Crisis Management

Almost every crisis contains within itself the seeds of success as well as the roots of failure. Finding, cultivating, and harvesting that potential success is the essence of crisis management. The essence of mismanagement is the propensity to take a bad situation and make it worse.

There are four requirements for a successful turnaround

• Is there a core business worth saving?
• Does the company possess the human resources to accomplish a turnaround?
• Does the company have the capital or access to capital necessary to do the turnaround?
• Does Management accept the need for change?

Revisit what the company stands for, what are the principles on which to base decisions: honesty, integrity, trust, respect.

Crisis Management Process

To Save the Company and Cure the Root Causes of the Crisis

Recognize the Crisis at its Root

• Look at what is happening (the data), not what someone within the organization tells you is happening
• Separate the symptom from the cause. Shortage of cash is a symptom; the real issue is what is causing the cash shortage

Prepare to Manage the Crisis

• Select the members of the crisis team
• Provide necessary resources
• Provide for communication
• Build firewall between crisis team and those operating the business

Contain the Crisis

• Stop the hemorrhaging in order to gain time
• Take steps to stop negative cash flow through cost reduction
• Review alternatives for sources of cash
• Determine who will have a problem if the company fails: Creditors, suppliers, banks, union, owners, employees, customers
• Explore short term alternatives based upon who has the most to lose

Develop a plan to address the root causes of the crisis evaluating and addressing the following areas

• Financial
  • Restructure the balance sheet
  • Make as much money as possible
• Product
  • Find out what customers think
  • Determine which products are profitable
• Marketing
  • Create a new marketing plan
  • Review sales personnel
  • Develop a new sales management process
• People
• Get the right people in the right places and get rid of the wrong people
• Set the right compensation

Communications and Planning

• Communicate the strategy to everyone in the company
• Take steps to avoid the crisis in the future