10 theses about crisis management
In these times, it may be in order to share some wisdom of a business leader from the world of crisis learnt the hard way. For 20 years, I have led and advised companies in crisis both as a temporary manager and an external adviser. Certain things tend to be repeated in different situations despite of company and crisis character.
Thesis 1: Crisis management = Attitude + Cash + X
In crises, there are always two things that affect its management: attitude and cash. The starting point is that a manager with an attitude to defeat the crisis who is not afraid to get their hands dirty is needed as well as a cash flow that is sufficient to cover the necessary costs. The crisis has taken over when the manager has given up and the cash flow is gone. Most of the companies in crisis is struggling with these two issues.
Apart from this, 1-2 changing factors are usually needed to help manage the crisis. These may be things connected to sales, such as a new customer, a new market, or a new funding pattern. Crisis management is mentally harsh, which is why X may also consist of factors such as good health, peer support through good networks, hobbies that offer piece of mind, or a good shoulder at home. Very often X is good luck. A good leader needs to have luck as well.
Thesis 2: Crisis is threats, surprising, fast decisions, and changes
A crisis has many names, but its definition consists of four things:
1. It is an actual threat that can lead to bankruptcy.
2. It is surprising, so it cannot be completely prepared for.
3. It requires fast decisions, which is why normal decision-making processes where everyone has a say, do not work. The time to react and correct is limited.
4. It comes with changes. It is rare to go completely back to normal after a crisis. Something has changed along the way. The cause of the crisis is usually a person, no matter if it is about an economic disadvantage, debt, war, a terror attack, sickness, trade war, or a political transfer. Even nature can impact business with typhoons or volcanic eruptions. The 2010s have been called the decade of crisis and hence, the surprise factor should slowly fade away. Crisis may be general or company-specific, and the sufferer can be an owner, management, staff, a customer, or a subcontractor.
Thesis 3: In crisis, a leader is needed
There are no coherent specs of a good leader; all leaders function sometime, but no one functions all the time. Every leader faces a crisis at some stage of their career. In crisis, everyone wants a leader as people want someone who steers them out of the crisis. It has been proven that most employees do not believe in the crisis management skills of their own management. So be a leader, don’t become paralyzed, don’t bury your head in the sand, don’t hide, don’t look for scapegoats for the crisis. You cannot control the crisis, but you can control how you react on it and how you get out of it.
Thesis 4: Crises have two steps: managing the crisis and managing out of the crisis
These two steps require different management. Before the crisis culmination, management is prevention and general preparation for the crisis. Lots of analytical action and know-how to identify, estimate, and understand potential threats. Managing growth is also crisis preparation in its own way. Without this step, reacting to the crisis normally comes too late.
The actions of the first step have a significant impact on the seriousness of the next step. If nothing else, one can at least be prepared by having cash for three months of costs and readiness to fast notify important stakeholders about the crisis. After the culmination, when the crisis is already on, management is more sturdy execution. Generally, people react in three different ways: by minimizing costs, by cutting marketing, and by adapting the staff. These actions are, however, usually signs of bad crisis management and overkills.
Thesis 5: The next crisis is always around the corner
Before, crises used to come every seventh year. By following the stock market, one could predict how the consumption decreases, the investments drop, the industry adapts, and the unemployment rate grows. Nowadays, crises follow each other on a short cycle. Every leader can be assured that the next crisis is soon at the door. Crisis management is hence a norm where one is always prepared. In other words, if a crisis surprises, it is a sign of poor leadership. In an ideal situation, a manager senses and identifies the threat fast and has built the needed infrastructure and process practice for it.
Thesis 6: Keep Calm and Carry On
Normal reactions to crisis are panic, fear, and a negative way of thinking. However, how one reacts is a choice. Another way to react to a crisis is a positive attitude that works as efficiency fuel. Bad news only needs to be spread when required, however, without creating panic and by giving hope for the future.
