There has been no shortage of events over the past several years that have resulted in companies coming under extreme financial pressure due to circumstances beyond their control.
Those events range from the COVID crisis, to rising interest rates, the threat of a looming recession, and the recent bank crises related to Silicon Valley Bank, as well as several other banks that have either failed or required bailouts.
Some of the “crisis” events occurred rapidly, almost overnight, while others could have been somewhat anticipated and perhaps mitigated with the appropriate interventions.
While many companies had the management talent or were just plain lucky to figure out how to survive these pressures, many others lacked the experience or the outside-of-the-box thinking to survive in the face of a rapidly changing business environment.
As a result, numerous companies either failed, or continue to limp along without the financial resources necessary to manage the business as a going concern. These businesses will most likely eventually fail as well.
LEADERSHIP IS CRITICAL …
Managing through crisis situations requires a leader who can evaluate the situation and quickly develop a plan to cope with the crisis at hand.
Sometimes crisis situations can be anticipated and planned for, however, many times they happen overnight without adequate time to prepare.
In either situation, leaders and their management teams must be able to quickly understand and start to define the crisis in order to attempt to deal with the issues. Furthermore, dealing with a crisis is not a cut-and-dried situation.
The plan developed initially, is only as good as the day it’s written. In crisis situations, it’s hard to determine how long it will last and how many ongoing variables will occur that will require frequent modification to any initial plan.
PROACTIVE READINESS …
One of the most effective ways of dealing with a crisis is to proactively develop a structured and systematic approach to crisis management that identifies certain types of potential crises and how the company might respond.
Using the talent and experience of the company’s leader and management team to identify and brainstorm around several types of crises that could occur would go a long way in developing an outline of what should be done in the event a particular crisis occurs.
While it’s difficult to anticipate every type of crisis that could occur, laying out a game plan for several possibilities will serve to provide a framework for dealing with an unanticipated crisis, if, and when, it occurs.
A WAR ROOM MENTALITY …
Proactively developing a crisis management plan that involves the management team is only a portion of what is required to manage a crisis.
When a crisis does occur, it’s important for the company’s leader, typically the CEO, to take charge of the situation and develop a “war room” mentality to start to deal with the crisis at hand.
Taking charge and leading the team through the process of identifying the issues and impacts and developing tactics and strategies to begin to mitigate the damage to the business is extremely important.
It’s essential for the leader to project honesty and confidence throughout the process. During a crisis, everyone looks to the leader for the next steps and to some degree a level of reassurance that they are in control.
If the leader projects fear and unease, then any plan that is proposed will be questioned or doubted.
While there may be a tendency for a leader to tell everyone that “everything is going to be okay”, it’s important to be realistic in communicating the issues and what steps management is taking to deal with the crisis. Frequent communications related to where the company is at in dealing with the crisis and what progress is being made toward dealing with it are also very important.
NO TIME TO PONDER PROS & CONS …
It’s also important for the company’s leader to be decisive yet adaptable.
A crisis situation is one of the few circumstances where leaders must be able to make quick decisions and often in a very short timeframe.
Leaders need to be able to make decisions on the fly, and in some cases, they might need to make the hard decisions even though they may not be popular ones.
There is no time to ponder the pros and cons of a decision at a leisurely pace.
Leaders who take action, who are decisive, and who are open to adapting their decisions to suit the needs of a situation, are going to have more success weathering a crisis than a leader who chooses to wait and not take action.
A MEASURED RESPONSE …
While making decisions quickly is a mandate in a crisis situation, it’s imperative that a leader does not throw caution to the wind and risk it all, unless there is truly no other option.
Leaders must be able to rapidly make decisions, however, in a measured way.
In other words, quickly evaluating all the facts at hand and then making a calculated decision about what would be the best course of action helps take some of the risks out of the fast-paced decision-making process.
HABIT & PROCESS …
The leader should make sure to involve the entire management team in the process, as obtaining a consensus view of the facts at hand and the resultant decisions that must be made, will mitigate some of the risks in executing the plan.
While this all might seem like an impossible task, in actuality, this is a habit and a process, that can be cultivated over a period of time.
Staying positive yet being realistic throughout the crisis is also an important attribute of the leader. However, this is one of those things that is easier said than done. it is important to keep a game face on until the worst of the crisis has passed. Projecting a positive attitude, while defining realistic expectations will go a long way in creating confidence throughout the company.
Yet even the best leaders may not be equipped to handle every crisis. If you determine that a crisis is outside your scope of experience or background, there is always help available.
Don’t ever hesitate to seek help if you or your advisors believe you need it.
Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering, State Receivership or Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.
