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Baburaj V Nair, Chief Mentor & Founder, P2B Consulting (https://www.linkedin.com/in/baburaj-nair-309a39a/)
Pessimists may indicate that the current scenario could lead to a bleak economic scenario and predict doom
scenario. Optimists may indicate that we have managed such scenarios earlier and we shall come over it,
without doubt. But a realist shall plan for a multiple scenario and will plan from a worst scenario, knowing fully
well the odds we must face, based on information garnered through different data analysis. I am therefore,
neither trying to portray a bleak scenario or an optimistic scenario, but only trying to draw a realistic scenario
and push senior management team to go for a contingency plan, urgently, pro-actively.
A study of economic depressions / recessions in global economy during the last 100 years,
directly impacting a few continents on each such events, and indirectly impacting other continents
and countries can provide a few insights for us. One economist jokingly defined recession and
depression as, "If your neighbour gets laid off, it's a recession. If you get laid off, it's a depression”.
More scientifically, a recession is defined when two consecutive quarters of negative growth in
the gross domestic product (GDP) happens. In other words, during this time, "a significant decline
in economic activity spread across the economy, lasting more than a few months” can be felt.
Depressions can be defined as drastic economic downturns in which actual GDP falls by 10% or
more and takes more time to recover. Normally, the impact of a recession goes through a year-
long economic impact cycle.
Such a severe event is bound to increase the government’s deficit. This is because the
government’s revenues shall fall and its expenditures rise, with extra payments to the casualties
of the slump, whether households or banks. Cutting the deficit by cutting welfare becomes the
litmus test of a government’s determination, especially in a democratic country. Once a downturn
gathers momentum, the scale of intervention needed to reverse it becomes frighteningly large.
Budget deficits balloon, public debts soar, governments take over banks – all conjuring up visions
of looming state bankruptcy.
Even before the advent of COVID, the risk of a recession beginning in the next 12 months is
estimated to be 20%, according to The Wall Street Journal’s survey of economists. Irrespective
of this, many CEOs/CHROs are still in a reactive, pause stand: waiting for the scenario to emerge
and then act.
Lessons from earlier such recessions/depressions indicate a few or many of the causes given
below, impacting the economy – macro and micro.
• Stock market crash (Investors will pull money out of the stock market. This will drain capital out of the businesses
and cause an economic slowdown).
• Bank failures: Risky lending, Inadequate fiscal policy. Banks tighten their lending standards, slowing the economy
even further.
P2B Consulting – People Process to Business Results
EMPLOYEE PRODUCTIVITY & COVID

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• Housing Crisis: When the prices of houses fall the owners start losing equity. They can-not pay their mortgages or
take second mortgages on their homes. This may lead to foreclosure, as happened in 2007-08. Though the direct
impact in countries like India due to this will not be high, if other dependent countries economy fail, it will adversely
impact our economy too.
• Exogenous shocks such as wars or sudden declines in the supply of key goods.
• Rising bankruptcies: Economic Scandals and Frauds: Sometimes banks, large corporations, and even government
institutions employ questionable practices and illegal activities to boost profitability. When such schemes and scandals
are exposed, the entire economy suffers. Many such instances in India and abroad are known to us.
• A slowdown in industrial production and manufacturing
• Widespread, prolonged drought
• International trade collapse – impacting foreign investment
In earlier instances, the major impacts were on Financial Institutions, Construction, Housing,
Agriculture, Gas & Petroleum, and Aviation sectors. However, in the current scenario, if a single
larger (say Fortune 1000 company) gets impacted, all its ancillary organisations, which have a
symbiotic business relationship with the larger company shall get very adversely impacted. Some
of the impacting areas could be:
1. Sales revenues and profits decline:
2. Falling stocks and declining / No dividends: Declining revenues show up on its quarterly
earnings report, stock price may decline; Dividends may also slump, or disappear entirely.
