A CEO’s Guide to Managing Business In Crisis

The world is currently going through a serious global crisis, triggered by the COVID-19 pandemic. It is not just a health crisis. It is rapidly imploding into societal, economic and business crises.

The critical question is: how long will this global crisis last? If it persists, the world will plunge into a deep recession. There are experts who predict that it may last at least 18 months because:

  • That is the quickest time frame when an effective medicine or vaccine can be found and brought to market. That said, there is no absolute certainty that an effective medicine or vaccine will be found.
  • Without a medicine or vaccine, the world will have to resort to non-pharmaceutical interventions e.g. a lockdown or some level of movement restriction. While these measures can help to suppress or “flatten the curve”, once lifted or relaxed, the virus infection may continue to spread, or worse still, mutate. What this means is no matter how quickly these restrictions can be lifted, this 18-month time frame will likely perpetuate a serious crisis.

In times of crisis, there is no time for procrastination or hesitation. There can be no other agenda more important than to safeguard the well-being of the citizens. Governments all around the world must take drastic and immediate actions to contain, delay and mitigate the outbreak, by any means possible.

We have to do our best to avoid the worst case scenario of factories and businesses shutting down, workers quarantined and unable to work, disruption in daily supplies, people losing their jobs with no means to support themselves, closed borders with limited mobility, crippling of the transport, hotel, retail and consumer service industries as well as the escalation of bankruptcies. At this point, the notion of an impending deep recession (or ‘depression’ as some might even suggest) seems very real.

 

Business crisis

Many businesses are currently facing serious crisis as a result. While many CEOs are well equipped to deal with business in good times, some have very little experience in dealing with serious business crisis. They need help. Because of the lockdowns, what would you do if you are the CEO of:

  • An airline: Do you have to ground all international flights?
  • A chain of shopping malls: Retailers cannot pay their rent and customers are not allowed to shop because of the lockdown?
  • A hotel chain: Customers are all cancelling their bookings?
  • A chain of cinemas: No customers?
  • A consultancy firm: Your clients are cancelling your contracts and your consultants are unable to travel and meet clients because of the lockdowns?

If these CEOs google the topic “Managing business in crisis”, they will find lengthy and insightful articles which describe the key principles and frameworks on how to manage business in crisis. The literature will include:

  • Crisis leadership
  • Quick decision making
  • Ruthless prioritisation
  • Agile implementation
  • Authentic communication
  • and so forth

No one disagrees with these universally accepted principles and frameworks – in many ways, they are all motherhood statements. But the key question is “How do we implement these principles and put frameworks into practice?” While many of these articles make interesting reading during crisis, business people don’t need be entertained or amused. They need practical ‘handrails’ to help them.

In what follows, I will describe step by step what the CEO, the management team and staff need to do to manage their business in crisis.

FIRST MONTH: DEVELOP THE CRISIS AND RECOVERY PLAN

Day 1:

The Chairman and CEO brief the management that the company is undergoing a time of crisis.

The CEO effectively declares a crisis, announces a Crisis Coordination (‘Nerve’) Centre (CCC) led by the CEO.

The CEO outlines the practical steps that needs to be taken to deal with this crisis. These steps are described below.

At the end of day 1, the CEO sends a circular to all staff announcing the business crisis and way forward.

What are the key crisis management principles in doing this?

  • Directive and action oriented leadership
  • Decisive leadership
  • Timely communication

Day 2-6: 

The CCC develops various business scenarios with appropriate company responses. This is how the company should develop the strategies for managing its business crisis.

In the context of a COVID-19 lockdown, this work can be done virtually by staff working from home. This work should be done in no more than five days. Any longer and it will lead to paralysis by analysis.

There should be three scenarios i.e. optimistic, pessimistic and realistic scenarios. The team should run financial simulations to show how long the company has before it runs out of cash under each of the scenarios.

These scenarios should inform the strategies that need to be taken to manage the company during this crisis, for example:

  • Which part of the business should be fixed, sold or closed?
  • For the parts of the business that need to be fixed, what are the levers to increase revenue and to reduce cost?

What are the key crisis management principles in doing this?

  • Business scenarios and financial simulations are a must for companies in crisis
  • Strategies to manage crisis should be developed based on said business scenarios and financial simulations
  • Crisis and Recovery Plans should be developed based on these scenarios
  • For a company in serious crisis, the first thing to do is to manage cash
  • Expect the worst (hence the pessimistic scenario) but plan for the best (realistic and optimistic scenarios)

Day 7: 

Once the scenarios and corresponding strategic responses are completed by the CCC, this should be presented to the CEO and management team. The ensuing actions should be centred around a strategic choice to fix, sell or close the whole or parts of the business. No matter how painful and difficult, the deliberation must be robust and frank. The CEO and management must take this exercise seriously because they have to make the right strategic choice i.e. which is the likely crisis scenario and which actions should be taken to deal with the business crisis?

The meeting should end with the CEO and the management team making a collective decision on the way forward, including the various actions that needs to be taken.

Then, the management assigns teams to operationalise the way forward into a detailed action plan for implementation.

On the same day, the CEO briefs the Chairman and the Board to secure their agreement on the strategic way forward. In all likelihood, the board discussion will be a replay of what took place during the management team meeting.

Discussions about strategic choices for business in crisis is a painful process, especially when it comes to deciding on “fix, sell or close” options.

