What role should a finance department play in a pandemic? HappyCo’s VP of Finance highlights the fundamental ways finance teams should shift their focus — from leadership and communication to data and testing.
With the coronavirus (COVID-19) outbreak causing devastating economic damage and affecting so many aspects of the workplace, HappyCo understands that business leaders are scrambling to answer the question: “what do we do?”
To help business leaders address the mammoth challenge of financial survival, we’re sharing strategies from Andrew Vernik, VP of Finance at HappyCo. Andrew has over two decades of experience in management, corporate finance and entrepreneurial pursuits. Here’s what he had to say about the way finance teams should pivot in the coronavirus pandemic.
To set the stage, what do you think makes the coronavirus outbreak distinct when it comes to economic consequences?
Multi-sector consequences: why the COVID-19 outbreak is historic.
Everything about this outbreak is unprecedented, as we’ve never had a multi-sector crisis like this — a global incident affecting travel, hotels, gyms, so many areas of business. In the past, when we had the great recession, it started with a specific trigger that caused ripple effects in one sector in one economy, with housing as the epicenter. Now, we’re facing a crisis on a much, much larger scale.
Given the profound economic uncertainty in the current crisis, what kinds of pressures do you think employees are experiencing that they may not have before COVID-19? How should managers be mindful of these stressors?
Navigating three profound workplace challenges
I see this crisis as causing three considerable challenges in the realms of physical, mental, and economic health — a combination of stressors that no one was used to facing at one time, let alone to this degree.
When it comes to physical health, people are not normally exposed to life-threatening conditions on a daily basis. At the same time, we have a primal instinct to respond to risk factors and to do our best to protect ourselves and our families and our friends. Naturally, this tense dynamic has a huge impact on people: i.e. how can we focus when we’re not safe, when we’re not able to ensure that our loved ones are safe? Consequently, our mental health may be affected for the worse.
In a lockdown scenario, people experience a fundamental change to their everyday routines. They might feel a sense of cabin fever; they might crave opportunities for outside interaction that are unfulfilled as they’re confined only to those in their households. Everyone is bound to experience the pain and anxiety of this pandemic in different ways, and it’s critical that managers — leading finance or any other kind of team — are sensitive to these expressions of suffering. Given the uncertainty of our current climate, I recommend that managers advise their employees: develop routines and a sense of structure, stay mentally occupied on something other than the news.
Finally, joblessness and payroll numbers are at levels never seen before. Needless to say, this will present an incredible strain on families throughout the U.S. Coupled with the physical and mental symptoms of this outbreak, this economic dimension will put an almost unbearable load on countless people across industries. That’s why it’s more important than ever for managers to be understanding and respectful of the stresses and strains on their team members.
Turning to Finance directors specifically, how do you think their roles within companies should change, post COVID-19?
Maintaining calm, leveraging expertise.
I’m reminded of the World War II saying: “keep calm and carry on.” Right now, no one wants to hear or see that their Finance Director has been shredding documents or rushing to the bank for a personal exit strategy. On the other hand, finance teams are often considered bean counters, back office types, and now more than ever it’s important to change this dynamic.
Finance directors should no longer be relegated to a dreary ten-minute powerpoint at the end of an executive meeting. Rather, companies should consult with and leverage the skill sets of their finance teams on a regular basis — not just for survival’s sake, but to collaborate on business strategies that could truly bear fruit.
How should Finance teams seize this newfound seat at the table?
Respond rapidly to changing information
First off, finance teams should be responding quickly to queries from other departments. As information is changing on an hourly basis, taking days to complete a report will not cut it anymore. Those numbers would be antiquated by the time they’re presented.
CEOs and COOs in particular will need credible reports at their fingertips to make tough calls, so finance employees will need to be able to bridge the gaps of the unknown for them. This will require frequent communication across departments, as well as a tight feedback loop with those gleaning information from the field (Sales, Customer Success, etc.).