3. Dampens company's accounts receivable (AR), leading to poor cash flow cycle impacting
other companies too. Making late or delinquent payments will reduce the valuation of a
corporation's debt, bonds, and its ability to obtain financing. It can further lead to other
tightening measures, which will impact the organisation’s future growth
(expansion/acquisition/merger etc.)
a) Extremely tight credit norms
b) Cut back on hiring new employees, or freeze hiring entirely.
c) All future investments (capex or otherwise) in abeyance: stop buying new equipment (a factor of
expansion of business gets hit)
d) Curtail on research and development expenses ; Stop new product roll-outs, Drastic reduction in
expenditures for marketing and advertising.(Decline in advertising expenditures will whittle away at the
bottom lines of giant media companies in every division, be it print, broadcast, or online)
e) Retrenchment of employees, and more work will have to be done by fewer people resulting into lower
morale and lower productivity, if not managed effectively.
f) May be forced to close plants and discontinue poorly performing brands/outlets.
g) May compromise on quality, and thus the desirability of its products.
4. The company's ability to service its debt (pay interest on the money it has borrowed) may also
be impaired, resulting in defaults on bonds and other debt and further damaging the firm's
credit rating. A company's debt may need to be restructured or refinanced, meaning new
terms will have to be agreed upon by creditors. If the company's debts cannot be serviced
and cannot be repaid as agreed upon in the lending contract, then bankruptcy may ensue.

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The company will then be protected from its creditors as it undergoes reorganization, or it
may go out of business completely.
Impacts adversely on Small Businesses: Without major cash reserves and large capital
assets as collateral, and with more difficulty securing additional financing in trying economic
times, smaller businesses may have a harder time surviving a recession. Bankruptcies among
smaller businesses typically occur at a higher rate than among larger firms. Too many
bankruptcies may also discourage banks, venture capitalists, and other lenders from making
loans for start-ups until the economy turns around.
5. A decline in real income shall impact adversely on consumer spending and reduced
consumer purchasing power. This vicious cycle reduces consumers' purchasing power and
firms' revenues to the point that they miss mortgage and business loan payments. : When
the wages and salaries of workers do not increase with the same level as the inflation in the
economy, the purchasing power of the public will reduce. He will not be able to afford the same
goods and services that he use to. This can cause an economic slowdown. Consumers
drastically cut back on spending, putting additional pressure on firms and setting off further
job cuts.
6. Lack of confidence among consumers and public, making them to take panic decisions.
a. In earlier instances, the International Monetary Fund had to step in to create bailout packages for the most-
affected economies to help those countries avoid default. But, in current situation, the countries seeking
help would be many, prioritising and providing such a support by the IMF also would be quite challenging.
b. Required government bailouts of unprecedented proportions. In earlier instances, it took almost a decade
for things to return to normal, wiping away millions of jobs and billions of dollars of income along the way.
Capitalism is a continuous process of destruction and renewal in which entrepreneurs play a key
role in overhauling the system (20th-century Austrian economist Joseph Schumpeter). This
enables long-term growth and balanced Economic Growth. Therefore, many larger companies
may look ahead and consider these events as “Constructive destruction” (economic decline
allows the economy to clean out the excess. Inventories drop to more reasonable levels.
Moribund firms that had limped along during a period of expansion go out of business, allowing
capital and labour dedicated to them to be used in more productive ways. It creates buying
opportunities. The S&P 500 stock market index, for example, shot up 285% from its trough in
2009 to October 20, 2017, after 2008 recession).
nCOVID Context and the way forward:
Therefore, some of the larger conglomerates will wait and watch how the situation is
developing. But, if the current situation continues, impacting all countries adversely it
will uproot the basic tenets of rural economy and its impact on consumers/companies,
and even governments could be devastating.
