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Strategic planning with uncertainty about pandemic’s end

The Covid-19 vaccine rollout demands that business leaders plan for recovery in the economy as well as in health. More pratfalls with vaccinations may delay recovery, but vaccinations could accelerate thanks to learning-by-doing and copying success. Either way, companies need to be ready for expansion, but they cannot commit too strongly to one particular timetable.

Questions that business leaders now face include: Cut staffing or beef up the workforce? Invest in new equipment or conserve cash? Shift to different markets or stick to one’s knitting? It’s tempting to throw one’s hands up and say that forecasting is impossible, but decisions need to be made. And leaving business unchanged is a decision, even if it feels like no decision.

The key to strategic planning in uncertain times is to figure out what has changed, what has not changed, and what is still uncertain. Then business leaders need to plan based on those insights, incorporating flexibility wherever possible.

The “what has changed, what has not” question is sometimes easy. A food company knows that people will still be eating in the years to come. An airline knows (or should) that some business travel will be replaced by video calls even after the pandemic. But other issues are uncertain: The entertainment industry wonders if people will be comfortable in crowded theaters or stadiums in the years to come.

 

Diagram of business processes

 

Business processes.
Dr. Bill Conerly

The possible changes are not just about sales, but about all critical parts of a business. The graphic above provides a way for company planners to organize their thoughts. It can be modified for a particular company’s situation.

The flow of goods and services moves from left to right, but the dollars flow from right to left: sales brings in money, which is eventually paid out to others, including owners. Planners should start on the right-hand side of the chart, as some inputs and processes may be irrelevant if sales change.

Some sales changes have been clear, such as restaurants shifting to take-out from dine-in. Other changes are less apparent outside of the particular industry. For example, nursery sales to consumers have increased, but the industry’s sales for new commercial buildings have lagged. People in this industry have already plotted out the shift, but now it’s time to look forward. Will home gardeners continue to put time and money into plants when they can travel on cruises? Will commercial development resume soon? This example illustrates that its not just total sales that can change, but how the product goes through different channels.

Sales of one products usually triggers related sales. Plants and shrubs are not only sales for the nursery, but also for packaging companies and transportation services. Different end users often dictate other changes. All businesses must trace through their own sales to end users in order to determine how the pandemic has altered their sales channels.

How the work gets done has changed across the economy, with some changes likely to be permanent and other changes possibly not.

Remote work will probably continue to some extent, but businesses should consider other changes. Will plastic partitions continue to be placed between customers and cashiers? What about social distancing, barriers, hours of operation and the other things altered by the pandemic?

The resources coming into a business, such as real estate, are also subject to change. With some employees working remotely, should the office location be changed? Will less space be needed? Can space be used more flexibly to accommodate those who come into the office without wasting space when people are away?

Supply chains have proved to be more fragile in the past year, partly due to production stoppages associated with Covid-19 and partly due to unforeseen transportation delays. This impacts capital goods—computers, machinery, trucks and so forth—as well as raw materials and necessary consumable supplies.

Human resources may seem to be abundant given the higher unemployment rate, but most companies have learned that workers are in short supply. The pandemic triggered a number of early retirements and also reduced migration into the United States from overseas, setting up a very tight labor market. Add in the extra unemployment benefits that allow laid off employees to take their time returning to work.

Financial resources have been fairly cheap in the past year. The downside has been that bankers became a bit more cautious in the recession. That is likely to change, but don’t expect lenders to become wild and crazy.

With heavy uncertainty about the future, this exercise may seem hopeless for generating useful plans. The magic comes from assessing what the company would want to do in each scenario. Some of the action steps will certainly be expensive, but some of the steps are fairly cheap and easy and will save a good bit of time if a particular change happens. The best approach in an uncertain environment is to prioritize changes that provide more flexibility and that are inexpensive. Changes that will lock the company into one specific path are less desirable, unless management is ready to roll the dice based on their self-confident projections of the future.

Every business leader plans, every day. Some plans are implicit and don’t seem any different from yesterday’s plans. But continuing the old ways is every bit as much a decision as choosing to change course. Planning is inevitable, and thus should be done consciously and not simply through inertia.

 

This article was written by Bill Conerly from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

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