To address the COVID-19 pandemic and its economic disruptions, India’s government, businesses, and nonprofits had to work together. Their experience provides lessons for the world on crisis management.
In March 24, 2020, India ordered one of the world’s strictest national lockdowns on its 1.3 billion citizens to combat the COVID-19 pandemic. The national government imposed a three-week ban on all domestic and international air and rail travel and shut down all offices, factories, educational institutions, malls, and shops catering to “nonessential” services. Each Indian state, in turn, halted all public and private transportation, including interstate transport, which impeded the shipping of essential commodities. The entire nation and its economy effectively came to a halt. The government extended the 21-day lockdown to 68 days.
In a country as vast and densely populated as India, with very limited spending in the public health-care system, there was perhaps little hope for another option. Studies estimated that the number of infected could range from 125 million to 240 million people at the peak of the pandemic and that as many as 1 million might require ventilators. But the country had only 57,000 ventilators at the start of the pandemic.
In this moment of public crisis, Anand Mahindra, chairman of one of India’s largest private business conglomerates, stepped forward to help. He didn’t offer just money and assistance. Instead, he committed his company’s automobile production plants and capabilities. Mahindra became one of the many for-profit firms that focused on developing and producing low-cost ventilators that suited India’s needs. In the three months of lockdown, India climbed from a significant shortage of ventilators to excess production capacity. In addition, Mahindra offered its extensive footprint and personnel across India to give the government temporary care facilities.
In a world fraught with uncertainty, unforeseen crises have the power to bring entire economies to a standstill. During such times, public attention focuses on the NGOs that typically lead relief and recovery efforts. Governments coordinate, while NGOs, thanks to their work in local communities, ensure that relief reaches every last person. But governments and NGOs cannot meet the needs of the hour, unless the products and services necessary to address the crisis are readily available or can be mobilized quickly. More often than not, this contingency depends on the procurement, production, and distribution capabilities of for-profit firms and the ability of managers to mobilize them though their role often goes unnoticed.
Recent management research argues that for-profit firms are more effective than other types of organizations to solve certain social problems, since they are better at undertaking innovation and producing and distributing goods and services. We propose that handling a large-scale crisis requires a new ecosystem of networking and collaboration among multiple organizational forms for-profit firms, government agencies, and NGOs that combines their strengths and exploits their synergies.
In particular, we insist that companies’ resources and capabilities must form the backbone of any effective relief and recovery effort. Consequently, governmental organizations and NGOs leading a crisis response must collaborate effectively with for-profit firms to succeed. In what follows, we offer a framework for how NGOs and public administrators must address large-scale crises such as pandemics and natural disasters. We also enumerate the resources and capabilities of for-profit firms that they should access and, if necessary, retool to meet the needs of such crises.
Four Essential Capabilities
If for-profit firms and their management are central to emergency response in society, why has their role in crisis management gone underappreciated? Over the past few decades, no disaster was large enough to disrupt the entire global economy. In the smaller-scale crises that did occur, governments and NGOs which work in the public spotlight could continue to be effective while relying upon the resources, capabilities, and supply chains of for-profit firms as a backstop.
But the COVID-19 pandemic marked a break. As governments around the world enacted national lockdowns to contain the spread of the novel coronavirus, the global economy ground to a halt, leaving many businesses idle. This cessation made providing relief and recovery to affected people exceptionally difficult and exposed the dependence of governments and NGOs on private industry.
The challenges have been especially pronounced for developing countries like India, whose governments have more limited state capacity than more affluent countries do. Many countries lack state machinery to distribute aid to all of their regions and localities during a massive crisis. For-profit firms and NGOs, on the other hand, have a pervasive footprint because of the inherent nature of their businesses and can muster local resources quickly to address local needs. Consequently, as the pandemic demonstrated, the effective management of such a crisis requires collaboration among government agencies, businesses, and nonprofits.
Different aspects of relief and recovery during a crisis are better managed by different organizational forms. We have carefully analyzed large-scale crisis situations that have hit multiple geographies in the world during the past two decades, such as the COVID-19 pandemic and the 2004 Indian Ocean tsunami triggered by Indonesia’s Sumatra-Andaman earthquake. We focused on the responses of various actors and stakeholders, and the strengths and weaknesses they demonstrated. Our analysis found that four capabilities are essential for managing such large-scale crises. While governments and NGOs do command some of these capabilities, they must depend on other sectors to secure all of them to their fullest extent.
