I was recently asked by a client, who owns a $10M business, whether I thought there will be more crises to manage. I paused to give the question thought. My response: Yes, definitely! Although I couldn’t predict the extent of disruption if another crisis hits, it’s clear business owners and leaders need to be prepared as if a crisis will happen. Consider everything from Covid resurgence, to climate/weather emergencies, to cyberattacks, to competitive disrupters.
Depending on your definition of crisis, there are a few areas where business owners will face challenges in 2023: Retention of key staff, recruitment of open positions, adapting to market changes, managing debt and controlling cash flow. Our discussion raised a question: Will she and other business owners be prepared for the next crisis?
Fortunately, the lessons learned navigating a company through Covid have prepared many small and middle-market corporate leaders to anticipate and manage the next wave of change and potential crisis. How many are ready is hard to say. Certainly, we have many more battle-tested leaders than we did pre-Covid.
Strong companies have strong managers willing to hold their organizations to a high level of disciplined preparation. This includes business continuity planning and risk scenario assessment. Leaders need to be acutely aware of the early signs that can quickly trigger a business crisis. Here are six areas to assess:
- The Economy (effects of a potential recession; supply chain issues, access to capital…)
- Specific market and competitive trends
- Client performance, needs and satisfaction
- Company performance and financial strength (setting and assessing KPIs routinely)
- Management alignment
- Employee retention, staffing, satisfaction and performance
Leadership of this nature takes a high level of strategic and emotional discipline. A business owner of security systems for home and business told me that he’s managing his company’s supply chain issues of specialized parts by partnering with competitors to access and share those parts. This is an example of institutional learning that will carry over to managing future challenges. Necessity is certainly the mother of invention.
Seven Practices to Minimize Crises
In addition to the six assessment areas, here are seven practices to minimize the risk of crisis:
Initiate or update your business continuity plan. Build in “what if” scenarios, including the loss of key employees. Get your management team on the same page by defining what crisis means to your company – don’t throw around the term loosely. Even if a crisis does not materialize, this exercise strengthens the management team’s collaboration – and gets them to work on the business strategically. Craft potential responses to different scenarios.
Stay close to clients. Ask them what they are seeing. Learn how you can bring them additional value. This will make it more difficult for your clients to leave you. It may also result in new business referrals.
Stay close to employees. Be present, observe and listen. Recently a CEO confided that he has lost the feel for what is going on with his people. Like sales, leadership and change management are contact sports. Set clear in-person and work-from-home policies. Recent trends show more corporate managers are bringing people back into the office – at least in a controlled, planned way. It’s smart to do so!
Tap into a cross-functional team of people who have a view across the six trigger areas. They become organizational scouts – your ears and eyes. Since your sales team is close to their market and clients, tap into their insight and learning. Work with your management team to get good at asking “Based on what we are learning, what changes do we need to make – what should we let go of, do differently, and do better?” This process builds change-management strength.
Build a bench for key positions. Don’t wait until an important person leaves. Be proactive in meeting and interviewing for talent. This will help to minimize staffing disruption.
Strengthen organizational and management skills. Identify new competencies needed to adapt to the changes you are experiencing. Don’t play skill catch-up. Developing your people is critical and one more hedge against the inevitable employee departure. Too many companies are neglecting this!
Reach out to key service partners. Tap into their knowledge, including your accountant, lawyer, banker, insurance agent, financial planner, and marketing partners. Ask them what they are seeing in their markets. Also stay close to your peers within and outside your industry. Having open discussions with peer business owners, industry associations, and trusted advisors can unmask issues early on.
Don’t wait. Assume change and even crisis may happen. Because it will! Don’t make hope a strategy – meet with your leadership team and prepare properly for change by building these strategic habits. Doing so may avert a crisis or minimize its effect. Companies that adhere to these practices are well positioned during uncertain times and may even come out the other side stronger.