The Wall Street Journal - 14.03.2020 - 15.03.2020

B4| Saturday/Sunday, March 14 - 15, 2020 ** THE WALL STREET JOURNAL. THE WALL STREET JOURNAL. ** Saturday/Sunday, March 14 - 15, 2020 |B5

EXCHANGE EXCHANGE

T

he coronavirus pandemic has lately prompted many companies to permit or encourage office workers to work from home. But in recent years, sepa- rate from the current crisis, some companies have proactively chosen to design a remote workplace, believing that structure is better for business. These employers say it can yield better access to talent, a better culture and more produc- tivity. Success, they say, hinges on whether remote employees can maintain their sense of collaboration and community without feeling left out. Their strategies range from hosting virtual holiday parties to setting clear etiquette for online chats and video calls. “You kind of have to plan for it,” says Michael Pryor, head of software company Trello, which was purchased by Atlassian in 2017 for $425 million. “It isn’t as simple as, ‘hey, let’s all just go home and we’ll keep working.’ ” Take meeting etiquette. Trello employs around 200 workers, with 80% of them remote. For any meeting, if a single participant is remote and participating in a video call, everyone else is expected to individually do so as well. In practice, that might mean four people sitting with their lap- tops open in the same New York conference room, each with a camera trained on their faces. Mr. Pryor says it places everyone on the same visual footing. Such a practice reflects a core principle Mr. Pryor and others say is key: Ensure everyone can participate equally, no matter where they are. At Trello, special occasions are also celebrated remotely, with managers sending cakes or gifts to workers for their birthdays. At cloud-computing software company Veeva Systems, the company makes a point of not asking remote employees to travel to the office for im- promptu meetings, because doing so would imply their location limits how fully they can participate, says Chief Executive Officer Peter Gassner. Communication is a delicate dance in any workplace. Even more is needed when workers migrate to a remote office. Companies have to be deliberate about ensuring employees get to know each other, says Wade Foster, co-founder of the all-remote software company Zapier. Still, he says those efforts can yield more meaningful connec- tions than hallway small talk. Zapier employees are ran- domly paired up every week to get to know each other in infor- mal 30-minute video calls. And every Friday, when people write up posts summarizing their work for their colleagues, there is also a tradition of adding something personal, such as a link they en- joyed that week or a photo of their families. Small gestures matter, says Automattic Chief Executive Offi- cer Matt Mullenweg, who over- sees a workforce of 1,175 that is almost entirely remote. The software company provides employees with a $250 monthly co-

working allowance that they are free to spend on anything from avocado toast at local cafes to rent on a co-working space. If more companies embrace remote working, Mr. Mullenweg says, it could help bring prosperity to places that have been bypassed in favor of big-city heavyweights like San Francisco and New York. Another all-remote company, software development company Art + Logic, hosts virtual holiday parties: Last Halloween, for ex- ample, employees wore costumes and hung out on webcam, talking about what Halloween was like for them growing up. (For his costume, Art + Logic President Bob Bajoras used the “pixellate” function on his webcam and went as the anonymous whistle- blower who alleged President Trump pushed Ukraine to investi- gate Democratic rival Joe Biden.) There are hazards to avoid, especially when using workplace collaboration tools like Slack. At software services company CloudBees, people didn’t have a clear sense of when it was ac- ceptable to try to arrange meetings with colleagues in different time zones, says Chief Executive Officer Sacha Labourey. Some employees were abusing a Slack feature that sends notifications en masse to everyone in a chan- nel, so that people were getting bombarded with alerts. So CloudBees employees drafted a “netiquette” guide, which instructs employees on best practices, such as rotating time zones for meetings when people aren’t in the same place. The company currently employs nearly 500 people in 18 countries, 70% of which are remote. Remote boosters say messaging tools like Slack can make it easier for colleagues to share high-fives. At photo book provider Chatbooks, emojis are used with abundance to offer encouragement—an arm flex, a lightning bolt, a raised-hands “hallelujah.” A GIF of a heavily bearded Rob- ert Redford smiling and nodding with approval—one taken from the 1972 movie “Jeremiah Johnson,” which was shot at Mount Timpa- nogos, near their company’s of- fices—is especially popular in- house. “Everyone can go click [the Robert Redford GIF] again, so you get 17 nods of approval, and it’s like, hey, I had a good day,” says Chatbooks Chief Executive Officer Nate Quigley. But chat tools, some of these companies say, aren’t suited for resolving conflict or long discus- sions. In those cases they say video calls are best. Mr. Quigley says his company obsesses about camera placement in its conference rooms to find the right an- gles. To avoid a tinny sound, they also spent money on $1,200 speakerphone systems. Chatbooks says its location- flexible attitude means it can tap more diverse talent pools. Its all- remote customer support team features so many working moth- ers that it is known in-house as the company’s “MomForce.” Chatbooks also delivers pizza to the homes of its support staff during the busy season.

