THE SAFETY NET OF GOVERNMENT FUNDS AND TAX CREDITS CREATED A FALSE SENSE OF SECURITY , LEAVING BUSINESSES IN EVEN WORSE SITUATIONS MONTHS AND EVEN YEARS LATER .
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THE SAFETY NET OF GOVERNMENT FUNDS AND TAX CREDITS CREATED A FALSE SENSE OF SECURITY , LEAVING BUSINESSES IN EVEN WORSE SITUATIONS MONTHS AND EVEN YEARS LATER .
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Weakened Business Decisions
When businesses are challenged , internal leaders have two options : get scrappy and find a solution or fail . Because of the $ 800 billion safety net given to businesses in the United States alone , business leaders didn ’ t have to make the tough but necessary decisions during that time . Think about it in a personal sense : if you have a lot of cash coming in , you ’ ll probably keep your Netflix subscription , but if you know you have to tighten your belt to survive , you ’ ll make the tough decision to shut it off .
Businesses needed to get scrappier . They needed to get out of unfavorable supplier contracts , restrict spending , and focus on growing business opportunities . Instead , things stayed the same , the loan money was spent , and lazy business practices compounded , adding to the situation we see now .
Substandard People Management
The whole purpose of government support for businesses was centered around keeping people employed . If half a country ’ s population loses their jobs , disaster strikes . A study by the National Bureau of Economic Research found that 2-3 million jobs were saved by the PPP alone , so at the very basic level , it did what it was designed to do .
However , poor performers were kept in their roles , people were promoted without working for it , and new hires were brought in with funding that had a very near-term limit . Now , those poor performers are dragging down companies , businesses have run out of money to pay everyone , and unprepared professionals are floundering in leadership roles . Since many companies weren ’ t forced to trim the fat and streamline their business operations , they are now dangerously low on cash and don ’ t know how to move forward .
False Security
Seventy percent of lottery winners go broke and 30 % of lottery winners end up filing for bankruptcy . With COVID relief programs , businesses won the lottery . They were given a large chunk of cash that they weren ’ t properly prepared for and didn ’ t have to face the threatening reality they were up against .
So , they spent it . Business leaders are human too , and being human means that we can be emotional and impulsive when making decisions . The safety net of government funds and tax credits created a false sense of security , leaving businesses in even worse situations months and even years later .
Lack Of Motivation And Achievement
Personally , this is the worst outcome . When people work hard to achieve a common goal , they find inspiration and create their own motivation to continue excelling . If , instead , people and businesses are given something for free without working for it , then they ’ ll fall into a pattern of mediocrity and low-effort endeavors . We are seeing that now in employees and business owners alike . People adjusted to coasting , lost interest in their goals or the chasing of those goals , and no longer strive to be better every day in the same way that they used to prior to the pandemic .
I want to reiterate that these government relief programs weren ’ t bad . They were intended to serve a purpose in a time when governments had to act swiftly , and they did serve that purpose . However , there has been organizational fallout since their implementation that no one anticipated . In order to recover on an individual business level and a collective societal level , we have to be honest with ourselves about the origins of the consequences we are facing .
LOOKING AHEAD
Untangling the web that your business is experiencing might feel overwhelming or impossible , but , just like every other challenge you have overcome up to this point , you ’ ll get through this one , too .
COVID relief programs saved many businesses in this country . Now the unintended consequences of those programs are hurting the businesses they were intended to help . It ’ s time to change the momentum , get smart , and make the hard decisions that were avoided for years . Are you ready ?
At Petra , when we coach a business that is ready to do the hard work to get set for the future , we start by asking questions , identifying paths , and constructing a plan to move through the current state and into the future .
If you feel like you might need someone to help you get honest with your people , your business , and your consequences , give us a call . There ’ s a long road ahead if we want to truly recover , but instead of using Band-Aid solutions , we must be proactive , critical , and willing to do the work . Not doing the work was what got us here in the first place .
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