Startup Coping in the 2020 Crisis

Eldad Rom (Ph.D.), Founder & CEO Rom Business Psychology| Reading Time: 7 min.

For founders and managers of many startups, the Corona Crisis is probably the first global crisis that they are facing as business leaders. For most of them the popping of the bubble and the days of the dotcom are merely legacy stories, and during the crisis that hit us in 2008 many of them were not in leadership positions. The combination of inexperience in dealing with similar situations combined with one of the worst global crises humanity has seen in modern times, requires the founders of startups to deal with complex management dilemmas and respond well to situations of increased uncertainty and ambiguity.

So, no one knows where this is going or how the world is going to look or the answers to other existential questions. In any case, we will attempt to provide answers and formulate a set of work assumptions that will allow managerial decision making during these times.

Firstly, in crisis situations the option of "not deciding" is often the worst decision that you can make. I've met more than a few managers during these times, who prefer to postpone decision making and don't understand that by doing that they have already essentially made a decision and they are starting to pay for it. If you reach a crossroads and are not sure which way to turn and decide to just stay there, you have actually made a decision to stay in place (a decision which by the way may have immediate consequences – just imagine being at an intersection and not being able to decide what to do. Can you already hear the horns of the cars behind you?). So, maybe the first thing that I recommend that managers do today is: Decide… decide… decide. Take a look up the road, but don't be in the position where others are deciding for you. Also, there are many things that are outside our circle of influence. Be a leader and lead your organization and don't let the "fog of war" paralyze you.

The second point, which is also related to decision making, is that you don't only need to make decisions, but also implement them. It sounds trivial and even though making choices and implementing them sound similar, they are actually two completely different operas. How many times have we already made a decision and because of some reason (or due to no real reason at all) didn't implement it? "From tomorrow I'm on a diet", "We need to change the system already", "I intend to leave early today", and more similar examples that illustrate well the difference between making decisions and implementing them. During these times, more than ever, decision making needs to absolutely be a process of deep discussions including processing and analyzing situations in all of their complexities and examining alternatives. But from the moment that a decision has been made it is important to apply different action mechanics, control and update. For example, the management of a certain startup decided that after the holiday it will clarify to its workers that it is expected of them to go to the office at least twice a week. It is great that the decision was made (without getting into the considerations that led to it), but if you didn't get down to the implementation resolution that answers three simple questions: Who? What? When?, then you haven't actually moved on to the implementations stage of the decision. By the way, there is not a small chance that the decision is being ruined in the implementation, which is the close cousin of not making a decision from the previous section.

Thirdly, even though we are hearing from grizzled veterans and from elders statements like "We've never seen something like this…" even though the crisis presents (and will probably continue to present) before us new situations that we are not used to, although in many situations it merely makes known phenomena more extreme. So the same staff member who was anyways problematic in keeping his commitments, is not expected to all of a sudden become disciplined and organized when he is working from home (even though miracles do happen), and the boss that was unreasonably demanding will probably not take his foot off the gas just because you are wandering around with a mask and the kids are jumping on you in the middle of the Zoom call. The internalization of the radicalization phenomenon of known types in the current situation, is very implemental for managers since it is essentially cutting a series of operative questions that allow the minimizing of the vagueness and they allow greater clarity for action. So, you should ask yourself the following questions: How would I act in a situation similar to this one if there wasn't a crisis going on? How have I acted in the past and how did that work out? Is the crisis really supposed to change the way I function in the current situation, or is it only an extreme version of something that I have already practiced? Adopting a slightly distanced perspective from the current situation and finding similar situations you faced in the past to help cope with the extremity which characterizes the current situation.

