Getting to know your tightrope, before stepping foot on it is critical to both your business and personal welfare.
Here is what we know
So here we are, 13 weeks since lockdown began, the football season has restarted behind closed doors; hospitality, pubs, restaurants are set to reopen; and yet a large proportion of people in the UK are afraid of venturing out to crowded public areas and shopping centres, which is going to cause a significant drop in business for these businesses. Worrying times for business leaders, worrying times for shareholders, even more worrying times for their staff. The balance is all out of whack.
By any measure, business levels are already, or are going to be, a long long way off the levels prior to COVID-19.
There is a significant vulnerability in the catering and hospitality industry's ability to respond to crisis, especially epidemics like COVID-19 that spread panic and disrupt the everyday activities of people. This is mainly due to the nature of our business - lots of people crowded together, having a great time, usually accompanied by food and drink, either served to them, or self served at a buffet plate.
Restaurants where people eat self service buffet style from counters of food in a crowded environment, lost as much as 90% of their business after the SARS outbreak in Hong Kong
So whats my plan (crisis management by common sense)
Step one - what's the panic?
This is the point where I would classify the crisis I am dealing with - important because it helps me decide the appropriate measures to keep the crisis under control. Rather than the too often used 'shoot from the hip and hope for the best' method.
Step two - what's the damage?
The extent and type of damage is assessed. I am a fully paid up Yorkshireman, and so being brutally honest with myself and others, has always helped me move on to step 3 swiftly in the past. If its knackered, its knackered
Step three - stay cool and form a plan.
Tactics are formulated and implemented to combat the crisis. No need to go all Mike Bassett on it ! I would much rather get the tactics right at the outset, and achieve the right result first time, safe and on time - Call me old fashioned, but I want pacey, direct, well planned action...
Step four - is it working ?
The last step of the crisis management process is to evaluate the effectiveness of the recovery strategies using a feedback loop that enables me to refine the tactics if necessary, until the crisis is brought under control.
Defined as a low-probability, high-impact event that threatens the viability of the organisation, an event that damages a firm's reputation or drastically harms the long-term goals of profitability, growth or survival....
Now thats a crisis.
Which is all well and good, but how do we breakdown the management of crises to understand impact, and how do we relate COVID-19 ?
As an external factor, physical environmental conditions such as natural disasters and technological failures are the least controllable by any business. The COVID-19 outbreak in 2020 fits naturally into the physical environment category of crises. The origin of the coronavirus is still unknown, so much so, that catering and hospitality businesses are still grappling with the task of dealing with its consequences.
The appropriate strategy to deal with disasters of the physical environment type is to react quickly to minimise the damage. Time is of the essence because the damage could escalate very quickly to a point that threatens the survival of the business.
Crises of the social environment are caused by human acts. Strikes by unions and boycotts of certain goods resulting in damage to organisational reputation or infrastructure, are examples. COVID-19 has indirectly generated crises of the social environment because many hospitality businesses will experience significant liquidity problems. Many companies will have to lay off thousands of staff or force them to take lesser hours, lesser pay, zero hours contracts, unpaid leave or sabbatical. Undoubtedly, this will lead to some labour unrest, disagreement and court cases - if not tackled correctly.
The strategies for dealing with crises in the social environment involve calming the people and negotiation with the parties affected to achieve a win–win resolution. Legal measures may be necessary if compromise is not possible.... classic restructuring exercises that must be dealt with properly, formally and within the law.... leaders with humility must never forget that these people are fearful for their future and entirely reasonably, sceptical of business intention.
Management head room is of utmost importance. The ability of management to react properly, to secure thinking in a balanced, process driven and logical manner. Many crises are caused by skewed management values, deception or misconduct. Budgets and goals that cannot be reached often lead to unethical behaviour on their part. As such, a crisis can utterly destroy the reputation of a business.
Remember the Audi emissions scandal ? Somebody in the Audi team, decided that chasing the dollar, whilst being less than morally upright, was a good idea....
If we look at the retailers that have disappeared from our high streets, each one almost guaranteed to have had leadership without the ‘headroom’ to deal with a crisis, at the time the crisis happened.
Mothercare. Iconic brand, probably in the top 10 most recognisable brands in the country. Systematically failed by its leadership failing to react to external market forces, over 2 decades. Sent into administration before COVID-19 came along in 2019.
Back in our own bubble – the catering and hospitality industry is facing serious cash flow problems during and after the COVID-19 lockdown is eased on July 4th onwards. There is great temptation for management to engage in unethical conduct to ensure the survival of their business, which may ultimately give rise to crises of the 'management failure' type. The appropriate strategy to deal with these kinds of crises is to enforce a strict code of conduct, revisit budgets, be realistic about targets and follow a process.
Cheers, but why do I need to understand what each crisis type's effect on crisis management is ? Do we not just raise our trouser legs and wade through the s**t ?
Understanding your crisis is useful to catering and hospitality management in two ways. First, the appropriate management and recovery strategies are dependent on the type of crisis in question Second, it can alert managers to subsequent crises that may follow the original one when the wrong approach has been used to deal with the original crisis.
In the COVID-19 pandemic, for example, if business leaders attempt to lay off staff without proper process, thought, communication or compensation to improve their cash flow... this may, no this will lead to confrontation with the team, leading to mistrust of management, and subsequently cause an entirely avoidable crisis of the social environment type.