So, what are the key crisis management principles to handle this?

  • Strategy is about making choices; no matter how tough, the CEO and the management must make the call
  • Making tough decisions requires leadership
  • CEO and the management’s buy-in and alignment on the chosen crisis strategy are critical
  • The way forward must be fact-based and not just based on opinions

Day 8-27:

The CCC works with the management to assemble Action Teams to work FULL TIME on the detailed operational plans with activities, KPIs, action parties, resources, budgets and respective timelines. Typically, there should be six Action Teams (or given the COVID-19 context, virtual Action Teams):

  1. Cash Team (how to preserve cash)
  2. Revenue Team (how to increase revenue)
  3. Cost Team (how to cut costs)
  4. Customer Team (how to manage customers during the crisis)
  5. People Team (how to manage staff during this crisis, particularly if it involves redundancy)
  6. Communications Team (how best to communicate internally and externally)

The CCC makes sure that the Action Teams do not conduct their work in silos. Although drawn up by different teams, the CCC ensures the action plans are  integrated as one. The interdependencies and trade-off are ironed out.

What are the key crisis management principles in doing this?

  • Strategic plans are of little value unless they are translated in detail.
  • Most strategies fail because they are too high-level.
  • Detailed operational plans must be developed to be action oriented towards achieving profitability of the business.
  • The operational plans must holistic and integrated in order to achieve the true north of the crisis and recovery strategy/plan.
  • The Action Teams should be made up the best talents in the company. They should focus only on this work and be time-boxed.

Day 28: 

The six Action Teams present their operational plans to the CEO and the management team.

What are the key crisis management principles in doing this?

  • CEO and management approval and buy-in of the Operational Plan is critical

Day 29-30: 

CCC and Action Teams prepare materials, including fact sheets and FAQs for the board meeting and a townhall session with staff. In the context of a lockdown, these sessions can be done virtually.

What are the key crisis management principles in doing this?

  • Effective communication requires preparation.
  • “To fail to prepare is to prepare to fail”.
  • Communication must be tailored to its target audience; materials for the board will be different from those for employees.

Day 31:

CEO briefs the Board and also conducts a townhall briefing for staff. The best practice is for the detailed operational plan to be exhibited in the townhall for the staff to view during a gallery walk. Again, in the context of a lockdown, the board meeting and townhall can be conducted virtually.

What are the key crisis management principles in doing this?

  • In communicating to the Board and staff, the CEO should not only speak with facts and figures, but engage their hearts and minds.
  • Tell the truth, speak with authenticity and plainly.
  • Answer questions directly; if you don’t have the answers, say so.

SECOND MONTH ONWARDS: IMPLEMENT THE CRISIS AND RECOVERY PLAN 

Implementation begins based on the six Action Teams. Together with management, they own these operational plans. The CCC’s role is to act as the architect of the change process, assisting the implementors to exercise discipline of action. In this phase, three things must be done:

  • D = “DO IT RELENTLESSLY” i.e. implement the recommendations of the 6 working teams as if it is their life’s calling!
  • M = Monitor it continually (using a Daily/Weekly Dashboard). Activities that are completed on time are marked green, those that are partially completed are marked yellow and those that are not done are marked red. I strongly recommend that the company produce a DAILY P&L and DAILY CASH BALANCE. This is important to keep the company focused on its true north.
  • S = Solve problems recursively (all items that are marked red require problem-solving by the designated action parties). An automatic escalation process will allow for problems to be solved at higher level management through a referral process.

What are the key crisis management principles in doing this?

  • The secret to success is effective implementation
  • Business people do not implement strategies; they implement operational plans
  • Disciple of action and work routines are the foundation of successful implementation
  • A key activity of leadership is problem solving
  • “People may do what you expect; they will do what you inspect” (monitoring).

 

Monthly review and corrective action

On a monthly basis, the CCC should organise a strategic review session. This is the opportunity for the CEO and the management team to:

  • Review the external business environment, competitive landscape, etc. to make adjustments in the crisis plan
  • Review performance of the business and the six Action Teams (i.e. what worked and what did not work)
  • Make decisions and take corrective action for those activities that did not work
  • Reward teams that delivered on promises and implement consequences management
  • Communicate to staff on a monthly basis, the outcome of the Crisis and Recovery Plan

What are the key crisis management principles in doing this?

  • A learning organisation learns from its mistakes and the best practices of others
  • An agile organisation is quick to take corrective action
  • Wisdom is a function of experience and reflection
  • Success breeds success; the more you reward and communicate success, the more people will work to deliver results

 

Effective communication during crisis

The CEO and management team must make communication a key priority. They have to stick to the communications plan. In line with this plan, at every step along the journey, the leadership has to engage its employees, customer and stakeholders.

At the start of the journey, effective communication is critical to securing buy-in and alignment. During the journey, regular updates will ensure there is continued commitment to deliver.

And externally, communication should still be in place to keep the brand alive in the hearts and minds of its existing or prospective customers/clients.

What are the key crisis management principles in doing this?

  • Communication is an integral part of leadership
  • Communication routines must be exercised with discipline
  • In communication, proactiveness is more effective than reactivity
  • Timely communication is critical

 


If you are the CEO of a company in serious business crisis and distress, I invite you to take your company through the above practical steps. If you work in such a company, my invitation is that you should forward this article to your CEO.

If your company needs help, I can be contacted on: [email protected]