Ray Zinn, the longest serving CEO in Silicon Valley has seen business disasters come and go, and dodged many of them.
In this episode of the Tough Things First podcast, Ray discusses how to plan for unplannable disasters, and even the common ones.
Guy Smith: Hello again, and welcome to another episode of the Tough Things First Podcast. I’m your host for today, Guy Smith, and as always, I’m really excited to have a chat with Ray Zinn about a topic which I think is on everyone’s mind. 2020 has been a heck of a year with the pandemic. Businesses have had to react to a disaster which is normally not on their books, normally not in their planning. Ray has been through many up and down cycles, many disasters in business, and we’re going to have a chat with Ray, the longest serving CEO in Silicon Valley, about how somebody in business, how a business leader can plan for disasters in general, but also for these whopper disasters that come around maybe once in a lifetime. So hello, Ray. Great to be with you again.
Ray Zinn: Well, thanks, Guy. Yes, it’s great to have you on the podcast with us.
Guy Smith: Always enjoy doing it. It’s exciting, it’s intellectually stimulating, and I learn more about practical business working on this podcast than anything else I get to do during the week. So let’s dive right into it. 2020 has been a disaster. Pandemic has really racked a lot of businesses, from the small to the large, so why don’t you give us first your perspective about what is the difference between a normal disaster, a run of the mill business disaster, and something exceptional about an event like a pandemic, and why this changes the way the business leader might do their disaster planning?
Ray Zinn: Well, Guy, I like to think of, all disasters are disasters. I mean, there’s no good disaster. And you could say that depending upon the kind of business you run, one kind of a disaster could impact you more than another kind of a disaster. So for example, if your company was a clothing company and you could switch to making face masks and other protective clothing, this disaster is actually a boom or an advantage. A disaster for one person can be a boon for another. For example, when you get a cavity or you break a tooth, that may be a disaster for you but it was a great thing for your dentist. Or if your heart goes bad, that’s a disaster for you but it’s a great thing for the heart surgeon.
So there’s always a… For every dark cloud, there’s a silver lining for someone else. So again, depending upon the kind of business you’re in, one disaster could be a boon for another business. But not withstanding that, trying to plan for something that will impact your company, presuming your company is not going to benefit from the disaster, is what we’re really talking about today, and that is to be prepared. As I say, plan for the worst but hope for the best. And so make sure you have sufficient cash reserves to hold you through the disaster. I like to think that three to six months is a minimum.
This particular one, the pandemic that we’re currently facing, has gone nine months so that’s a little extraordinary, because generally, these disasters tend to start slowing down in about a year, year and a half, something like that, so that they kind of recover in about that time period. This one may recover in about that time period too based on what we’re seeing. But if you can have at least three to six months worth of working capital and reserves, that’ll definitely a way to stave off the effects of it.
The other thing is of course to have a good relationship with your employees. Your employees can withstand a disaster if they know that you’re in there with them, if you’re actually feeling the pain just as much as they are. And when I was running Micrel, the thing I like to think of is treat my employees like family, and families stick together. And my employees were willing to do whatever it took to keep the company going because we had a good relationship with our people.
Guy Smith: All great points, and in terms of businesses that actually benefit from disasters, that’s not really all that educational for the audience today but it is fascinating to watch. I have a friend who owns a factory and they make valves, and about three months into the pandemic, I was wondering how his business was doing. And he very sheepishly said, “Guy, I hate to say it but business has never been better.” And the reason was that a lot of the valves that they make go into medical equipment, and the demand for that medical equipment had just spiked through the ceiling. So yeah, some people do definitely walk away from disaster better off.
But on the flip side, let’s take something like your local mom and pop restaurant. The pandemic and lockdown really started back in March. Given the timing of when the vaccine will be available, it’s probably not going to be until February or March before they can be fully back open again, and that may even be optimistic, so we’re looking at a year of a severe shutdown. So for the average startup, let’s talk about startups for a second. What did you see that they did well or did wrong, aside from not having enough cash in the bank, in reaction to the pandemic? What were some of the things that were obvious and smart survival tactics?