Before a recovery plan is devised to rebuild the business, restaurants should assess the type and extent of damage caused by the crisis. COVID-19, for example, has caused a lot of hospitality businesses sudden cash flow problems - both immediate and heavy. Hence, the appropriate counter measures must aim at maintaining an adequate liquidity position; Operating costs must be minimised and low cost or shareholder loans or investments, must be sought. Meanwhile, revenue enhancement plans need to be devised to generate more cash... #noshit.
To draw out the appropriate recovery strategies to save their business, managers must consider each process in the business operation, and find out how each step in the service management cycle could be modified and improved to bring the crisis under control. The appropriate tactics in the COVID-19 epidemic should include all measures that could minimise the cost and enhance the revenue of the business.
We must find ways to minimize the running expenses of our businesses, so that it has a better chance of survival. This could be reduced investment in advertising and promotion, a benefit of reduced offer. It could be a reduction of operating costs, achievable through negotiation with suppliers to reduce prices, with landlords to reduce rents, and with staff for pay cuts, temporary reduction of hours or unpaid leave.
A time of crisis also warrants the step of government financial support. Our government has taken notice of the trouble businesses are going to be in, and offered benefits beyond anything I think anybody alive has ever seen including: a furlough scheme to protect jobs, Loans, tax relief and cash grants, Employers can apply for staff to get up to 80% pay if they can’t work, Self-employed people can receive up to £2,500 per month in grants for at least 3 months – our government has put in a titanic £123.2 billion package that includes all the above... I think our businesses owe it to the people in our businesses, to at least do the right thing at the right time – and most importantly for the right reasons. They also owe it to everybody to get back on their feet, and repay the faith the government and subsequently every single tax payer has put in them.
Those that have read my blogs will know, I never favour a race to the bottom, with one dimensional cutting of costs. Whilst cutting costs will deliver short term result, balanced businesses stay stronger longer. Simultaneous to cost reduction, we must implement revenue enhancement strategies. To combat the pressures resulting from widespread fear of COVID-19, a hospitality business could increase its guest perception of value by adopting a combination of revenue enhancement tactics.
Heres a selection of the low hanging fruit:
The most obvious tactic is to improve food quality and service... and as a result price... I call this qualitative pricing - by aligning price to service level, you ensure a friction free price rise, when needed.
Maybe offer discounts or other forms of promotion to entice potential customers to dine.
Capitalising on the current public obsession with health and strengthening their own immunity, maybe an increased awareness of healthy menus, with items that claim to boost customers’ immune system. Such items are may be based on herbal medicine, aiming to induce harmony between the yin and yang forces within the body?
For customers who were nonetheless still afraid of dining out, take-away or delivery services need to be considered...
Think about the impact of social media over the last few months, it has been hugely important to families and individuals staying in touch during lockdown. Like it or not, your customers use it, believe it, and are absolutely in the right frame of mind to share great news stories. So maybe set up a community fund whereby a proportion of any sale is donated to COVID-19 related causes, such as NHS Charities, locally affected families or care homes.
Decrease perceived physical risk
The damage to our wonderful industry caused by COVID-19 is largely due to panic and widespread fear as opposed to actual direct consequences of the virus. This stems from the fact that threats that cannot be seen or controlled are considered much more perilous than those that can be seen.
Perceived physical risk is a massive problem for hospitality leaders. As the COVID-19 virus is transmitted by airborne water molecules, we must deploy a clear and effective policy that ensures the sanitation of the premises, so that the perceived risk of attendance is kept to the lowest possible level. To instil a sense of confidence in the guest, we should advertise our hygiene policies loud and proud, we should yell about the measures taken to safeguard the customers’ physical health. To make the customer feel confident, we must be proactive.
Why can’t we use cleanliness and hygiene as a selling point in addition to food quality and cost ? We already proudly display our 5 star rating from the EHO.
I would like to suggest that the following measures as a minimum were adopted by hospitality businesses to combat the COVID-19 pandemic:
Regardless of position, all staff should be instructed to wear protective masks.
A ‘hygiene ambassador’ should be employed to greet customers and offer antibacterial wipes or hand gel.
We should disinfect the premises several times a day
Close buffets and self service
After the SARS outbreak, the American restaurant chain Ruby Tuesday said it regained 30% of its lost revenue through a combo of these sanitation measures and the offering if a 50% discount on certain products... by the way, that equates to $200 million, in case you were wondering - $7800 per week per restaurant... with an labour ratio in the industry of 30% - that is $2574 a week, of jobs saved – by squirting sanitiser and being nice people – unbelievable.
July 4th 2020 – and beyond
Businesses that prepare for a crisis should use a team approach. The use of teams is standard practice among leading organisations today, and is proven that a crisis team approach has a better chance of formulating a crisis management plan that is effective. A crisis management team of cross-functional people within the business, who have been designated to handle any crisis... how organised does that sound ?
Whilst the COVID-19 crisis is a natural disaster, the methods employed by catering and hospitality management to deal with the challenge, are crucial. They are crucial not just for now, but for the future, and for developing a functioning strategy for dealing with crises. I am absolutely positive, that catering, pubs, restaurants, clubs, stadiums and all hospitality can be adept in responding to the COVID-19 crisis. Through a combination of the cost reduction and revenue enhancement strategies, along side tough on the line management – our incredible industry businesses can succeed in turning a profit, even under the adverse influence of the COVID-19 pandemic.
Because, when you have a plan... the rest is just gravy.