Managing your business or department in a crisis

First off let me just say I’m not talking about a crisis management plan for your company. This chapter deals only with how you react to the crisis within your department. A major company crisis like fraud at the top levels of the organization, or a product release fiasco requires a public relations expert specifically trained in crisis management. Our goal in this chapter is to show you how to manage your staff during very difficult times within the business or just within your department. Great managers are often “discovered” during very tough times. Manager that were previously thought highly of are also discovered to be less than adequate during these crucial times.
A couple of crisis scenarios that many managers have to deal with are a mass exodus of employees, either voluntarily, or by a corporate wide reduction in force, loss of a large customer, project gone horribly wrong, or a takeover of top management.
There are essentially four steps to managing during a crisis situation.

Evaluate
Plan
React
Conclude and Learn

Evaluate

Understand as clearly and as concisely as possible what the crisis really is. Reacting to quickly and without all of the pertinent information will generally make things worse. Unless the building is on fire you have at least a few hours to gather information and figure out what happened and why. To get a complete picture you may want to bring in a couple of key members of your staff. Not only will this help with your understanding of the situation you’ll also get immediate buy-in from the employees who are going to be instrumental in helping to solve the problem.

Plan

Before you make any changes collect your thoughts and create a plan of action. Again, get input from your HIHMs and as much as possible their approval. You’re going to need them more than ever during tough times. The first part of your plan should be acknowledging the situation to your staff and if prudent to the customers affected. Then come up with a few possible solutions and check the merits of each one.

React

Implement your plan. Make sure you stay calm and collected during this phase. Nothing will cause you to lose the respect of your staff faster than looking like you’re not in control of the situation. Even if you’re not, don’t let your people know.
Keep everyone informed of the status during the reaction time. Now more than ever good communication is absolutely vital. Fear of the unknown may cause employees to leave the company exacerbating the situation.

Conclude and learn

Once the crisis has passed you want to bring everyone up to date and put it to rest. At the same time review your plan (it will have changed) and see if there is anything you can do to avoid the same crisis in the future, and if not, what would you change about how you reacted to it. Management consultants like to say, “There are no problems, only opportunities.” I think they say this because they’re not the ones who have to deal with the problem. You can however learn from a bad situation and make it less of a crisis in the future.
Now let’s take a few minutes and look at some specific case studies and understand how we might best respond to them.

Case studies in crisis management

A mass exodus as a result of a change in management.
If your department only has 10 people and three of them leave that’s enough to be considered a mass exodus by the remaining staff. When this occurs managers usually make one of two mistakes. The first reaction is to try and hire replacements to quickly, the second is to not hire anyone at all because you think the work will dry up without the people. If you don’t hire replacements the work will disappear. It’s better to hire to quickly than not at all, but to avoid making a bad hiring decision in a situation like this it’s best to plan ahead. I always try to have a few résumé’s of people looking to make a move. Ideally you want someone who already has a job somewhere else. That way if it’s several months before you actually need them, they may still be looking.
Forced layoff as a result of lost sales.
In this case you want to be able to tell the employees who remain that the changes were made not just to solve a short-term problem but to make sure the company is stronger in the long run. That’s why some people with more seniority were let go before employees who may have only been with the company a few years. If you tell them the layoff was to strengthen the company but you layoff by seniority any fool can figure out that you took the easy way out.
It’s far to often the case that big companies try to put a rosebud on the turd that is a mass layoff. Big reductions in force are almost always a result of poor management at the upper levels. And everyone knows it. It’s best just to say, “We screwed up. We’ve hired to many people and we don’t have the work to keep them all busy.” Then tell them what you’re going to do about it. It may be you’re going to engineer better products, increase the marketing and sales staff, or just sit tight for a few years and build cash so that you can grow the business.
With medium and smaller businesses a large layoff can be out of the hands of those who run the show. If your company has two hundred people and seventy percent of them are dedicated to a single client what’s going to happen if that client goes away? There is no choice but to let large numbers of employees go. It doesn’t make it any less painful for those who get the axe, but at least you can keep a clear conscience and build from a foundation of trust.
Loss of a major customer.
The first thing to do in this situation is find out if you can get the customer back. I’ve had this happen before and by quickly meeting with the customer I was able to salvage the relationship. If it’s not possible to make a concession or change to keep the customer, at a minimum keep the relationship positive. You never know how the new company will handle the account and if you part on good terms you may have a chance to get them back at some point in the future. If the result of this loss of business is that you’re going to lose staff members, make sure you gain something out of a bad situation and get rid of some of those at the bottom. This will go against your first instinct, which is to let go the staff members who were working for the lost customers project, but in the long run it really is a great opportunity to strengthen for the future.

Loss of a critical employee

No matter how hard you try good people sometimes will leave the company. Maybe it’s just Murphy’s law but it always seems to happen at the worst possible time. If you’ve managed your department with an emphasis on treating those at the top exceptionally well it can be rather easy to weather a storm like this. The reason is obvious. Other employees would like to receive the same treatment. Hopefully you’ve got someone in the middle of the pack you can motivate to the HIHM level. It’s somewhat of a risk because you’re going to have to pump training dollars and experience in to the person pretty quickly so choose wisely, as the saying goes. If you don’t think you’ve got an internal replacement I highly recommend against forcing it. You’re better off to go outside the company and higher someone.
The least and most attractive option is sometimes necessary. Occasionally you’ll have to hire two people to replace on really good one. That’s why it is so important to try and keep these people around in the first place. Remember the bottom line is the issue. If it takes two people to keep things rolling than bite the bullet and do it. You’ll be better off in the long run.

Too much business

Although it is a good problem to have it’s still a problem. If you don’t handle it effectively it won’t be a problem for long. This is the biggest reason many small companies go through a sell and implement cycle. You work hard to get new customers and then don’t staff up or increase training or compensation to the level necessary to get the job done. I don’t know of a single small company that hasn’t gone though this at least once. This is particularly the case when the boom has followed a bust. Management is hesitant to add head count and opts to try and get everything done with the same number of people. The work doesn’t get done or gets done poorly and you end up with another bust. If I can do just one thing to help your business it’s to tell you this. Don’t sacrifice the integrity of your work, or the satisfaction level of your employees to make a quick book. It never works. I need to say this again, It never works. You’ll end up with good people quitting and customers looking for another vendor.
When your employees get overwhelmed don’t buy more whips buy more horses. You can always lay them off down the road if that becomes necessary. It’s not a nice thing to do but at least you’ll keep the business you have and be stronger in the long run.

Back to beginning of entrepreneurial mangement and motivation.

More business leadership training.