Ray Zinn: For those who can pivot, that’s the key, and if you’re a startup and depending upon what kind of a startup you are, being able to pivot to keep yourself alive is key. So one of my grandsons, he’s graduated already but he lost his job during the pandemic, and so he was struggling to keep his family going, and so he started doing YouTube videos and selling those. And I thought that was kind of a cute thing to do, so he pivoted. In other words, he just said, well, rather than just stay home and do nothing, I’m going to see if I can make lemonade out of these lemons. That’s the kind of thing that you need to do if you’re a startup, is you have to pivot if you want to stay in business, so you’ve got to find ways to earn money.
Another one that comes to mind is this person was running this pet salon where they do shampooing and combing out the pet’s hair and nail clipping and so forth, and so because of the pandemic, they had to shut down their store. But they went and got a couple of vans and then they went mobile. And even though they did social distancing, they were able to go to the client’s home, and there, they were able to service those clients by actually going to their location to take care of their pets. So again, pivoting, that’s the key. These mom and pop restaurants, as you’re talking about, rather than sit down dinners or meals, you could pick them up. They actually had ways for people to drive to the curb and then the employees would come out, actually deliver the meal to the customer. So again, pivoting is the key. Just because you’re down, you don’t have to be out.
Guy Smith: And that relates to the barbecue restaurant right down the street from me. Being a Southern boy, going without barbecue is considered a cardinal sin, and when the pandemic came in, they pivoted hard, hard, hard to the takeout and delivery motif, even incorporating it into their loyalty advertising to people like me, doing very cute things like saying, life without barbecue is meaningless. Let us add meaning to your life. We will deliver your barbecue on an emergency basis to your house. And they found a way of keeping the customer base and even possibly expanding it during the pandemic. And let’s touch on that for a second because customer loyalty I think is one thing that’ll get a company through hard times better than just about anything else. Talk a little bit about what you’ve seen during the pandemic in terms of companies that have great customer loyalty, or maybe marginal customer loyalty, and what that’s done in the way that they can get through.
Ray Zinn: Well, as an example, during the pandemic, my wife had a difficult time getting her hair done. So she tried to get ahold of the owner, the salon owner, but wasn’t able to. And so she just said, okay, so much for that hairdresser. She went out and found someone else to do her hair who was more flexible and more willing to take some chances, I guess is a better way to say it, and she was able to keep having her hair taken care of. So again, loyalty is extremely important, no matter what business you’re in because your customers will stick with you if you have the right attitude toward client service. Especially during a difficult time like a pandemic, you want to be on the phone, texting and emails with your clients regularly, even more so than during regular times or non disaster times.
Guy Smith: I think I’ve seen a lot of that from small to large businesses, the ramp up in terms of any outboard communication seemed to increase. I’m willing to just ballpark this at about 25%. Everyone seemed to believe that staying in touch with the customer was not harmful and probably necessary in terms of staying top of mind during the pandemic, but also after the pandemic resolves itself. Did you see any large companies who did not do well in response to the pandemic? And how did they stub their toes?
Ray Zinn: Some of these airlines that were not flexible, they were still charging you for changing your reservations. I think they suffered. Now, many of them did get off of that kick and didn’t charge for changing your reservations. During this pandemic, I mean, everybody is going to suffer, and the last ones you want to suffer are your customers. And so you want to make it as convenient and as good an experience as you can for your customers. Some of these computer companies didn’t do a very good job either because they kept complaining that they had a hard time getting parts. In other words, that parts suppliers were the reason for their not being responsive and taking care of their customers. And so that was another large industry that I don’t think did particularly well during the pandemic, especially with people having to stay at home and run their business or run their employment from their home. They need to have access to their computers and to their network.