Network Coordination | Crisis management requires effective coordination among many different parties to ensure that relief is delivered quickly and efficiently. Among other things, crisis coordination requires the procurement and delivery of different types of goods and services on a large scale. Governments are well positioned to coordinate, because they have authority over the entire state machinery at the central, state, district, municipal, and neighborhood/village levels.
By contrast, individual firms are unlikely to possess the requisite authority. For-profit firms may together be able to orchestrate their networks through trade groups or partnerships in a moderate to limited fashion, depending upon the size and reach (through dealer and supplier networks) of their firms and their presence at national or regional levels. Similarly, NGOs some with a broad presence across multiple states, others with a local presence within specific regions have only moderate to limited coordination capabilities.
Local Management | While government centralizes coordination and leadership during a crisis, NGOs can connect relief efforts to individuals on the ground who are in need. Consequently, they can serve as fiduciary liaisons between those affected by the crisis and the broader economy and state. During a crisis, nonprofits and community organizations take on the role of local management. They resolve information asymmetries between government authorities and local needs, and monitor relief material and services on the ground. NGOs tend to be very good at these activities. Without such oversight, bottlenecks and hoarding by corrupt government officials may prevent relief funds and material from getting to those who need them. NGOs are more agile at raising funds, material, and volunteers from local communities to address the needs of these communities during a crisis.
For-profit firms are less capable of tracking and typically have less incentive to track information asymmetries on the ground, or to verify that all those in need have received their due. For-profits tend to focus on their own customer base, not all segments of society. But the corporate social responsibility (CSR) arms of firms are often effectively organized as NGOs, and they can contribute during a crisis the way other NGOs do.
Governments, by contrast, though well positioned to eliminate information asymmetry, are prone to allowing bureaucracy and corruption to impede getting the job done. In addition, some countries lack the state capacity to serve all constituents in every region and village. They instead rely on NGOs to reach all who need assistance.
Production and Procurement | We consider production and procurement capabilities together, since most organizations that engage in the production of goods and services also engage in procurement. For-profit firms are incentivized to produce goods and services efficiently. The need for raw materials and other resources makes them part of extensive supply chain networks, which give firms access to a variety of resources and actors. Such capabilities are important in crises that trigger sudden demand for products and services. For instance, during the COVID-19 pandemic, several firms in the automobile industry came together to address the shortage of ventilators and collaborated with medical-device manufacturers to ramp up ventilator production.
National governments also possess production and procurement capabilities, but they are typically restricted to areas such as defense and health care and are limited in extent. NGOs are least likely to possess these capabilities, since they are focused mostly on coordinating last-mile delivery of services and goods to the needy.
Distribution and Logistics | For-profit firms that specialize in the distribution of goods (such as e-commerce, courier, and parcel-delivery firms) command by nature significant capabilities in distribution and logistics. Such firms can help transport material and people quickly and efficiently to wherever they are needed. For instance, during the COVID-19 lockdown of Wuhan, China, from January 23 to April 8, 2020, Chinese e-commerce giants Alibaba and JD.com managed to deliver essential food and medicines to city residents safely and securely.
Governments do possess moderate logistics capabilities, typically through the military, and have access to mobile telephony/digital networks. Some governments, including India’s, also have access to public distribution systems (PDSs), railways, and public buses through which they can ensure the supply of essential items to the affected areas. NGOs, on the other hand, are least likely to possess significant distribution and logistics capabilities.
According to our framework, when a crisis hits a country, the government must work with industry associations to identify the resources and capabilities necessary to address the urgent needs of the affected parties. Instead of focusing simply on their immediate departments and niches, policy makers, NGOs, and business leaders must take stock of the core resources and capabilities they jointly command and figure out how they can best retool these capabilities to meet the needs of the crisis.
Next, government institutions must coordinate with firms and NGOs to help them redesign and scale up, because their existing internal capabilities alone are unlikely to suffice in meeting the needs of a large-scale crisis.
Third, for-profit firms must take the lead in procuring and producing the goods and services deemed necessary through these collaborative efforts.