BYTE-PINGCHEN

TheseBossesPrefer

YouWorkatHome

The keys to designing an all-remote workforce

said its CEO, 53-year-old Philip Jansen, has self-isolated and will work remotely. It will deep-clean its London headquarters. U.S. consumer spending was strong before the virus surfaced, and not all business activity has stalled. PepsiCo Inc. struck a nearly $4 billion deal this week to acquire the maker of Rockstar energy drinks. Insurance broker Aon

PLC agreed to buy a rival for nearly $30 billion, the biggest deal of the year on one of the wildest days for markets. Just as households are stocking up on supplies and preparing for an uncertain future, companies are making sure they have credit lined up and cash they may need, said Gregory Daco, chief U.S. economist at Oxford Economics.

nesses across industries. Airlines have canceled thousands of flights. Americans are now expected to buy 1.5 million fewer cars this year, one analyst predicted. Major sports leagues have suspended play indefi- nitely, dealing a blow to venues and broadcasters. “I’m tossing and turning at night about it,” said Aron Ain, chief executive of Kronos Inc., a software maker with 6,000 employees. “I’m uncomfortable because I haven’t been through it before.” The spread of the virus has led to a nearly endless stream of hard-to- answer questions from Kronos staff, like whether or not to travel to cli- ent meetings. There have been few mass layoffs so far in the U.S., which before the outbreak had the lowest levels of unemployment in decades. During the 2008 financial crisis, nearly six in 10 companies stopped hiring or decreased staffing, while 35% froze pay, according to executive search firm Korn Ferry. “Cutting muscle and hurting your ability to recover is far more damaging to an organization than limping along with a couple of quarters of extra expense,” said Bob Wesselkamper, a vice chair- man at Korn Ferry. Declared a global pandemic on Wednesday, the new coronavirus has infected more than 137,000 people in more than 100 countries. More than a third of the infections globally have been outside China. They include the CEO of British telecom giant BT Group PLC. Inside China, the rate of infec- tion has slowed after the government locked down much of the country for more than a month. Factories are restarting production and workers are returning to their jobs. Apple Inc. reopened all 42 of its stores in China on Friday. Elsewhere, businesses are adapting to rapidly changing public-health guidance, sending workers home, canceling events and switching to teleconferencing. BT

Continued from page B1

Virus Upends

The World

Of Business

San Rafael, Calif.

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O Products, a Bay Area maker of bath and body products, has quadrupled production of its high-end hand sanitizer. It is run- ning extra shifts, speed- ing up lines, hiring temporary workers and converting factory lines designed for other products to make hand sanitizer instead. It still can’t keep up. Customers call, sometimes in tears, begging for a few bottles they say they need to care for sick relatives. Retailers, facing an un- precedented surge in demand, are rationing as they try to restock bare shelves. A parts shortage with no workaround almost halted

production on the factory floor. “How do you prepare for a huge spike in demand where everything sells out and everyone is mad,” said EO Products President Tom Feegel. “You don’t prepare for that.” A once-sleepy staple, hand-sanitizing products—wipes, sprays and gels—are selling out nationwide in the time of coronavirus, as health officials say disinfecting hands and surfaces is critical to stopping the contagion’s spread. At one point last month, one of the company’s suppliers ran out of the aluminum-like seals that go on hand-sanitizer gel bottles and are roughly the size of the tip of a pin- kie finger. Federal regulations re- quire stringent testing of any re-

placement seal, so there was no quick answer. “It was a horrible feeling,” Chief Operating Officer Sam Borri said of the moment he realized the company was going to run out. “My immediate reaction was, ‘How can this be happening?’ ” The company had to stop making gel sanitizer for a time, while upping production of sanitizing spray. Sales ramped up dramatically at the beginning of March, and the company expects that trajectory to continue as the virus affects more parts of the country. No manufacturer has been able to make enough—not even Purell, the top U.S. brand by sales. Purell parent company Gojo Industries

