Organizations are faced with different disruptive situations and changing business contexts that force them to adapt or redefine their management practices and business models. Some are foreseeable, and can be addressed strategically, while others are unexpected crises that need to be responded to in a particular way. Those crises run the gamut of unexpected wars, financial irregularities, new unforeseen competitors, reputational damage, and environmental disasters, among others. The challenge with the unforeseeable crisis is that it can be more complex, rapidly moving in unexpected directions, with side-effects, making it much harder for the board, and the different management layers to sprightly address.
Digital disruption has particularly been making the headlines over past years, but most recently the economic and financial situation shrank all other headlines. Whether companies are on the verge of financial collapse or at the start of a recession, board members, executives, and managers are faced with making critical decisions during these challenging times. Putting a core crisis management team together is essential. The selection of this team needs to guarantee a profile with enough experience, knowledge of the business, varying seniority levels, as well as familiarity with the parameters of business disruptors. In addition to this, special attention needs to be given to presenting leadership with a high adversity quotient[1]; a profile that can naturally find opportunity in a challenging context. What are some of the headlines the board, and its advising crisis management team, looking at during these difficult times?
Cost Cutting: Looking at the Alternatives
Reducing costs may be one of the most difficult questions managers face. The options are numerous but the question remains: What to do first?Cutting budgets uniformly, across departments, or just those units that are bringing less value during this period? These decisions have direct impact on organization performance during and after the crisis. The leadership team makes these critical decisions, based on the following recommendations:
- Identify low value cost activities, products, services, and departments. Look into reducing their related budgets; consider trimming or outsourcing them if they are not core to the business. In case you outsource, manage risks with special attention to quality.
- Identify revenue-generating activities during those challenging times, and maintain or increase the company's investment in them. Revisit their strategy with a growth mindset.
- Change employees and management compensations by cutting down unnecessary benefits, freezing part of their salaries, or applying a haircut.
- If laying off employees is considered. Offer early retirement, and consider contracted employees first, as well as those who do not contribute directly to the business. Unnecessary management layers can also be removed, and decisions can be pushed to lower levels of the organization, which will also help in developing new talent, and propagate organizational change faster.
Don't Give-Up the Company's Growth Mindset
As leaders manage their crises, one should not give up one's growth mindset. In challenges, there lie different opportunities. One can learn from these challenges, and not give up finding new opportunities that are only on the table due tough times. In this context, one can seriously consider new markets to extend to, and are in need of some of the company's products and services, through partnerships, for easier penetration. Keeping an eye on a balanced score-card and the company's KPI's is critical to growth, and look for new opportunities, whether in this crisis or other contexts critical for consideration at this difficult time.
People, People, People
In difficult, unforeseen situations, people are, more than ever, the organization's main assets. When in turmoil, the main challenge remains for a company to keep its "survivors" focused, adaptable, and resilient. As organizations downsize, leaders should change their compensation and benefits plans, adding responsibilities to surviving employees, in order to expect more of them. People remain the main link between organization strategy and its performance. As such, a top priority for the leadership team is to assure that leading talent is glued to their key positions. Retaining key people in critical positions, and investing in them is crucial during a time of crisis. Infusing a culture that nurtures a thirst for knowledge and learning, promotes curious minds, and encourages consultative approaches in problem solving is fundamental, while staying focused on the business at hand. Difficult times don't last forever. It may look like a tunnel or a maze at times, but perseverance, grit, and commitment are core attributes that are needed to see an organization through to the other side.
[1] Paul Stoltz
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