Finally, the coordinating agency (usually the government ministry in charge of crisis management) must ensure that these products and services are delivered swiftly to the affected population, using the distribution and logistics capabilities of enlisted organizations. Our research showed that NGOs and charitable foundations possess good local management capabilities and should therefore be responsible for ensuring delivery of essentials to all, including the most remote and needy.
The relief efforts after the 2004 tsunami are a good example of how enhanced collaboration among multiple organizational forms can be very effective in managing a large-scale crisis. Nagapattinam, in the southern state of Tamil Nadu, was one of India’s worst affected districts: More than 7,000 hectares of agricultural lands flooded there. Initial estimates suggested that it would take at least two to three years to desalinate the land and resume farming activities in that area.
In response, Nagapattinam’s district administration quickly put together an NGO Coordination Resource Centre (NCRC), starting with 23 NGOs that volunteered to work together toward the land-reclamation effort. Nearly 400 NGOs came together to help out with the relief activities in about 80 villages severely affected by the tsunami. NCRC, in collaboration with relevant government departments, local communities, and farm-equipment manufacturing companies (which provided necessary tools and machinery), worked tirelessly to reclaim the tsunami-affected lands and made them cultivable in less than a year.
The NCRC later also focused on rehabilitating the affected population through more coordinated interaction among district administration, NGOs, and funding organizations. For instance, several fishing villages in Nagapattinam lost their homes and livelihoods and required damage assessments, compensation, housing, and alternative livelihood opportunities. NCRC created village information centers to facilitate communications between affected villagers and funding organizations, so that appropriate relief could be mobilized and made accessible to the needy. It also established village facilitation units and a clearinghouse that collected information, identified needs, and ensured that adequate support was provided to priority areas and communities. The NCRC’s success underscores the vital importance of coordination in catastrophe response.
Who Benefits?
As the world struggles to recover in COVID-19’s wake, economic revitalization will require governments, NGOs, and for-profit firms to work together. But what will motivate the respective parties to invest their time and energy? What’s in it for firms? Why should for-profit companies venture into crisis management? What will NGOs and the government get out of it?
In addition to fulfilling CSR responsibilities and generating goodwill, firms can spark new business opportunities through participation. Given the uncertainty that the COVID-19 pandemic has created for businesses, participating firms will likely have a better understanding of the market and be better prepared to face the future than rivals who do not partake in crisis-management efforts.
NGOs will likely open new avenues to increase their reach and sources of funding through collaborations with for-profit firms and their foundations and associations. This opportunity especially holds in countries like India, where for-profit firms are required to spend 2 percent of their profits on CSR activities. Collaborations with government and for-profit firms during crises can enable NGOs to better demonstrate their causes and needs, build credibility, and strengthen their future calls for funding. NGOs will also get the chance to work with public servants and build networks with government agencies; doing so will likely help them to better navigate regulatory hurdles and manage future dealings with government agencies.
Finally, the government gains greater capacity from these collaborations. Government agencies can more easily access and draw upon NGOs and for-profit businesses to address future crises. The intense collaborative efforts between for-profit, government, and NGOs, such as the NCRC, can also provide blueprints for long-term, community-related development work to address local problems. In such undertakings, for-profit firms can provide the necessary resources and CSR funding, NGOs can act as coordinators and volunteers for implementation, and government can fill the remaining gaps by putting in place appropriate regulatory structures and incentive mechanisms.
When countries face disasters, no one organization has the resources and capabilities to deal with it, so resources across different organizations need to be pooled. Therefore, intense collaborations and networking among multiple organizations is necessary to bring together the unique strengths of governments, NGOs, and firms. As India’s 2020 pandemic response showcased, when such collaborative efforts get deployed, even the deadliest of disasters can be managed effectively.
_____________
SOURCES/AUTHORS
Jiao Luo and Aseem Kaul, “Private Action in Public Interest: The Comparative Governance of Social Issues,” Strategic Management Journal, vol. 40, no. 4, 2019.
Haritha Saranga, Professor of Production and Operations Management at Indian Institute of Management Bangalore (IIMB), India.
Prateek Raj, Assistant Professor of strategy at the Indian Institute of Management Bangalore (IIMB) and the IIMB Young Faculty Research Chair, leading the IIMB Inclusive Markets Project.
