Illustration by Justin Tran
Illustration by Justin Tran

Work Culture

A small-business guide to weathering crises

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Published on July 23, 2020

Illustration by Justin Tran

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Crises, whether financial, ecological or epidemic, are a recurring fixture in our lives. Long before Coronavirus wreaked havoc on public health and the global economy, the energy crisis of the 1970s crippled transportation and travel. The dot-com bubble burst decimated an entire industry. The Great Recession threatened the financial structures that underpin society as we know it. The Black Summer Australian bushfires devastated 72,000 square miles, an area larger than North Dakota or Oklahoma. Even Black Swan events — highly improbable events that carry massive impact — are relatively common, if unpredictable.

Every crisis feels like an inescapable existential threat while we’re going through it. But society always finds its way back to some semblance of normality. Alongside that transition, people, communities, and businesses recover, too.

While crises typically hammer small businesses the most, those businesses’ smallness can also be an asset. Lean organizations can learn, pivot, and grow faster than their larger competitors, paving the way to a secure future.

Consider Jennifer Shine and Carl Mazzanti.

On the morning of September 11, 2001, the pair were on their way to a sales pitch for their month-old IT business, eMazzanti. They stepped out of a New York subway car onto a platform in lower Manhattan. Seconds later, a passenger jet struck the World Trade Center’s north tower.

As sirens whirred to life and security guards poured into the streets above them, thoughts of their potential sales opportunity quickly evaporated as they turned toward survival. 

They split up, Mazzanti running north to the headquarters of one of his first clients, and Shine south to the offices of another customer. It wasn’t until long after they’d reconnected that they understood the day’s events would change their lives and transform their business.

Drifting at sea

The development of any crisis is highly unpredictable. The novel coronavirus outbreak, for example, evolved from a regional Chinese news story into a worldwide pandemic in just a couple months. Before many realized what was happening, the virus had wrested everyday life from our hands and implemented a new, capricious normal — one of lockdowns, social distancing, and economic turmoil. How it will continue to evolve as both a healthcare and economic crisis, no one knows.

Lean organizations can learn, pivot, and grow faster than their larger competitors, paving the way to a secure future.

Living and working in such an environment feels like drifting at sea, as if your life raft is being pushed and pulled by the whims of the currents. But management experts suggest such powerlessness is just an illusion. While we cannot control the macroeconomic tides — the stimulus bills, economic policy decisions, and trade negotiations — we do have the power to affect change within our organizations.

For the 90% of small businesses reporting a negative downturn due to the COVID-19 pandemic, now is not the time to sit back and drift. Instead, you must take control of what you can and guide your course as you are best able. Because even simple actions can have outsized effects, building resilience, adaptability, and performance.

Search for new opportunities

In the aftermath of the September 11 attacks, Mazzanti and Shine realized eMazzanti didn’t have a future. When they founded the business, they had concentrated on sales force automation and other large-scale products, exactly the type of projects companies wouldn’t be investing in for some time.

To survive, the pair pivoted away from big investments to practical network infrastructure, business continuity, and disaster recovery. Then, almost ten years to the month after the September 11 terrorist attacks, a rare tropical storm — Hurricane Irene — struck much of the East Coast, leaving much of the Northeastern United States paralyzed. But this time, Mazzanti and Shine were prepared and immediately sprang into action to support affected businesses. 

“We had engineers on staff calling people to help with preparations and had people in the field with what we considered high-risk accounts. We had 100% of our customers up and running come Monday after the hurricane,” said Mazzanti. “I'm proud of what we've been able to accomplish."

Crises almost always create huge economic unrest. As the status quo is torn up and the economic fabric patched back together, whole industries and markets disappear in the blink of an eye. But amongst the turmoil grow new shoots of opportunity.

Walt and Roy Disney founded their eponymous media company during the Great Depression, Microsoft emerged during the 1970s stock market crash, and WhatsApp launched when the world’s financial systems still hung in the balance in 2008. These large organizations are not the exceptions, either. All businesses large and small can survive a downturn if they identify and capitalize on emerging opportunities. There are myriad examples that have emerged since the Coronavirus outbreak took hold.

