There has been no shortage of macro events over the past few years that have resulted in companies coming under extreme financial pressure due to circumstances beyond their control. Triggering events have ranged from pandemic-fueled workforce disruption to sharply increasing interest rates, supply-chain pressures, slackening demand in the face of a looming recession and, most recently, the bank contagion in which a number of well-established banks have either failed or required bailouts. Some of these upheavals occurred rapidly, seemingly overnight, while others could have been somewhat anticipated and perhaps mitigated with appropriate intervention.
While many companies had the management talent or were just plain lucky to figure out how to navigate through them, many lacked the experience or outside-the-box thinking to survive. As a result, numerous companies either failed or continued to limp along without the financial resources necessary to manage the business as a going concern. Many of these businesses will most likely eventually fail as well.
Why good leaders are always on storm watch. Leaders and their management teams must quickly be able to identify and manage a crisis — before it hits. What makes the job tougher is the simple fact that each brings with it some unique elements. The initial plan is only as good as the day it’s written. As new developments unfold, it’s hard to determine how long the storm will last and how many tactics will require modification.
One of the most effective ways to prepare for these contingencies proactively is to develop a systematic plan which identifies specific types of potential crises and how the company might respond to them. Using the talent and experience of the company’s leadership to identify and brainstorm on these scenarios goes a long way toward neutralizing the actual crises when they land.
That said, proactively creating a crisis-
management plan is only a portion of the overall solution. When adversity strikes, it’s important for the company’s leader, typically the CEO, to take charge of the situation and develop a “war room” mentality to get on top of it quickly.
People take their cues from the top. During a crisis it’s essential for the leader to project honesty and confidence throughout the ordeal. Stakeholders look to the leader for guidance, and to some extent, a level of reassurance that things are under control (not necessarily resolved). If the leader projects fear and uncertainty, then any plan will face serious questions or doubts which can ultimately undermine its effectiveness.
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 address them. Frequent communications related to where the company is at in managing the crisis and the progress being made are also advisable.
It’s important too for the company’s leader not only to be decisive but also adaptable. A crisis situation is one of the few circumstances in which leaders must be able make decisions quickly and often in a very short period of time. Leaders need to be able to make these decisions on the fly, and in some cases, even though they may not be popular.
Measured risks. Often, there is little to no time to ponder the pros and cons of a decision at a normal pace. Leaders who take action, who are decisive, and who are open to revising their decisions to address new developments, are going to have more success weathering a crisis than a leader who chooses to wait in a vain attempt to mitigate risk.
While making decisions quickly is a mandate in a crisis, it’s imperative that a leader does not throw caution to the wind and risk it all — unless there is truly no other option.
Good leaders must be able to make decisions rapidly; 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 takes some of the risk out of the fast-paced decision-making 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 which must be made will mitigate some of the risk in execution. 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 realistic throughout the crisis is also an important attribute of the effective crisis manager. Admittedly, this is is easier said than done. Nevertheless, 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 ranks.
Despite all good intention and preparation, even the best leaders may not be equipped to handle every crisis that lands in the boardroom. If you determine that a crisis is beyond your scope of experience or background, expert help is always available. Don’t ever hesitate to seek help if you or your advisors believe you need it.
Bill Lawrence is a Principal at Seattle-based restructuring and corporate advisory firm Revitalization Partners, which has served as a receiver in more than 30 cases in the Pacific Northwest. He and his partners write regularly about the operational and financial challenges in successfully restructuring companies. Learn more in the firm’s blog as well as its e-book, “Insights to Grow, Build or Save Your Business!”
