COVID-19: What companies are missing?

Policy making at many companies is scattershot,especially at those that haven’t yet seen the coronavirus directly. Many, such as professionalservices and tech companies, lean very conservative: their protection mechanisms often add to a perception of safety without actually keeping people safer.

 

by Matt Craven, Linda Liu, Mihir Mysore, and Matt Wilson
 

At the time of writing, there have been more than 160,000 confirmed cases of COVID-19 and more than 6,000 deaths from the disease. Older people especially, are at risk . More than 140 countries and territories have reported cases; more than 80 have confirmed local transmission. Even as the number of new cases in China is falling (to less than 20, on some days), it is increasing exponentially in Italy (doubling approximately every four days). China’s share of new cases has dropped from more than 90 percent a month ago to less than 1 percent today.


 

The WHO declared COVID-19 a pandemic on March 11, 2020. In its message, it balanced the certainty that the coronavirus (SARS-CoV-2) will inevitably spread to all parts of the world, with the observation that governments, businesses, and individuals still have substantial ability to change the disease’s trajectory. 

 

 Responding to COVID-19:

What companies are missing Our conversations with hundreds of companies around the world on COVID-19 challenges have allowed us to compile a view of the major work streams that companies are pursuing.


While this list is fairly comprehensive, some companies are taking other steps. However, we have seen evidence that many companies are finding it hard to get the major actions right. We have consistently heard about five challenges.

 

Having an intellectual understanding isn’t the same as internalizing the reality Exponential case-count growth is hard to internalize unless you have experienced it before. Managers who haven’t experienced this or been through a “tabletop” simulation are finding it difficult to respond correctly.

 

In particular, escalation mechanisms may be understood in theory, but companies are finding them hard to execute in reality, as the facts on the ground don’t always conform to what it says in the manual.

 

Crisis case studies are replete with examples of managers who chose not to escalate, creating worse issues for their institutions.

 

Employee safety is paramount, but mechanisms are ineffective

Policy making at many companies is scattershot,especially at those that haven’t yet seen the coronavirus directly. Many, such as professionalservices and tech companies, lean very conservative: their protection mechanisms often add to a perception of safety without actually keeping people safer.

 

For instance, temperature checks may not be the most effective form of screening, given that the virus may transmit asymptomatically. Asking employees to stay at home if they are unwell may do more to reduce transmissibility. Such policies are more effective if employees receive compensation protection—and insulation from other consequences too.

 

Some companies aren’t thinking through the second-order effects of their policies. For example,a ban on travel without a concomitant work-fromhome policy can make the office very crowded,leading to higher risk of transmission. Others are adopting company-wide policies without thinking through the needs of each location and each employee segment.

 

Optimism about the return of demand is dangerous

Being optimistic about demand recovery is a real problem, especially for companies with workingcapital or liquidity shortages and those veering toward bankruptcy. Troubled organizations are more likely to believe in a faster recovery—or a shallower downturn. Facing up to the possibility of a deeper,more protracted downturn is essential, since the options available now, before a recession sets in,may be more palatable than those available later.

 

For example, divestments to provide needed cash can be completed at a higher price today than in a few weeks or months.

 

Assumptions across the enterprise are misaligned

Some companies are pursuing their coronavirus responses strictly within organizational silos (for example, the procurement team is driving supplychain efforts, sales and marketing teams are working on customer communications, and so on).

 

But these teams have different assumptions and tend to get highly tactical, going deep in their own particular patch of weeds rather than thinking about what other parts of the company are doing—or about what might come next.

 

The near term is essential, but don’t lose focus on the longer term (which might be worse) Immediate and effective response is, of course,vital. We think that companies are by and large pursuing the right set of responses.But on many of these work streams, the longer-term dimensions are even more critical.

 

Recession may set in.The disruption of the current outbreak is shifting industry structures. Credit markets may seize up, in spite of stimulus. Supplychain resilience will be at a premium. It may sound impossible for management teams that are already working 18-hour days, but too few are dedicating the needed time and effort to responses focused on the longer term.

 

The coronavirus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic, and that companies have an imperative to act immediately to protect their employees, address business challenges and risks, and help to mitigate the outbreak in whatever ways they can.

 

Excerpts from  McKinsey's Briefing note``COVID-19


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