Understand departmental impacts
A feedback loop is of particular importance, as sales and customer success teams have the best ability to assess industry trends (whether promising or damaging) that could affect forecasting and budgeting in profound ways.
Similarly, Marketing teams may be cancelling events left and right, but the loss of a trade show model doesn’t have to spell doom in its own right. After all, Finance may get word from Sales staff that webinars or how-to guides or podcasts are gaining traction with customers scrambling for answers. From there, a pivot to webinar software or a podcast hosting platform would be a valuable investment for Marketing.
If these desperate economic times have proven anything, it’s that nothing seems too crazy to try. When your survival is at stake, it’s time to get creative.
Trust (but verify) the data on offer
Nevertheless, the old saying of finance still applies: “trust but verify.” Finance teams should always question the integrity of data presented to them; they should always ensure that their systems and software are working as hoped. But finance teams should now go a step further and infuse that sense of skepticism in the leaders around them.
It’s always my practice to ask for questions during executive meetings, as I want the people around me to have full confidence in the figures I’m presenting. Now, it’s more important than ever for leadership teams to be making calls from rock-solid data.
Sharing data conscientiously
However, in the realm of reporting insights and data, I feel it’s important to stress: there’s a fine line between informing and fearmongering. At HappyCo, I’m leading my team in such a way that we’re publishing data to get leaders suitably concerned — not panicked or unfocused.
This is a tough and unprecedented situation, so while we’re here to open minds and encourage collaboration, comparing sales projections from a month ago against April’s forecast would be disheartening for all involved. Going forward, Finance teams should be especially conscientious about the way they’re presenting data — and to whom. It’s so important right now that they tailor their messages to leaders’ concerns, essentially acting as a marketing team in this key respect.
I recommend presenting potentially sensitive financial information through illustrative, accessible visuals — and leaving plenty of time for questions. Again, this allows department leads to not only understand what’s at stake, but also to feel heard and included in the strategy behind the numbers presented.
Checking in with leaders individually
On this note, I recommend that Finance directors take the time (soon) to check in one-on-one with their colleagues in leadership. As I mentioned before, everyone will experience and express pain differently through this pandemic, so it’s critical to understand your peers’ perspectives one-on-one before discussing budgeting and business strategy in group settings.
With those strategies in mind on monitoring trends and presenting data, what exactly would you recommend finance teams be identifying, measuring, and modeling right now?
Question revenue assumptions
Earlier, I mentioned the importance of questioning data integrity. In this climate, finance leaders should question their most basic assumptions surrounding revenue and expenses. CFOs and their leadership colleagues may well need to acknowledge a new baseline altogether. Once they agree on that baseline scenario, the door opens for a range of powerful safeguards: identifying failure points and conducting stress testing.
Identify failure points
As unnerving it sounds, it’s critical right now that finance teams brainstorm even the macabre. They need to pose questions like: “How do we fail? What does failure look like and what are our opportunities to change course before it happens?” These aren’t exactly optimistic lines of thought, but the findings they spur can absolutely be leveraged to help teams prevent the worst.
Prioritize liquidity as your must-know metric
Along these lines, I think it’s incredibly important that finance teams get a firm sense of their company’s liquidity. Many firms may have an entrenched sense of the value in various metrics and KPIs — the notion that delivering a great product at a higher price than the competition will inherently spur growth.
However, more than ever, it’s critical that companies scrap tradition and embrace a new metric of survival in liquidity. Essentially, it refers to the ability of a company to remain solvent and carry on with operations — based on how much cash they have to pay employees, vendors, etc. Most companies would never contemplate the possibility of losing every single customer in the span of one month. Unfortunately, this worst-case scenario is now a genuine possibility for a range of businesses, post-pandemic.
Now is the time to ask the uncomfortable questions of: “what do I do if this is the only money I have left? Are there payments I can defer?" All of these decisions stem from a liquidity mindset, and that’s precisely the framework finance teams will need to leverage — and their colleagues must buy into — in order to stay afloat.