For instance, faced with plummeting demand, London-based babysitting network Student Nannies adapted its business overnight to target a new market. Instead of connecting time-rich students with busy parents to fill caregiving gaps, the company began linking students with stuck-at-home kids to support their distance learning.

On the other side of the world, in Australia, with most large music events cancelled or indefinitely postponed, the future looked bleak for Jeremy Fleming’s stage building company, Stagekings. But amid the chaos, he spotted a new opportunity in the mass shift to home working. New remote workers needed new desks and he had the perfect company to manufacture them.

While we cannot control the macroeconomic tides, we do have the power to affect change within our organizations.

“In a matter of hours,” Fleming told Xero, “we made the decision to rethink our entire business model to one that focused on producing affordable desks that provide people with a safe space to work from home during this period of isolation.”

Elsewhere, in the hospitality sector, one of the hardest hit parts of the economy, businesses have exhibited similar innovation and ingenuity. Distilleries have switched production to alcohol gel hand sanitizer, hotels have rolled out cut-price rooms as makeshift offices, and brewpubs have begun selling beer in takeaway growlers.

While disruptive and unsettling, economic downturns are often prime opportunities to start new businesses or pivot existing ones. In fact, according to former McKinsey consultant and CEO coach Victor Cheng, over the last 150 years, roughly 60% of Fortune 500 companies were founded during a recession — even though recessions represent only one out of every five years.

“The goal of an economic crisis should not be to weather them,” former McKinsey & Company consultant, Cheng, tells Dropbox. “The goal should be to thrive in them.”

Acknowledge the human element

On March 10, 2020, in what was still the early days of the global coronavirus pandemic, Italy became the first democratic country to implement a nationwide lockdown since the Second World War. Overnight, 60 million Italians became prisoners of their own homes. Their experience was a premonition for billions of people all over the world.

Crises press the fast-forward button on historical progress, wrote Yuval Noah Harari, historian and author of Sapiens. Behavioral change that typically creeps at a glacial pace happens in the blink of an eye. Policy decisions that ordinarily elicit endless hours of debate skip through legislatures in days. And scientific breakthroughs that normally take years happen in months.

During crises, we hurtle forward at breakneck speed toward an unknown future, toward something academics and journalists have jointly dubbed the new normal. The personal impact of such fundamental change cannot be underestimated, says Jan P. de Jonge, founder of People Business Psychology.

“A key aspect of mental well-being is the extent to which we feel we have control over our lives,” he tells Dropbox. “Being sent into lockdown, for example, has undoubtedly caused many of us to write off our sense of control over our own lives.”

But this is just the tip of the iceberg. Crises often breed a sense of helplessness, increase demands on our adaptability and resilience, and ramp up the social judgement we feel from others. 

De Jonge’s sentiments are echoed by crisis management expert, Brandy McCarron, CEO of McCarron Risk Group. McCarron says it is essential employers recognize their employees are under unprecedented stress.

“Those who were able to keep their positions during this crisis will feel worn down by the constant worry of the possibility of their security being ripped from them and potentially overworked because they wanted to ensure they demonstrated their value to maintain their positions,” he tells Dropbox. “The employees, who are recalled after the crisis has been averted, may struggle with loyalty and motivation.”

Amid the chaos, De Jonge recommends employers turn the dial on their communication. “Communicate frequently and meaningfully,” he advises, “and be easily accessible to your employees.”

Empathy also comes to the fore. Authentic and compassionate leadership goes a long way to build authentic support that is perceived as such by employees.

“Employers who are more successful in dealing with the uncertainty of a serious crisis are likely to be those who are transparent about the organization’s situation and who create opportunities for staff to be involved in shaping the future,” says De Jonge. “It is in times of crises that compassionate and participative leadership is created and consolidated. Clearly, that time is now.”

Share decision-making responsibilities

In the fall of 2001, eMazzanti was just one of tens of thousands of New York businesses trying to make sense of the new normal. For months, Lower Manhattan was deserted, frequented only by emergency service and security personnel. For businesses, such as restaurants and bars that depended on a consistent flow of office workers and tourists, the future was uncertain at best.