stock store shelves. Retailers are doing “literally whatever they can” to replenish supplies, he said. The company’s website sells out of sanitizing products in minutes, while thousands of calls a day come in from consumers desperate to know when more will be available. “They’re really frantic. We get calls, ‘My aunt has M.S., my mother is sick,’” said Katheryn Jones, who runs customer service. “That’s what it comes down to, they’re scared.” So many callers have special cir- cumstances that Ms. Jones imple- mented a strict rule against making exceptions to ship products to customers. Staffers broke the rule once and sent a bottle from their office supplies to a caller in a par- ticularly dire situation, she said. She has a list of guidelines for employees to remain upbeat. “We say, ‘Smile, and fake it until you make it,’ ” she said. “We don’t want it to come across that we’re feeling stressed or frustrated, because then our customers will feel it.” Ramping up demand for hand sanitizer, in particular, is challeng- ing because it is regulated by the Food and Drug Administration as an over-the-counter product and must meet the agency’s safety and efficacy standards. Adding to the quandary: EO Prod- ucts promises to use all-natural products and adhere to certain guidelines about employee pay and environmental impact, which limits

which suppliers and third-party manufacturers the company can use. Now, EO Products is rushing to execute another fourfold increase in production. All the company’s hand sanitizer is currently made at its own factory, but it plans to hire private-label manufacturers to make the products using its for- mula, specifications and rules around employee pay and sustain- ability. Any agreement it strikes with an outside manufacturer will be temporary so the company isn’t stuck with excess capacity when demand dies down. On Thursday, Mr. Feegel said he was on the phone with suppliers pressing them to step up production of bottles and ingredients the company needs to make sanitizer. “They said, ‘we can do that by April,’ and I said, ‘How about by next week?’ ” he said. “And they didn’t say ‘no.’ ” The company’s typical “fill rate,” the ratio of orders it suc- cessfully fills, is generally 98% across all products. Mr. Borri, the COO, estimates that will drop to somewhere around 60% this month for hand sanitizer. Rosa A. Prado, a senior supervi- sor on the factory floor, said workers are energized to be part of what they see as a cause, but they’re also getting tired and con- cerned about whether they will be able to secure sanitizer and soap for their families. Workers at the company get health insurance and paid sick time, and this week re- ceived packages of sanitizer. Workers “like the fact that they are contributing to something,” she said.

BYSHARONTERLEP

A Hands-On Effort to

Ramp Up Sanitizer Production

Inside one company’s push to quadruple its output—without raising prices

Inc. is rationing sales to stores to protect supply for hospitals and other businesses. Private-label brands are likewise selling out. Amazon.com Inc. and eBay Inc. are fighting price-gouging by third- party sellers. Meantime, the state of New York has prison inmates making sanitizer to bolster supply. U.S. hand-sanitizer sales were just below $200 million in 2019, a 4.5% decline from the previous year, according to Nielsen. The most recent data available shows U.S. hand-sanitizer sales were up more than 470% for the week ended March 7, compared with the year-earlier period. At a nondescript complex about 20 miles south of San Francisco, EO Products develops, produces and packages its Everyone brand of fragrant, organic soaps, lotions and sanitizers alongside its higher- priced Essential Oils line of body- care products. A six-pack of 2- ounce Everyone hand-sanitizing gel bottles costs $17.99, or $1.50 an ounce, roughly 50% more than a similar-size package of Purell. Hand sanitizer generally is made mostly of alcohol. The Cen- ters for Disease Control and Pre- vention says sanitizer should con- tain at least 60% alcohol to be effective. The company has also ramped up production of soap as the CDC recommends washing with soap and water, when available, over using hand sanitizer. The company, with about 150 employees, sells the bulk of its products at retailers. It has been at Whole Foods for more than 20 years and has more recently started selling at Walmart, Target and Amazon. Before coronavirus, the company was doing roughly $100 million a year in sales. Owned by its founders, a divorced couple that still work together, the 25-year-old company is privately held and has no outside investors. Neither hand sanitizer nor soap is among the most profit- able products for the company, so the switchover will drag on margins. But the company hasn’t raised prices and isn’t considering doing so. “Raising prices at this time would not be in alignment with our core values,” Mr. Feegel said. “All the business rules about profitability are off the table.” Stores are struggling to provide accurate forecasts of how much they’ll sell, Mr. Feegel said, and the company had to cap online sales as some retailers have turned to the company’s website to re-

