Since the pandemic began, business leaders have been tasked with many tough choices and seemingly mutually exclusive goals: behaving fiscally conservative to weather the crisis while, simultaneously, looking for growth opportunities and ways to pull ahead.
Now, as we move into the fourth quarter of 2020 and the new year comes into view, business leaders are wondering what’s next when it comes to cash management in these uncertain times. During a recent YPO Presents, Chris Larkins, senior partner at CEO Coaching International, and David Sun, also a partner at CEO Coaching International, spoke with Kerry Siggins, CEO of StoneAge, about tips for fueling growth in the time of COVID-19.
While Siggins’ business isn’t recession-proof, it is a resilient one and a necessary one, she says, creating industrial cleaning tools for facilities in 45 countries. It’s simple: “We live in a dirty world and everything needs to be cleaned,” Siggins says.
So, while Siggins may not have been afraid of going out of business, she was concerned about what the pandemic could do to her bottom line and how big of a hit it would take and for how long. The first thing she did was cut out all discretionary spending and took it upon herself to be the one to approve all capital expenditures. “It was that serious that I wanted to make sure that everybody understood that this could have a very dramatic impact on the company,” she says.
Secondly, Siggins put her focus on accounts receivable. “We knew that to manage cash, we were obviously going to have to continue to try to sell our products,” she says. Siggins and her team were very proactive with their clients. “We called them immediately and worked on plans with them and took a very ‘We are here for you’ type of approach,” she says.
Thirdly, Siggins made a plan for what the company would do if the impact ended up worse than anticipated. “We made a plan for layoffs, for wage cuts and things like that, so that we could implement it quickly when we knew that we had to,” she says. The company did end up having to make some cuts, and Siggins says she was relieved to have the plan in place. “We were ready for it when we needed to make that decision,” she says.
Pockets of opportunity
For businesses with their feet in multiple countries, it is important to be flexible and to remember that economy re-openings are happening at different paces all over the world. This, says Siggins, can prove fruitful for a nimble global business. “As economies open up, shifting additional sales and marketing resources to those economies and just maintaining that flexibility seems like a best practice for others to follow,” agrees Larkins.
For Siggins, the staggered economic openings and closings have helped fortify her business. “As the United States was going into lockdown, China was coming out of it, and China’s a very big market for us,” she says. “It is an interesting time to figure out how do we push forward into China with the given constraints that we have there as well; our products have a 25% additional tariff put on to them right now.”
For Siggins, memories of the 2008-2009 financial crisis were still fresh in her head when the pandemic hit. “We were a very different company then, but we made the decision at that time to invest in product development and in marketing. And we bounced back so much quicker than our competitors in the market.”
Siggins felt like a similar approach was needed in this crisis as well. “We need to position ourselves to be the supplier of choice, the partner of choice, when we come out of this,” she says.
To achieve that goal, Siggins ended up acquiring Breadware, an AI company. The deal closed on 31 March right at the beginning of the pandemic. “I had to weigh the use of cash. Is this a good use of cash? How am I going to keep this additional head count employed? I had to really balance those decisions.”
Some people disagreed with the decision, and others didn’t understand it. But Siggins went ahead because she knew it was an important piece for her plan. “Part of our vision is to be the leader in robotics and automation and the industrial cleaning market. And so Breadware, being a product development company, designing, IOT, the Internet of Things, connected devices, robotic products, it’s very much a part of our future.”
Ring in a successful 2021
Siggins says she is heading into the new year very conservatively. “My advice to everybody is to have multiple select scenarios that you can enact quickly, depending on if you’re hitting your forecast or not, or exceeding it.”
But business in the age of COVID-19 is complicated. And while Siggins says she is going into the year conservatively, she is also looking forward and planning for growth and more robust times ahead.
“Be conservative, confront the darkness, so to speak,” says Larkins. “But at the same time, lay out that path to even bigger success on the other side of this.”
This is the dichotomy that leaders are faced with, says Siggins. “We have to figure out how to play both sides of that line and do it while still inspiring our employees to show up every day, employees who are sharing the pain of pay cuts and doing more with less right now and going, ‘Well, what is surviving like, and why are we investing in our future?’”
Layoffs versus salary cuts
Siggins had a choice between “sharing the pain with everyone” by making salary cuts or laying off some of her staff. She ended up having to do some of both. “The reason why I did layoffs is partly because my future vision is different than the current one that we’re living,” she says. “And I wanted room to be able to, when we came back, make different decisions about the kinds of roles that needed to be filled within the organization.”
So, layoffs came first and then salary cuts for everyone, from the top to the lowest wage earners. “We’re employee-owned, and we all have to share in it,” says Siggins. “We get to share in the success of the company, but that means we all have to tighten our belt. So that’s how we made our decision to do both a pay cut and layoffs.”
Siggins offered severance to everyone she had to let go. The severance included health insurance and money to help them with the transition, she says. The amount differed depending on in what country their employment contract was.
“I had to just go through state by state and country by country and make sure that we were making the decisions and implementing them in the proper way so that we didn’t get ourselves in trouble with regulatory bodies,” she says.
One of the lessons Siggins says she has learned from the pandemic is that as a leader you really need to be always thinking about the dichotomies of the decisions and trade-offs that you have to make and to do that in a really smart way. “That way, when the next crisis happens, because it will, you are in a position to weather it and thrive, on the other side.”
Hear more tips on fueling growth during the pandemic from global chief executives.