The solutions to the economic crisis are not easy. Consumer confidence is a definite
factor. If a consumer believes that the economy is in downturn he will spend less money
and invest less money as well. This will have an adverse impact on the economy. Hardly
any sector is recession-proof, but some sectors are not too sensitive. Healthcare is the
best example of very light exposure to recession risk, as are some other services.

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On the opposite end of the spectrum, construction and capital goods are highly cyclical
and may be much worse off than general news reports.
Therefore, I strongly feel that a contingency plan to manage the environment would be
highly desirable at this juncture. A broad framework is created, and others could build on
it.
This scenario warrants a dramatic difference in approach.
a. Build a symbiotic relationship among all stake holders, including government, and
society. The most critical factor here is to create confidence in the society and not
making them panic. A healthy and confident society can help manage any big crisis.
A more pro-active, multi-layer involvement is a must to make it happen. This will
also bring a more robust co-dependence among this triad.
 Must be triangular approach: Corporates, Government, and Society. Here, society includes employees
at large, and not just in its company, but in its ancillary companies too. Government must have a global
as well as local reach.
 Multiple business associations – sectoral and non-sectoral have to immediately convene meetings to
define a contingency plan and advise governments on what support is required.
 Media should have specific guidelines on “how to communicate in such environment”.
Consumers/people shall have a panic mindset and will start taking decisions which will adversely impact
even a well-planned execution. Therefore, it is critical to have a complete road map available with media
and transparent process is made between government, corporate, media, and society. This is one of
the most critical area to be addressed.
 Central Government needs to ensure that a strict policy/guideline must be implemented without any bias
– political and religious and more important people should feel that the actions are just, fair and a must
need.
 Judicial code of conduct must be redrafted. It must be communicated to all politicians which factors shall
be entertained by the Judicial system on this context to avoid waste of judicial time, and more critical
taking undue advantage and using it for political mileage.
 Each Industry collectively can create a fund which can be used to support that industry with the active
support of the government. Norms for fund creation and tax benefit need to be discussed and firmed up.
 Banking sector must have clear guidelines from RBI and Financial sector and no deviation to be
appreciated and immediate action with big penalty including dismissal from services and imprisonment
should be made to ensure that all are aligned and work together with a purpose of saving the nation.
The government can be stronger and take more forceful directional decisions only
if the captains of various industries – irrespective of political lineage – come together
and support the government. Therefore, the triad need to be formed with specific
broad guidelines to ensure that such support is not mis-used by any government.
b. Focus on the entire Corporate Business value stake holders – externally, rather than
just internal focus. It should have a global reach, cutting across the continents.

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 Understand challenges and see how to re-align and support. The focus should be on how to survive
and not how to increase return. Have the courage of sharing difficulties and build a more robust working
relationship.
 Redefine credit terms and have a plan of actions on deviations
 Ensure that “transparency, authenticity” is a major value
 Redefine product mix and market segmentation. Use Co-opetition principles (A revolutionary
mindset that combines competition and cooperation)
 Imagine all possible psychological changes in Consumer Attitudes and therefore impact on the
business: Economic hardship can create a change in the mindset of consumers. This generally causes
the national savings rate to rise and allows investments in the economy to increase once again. (learn
from new economic concepts such as Chrysalis Economy, Behavioural Economy (Nudge concept is
one of behavioural science factor) and redefine its sales process. Involve all key stake holders in
mapping to have proper ownership.
c. Focus on the entire supply chain – backward and forward. Distribution and logistics
would be a major challenge.
 The migrant labour – availability and safety – is going to be a major challenge. Whether scarcity will
increase the cost of labour? Whether government can intervene? Can they be more involved team
members, than currently being made to feel.
 Inter-state / international national logistic planning. Higher cost needs to be factored in such initiatives.
d. Focus on productivity. It is more sensitive due to its societal values, economic
impact, and political overtones. Hence, until and unless it is planned well in
advance, and executed with a positive long-term perspective, any decision on
retrenchment shall back-fire.
e. Unproductive employees, irrespective of investment on them to improve and
contribute. Even at senior level, this needs to be implemented. Generally, at senior
level, due to position or due to longer services, not much actions are affected at the
people at senior level and actions are initiated more due to “non-alignment with
other members”, rather than just unproductive. A more transparent, authentic,
action plans cutting across has to be planned.