Fourthly, you should pay special attention to the dynamics of things and the pace of changes. Our ability to be adaptive to the changing needs of the workers, the customers, the investors, and the rest of the interested parties in the company is critical to making an effective method of operation. When we try to adapt our response method to the changing reality, it is important to remember that in the end our responses in each situation, even extreme ones, stems from the same human operating system (which unfortunately still has not received an update). The human operating system will always seek out certainty, order, and security. It is in our nature to be adaptive beings that adopt habits and routines. From conversations with managers from many startups in the last weeks a picture has formed: In the first days we acted in the first and basic layer of supplying supplies, organizing new workspaces, adopting technologies and solutions that allow us to keep the lights on. Immediately afterwards, and often parallelly, the productivity challenges appeared. Specifically, even though new management routines and processes were formed, the productivity levels lowered. In the last few days founders have started to recognize that they need to implement productive measures in order to cope with the new reality. The understanding is that we need to stop acting in a reactive and defensive manner which characterized the start of the crisis and get back to leading and organizing for an offense.

Specifically, many startups today are making new and updated work plans that take into account the new business reality. Naturally there is a big difference between companies that entered the crisis well financed and those whose cash flow situation, without expected income, was grim. Together with that, in what is a paradox, it is actually the large and mature startups that are at this stage making cuts and enacting streamlining measures. The same ripe startups that are based on annual returning revenue (ARR), need to recognize the bitter truth that the current work year will be difficult if not completely lost on a business level. In accordance with the market in which the company functions and the level of standstill that exists in it (the situation of startups that deal with tourism is and air travel is not the same situation of companies that deal with security and remote working technologies) the companies reorganize while remapping risks, estimating the organizational capacity, and developing adapted solutions.

The depth of convergence of the companies and the scale of the streamlining measures depends on the level of financial strength that they had on the eve of the crisis, but it is also quite dependent on leadership values. It is important that common sense, human honesty, and thinking about how we want to get out of the crisis are seen as important and having central functions in the building of new organizational programs. Nobody wants to actually layoff employees, but it is important that it is left as a last resort. I have already had a number of conversations with founders that wanted to make sarcastic use of the current crisis in order to fire employees for unsatisfactory performance. Workers that probably were supposed to leave the company a long time ago, but due to lack of managerial courage stayed on. Having to put them out in the job market during these hard times will require them to pay the price of managerial cowardice of the organization's leaders. It is important to remember that even though it is possible that the sales forecast needs to be updated, the expense forecast does too. Without flights, events, and operating expenses it is possible to reach large savings that will allow layoffs to really be a last resort. Salary reductions are also a legitimate tool in order to buy some cash flow breathing room. Here also the personal example of founders and management staff is second to none. Managers should promote the reduction in their salaries and make sure that the reduction, percentage wise, is significantly larger for managers. Even if it comes to a situation where managers are making less than their workers.

After we have used all of the tools and unpaid leave isn't really an option, then it is really important to get to the point and create clear metrics of contribution to the organization, transaction expenses, and more, but also to use your heart. There could be cases of Solomon's court in which you will need to decide between a single 28-year-old and a new immigrant, between a father of two and a single father. And when the decisions have already been made it is important to pay very close attention to implementation. The people who are staying are looking at the way in which we are disposing of those who are leaving.

And regarding those who are staying, if we act right, they will probably be a great illustration of the cliché "we got out of this crisis stronger than ever". This is actually a great opportunity to strengthen the bond of the works to the company. To include them in new business opportunities that arise and how they can help in their implementation, accelerate the preparation of products because during these times timing is everything and to be as transparent as possible.

To finish, many managers speak with me today about the feeling of lessened security of some of their people. It is very natural in the current situation and there are a million good reasons. Without going into the specific circumstances, it is important during times of crisis more than ever, to appraise and encourage the staff. But don't get confused, it doesn't mean to lower standards. People want to feel great and get opportunities for growth and development. It increases our resolve and increases our sense of capability. There are large correlations between productivity and emotional welfare and from here also for development and better performances. What is certain is that also founders and management staff in startups will develop from the current crises and hopefully also increase their management abilities.

Dr. Eldad Rom has a Ph.D. in psychology, with honors, from Bar-Ilan University. Over the years, he has specialized in leadership and team development and supporting organizational transformation. For the past 20 years, he runs a consultancy that specializes in consulting to high tech enterprises, in particular startups.

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