((Hotels Conference cancellations and a pullback in business travel are dragging down revenue in the hotel industry, which just suf- fered one of its worst weeks in years. Some operators lowered room rates, a move they usu- ally try to avoid because it can be hard to push rates up again even if the outlook improves. Historically leisure travelers are quicker to return, as they did after the Sept. 11 terrorist attacks and the 2008 financial crisis. Business travel typically takes longer to snap back, as companies want more clarity before approving most trips again. It’s also possible that some business never comes back if fears about future virus outbreaks–along with emerging environmental concerns about plane travel—prompt more businesses to rely increasingly on teleconferencing. —Craig Karmin

((Gambling Las Vegas casinos are experi- encing a financial hit as people grow fearful of public gather- ings and conventions are canceled. The emerging U.S. sports-betting industry faces an even more brutal test: how to survive without sports. The NCAA’s cancellation of its March Madness tournament— and decisions by the NBA, MLB and NHL to suspend their seasons—wiped away weeks of potential profits for sportsbooks. “This is probably a contingency that most sports-betting operators have not prepared for,” said Chris Grove, an industry analyst with Eilers & Krejcik Gaming. Gambling stocks have declined an average of 42% since Feb. 19, far steeper than the 22% they fell in the three weeks following the Sept. 11, 2001, terrorist attacks, according to JP Morgan analysts. —Katherine Sayre

((Luxury goods The new coronavirus is rippling through the most important world markets for luxury brands. First it hammered demand from Chinese shoppers as the epidemic took hold in that country. Louis Vuitton, Gucci, Hermès and other megabrands were forced to shut dozens of stores in mainland China, Macau and Taiwan, while China’s well-heeled shoppers stayed home rather than splurging during trips to Euro- pean fashion capitals. Then, as the virus spread to Italy, it landed in the industry’s most important manufacturing hub. A lockdown decreed by the Ital- ian government tested the ability of brands to produce their handbags, clothing and accesso- ries. Now, the virus’s emer- gence in the U.S. is threatening to sap demand in another of the industry’s biggest markets. —Matthew Dalton

((Grocers Supermarkets face opportunity and peril as more people stock up on supplies and hunker down at home. They are rushing to meet the rising demand for sanitizers, household goods and shelf-stable foods while also rationing how much customers can buy. Kroger Co. and Albertsons Cos., the nation’s biggest grocers, are limiting the purchase of cleaning products while regional chain Price Chopper is looking for new suppliers that can provide more toilet paper. Many of the grocers are also expanding deliv- ery and pickup options as consumers begin avoiding stores altogether. “You plan for the worst and hope for the best,” said Gordon Reid, president of Stop & Shop chain. “It’s important that people can get access to food and products they need.” —Jaewon Kang

((Pharmaceuticals The biggest impact to the pharmaceutical industry is on its supply chain, partly because of how much medicines rely on raw materials—known as active pharmaceutical ingredients— from outside the U.S. One drug has already gone into shortage because of the outbreak and industry observers are worried more could follow. Most vulner- able are generic drugs, which make up some 90% of the medicines taken by Americans. Some of the biggest drugmakers, As- traZeneca PLC, Merck & Co. and Pfizer Inc. have said recently the epidemic could affect supplies for certain drugs or sales, depending on how long the pandemic lasts. But the pandemic is also an opportunity for many companies that are racing to develop drugs and vaccines.—Jared S. Hopkins

Employees and managers at EO Products are working to produce as much hand sanitizer as they can.

Workers ‘like the fact that they are contributing to something’ amid the health crisis.

