Many companies are currently struggling with new and completely unforeseen challenges thrust upon them since mid-March as we all deal with a global pandemic. Many companies employ enterprise risk assessments to help plan for all manner of unexpected challenges that will negatively impact their businesses. I can assure you that very few, if any, had global pandemics as a potential risk. At Duke Realty, our business has recovered nicely. Much of that is due to being in the industrial and logistics sector, which is outperforming most other real estate sectors. Additionally, I credit our strong, agile management team that moved very quickly early on to prepare for the worst.
Prepare for Trouble. Most of our senior leaders have managed through more than one economic downturn and all were with Duke Realty during the Great Recession of 2008. We’ve been preparing for the next downturn for several years. We had no more insight into the global pandemic than any other company leader, but we did know that even ten-year runs, like the one we were experiencing, had to come to an end someday. Being prepared for the next downturn is just good management. It’s important to anticipate what might happen and where your company is vulnerable based on previous recessions or crises. Make sure you have a plan, or at least an outline, for the business areas you’ll need to address immediately.
Recessions accelerate trends. Companies that were failing, fail faster during a recession. Technology and innovation evolve faster during a recession. Just look at the front page of the WSJ. Every day retailers that were struggling before the pandemic are now filing for bankruptcy. Did anyone think Sears or JC Penney would survive? Technology and innovation are filling the gaps. Online grocery shopping sales went from $1.2 billion to $7.2 billion over the past year. Companies like Zoom have seen company stock go from $60 to $588 per share based on their incredible jump in user subscriptions.
United We Stand. This is very simple concept. However, we have seen many examples of poor management decisions over the last six months. Taking care of your people is a must. The health, safety and welfare of your associates has to be your number one priority. Without them, you have no company. Even the most successful companies wouldn’t have survived the pandemic without putting the interests of their associates first. Companies like ours that recently moved into a new headquarters, sent associates home to work remotely. We made allowances for associates who had kids at home who needed care as schools and daycares shutdown. Companies and operations that were deemed essential or critical have spent millions and in some cases, like Amazon,* billions of dollars to keep their associates safe.
Just as you take care of your associates, take care of your clients. Many are fighting to keep their businesses afloat, and their associates employed, all while meeting the demands of their customers. Relationships can be easy when times are good. Take care of your clients when times are tough and they’ll remember you forever. Through this pandemic, we have entered into rent relief or deferral agreements to help our clients that were facing challenges. We have helped others secure government funding or loans. We even developed and implemented new safety protocols to help our clients keep their associates safe.
Lead Decisively and Transparently. We made some very tough decisions early in the pandemic. In mid-March, we stopped all speculative new development and all land and building acquisitions. Why? Simple — to preserve capital. We figured these moves could save us $500 to $700 million. We had no idea how long or how severe the impact of the pandemic would be, but cash is king and being smart about our cash was key. Some people weren’t happy about these measures but we communicated our decision and were honest about why we made the decision. We didn’t try to sneak out of deals or go away quietly. We called sellers, brokers, our own associates and our investor community to share what we were doing and why and offered no exceptions.
In times of uncertainty and stress, you can’t over communicate. Everyone wants to know how Duke Realty is doing and where the company is going. Prior to the pandemic, I would talk to all of our associates once a quarter and to our board of directors twice a quarter. At the height of the pandemic, I communicated with our board and our associates weekly. I started doing video updates for all of our associates, so they could see my smiling face. I always told them exactly what we were experiencing, how we were reacting, and where we were changing our strategy. One week, when I really didn’t have any new updates to share, I told them I had no new updates and shared baby pictures of my 3-month-old granddaughter, Maggie. Duke Realty’s performance has come back strong, but I still update our associates bi-weekly.
These are just a few management tips that helped guide Duke Realty through the past eight months and should help any leader manage through a pandemic or any economic downturn. This list is by no means complete. These are some strategies I’ve learned in my more than 40 years in business and that have helped me in leading Duke Realty to thrive in the last eight months. Use them to your benefit and in the end we’ll all get through this together.
*Amazon reported spending $4 billion in Q2 and $2 billion in Q3 on COVID safety measures to keep its associates safe.