Hi Managers: After the disaster comes a 'new normal'

Since the worst of the floods has receded, it has been replaced by a sense of foreboding about the long-term consequences on this nation.
It is human nature when disaster occurs, be it man-made or otherwise, to yearn for a return to normalcy – the secure cocoon of our daily routines. But, very occasionally, something so dramatic occurs that one implicitly knows it will have such a severe effect that it cannot be undone or reversed – in essence it creates a “new normal”. Fortunately, there are not many of these events, but when they happen, it is important to know that they have occurred and to adapt to them.
As the floods started receding, Grant Thornton gave post-disaster Business Stabilisation Workshops to more than 50 companies that had been directly affected. These workshops were interactive, giving companies a chance to speak about their experiences and to air their questions about the future.
There were a few common themes that came up in every session.
The most notable was the profound degree to which businesses and people had been traumatised both physically and psychologically. Post-disaster studies from around the world support the fact that not only does it take a considerable time for people and businesses to recover, but also that pre-disaster status is rarely attained again. For example, Hurricane Katrina hit the southeast coast of Louisiana six-and-a-half years ago. Today the population of New Orleans is 343,839, down from an estimated 455,000 pre-Katrina. In a study, the US Federal Emergency Management Agency (FEMA) reported that more than 90 per cent of the small businesses had failed two years after the disaster, even though the US has more organised federal assistance and NGOs than Thailand.
An important reason is that all businesses are essentially connected to each other. Just because one business is okay, it does not mean to say that their suppliers and customers are, and so on. Big businesses, which may be okay, are connected to small companies, which may not be. Over time this creates changes to the ecosystem as companies come and go almost like an aftershock of the previous disaster.
In 2005, Louisiana contributed just 1.2 per cent of the gross domestic product of the US. Bangkok, however, contributes 40 per cent of the GDP of Thailand. Given its dominant contribution to GDP, it is likely there will be less population shrinkage and great determination to fix it. However, for the participants of our workshop, it was clear that they foresaw significant long-term implications for their businesses. Importantly, this was also associated with the fact that it was impossible to say that it could not happen again, with the resultant impact on confidence and rebuilding – both business and personal.
The timing was also undeniably bad. Given a high likelihood of global recession fuelled by European debt, with the US in only a very fragile recovery, and China and India’s growth slowing, large companies are reviewing their investments for the next five to 10 years. The Bt300 minimum daily wage taken in isolation is a good thing, as I have written previously, but its arrival during this tempest is a further challenge.
Related to that, in every workshop, one of the most-asked questions was how to lay off workers after the flood. There is no question that the workforce will be downsized in Bangkok. Fortunately, Thailand has a social system that can absorb these workers, but how long will they be laid off for?
Other questions concerned insurance, cleaning services, employee communications and the realisation that in the future, all of these must receive more attention and more focus in Business Recovery/Continuity Plans.
Standard operating procedure for national governments during times like this is to make and voice optimistic projections about investment and growth for the years ahead to try to increase business confidence – confident people spend money. But as business owners, we should “hope for the best, plan for the worst” as the reality, studies tell us, are likely to be closer to the latter.
So how can we prepare for our “new normal”?
Many business owners will be instinctively trying to make their “new normal” benefit from the floods, for example introducing new products or services that will be in demand during reconstruction. There is opportunity post-disaster.
However, the reality for most businesses is that their “new normal” will be more negative, so the question in a lot of minds today is: Can the positive “new normal” offset the negative?
The answer, unfortunately, is that it cannot and that the old normal is exactly that – old.
To prepare for this “new normal”, businesses should get very pedantic over the next 12 months; for example weekly meetings chaired by the CEO, where sales pipelines, the profit and loss statements, suppliers and employees are all thoroughly reviewed in detail. Note that the effects may be gradual, so plans should be in place that can be quickly activated as the market changes. Plans may include new products or services that are more relevant to the “new normal”, closing down business lines that are not profitable, repositioning key staff where they can make more difference, freezing new recruitment, reviewing new investments and looking at ways to increase productivity of existing businesses.
Preparing and purposely shaping the organisation ahead of time will mitigate the effects of any downturn, possibly even making a stronger organisation in the “new normal”.

Andrew McBean is a partner at Grant Thornton Management Consulting, a unit of Grant Thornton Thailand. His column appears every third Monday of the month. He may be contacted at [email protected].