((Sports
Three big sports leagues—the
National Basketball Association,
National Hockey League and
Major League Baseball— all
suspended their operations,
aiming to protect fans as well
as players. The leagues will lose
revenue from ticket sales, but
the biggest impact may be on
media partners. Sports TV net-
works including Walt Disney
Co.’s ESPN, AT&T Inc.’s Turner,
Comcast Corp.’s NBC Sports
and Fox Corp.’s Fox Sports will
take a hit on advertising sales.
The NBA alone brought in
nearly $1.6 billion in ad revenue
in the last season, according to
research firm Kantar. And net-
works may be on the hook for
billions of dollars in rights-fees
obligations even if games aren’t
played. The leagues and net-
works are hopeful the break is
just that—a break—and that
they’ll be able to resume their
seasons.—Amol Sharma

((Consumer products
Makers of everything from
hand sanitizer to cleaning prod-
ucts to baby diapers are racing
to increase production as they
work with U.S. retailers to keep
shelves stocked. Clorox Co. is
uniquely advantaged as a major
producer of cleaning products
that both sells and produces
most its products in the U.S.
For truly global consumer-prod-
ucts companies like Procter &
Gamble Co., for which China is
the second-biggest market and
home to hundreds of suppliers,
the upside of increased sales
could be well outweighed by
the impact production disrup-
tions in China and slowed con-
sumer spending globally. An-
other challenge is for
companies like Amazon.com
Inc. and eBay Inc. to control
price gouging by third-party
sellers.—Sharon Terlep

((Airlines
A fear of flying has taken hold,
and airlines are preparing for
the prospect that it could de-
press demand for months. Car-
riers slashed scheduled flights,
froze hiring, and offered em-
ployees unpaid time off in an
effort to conserve cash and pre-
vent layoffs. A trade group esti-
mated a potential loss of $113
billion in global passenger reve-
nue, and the outlook worsened
after the U.S. announced ag-
gressive new restrictions on
travelers from Europe. “The
speed of the demand fall-off is
unlike anything we’ve seen—
and we’ve seen a lot in our
business,” Delta CEO Ed Bastian
wrote to employees Friday.
United Airlines Holdings Inc.
President Scott Kirby offered a
“dire scenario” United is using
for planning purposes: Revenue
drops 70% in April and May,
60% in June and remains de-
pressed the rest of the year.
—Alison Sider

((Energy
The oil and gas industry is fac-
ing twin shocks: a demand drop
caused by coronavirus, and a
supply glut caused by overpro-
duction. A spat between OPEC
and Russia worsened the situa-
tion last week, sending U.S.
benchmark prices crashing to
$30 a barrel. Companies—espe-
cially many American shale drill-
ers who were already on the
ropes—now face a threat to
their survival. Companies includ-
ing Occidental Petroleum Corp.,
Apache Corp., Matador Re-
sources Co. and Marathon Oil
Corp. have begun belt tighten-
ing, with many slashing spend-
ing and reducing drilling rigs.
The idling of rigs results in less
work for the contract crews that
operate them, rippling through
the economy.—Miguel Bustillo

((Movies
Hollywood studios will likely
feel the sting of postponing ma-
jor movie releases for several
months, if not years. Delaying a
$200 million film like Walt Dis-
ney Co.’s live-action remake
“Mulan” has long-term ramifi-
cations not only for the studio,
but for the industry as a whole.
Studios typically plan years in
advance to decide when to re-
lease movies, weighing both the
time of year and what the com-
petition has slated. As the num-
ber of delayed releases grows
so too do the chances that
other films will suffer. MGM
Holdings Inc. moved the release
of its James Bond film “No
Time to Die” to November from
April, a month already chock
full of big franchise films. The
coronavirus scare has also
caused studios to delay the pro-
duction of big-budget films like
Paramount Pictures “Mission:
Impossible 7,” which could lead
to a drought in future years.
—R.T. Watson

CAYCE CLIFFORD FOR THE WALL STREET JOURNAL(2)

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3 1.A shopper scans shelves at a Walmart in Alexandria, Va.2.An empty ballpark in Surpise, Ariz., after the cancellation of a spring training game.3.An employee at a Siemens Healthineers AG factory in Shanghai.4.Boston Logan Airport on Friday. 5.An employee at the Porsche AG factory in Stuttgart, Germany,

CLOCKWISE FROM TOP LEFT: SHAWN THEW/EPA/SHUTTERSTOCK; ELAINE THOMPSON/AP; QILAI SHEN/BLOOMBERG NEWS; SCOTT EISEN/GETTY IMAGES; KRISZTIAN BOCSI

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ELIZABETH GALIAN

The Wall Street Journal - 14.03.2020 - 15.03.2020

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