A British saying from the second world war describes how positivity and clear goals can get you through even the worst crisis. Or as Churchill expressed himself:”If you're going through hell, keep going”.
A good crisis manager knows that she or he is observed and that every word and gesture is interpreted. If you let emotions take over, the employees lose their belief in their leader’s ability to steer them out of the crisis. However, sugar-coating it all is not good either as there is no proof of the audience panicking in a crisis.
Thesis 7: A leader makes mistakes in crises
There is no ready-made template for crisis management as each crisis includes something different. A leader faces situations in a crisis where he or she has not been in before. There are not answers to everything. And since there is no data available for all decisions, and no time to gather it, a leader must improvise and take calculated risks. No answer is a hundred percent correct.
Listening to an opponent and considering options is good, but usually there is no time for consensus or internal sales. Be determined, don’t look for decisions that satisfy everyone. A crisis requires continuous decisions, on e decision is not enough. Everyone makes mistakes. When something goes wrong, however, there is no point in grieving over it as there is no room for looking back in a crisis. A strong leader admits his or her mistakes but does not take them personally. Mistakes are part of management.
Thesis 8: Crisis management takes 100 days
Managing a crisis or fundamental change takes 100 days, not less, not more. Of this, 10 days are planning, and 90 days are execution. If you do not have 100 days, management fails. Too often I see situations where management asks for help too late when there is not 100 days left. It is worth making employees and stakeholders understand that a fight cannot be defeated in one day. What kind of competence is then needed the most in crisis management?
1. Agility. Be fast, but don’t panic. You need to make space for changes and be prepared to change the first reactions. In crises, there is no time for splutter or panicking negotiators. And aftermath is unnecessary.
2. Communications. Be open and consistent. Do not leave things to the listener and treat the listener like an adult. If you make unpleasant decisions, be straight forward instead of sugar-coating.
3. Emotional intelligence. Identify the importance of emotions and use the information in problem solving. In crises, emotions beat reason. It is proven that people want sympathy and understanding from their leader as well as the reassurance that everything will be okay despite the difficult times.
4. Assertiveness. In crises, there is no room for making friends or being too nice. A crisis requires adjustment and sangfroid. Be prepared to choose which one is more important, the company or a friend.
5. Envisioning skills. Live and operate in the present moment but paint a future. In a crisis, direction is needed, in other words a clear vision and aim to strive for when the crisis is over. Without a future image, people do not have the strength to live through the crisis long.
6. Taking care of know-how. Make sure that you entice, engage, and hold on to your key persons. They are the future of the company. It is also good to remember that those who are not laid off usually suffer from bad conscience when their colleagues are laid off.
Thesis 9: In crises, the leader is alone
The starting point is that a leader is lonely in a crisis. Generally, everyone takes care of themselves, especially if the crisis is of general character. Crisis management can be compared to a hamburger. The leader is the steak. The bottom bun is the employees who need to be motivated and at the same time kept at distance in case of laying them off. The upper bun is the board who requires actions from the manager and who keeps its distance as it may anytime lay off the leader.
When pressing the burger hard enough, the pressure from both sides leads to ketchup leaking out, in other words the blood of the manager. Part of the organization wants the manager to succeed and the other part wants him or her to fail, for instance, to keep their own position or in hope of being promoted.
An intermediary ensures their own position and does not takes the risks required in crisis management. And if the crisis leads to failure, a scapegoat is needed which is the manager. No one wants to identify themselves with him or her. And if the crisis leads to a successful outcome, the manager only did his or her job.
Thesis 10: Crisis is good
A consolation to a crisis is that it usually comes with something good. Accept the crisis and believe that it will bring your company positive changes. In crises, the grain is separated from the chaff. In other words, you see who works and who doesn’t. According to Darwin’s way of thinking, a crisis is an evolution that erases the weakest and gives living space to the ones in good shape. Market overheating is contained.
A crisis comes with changes and learning that promote the growth of the company. After the crisis, you can get back to normal stronger and wiser.