Some companies did well in taking care of their customers, others did not do so well. Companies like Zoom I think did a pretty good job. They jumped in and actually made it convenient for their customers to use their product, but also some of these other, WebEx and so forth didn’t do so well. So depending upon the kind of services you wanted to provide, don’t blame your demise on someone else. Just accept the responsibility to satisfy your customers and not let them suffer because you’re having to suffer as you would.
Guy Smith: Very good advice on that one. So planning for a normal downturn, a normal disaster, you’ve said anywhere from three to six months of cash in the bank, being close to your employees, but how should a business leader incorporate mass scale disasters into their forward planning? It’s maybe a once in a lifetime event, but should a business leader be incorporating that? And if so, what precautions should they have in place in order to deal with something this big?
Ray Zinn: Well, as you know, all these emergency companies, emergency governments have had their disaster preparedness, and they go through drills and they go through all kinds of rigmorole to practice for a disaster. So the fact that you may not be having a disaster doesn’t mean you don’t want to plan for it. So depending upon the kinds of potential disasters you’ll have in your area, whether it be fires or floods or hurricanes or whatever, preparing for it, even though it hasn’t happened yet, is key. And I think the people in California saw that with the problems they were experiencing with these fires. They harangue the public utility company that supplies power to the point where at the drop of a hat, they would shut off power for fear of getting lawsuits and other problems.
So preparing for a disaster is necessary. As I said, plan for the worst but hope for the best. So I’ve been involved as a ham operator in a number of disaster planning times. We just recently did one here for earthquakes, so even though we weren’t having an earthquake, we all checked in at a certain hour, at a certain time, just to make sure all of our gear was working and that we could communicate in the event of a disaster. So plan for the worst but hope for the best, that’s the key.
Guy Smith: And before we wrap this up, let’s talk a little bit about the interaction with employees during the disaster. Now, one part of that is of course the normal leadership practices, stay calm, keep on course, blah, blah, blah. But a lot of companies had to make some harsh trade-offs in terms of furloughs, layoffs, outright terminations, rescinding of Christmas bonuses, et cetera. Let’s coach a couple of startups here, what the wiser trade-offs that a company can make when they have to go to their employees and say, this is a long-term problem and we have to make some changes.
Ray Zinn: Well, we think we talked about that earlier, and that is as long as you’re willing to suffer more than they are, for example, when I ran Micrel, we had a number of disasters. I always made sure that if there was time off, I took twice as much time off as employees did. If there was a pay cut, I made sure my pay cut was two to three times more pay cut than they had to suffer, and so I just want them to know that I was in it all the way. As they say, are you in it all the way? They didn’t have the feeling that I was taking advantage of the situation.
Guy Smith: Wow, and I think that’s good advice for anyone, shared suffering or at least a commitment to your employees through demonstrated self-sacrifice is one of the things that keeps employees motivated, keeps them believing in the mission and the vision and the company, and staying on board. Because during a disaster, sometimes employees leave if they think their future prospects are not going to be all that great.
Thank you, again. This has been enlightening and informative, as it always is. For your audience, if you need a massive dose of leadership, management and executive thinking thought, by all means, get Ray’s book, Tough Things First. I’ve read a lot of management books in my day and this is the number one as far as I’m concerned, because it’s comprehensive and it leads the new startup CEO basically through all the rigors that they need to understand in order to run a successful business.
Ray’s second book, Zen Of Zinn is also out. More philosophical, but what I like about that book is it kind of ties together the philosophies of humanism, of being part of society, about being part of an organization, so that you can see how the human aspects affect a business and how business affects humanity. In this age of conscious capitalism, Ray shows that this is not a new thing. He’s been doing it for a long, long time. And just to tease the audience, there will be a Zen Of Zinn Two I hear, sometime in the spring most likely, so keep your radars tuned in for that. So thanks again, Ray. I appreciate it. I look forward to talking to you again.
Ray Zinn: Well, thanks, Guy. I enjoyed having this podcast with you.
