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Continued from Previous……
Economic Challenges
In Part I, we talked about Organizational Challenges. Here we talk about Economic challenges. The reason for taking it up separately are as follows.
- Economic challenges are both organization-related and people-related
- For organizations, economic challenges are of two main types.
- Maintaining inflow of revenue/ cashflow
- Keeping expenses in control
The first is not entirely in own control; the second possibly is.
People-related
People are important economically for the organization in two ways. They bring revenue which keeps the organization running. And they carry valuable information within them which creates value but is not recorded anywhere.
The organization faces the challenge that it cannot relieve everyone in the name of cost saving. It would disrupt the revenue stream and also disrupt the whole work. This dilemma continues to be faced by the organizations. The larger ones have laid off all non-core, non-essential employees. Smaller ones are still toying with the idea of laying off. The only thing stopping them is that often there is only one person in one function and removing him will stop the function altogether.
The other people-related issue is maintaining morale in the face of demoralizing news coming from everywhere. The entrepreneurs are not generally not good at motivating people; they work more through coercion. During this time, it is unlikely that someone will leave the organization for reason of demotivation, but it is quite likely that the work output will go down due to low morale.
Maintaining inflow of revenue/ cash flow
Cash flow is the lifeline of any organization; even if it is a charity one. All activity that happen in a business is either income or expense. But expenses can only be met with the income. COVID has hit the cashflow for almost all companies. The customers and the sales teams went under lockdown and could not work. In the healthcare sector, government hospitals were closed for general public and were dedicated for corona patients. Private hospitals were initially closed and then opened for COVID patients. Private practice was completely shut down for several weeks; then some doctors either started online consultation or started selective patient consultation in person. Such consultations were quickly stopped if a COVID scare was felt. New prescriptions were not issued in this period. The pharmacies kept filling the older prescriptions for chronic patients such as people with diabetes, high blood pressure, psychiatric illnesses. The pharmaceutical companies suffered accordingly. If they had a large share of chronic-care business, their revenue was hit lightly’ for those heavy on acute-care drugs suffered more. Pharmacies might have been able to maintain their cashflow by selling new hot items such as face masks, hand sanitizers etc. Some had ‘COVID drugs’ in their access and could sell at high prices. The summary is that the regular business of pharmaceuticals suffered, and the irregular business thrived. Exactly the same situation was seen in other businesses where revenue from regular activity was down but through irregular activities went up. Many of these irregular activities were rooted in exploitation, black-marketing, hoarding, overcharging and so on.
Keeping Expense in Control
The most straightforward way of controlling expense is to stop spending. However, in the organizational context, it is not possible. There are maintenance costs, utilities, salaries, materials, services; the list goes on and on. Even if you lockdown the office and lay off everyone, the expense will not become zero. It is therefore more reasonable to exercise suitable restraints in order to control expenses. I know that the organizations have suffered heavily and have faced the COVID quite bravely. I also understand that the spirits during the first wave of Corona was higher, energy was better and the will to face challenges was stronger. The second lockdown is not being taken with the same enthusiasm; tiredness is apparent, and so in disillusionment. There is no light at the end of the tunnel at the moment because no one is putting an end date on COVID. The hope after hope of seeing the end of it have dashed consistently and the people and organizations are exhausted. It is a sensitive time and must be handled sensitively by all concerned.
Expense control is an extremely desirable measure at this time. Having said that, the control logic, parameters and outcomes should be properly designed. Firstly, all long-term investments should be held back till the future scenario becomes clearer. Secondly, day to day activities generating revenue must continue uninterrupted. Thirdly, small plans with a shorter recovery time should be rolled out. Fourthly, non-essential expenses should be cut down to bare minimum.
Economic challenges are serious and threaten the very existence of enterprise. Deeper understanding, careful planning and agile execution are highly recommended.
Shall Continue InshaAllah……