Consider government loans
Traditionally, a crisis is not the best time to seek a loan; desperate times are when predatory lenders seize on the vulnerable. However, I’ve been heartened to see governments across the world start to create sizable bailout packages with reasonable interest rates as this pandemic grows in scope. It’s in governments’ best interest to maintain the flow of credit, but it’s not a given, so I’m glad to see them acting.
Unfortunately, in a state of hopelessness, many small businesses have shuttered altogether because they didn’t foresee that these bailout loans would be on horizon. It’s why I caution companies to check in with local bank managers and stay abreast of government announcements before calling it quits. Additionally, I would caution those contemplating large reductions in headcount to consider more creative cost reduction strategies. Oftentimes, mass lay-offs allow for a bare-minimum survival mode but limit the company’s ability to prosper and grow on the other side of a crisis.
Conduct scenario testing
Additionally, every finance team needs to start scenario testing. They should be modeling in ways their textbooks didn’t teach them. Now is the time to start from a blank slate and ask: “how will long-standing paradigms start to shift? What are all the variables that might affect our potential to stay in operation?”
They should begin with a budget or a baseline figure (mentioned above) in Excel and start exploring how various scenarios will spur different financial outcomes. By modeling a range of possibilities, companies can get a sense of where they should and shouldn’t be spending money.
Maintain your daily routine
Still, I think there’s great value, too, in preserving some sense of normalcy among your finance team in these chaotic times. That means continuing to deliver on objectives, focus on accounts payable, etc. By adhering to various routines this way, your teams can benefit from a sense of equilibrium even as they work to be more agile than ever before.
With this pandemic causing so much economic despair, can you weigh in on the potential for growth opportunities? The hope that, with a little creativity, companies can actually come out thriving?
What comes to mind first are examples from various gyms. As these companies watched shelter-in-place orders take effect in city after city, internal teams must have been asking: “what happens if people can’t walk through the front doors and work out?” From that sort of verbal scenario testing, many of these businesses started offering virtual classes — all to ensure membership revenue kept flowing. They shifted focus and are reaping the benefits.
Many restaurants are also proving more and more savvy as shelter-in-place orders expand in scope. For example, a growing number of restaurants are working to transition to a take-out, delivery, and even interactive cooking class structure, so that they can maximize the potential for paying customers even when people can’t enjoy a meal from inside a brick-and-mortar location.
To me, these are inspiring examples, ones that make clear: despite all the pain caused by this pandemic, there’s a profound opportunity for workplaces to grow more collaborative and creative than ever before.
On that work culture note, is there any other advice you’d like to give finance leaders facing the biggest crisis of their careers?
Now is the time for finance directors to express gratitude and to show kindness. Those were always good traits to have as a leader, but in this new chapter where people are suffering in unforeseen ways, having a sense of empathy for employees is crucial. People remember how you treat them in a trying time, so finance directors would do well to acknowledge people for stand-out work — publicly and privately.
Additionally, companies in a robust financial position may be wise to boost morale in this climate by offering certain home office benefits — from internet stipends to funding for ergonomic furniture. By providing simple perks like these in a painful time, leaders go far in building trust and loyalty with their teams, finance or otherwise.
Above all, however, finance leaders should take this to heart: if an employee is struggling to focus while working at home with their kids moving around, a word of encouragement from the top could be a highlight of their day — a piece of light when they need it most.
Andrew Vernik brings more than two decades of experience in management, corporate finance and entrepreneurial pursuits to his role as VP of Finance and Operations at HappyCo, having founded and exited a number of rapidly growing and profitable technology businesses. Prior to joining HappyCo, Andrew held senior roles in a range of banking and corporate finance engagements, specializing in M&A, financial forecasting, corporate treasury, enterprise risk management, strategy and capital markets.