 Each company must plan the reduction of manpower keeping the culture and impact. Finance, culture,
values, and the conviction of the leadership are critical in making a well-planned process to be
implemented without backfiring.
 This should be the last resort but can be communicated well in advance to avoid any unpleasantness.
 Focus on Organizational Obesity: Study the entire organisation and see where and at what level the
organizational obesity exists. It can not be same for each function, and hence had to study effectively
for each function – age, demography, skill sets, expected contribution, future growth plan etc.
 All such decisions together to be brought to the notice of government to ensure that if any specific
support can be provided to these personnel and support from Income Tax benefits.

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f. Operational cost reduction:
 Create a committee – cross functional, cutting across the levels – and categorise them on ABC level –
High, Medium and Low probability. Have a framework ready for them to work. i.e. how much to be
reduced at which area, periodicity or abeyance for a period etc.
 Unviable plants have to be closed down and the unit/space if it is owned to be used more creatively.
 Ensure Quality of service or products are not hampered – but alternative process like packaging,
inventory management, lower content etc. can be explored.
 Create an Employee connect process plan. To ensure that any employee who have supported the
company in the environment is helped and supported in the best possible manner in future and in some
cases even in current environment.
 Opportunity of salary cut.
As the recession increases in severity and length, management and labour may meet and agree to
mutual concessions, both to save the company and to save jobs. The concessions may include wage
reductions and reduced benefits. Studies of rise in Unemployment due to job losses (6% to 11% during
a recession, and it can hit upto 25% during depression) have shown that the involuntarily
unemployed tend to suffer higher levels of anxiety, stress and depression than the employed, as well as
more frequent hospital admissions and premature death.
Further lessor income means, lessor purchasing power with the consumers and that will impact the
overall business cycle.
Hence, this is a very sensitive process and needs to be planned with utmost care.
▪ Fix an amount and above that the salary cut can be implemented. ( In some international companies,
actions already initiated from 1st April. Chairman (100%) Sr. Management (50%); Middle
Management (40%); and Junior Management – 30%. But, in India, keeping the culture of the
organization, and involving unions and key working-class employees, a definitive more innovative
process can be initiated.)
▪ Furloughs can be implemented.
▪ Part-time jobs can be given for a fixed period and the same can be made to full time role when the
company comes back to growth mode.
▪ Fexi-time and flexi compensation can be planned.
▪ Minimum sustainable income based on family members to support can be planned and executed.
▪ Piece work based compensation – if appropriate
▪ Productivity based income, after a sustainable income while working from home.
▪ Deferred income process with a commitment to return the deferred salary, if the situation returns to
normal. This should be a board commitment.
▪ Re-aligning all benefits and performance related rewards.
▪ Utilising all leaves, if the company has a policy of 120 and more PL accumulation policy or sick leave
accumulation policy. Re-align in a manner that it will not impact the employees with longer service.
▪ Old versus new employment for people who are not adding value and becoming aged. Deploying
their children if they are good and capable.

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Most of us know the truth, but are not willing to accept the same, due to huge uncertainty
and the inability to manage this uncertainty. We must realise that nobody has any clue
on what is going to happen and how it is going to be impacted our daily life as well as life
itself.
But, together, if we plan ahead with a sense of survival and purpose, we can definitely
come out with a more effective solution, than groping in darkness and acting based on
“what others do”, and getting into a psychologically bad blame game.
Such an attitude shall not help the government, who is going to be the key player during
this entire process. Strengthening that entity as a team and holding them accountable is
possible only if the Corporate world – small, medium, and large – come together with a
purpose: Survive with the Society.