For Evelyn Robb, owner of chocolatier Evelyn's Chocolates, times were tough. Even after five years of waiting, footfall and revenue were still down.

"It's not going to change for many, many years," Robb told the Associated Press, five years after the attacks. "The people are not back."

Few can predict how any given crisis will unfold, whether it’s the local retail repercussions of September 11, the financial sector rescue packages of the Great Recession, or the multi-trillion dollar stimulus deals of COVID-19. Such an opaque and malleable landscape presents a dilemma: business owners must make choices swiftly and confidently but few have the context to make an informed decision.

During times of economic peace, the future is largely predictable. We look backwards at events and extrapolate their trends forwards. If you served a dozen customers yesterday, it’s likely you’ll serve a dozen today. If your business grew 10% last year, it’s likely you can grow 10% again this year. But during crises, a fog descends and obscures our view of the rapidly changing future.

All businesses large and small can survive a downturn if they identify and capitalize on emerging opportunities. 

One solution comes from a group of five academics who recently studied decision-making trends through crises. The group compared firms with centralized decision-making structures to those with distributed authority. They discovered the latter, those with decentralized authority, weathered crises much more successfully.

“This result,” they wrote, “is akin to those emerging from a wide class of models where higher turbulence and uncertainty increase the value of local knowledge and the benefits of decentralization.”

In other words, distributing your decision-making authority means decisions are made by the people with the best information.

Tap into purpose

For more than a decade, academics Rajendra Sisodia, Jagdish Sheth, and David Wolfe studied a group of businesses they dubbed Firms of Endearment.

“[Firms of Endearment],” the team wrote, “strive through their words and deeds to endear themselves to all their primary stakeholders — customers, employees, suppliers, communities, and shareholders — by aligning the interests of all in such a way that no stakeholder group gains at the expense of other stakeholder groups; rather, they all prosper together.”

These organizations had purpose and passion beyond pure profit. The researchers compared these organizations to the average financial performance of their competitors. What they discovered was astounding: businesses with purpose outperformed those without by an average of 10 to one.

Why the Firms of Endearment perform so well is clear: people need a reason to act. Purpose is an existential imperative for humans. So it’s no surprise that it’s just as fundamental to human institutions. That’s just as true at a global conglomerate as it is at a local mom and pop store.

Take Phillip Cohen’s commercial woodworking firm, Cohen Architectural Woodworking, one of Forbes’ 25 'Small Giants,' for 2020. His business, he says, is about more than just adding design elements to office spaces. “Our stated mission,” Cohen told Business News Daily, “is to transform every life we touch by the way we live, the way we treat people and the beautiful work we produce.”

By building his business around a mission, Cohen imparted meaning into every project his carpenters worked on. Every corporate office fit-out, healthcare clinic waiting area, and hotel reception desk was more than just a woodworking project, they were opportunities to enhance the lives of the people who worked there.

While Cohen’s mission was effective in times of economic prosperity, it evolved into an organizational superpower during crises, such as the Great Recession and COVID-19 Pandemic.

In volatile, uncertain, complex, and ambiguous environments, purpose provided a framework for fast and efficient decision-making and it created a reason to work beyond basic survival. Each task and project became more than just a route to a paycheck, allowing employees to focus on long-term goals, rather than short-term survival. 

Indeed, when Ernst & Young investigated the long-term benefits of purpose, they discovered the gulf between performance between purpose-led organizations and the average company is only widened when organizations go through volatile periods.

“In uncertain times,” explained Ernst & Young’s analysts, “purpose is what keeps you anchored but almost paradoxically it’s also what keeps you faster, nimbler and more agile.”

This too shall pass

In the months that followed September 11, 2001, as New Yorkers resolved to rebuild, so too did Shine and Mazzanti.

By pivoting, adapting, and focusing on what they could control, the pair found solid ground once again. And one customer at a time, they rebuilt a new business from the ashes of their fledgling venture.

The pair could have let September 11 define and defeat them. They could have shuttered their office and retreated to something safer — but they didn’t. Shine and Mazzanti accepted the reality they found themselves in and pushed forward towards a brighter future. In the midst of new crises, such as the COVID-19 pandemic, we must follow their lead, too.