Navigating the crisis: balancing prudence and boldness

June 3rd, 2020   •   no comments   

Learning from one inspiring example of how to navigate the current crisis.

What can we learn from the various ways companies navigate the covid-19 pandemic and the tremendous challenges that result from this crisis? Companies have chosen very different approaches, from “hunker down and wait for dawn” to “be bold and seek out the opportunities”. The contrasting approaches provide valuable insights. This article extracts lessons from one inspiring case study. [Reading time: 4-5 min]

 

On May 6th, 2020, Norwegian Cruise Line Holdings warned that there is “substantial doubt” about its ability to continue as a “going concern”*. The cruise industry has, of course, been hit extremely hard by the covid-19 pandemic, with revenue rapidly dropping to zero. Adding insult to injury, the industry has been hit with substantial costs associated with repatriating crew who were stuck on ships all over the world – severely constrained by travel restrictions.

 

While all companies in the travel and transportation and the hospitality industries have been adversely affected, some leaders have demonstrated great courage, foresight and optimism in their approach. HospitalityCo, a global company in the hospitality industry, took an inspiring approach that may hold lessons for others.

 

When the crisis arose and contagion started to spread around the world, a key topic of discussion in the C-suite was: “Where is the opportunity?” While not perfect, the approach chosen by leadership was balanced, yet bold. Rapidly HospitalityCo’s top team agreed on a five-pronged approach:

  1. Reduce spending and preserve cash – where this causes little harm to the company
  2. Establish new revenue streams – building on existing assets and capabilities
  3. Strengthen individual leadership capabilities
  4. Strengthen collective leadership capacity
  5. Strengthen the organization in preparation for the rebound.

 

1: Preserve cash based on discipline and clear principles

To increase flexibility, the leadership team scrutinized expenditures and cut costs where possible – without damaging the brand or the reputation of the company. In some cases, eliminating waste was simple. Upon careful investigation a number of expenditures were deemed mere “nice to have” and were cut. Eliminating bonuses and reducing pay for executives was also relatively straight-forward. On other fronts the decisions were harder. Furloughing people required careful deliberation. But with a disciplined, principles-based approach the top team succeeded in markedly cutting costs, thereby providing a longer period before financial distress might set in, and providing freedom to pursue new opportunities.

 

2: Establish new revenue streams by leveraging existing assets

The complement to cost cutting was, naturally, the quest for new revenue streams. Leveraging its assets, including a strong brand, a loyal customer base, a great network in the industry and loads of creativity, the company brainstormed new revenue generating opportunities. In this work there were ‘no bad ideas’ in the early days. And with an encouraging atmosphere, employees at many levels pitched in with their ideas. A diligent process of vetting, filtering and prioritizing followed, and several of these ideas are now being implemented. They will not restore revenue to its pre-crisis level, but new offerings will keep customers engaged and will – again – extend the runway before any discussion about the ‘going concern’ assumption arises.

 

3: Strengthen individual leadership capabilities

The two sets of actions touched on above are classical. The leadership of HospitalityCo went beyond this and launched three additional initiatives that would strengthen the organization and build a robust platform for post-crisis success. The first of these focused on individual leaders. Each senior leader was given a leadership assessment and was invited – on the back of the insights from the assessment – to articulate the shifts they wanted to bring about in their own mindsets and behaviors. Leaders were provided with a personal coach to help them interpret the assessment, articulate bold shifts and work on making these shifts reality. The leaders were struck by the strategic approach taken by the top team. This investment in individual capability building in the midst of the pandemic was highly inspiring to the team, and they engaged with gusto.

 

4: Strengthen collective leadership capacity

In addition to strengthening individual leadership capabilities, HospitalityCo also launched an initiative to strengthen collective leadership capacity. This included deepening trust among leaders, strengthening their ability to navigate through conflict, increasing commitment, strengthening accountability and increasing their focus on results. The collective leadership development took the form of a series of webinars, as everyone was working from home by the time this effort started. Topics covered included developing strategy, solving problems, building and deepening trust, managing performance, and giving feedback. Very quickly the team developed a new shared vocabulary, shared frameworks and a higher level of expectations of one another. Perhaps the crisis put particular emphasis on the need to act on the new learning, not just listen, absorb and learn. At any rate, mindsets and behaviors both evolved favorably in the course of the first two months of investment in this area.

 

5: Strengthen the organization to prepare for the rebound

The third of three strategic initiatives was to strengthen the organization. This involved clarifying roles and responsibilities, re-designing the organization to make it more customer-oriented, strengthening performance management, articulating a clearer collaboration model and making improvements in all functional areas, from Marketing through Sales, to Operations. The leadership team was better equipped to improve the performance of their respective functional areas given the investment that had been made to boost their individual and collective leadership capabilities. In each area the unit head set bold new targets for their area and laid out a detailed plan to achieve these new targets. The work is in progress now. The prevailing ethos is clear: “We must not waste this crisis. This unique period when our customer-facing work is reduced is a golden opportunity to make improvements that have long been pending”. The sense of urgency is palpable.

 

No one knows when the world will return to something close-to-normal. The current pause may be relatively short, and this chance to invest and improve will, in hindsight, be seen as a very special opportunity. HospitalityCo’s approach may inspire us to balance tactical and strategic initiatives to make the most out of the crisis.

*Source of the quote on Norwegian Cruise Line Holdings: https://www.telegraph.co.uk/travel/cruises/news/nclh-liquidity-warning/