Many businesses locally and statewide are starting to reopen this week. But exactly what they’ll face is largely unknown.
“Once a company is authorized to go back to business, there’s really not a business to go back to in the sense of the one that was left,” Dr. Bill Andrews, a professor of management at Stetson University’s School of Business Administration, told The Beacon. “Finances have deteriorated over time, and people have left.”
Andrews said there are three categories of concerns that business owners need to address simultaneously when they decide to reopen: financial, legal and personnel.
“There is substantial overlap between these categories, but it’s a helpful way to think about restarting,” he said.
Fixed costs like rent and insurance did not cease when social distancing started, and revenues either dried up completely or fell off substantially, especially for businesses related to tourism, Andrews said. A company finds itself in a terrible cash position compared to where it may have been before quarantining started. So the first job is to arrange financing so that a business can rehire and resupply inventory.
“The really small businesses — say under $2 million in annual revenue — that I have spoken with have said that they have fallen through the cracks of the government’s small-business rescue loans,” Andrews said. “The loans seem to be more accessible to larger businesses with more sophisticated legal, banking and investor relationships that help them navigate the bureaucracy.”
Legal issues are complex, he said, but there are two prominent issues in play.
Most importantly, in many contracts there is the force majeure clause, or act of God clause, that provides both an ethical and legal basis for nonperformance of a commitment or contract.
“Small businesses may do well to review their contracts to see if there is such a basis for modifying their obligations,” Andrews said.
Secondly, there is the issue of safety as employees return to work. Under federal guidelines, employers have a legal obligation to provide a safe and healthful workplace. This will likely require activities that a business was not performing prior to the virus.
“At a minimum, the business should have an employee awareness program, ensure that they have reasonable personal protection equipment, and have some process for identifying and isolating employees who show symptoms,” according to Andrews.
Recovering employees, to a large extent, may be determined by the pre-COVID culture of an organization and how it said goodbye when they were laid off.
“To the extent that their furloughs or layoffs were done compassionately and with full disclosure as to why they were necessary, the prospects of rehiring the same employees are improved. That puts you miles ahead of having to retrain new employees.” Andews said. “On the other hand, if they were simply dumped as ‘factors of production,’ then it may be very difficult to rehire them.”
It is also likely that you will not be able to restaff to your original size, which may involve broadening job descriptions, reassignments, or retraining for those that you do bring on, he said.
“This in itself will feel disruptive to employees who return, and the managers will need to be supportive and understanding as the company rebuilds the staff,” said Andrews.
Andrews didn’t want to make any kind of predictions on how well reopening businesses will go.
“I could, but my crystal ball from Cassadaga is not working very well,” he said. “I think there’s going to be a tremendous amount of uncertainty going forward.”