The companies and employees at ground zero of the COVID-19 outbreak provide insight into what works in a time of crisis — and what doesn’t.

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Leaders around the world are facing twin anxieties: how severe the coronavirus (COVID-19) outbreak will be for the economy and what companies should be doing to prepare.

Scientists have long warned that emerging infectious diseases represent a new reality with the potential to cause untold human suffering and economic disaster. While the financial damage of the COVID-19 epidemic — first reported from Wuhan, China, on Dec. 31, 2019 ― has so far largely been confined to China, organizations around the world are directly and indirectly affected by what is fast becoming a global crisis.

Managers lack clear guidance on how to ready their organizations for a global pandemic event. The World Health Organization (WHO) tracked 1,438 epidemics between 2011 and 2018 and notes, “In addition to loss of life, epidemics and pandemics devastate economies.” Many of the outbreaks in this period, including Ebola and MERS, were able to be contained geographically. But the conflux of hyperurbanization and global warming makes pandemics and other ecological dangers more likely to spread over a larger area — and a very real threat to the world’s economies.

We’ve been taking a close look at the effects on Chinese companies and workers of the government quarantines that began being imposed in January. The responses of these two sets of stakeholders at the front lines of managing this crisis offer important lessons for organizational leaders in other locales. Current projections suggest that it’s only a matter of time before most organizations are facing similar challenges.

 

Best Practices to Guide Companies Through the COVID-19 Crisis

In addition to analyzing emissions data, our team has also been systematically aggregating news and social media data from the most severely hit regions in China to better understand how COVID-19 has affected the Chinese economy, including those portions that are less observable through traditional economic proxies. This data collection has given us a unique lens on how Chinese companies and other Chinese organizations have been responding to the ongoing crisis.

Our data shows that there are several steps that Chinese managers are successfully taking, often with the encouragement of Chinese authorities, to mitigate the impact of the virus and its disruptions. There are also several areas where a lack of preparedness has led to less-than-desirable outcomes.

We believe that managers can learn a lot from how companies in China have been coping with COVID-19. These coping practices include having smart policies around remote work; anticipating and mitigating operational roadblocks; and addressing the social impacts of this health emergency.

 

Develop an Infrastructure for Remote Work

Using the Chinese experience as a model, we believe there are steps managers can take to maximize the effectiveness of the remote work option during a crisis. They include these four:

  • If you are not already doing so, allow your employees to telecommute. Companies that allow for remote work — right now — will have the necessary tacit knowledge, planning, and infrastructure in place to quickly transition more operations if that becomes necessary.
  • Train your leaders. Our data shows that employees’ biggest complaints about remote work are about managers who lack respect for normal working hours. Leaders need sensible rules about when they expect workers to be available — and when they don’t.
  • Identify employees who are most crucial to maintaining business continuity. Do they have the tools to work effectively from home if they have to? Ensure that they are prepared.
  • Develop a disaster scenario that incorporates telecommuting. How would your organization operate if there was a quarantine that shut down geographic areas where you operate? Use techniques from scenario planning to generate ideas about how your company could pull together the capacity to resume operations in even a limited form.

 

Be Ready for Operational Shocks

The middle of a crisis is the worst time to be scrambling for the basics of operations, whether it’s finding cash to make salary payments or finding alternative suppliers because your regular source has gone cold. If you believe your organization could find itself in troubled waters because of COVID-19, start the following now:

  • Have at least one to three months of cash on hand. This cushion is necessary to cover immediate expenses, such as salary and debt payments. Do not solely rely on financial instruments or short-term credit to make up the difference.
  • Know what your options are for extending loans, terms, and other short-term obligations. Look this over now. Banks care that they can recoup the principal amount of the loan, and in the midst of a crisis, borrowing more or changing the loan’s conditions is difficult. Some governments have relief programs or provide other forms of targeted assistance. The Chinese government, for instance, earmarked U.S. $114 billion in February to support short term loans to SMEs.
  • Have an adequate buffer stock of crucial parts and other inputs on hand. If you have not already done so, identify and establish relations with alternative suppliers from countries that are less affected by the crisis. Developing supply chain resilience is a best practice in any condition. (To our surprise, many Chinese companies were completely unprepared for the need to find new suppliers.)
  • Try to get an understanding of how prepared key suppliers and other stakeholders are for an unexpected event. Will they be able to sustain their operations? The more knowledge you can gain in the early phases of this outbreak, the better prepared you can be if and when circumstances shift.

 

Become a Community Player

If the COVID-19 epidemic comes to your town, you should be prepared to help. Here are three ideas drawn from the Chinese examples:

  • Target nonprofits and community outreach organizations in your local area. Corporate generosity has a much larger impact when it is provided directly to a local community.
  • Encourage volunteering by your workforce. Employees who have the option to participate in corporate volunteer programs are more likely to participate repeatedly.
  • Let others know what you’ve done. Release a succinct external announcement when you make a donation. Don’t boast: Provide only the most pertinent details, including the amount of funds committed, the key beneficiaries and recipients, and what you aim to achieve with your donation. Include a quote from your executive leadership team.

 

For deeper insights visit MITSloan Management Review