Business Lessons learnt from working through a Crisis
Updated: Jun 29, 2020
I have spent the last ten years working in the finance departments of high street brands, one of which was part of a large international group. While I was there, we experienced a crisis, which was obviously on a completely different scale to the much wider crisis we are all experiencing today, but I think the business lessons learnt from this are still relevant which is why I am reflecting on them now during this lock-down period.
The ‘incident’ we encountered is hard to describe, it may have been accounting irregularities, it may have been deliberate fraud by the CEO. I imagine very few people know the real truth. However, working in the UK head office, I got a bird’s eye view of its repercussions and these are the 3 lessons I have learned from it.
As soon as news broke within the company, the first thing that happened was each division immediately put their own interests first and started hoarding cash. There was a cash-pooling arrangement within the group (which is when all cash is shared and your bank accounts get swept every day putting you back to 0 whether your bank balance was positive or negative). This arrangement fell apart within a week because each division was keeping cash in non cash-pooled bank accounts and making all their payments out of the cash-pooled accounts. Divisions that owed each other money wouldn’t pay and it turned into a game of chicken.
Banks very quickly lost their trust in the company and panicked about losing their investment. In the end the company had to completely restructure all the financing as no bank would touch us and we had to go to a different kind of lender who is willing to take on a riskier investment for a higher return (of course!)
Even though our stores were still open and trading, the credit card companies starting holding on to customer deposits. They do this because they are worried that if the company goes bust customers will lose their money. However holding on to the deposits almost did put the company under. This lasted about a month and when they finally released the cash to us it ran into the millions.
As mentioned earlier, cash quickly became the most important thing. We immediately put in a strict cash management process and were tighter than a cat’s bottom at letting people spend anything.
Most suppliers wouldn’t give us credit anymore so cash very quickly became the top priority and was discussed on a daily and often hourly basis (I’m not even joking!) This perspective never really goes away and even 2 years down the line from the ‘incident’ that cash-flow process is still in place, although it is now discussed on a weekly/daily basis instead of daily/hourly!
3. Look after your employees
In our case there was quite a lot of press coverage around the ‘incident’ and since then we have struggled to recruit good staff in our head office. Any decent candidates will Google the company they’re about to interview for and because of that we had very few decent ones turn up for interviews.
Happily though, it did suddenly make them appreciate their existing staff; when I returned from maternity leave first time (pre-incident) they had refused my request to work 3 days a week and I had
to go back on 4 days and spent months negotiating a 3 day arrangement. Second time round (post incident) was very different; I could still do 3 days, I could pick the days, I could do a phased return coming back initially on 2 days and ease back up to 3 days…. whatever worked best for me and my family!
So, reflecting on these 3 points and how they can be applied today, I think we can all manage points 1. and 3. on our own. Particularly point 3, personally it has been so heart-warming to see how kind people have been during this lock-down and I feel like there has been a big shift in people making a conscious effort for looking out for those around them.
However point 2 is probably a tricky one if you don’t have the skills or experience. I know first-hand the importance of cash management so get in touch if you would like help with this.