To Reopen or Not to Reopen

As government lockdowns begin to ease, businesses that expected to reopen fast now aren’t so sure.

The governor lifted shelter-in-place orders. The mayor gave the green light to reopen nonessential businesses. But employees are nervous to come back to work, and customers are not likely to return en masse. Is it worth opening or not?

At the start of the government lockdowns two months ago, few leaders might have thought this would become a question at all. Now, the issues they face are far more complex, whether it’s worrying about still unresolved employee and customer safety, or figuring out how parents with schoolchildren still at home could return to the office.

When it comes to certain types of businesses, of course, social distancing may make opening financially unviable, says Radhika Papandreou, a senior client partner and leader of the North America Travel, Hospitality, and Leisure practice at Korn Ferry. Factories, for instance, may be able to operate at half capacity, but that doesn’t mean they can make money. For a restaurant, where profit margins are razor-thin to begin with, opening up to serve half the usual volume of customers would cost more than it can make. Moreover, from a reputation perspective, “all it takes is one outbreak to destroy a business that had survived the initial crisis,” says Papandreou.

There are risks to not opening, of course. For one, revenue continues to stay dry—by the tens if not hundreds of millions at Fortune 500 firms. Competitors that do choose to open can steal market share or be better positioned for the eventual recovery. “Talent retention and employee engagement may diminish if a company is perceived a laggard by its employees,” says Papandreou. Put another way, employees who are anxious to get back to work for financial or other reasons may end up leaving for another company.

Denise Kramp, a senior client partner and leader of Korn Ferry’s North America Retail Sector practice, says retailers are taking a “slow build” approach to reopening. “Most retailers are phasing reopening based on their locations and local government,” Kramp says. “They do not think customers are viewing reopening as a rush to go shopping.”

The reason for that boils down to safety—customers aren’t going to come back until they feel it is safe to do so. In fact, businesses that opt to stay closed now could win more consumer loyalty in the future, says Nathan Blain, a senior client partner and global leader of organizational strategy and digital transformation at Korn Ferry. “Revenue follows safety,” he says, explaining that safety could lead customers to choose one brand or company over another.

As states slowly begin to reopen, with health and safety benchmarks guiding the process, Papandreou says business leaders need to make decisions based not on government timelines but instead through the prism of safety, reputation, and economics. For many organizations, “opening a little later might be better than opening too early,” she says.