It is the million dollar question and the one that you, an entrepreneur, ask yourself every day when you have to face your business day again. In our study on crisis management, we have sought the answers to this question.
In most cases in which we have managed a crisis, we find a common pattern of both the problems and the solutions that are used to ensure success.
As for the reasons for failure, the most important is the "paralysis by panic" of the top managers, that is, not making decisions. This attitude is the consequence of a lack of experience in similar situations or of not finding alternatives to improve results and get out of the crisis.
It is also common for companies to take longer than necessary to identify the crisis and solutions (in our study it appears that companies take 17 months to react). Thus, we move on to another phase that we could call “decisions without reflection” in which decisions are started due to the pressures of the income statement but without the necessary analysis. In these cases, very serious problems appear within a few weeks.
Success in crisis requires focus to ACTION and a plan. And we have analyzed the correlation that existed between each of the behaviors that we have observed and the success achieved in managing the crisis.
To carry out the plan, we use a play on words where the term ACTION is combined with the key elements for success in the crisis management plan:
- Agility. Forcefulness. Box. Information. Objective. Core.
And the elements would be like this:
- Agility. A plan must be geared towards short-term action. Speed is key and the first 100 days fundamental Let's look at 10 years but execute in 100 days! 62% of the companies that successfully overcame the crisis were agile in making decisions. Forcefulness. Companies that make radical changes in their strategy (elimination of unprofitable customers, change in pricing strategy, redefinition of products) are more successful. 81% of the companies that succeeded made strong decisions. Box. In the crisis, there are three obsessions: box, box and box. Having an accurate cash forecast based on different assumptions is key to success. In our study, we found that 77% of companies did not have a correct treasury tool.We have also identified that of the successful cases, 71% had a very important focus on treasury management. Information. We must maintain fluid and constant communication with all stakeholders (suppliers, collaborators, banks). It is essential that there is a clear plan with the tasks to be developed. 47% of the firms that were successful in the situation, had communicated perfectly to all the actors. Objective. The plan must be objective and credible, thinking about what we must do in the future to be competitive. The situation is different and we must face it differently. The Management by Objectives for monitoring the plan is also key to success. Core:Any successful crisis plan must focus on the core - on what you really know how to do - and divest yourself of activities where you have no competitive advantage. This was done by 59% of the companies that managed to overcome a crisis.
- But success comes with a plan and a team. It may be the case of having a management team used to managing in times of crisis or incorporating external professionals with experience.
The practical reality is that teams come from growth situations and without much focus on costs.
For this, a method that we have proven is the figure of the "Restructuring Director", a professional who is in charge of leading this crisis plan and who must have practical experience in crisis management.
All you need to do is get going… And making the ACTION plan is the first step! The second is to put the team… and the third is to enjoy the opportunities that the crisis teaches us.
