Breathing new life into a company, and rising above the routine can be done if you ask yourself the right questions. Christine Castillo, performance management consultant, the partner of Stride company advises managers on how to act, during crisis times.
About a year ago I witnessed an interesting situation. During that time a new economic crisis began and the head of one of the domestic companies which produce mechanical equipment, rushed to the HR-manager with a cry: "I need the layoff plan on my desk ASAP! We will lay off 200 workers out of 500". It all happened in a small town for which two hundred people is a huge amount. Of course, all of them had families, children and almost zero chances of finding a new job. HR-manager called the head office in a panic asking what to do. She received a reasonable answer: "Price for imported products will rise for sure. Firstly, we need to estimate whether we actually need to dismiss anybody at all? "
HR-manager honestly tried to convince superior to wait. But he demanded to start laying people off. So she ended up basically pretending to fire people and hiding documents to make it look like they were actually fired. Two months later, the same head came running to her, shouting: "We need to hire people urgently!" as the company received many new orders because as expected similar imported products became quite expensive thus creating a huge demand for a local producer.
So before you panic because of a start firing people you really need to sit down and think if this is what your company actually needs. Time of crisis is the time to revise your strategy.
In any organization there are stakeholders; it's a group of individuals that affect the company and depend on it. Firstly, they are the shareholders, customers, suppliers, employees, and supervisors. But there is also a less familiar category. For example, at the Cranfield University, I met a future colleague from the World Food Program. It is a UN agency which is engaged in the delivery of drinking water and food to the areas of natural disasters or armed conflict. She told me that in the planning of each campaign they thoroughly analyze all stakeholders. And every time they take into account not only contributors, victims, local authorities, transport companies, but also militant groups, pillagers, and looters. To assess these stakeholders they even have a special security scale: if the situation is too risky, they have to end the campaign. To control these stakeholders, it is necessary to negotiate with the troops or to hire security agencies.
Therefore, the first step in the strategy revision is the analysis of the needs of the most important stakeholders. The crisis may adjust their wishes, as in the above-mentioned story: the situation in the market has changed, and suddenly customers needed the domestic product.
Think it through and write down all of your stakeholders, consider their needs and prioritize them: which one is the most significant to you. Because Mrs. Smith, who lives next to your plant and whose nice view from the living room window will be ruined by your plant, is also your stakeholder but not too significant one.
The next step is setting goals: what you want to achieve as a company? This is a very important point. When you do not know where you are going panic begins: fire two hundred workers and then rehire them. Your goals can be different: become one of top three industry leaders in the domestic market or to grow faster than the market. "A computer with our software on every desktop and in every office" was a Microsoft goal in the 80's”. "Sending a man to the Moon and returning him safely to the Earth before the end of the decade” - that's an example of a higher-level goal of JFK's Moon Challenge. The crisis is a reason to once again say or restate your main goal.
Once you have determined where to move, the analysis of the external environment is required: what forces act on the external market, what happens to the needs of customers and with suppliers capabilities, what is the strength of your competitors, how high is the possibility of new substitute products emerging, what is the legal field, and so on. It is a great science to which Michael Porter, Henry Mintzberg, and other pillars of strategic planning devoted their works.
In any company from time to time, there are overlays, failures, and setbacks. These are the most important moments for learning. The head is able to find out what sequence of events led to the failure and what needs to change in the organization so that it does not happen again.
It is necessary to carefully review where you have well-established business processes and where they are not entirely correct.
The next step is called a success map. Let's say you set your goal to be the leadership in the domestic market. Then the time to evaluate and think through to all the steps in detail comes.
It is very useful to count all the company's assets and how much each of them costs, what is the profitability of each product individually, and cost of each activity. Sometimes it turns out that your favorite product is very low-margin and the least favorite one is quite profitable. Also as a result of creating success map, it can turn out that you actually need to hire new employees and not dismissing.
Take Microsoft for example, In the 80's they started with software for personal computers. But later they rethought the success map. Today, they have separate units for entertainment services and video game consoles, smartphones and software solutions for businesses. Now they are studying new areas: human-computer interaction, technologies to reduce energy consumption, and pattern recognition. So to maintain leadership they have widely diversified their product line.
I once witnessed a very difficult situation: management closed in the office and began to develop "the best strategy." The meetings were held for six months. All this time, the company was losing income because no actual decisions were made, and the employees were in the state of anxiety. The bravest and the best ones just left the company; the rest of them developed a depression. The effect of this demoralization is difficult to calculate, but it is monstrous – everybody starts to work badly.
Yes, you need a plan, but you need to think fast. Once a solution is found, you should talk to your employees. You do not need to discuss every detail with them: now we are thinking about our stakeholders, and now we draw a map of success ...
But give people at least some certainty: we are moving in a certain direction, we will keep developing these products, and these ones we will stop selling. And do not be afraid: a bad plan is better than no plan.
Unfortunately, sometimes this step is inevitable. If you are going to lay off people, do it quickly, accurately, and transparently and understand that you need to keep up the morale of the remaining employees.
As soon as employees hear the words about an optimization, each one decides that either they will be the ones to get laid off or they will get three times the work.
They immediately begin to run to job interviews, look for other opportunities. Those who do not see any ways out just multiply the panic. To prevent all that just say: "We have the layoff list, the rest of you have no reasons to panic." And it is equally important to say to the fired employees: "Guys, we also appreciate you and we dismiss you with sadness and tears. And if the situation changes, we will be happy to cooperate with you again."
The idea of working in a humane company is a very valuable employee sentiment. Be honest with your employees, their confidence and loyalty during the restructuration are worth it.
An executive will be required to have maturity and awareness if the business is built by a group of friends. Business in some sense is something very simple and beautiful in its simplicity. In business, you need to be able to separate yourself from work. In our private life we can be emotionally involved. But business and friendship are two different genres that are hard to mix.
However, a team of friends can be a valuable asset. The only requirement is to be honest and set an appropriate goal: “I want to be around great people and at the same time, we all could earn some money for life."
Properly, revising your strategy should be an ongoing process. But usually, as the company grows it accumulates a lot of administrative routines, so the management has time to deal only with the current operations. Therefore, in times of crisis, there is often this panic that comes from not being able to instantly determine what to do and where to go.
Do not despair. During any crisis market is shuffled and there are often new niches opened, so you can always find new opportunities if you ask the right questions.