning?

Be Ready for Operational Shocks

The struggles of many small and medium-sized enterprises (SMEs) in China that have largely been ignored by Western media. SMEs contribute up to 60% of China’s gross domestic product. The data shows that the lack of available operating funds is one of the most frequent concerns expressed online by Chinese SMEs.

The middle of a crisis is the worst time to be scrambling for the basics of operations, whether it’s finding cash to make salary payments or finding alternative suppliers because your regular source has gone cold.

If you believe your organization could find itself in troubled waters because of COVID-19, start the following now:

  • Have at least one to three months of cash on hand. This cushion is necessary to cover immediate expenses such as salary and debt payments. Do not solely rely on financial instruments or short-term credit to make up the difference.

  • Know what your options are for extending loans, terms, and other short-term obligations. Look this over now. Banks care that they can recoup the principal amount of the loan and during a crisis, borrowing more or changing the loan’s conditions is difficult. The SA government has relief programs or is providing other forms of targeted assistance as mentioned by the President.

  • Have an adequate buffer stock of crucial parts on hand. If you have not already done so, identify and establish relations with alternative suppliers that are less affected by the crisis. Developing supply chain resilience is a best practice in any condition. (many Chinese companies were completely unprepared for the need to find new suppliers.)

  • Try to get an understanding of how prepared key suppliers and other stakeholders are for an unexpected event. Will they be able to sustain their operations? The more knowledge you can gain in the early phases of this outbreak, the better prepared you can be when circumstances shift.

Become a Community Player

Charity is an important response to natural disasters such as COVID-19. In addition to simply being a good practice for ethical reasons, there are empirically established correlations between charitable activities and future financial performance, improved relations with government authorities, and reputational legitimacy. Companies that recognize the stress on social systems during medical emergencies are more likely to do better afterward than companies that do not. Corporate charity provided by local companies has a particularly strong and positive effect.

China’s largest private companies have taken the lead in providing outreach during these first few months of the crisis, and the reputational effects are apparent on traditional and social media.

When the COVID-19 epidemic comes to your town, you should be prepared to help. Here are three ideas drawn from the Chinese examples:

  • Target non-profits and community outreach organizations in your local area. Corporate generosity has a much larger impact when it is provided directly to a local community.

  • Encourage volunteering by your workforce. Employees who have the option to participate in corporate volunteer programs are more likely to participate repeatedly.

  • Let others know what you’ve done. Release a succinct external announcement when you make donation. Don’t boast: Provide only the most pertinent details, including the amount of funds committed, the key beneficiaries and recipients, and what you aim to achieve with your donation. Include a quote from your executive leadership team.

While the effects of COVID-19 on the global economy are only starting to be felt, there is a growing awareness in the scientific and business communities that companies need to be prepared to deal with epidemics in their own backyards.

Business owners must be prepared to accept that what we are now observing represents a new reality. Diseases and other forms of ecological disasters are very real global threats to operational continuity.

Source: “How Companies can respond to the Coronavirus” by Michael Hudebeck, Charlotta Siren, Dietmar Grichnik and Joakim Wincent – courtesy of MIT Sloan Review. 

Leave a Reply