In the wake of the COVID-19 pandemic, businesses will start to reopen and will be forced to readjust to the new economic landscape. Many businesses will want to resume their usual operations as quickly as possible. However, those businesses may find that how business is being done is changing rapidly as a result of the global pandemic. Businesses need to begin preparations for this new normal, starting with operations.
Your company is already adjusting for the impact of COVID-19. As you set out on your company’s roadmap to recovery, you are creating new budgets, adjusting financials and establishing a post-pandemic cashflow forecast. This is the best time to consider the impact that a new operational structure will have on your company.
As the economy recovers and readjusts, your business will need to consider pandemic-induced operational shifts like:
Supply chain disruptions
Lower employee counts
Higher workload per employee
Potential for extended social distancing measures
Consider whether or not departments can be consolidated to reduce operational costs. Can you reduce employee hours? Reduce overhead expenses? Are you paying for redundant services? Do you have options for an alternative revenue stream? Even simple operational shifts to save money can have a big impact on your business moving forward.
Things to Consider: Measuring Impact
If your company’s post-pandemic revenue cannot support normal operations, your response to the new norms can be categorized by impact. As you track and evaluate your fixed and variable expenses, consider which expenses can be cut or reduced. Then, categorize those changes by tiers. You can select which tier you make changes from based on your cashflow forecast or the timeline of the needs of your company.
Immediate or Minimal Impact
Items that would have an immediate but minimal impact on long-term finances are considered in this tier. This includes things like temporarily trimming a department’s budget by 20% or eliminating non-customer-related travel.
Short-term or Moderate Impact
Expenses in this category have a longer-term impact. This category includes options like extending the period of budget cuts, furloughing contractors or part-time employees or eliminating overtime.
Long-term or Permanent Impact
These items have a bigger and permanent impact on your business operations. Things like reducing employee headcount, eliminating non-essential projects, or establishing an expense approval system would fall into this category.
Prioritizing efficiency in your operational structure can lead to higher stock performance, higher profit and faster growth. As you restructure your operations, consider how you can streamline your company’s workflows. For example, are there any departments you could temporarily or permanently combine to reduce overhead and clarify workflow?
Create a comprehensive list of functions. This list should include the tasks of each department, the people who carry out those tasks, and any software or equipment necessary to those tasks. Identify whether any team members or departments are completing redundant tasks and whether these can be combined. Similarly, identify any tasks that are unnecessary to business functions. Adjust your operational structure accordingly. This can include eliminating roles, issuing layoffs, or consolidating departments or teams.
Automation and Outsourcing
Often, maintaining a full-time staff for certain tasks is not cost-effective. As you consider your business’ functions, consider whether shifting some tasks to automation or outsourcing would cut costs. For example, your payroll process could be outsourced to an accounting firm. The firm will only charge you for the hours it takes to complete your payroll, so you would not have to pay a full-time salary or employee benefits.
Some other areas that can be outsourced or automated include customer support, marketing and social media analysis and management. While resorting to layoffs and reducing employee hours is not ideal, sometimes businesses have to make tough decisions to survive in a recession or an uncertain economic landscape.
Establish Pandemic Contingencies
While many businesses are reopening their doors to the public, many experts maintain that the pandemic is far from over. Business owners need to consider what the plan is in the event that pandemic initiatives like social distancing are extended and how that will impact their business.
Any shifts in operational structure need to include these considerations. Can you allow more of your employees to work remotely? Does your business structure support video conferencing and other technology? Would a reduction of headcount or a staggered schedule make social distancing easier? Can you afford to enact a hiring freeze?
Businesses also need to consider how the pandemic will affect their supply chain and create contingencies for that. Should you consider an alternate vendor? Will the pandemic affect supply chain pricing? In this economic landscape, communication with your employees and other affiliates is key.
Assess Operational Risk
Some risks can be planned for and avoided. Other risks, like a global pandemic, cannot. As you move forward, you should complete operational risk assessments at each stage. Consider the ways you can mitigate the risk of each of your business decisions. Use your Key Performance Indicators (KPIs) and cashflow forecast to see the impact of each risk before you take it. Detailed records, contingency plans, rainy day funds and other preparations are key to protecting your business from unforeseen risk.
As businesses adjust to the new normal forced on us by the COVID-19 pandemic, there are going to be a lot of changes. The way your company does business may have to be one of them. By changing up your operational structure in a way that saves money and makes your business more efficient is a crucial step on your company’s roadmap to recovery.