The beauty of a full-fledged business crisis

MANILA, Philippines - It is inevitable that all businesses will have periods of crisis. Be it from competitive initiatives, political or social instability, market declines, natural disasters — you name it — the good times are never endless in business. Each and every one of us will have times of crisis, when tough choices need to be made and fear is in the air.

Most people hate times of crisis. They hate the stress. The pain. The difficult decisions. The pressure on the bottom line.

Having weathered many crises over the past 29 years, from political upheaval in Palestine shutting the borders to economic shock in Poland to strong competitive moves in the USA, I am actually different. I love times of crisis. Not only does it get my blood flowing and competitive juices oozing, but I also see the bright side of crises — they are perfect opportunities to sharpen a company. To set a clear direction for the future. To actually strengthen your business!

Yes, indeed. A crisis, when handled properly, will actually create a stronger and more sustainable company in the end.

1. You find out who your superstars are. Nothing weeds out the water-walkers from the mere mortals like a crisis. Who panics? Who complains and moans about budget cuts and can’t seem to find a solution other than saying, “It’s impossible”? Who gets frustrated and bails out and who remains loyal and rides it out by your side? I can recall in Poland, in the dark days when our profits eroded by nearly 60 percent and about 20 percent of the company resigned, I told those who stayed, “I am happy they are gone.” Because from then on, I knew who I had by my side, I knew who had staying power and who the “jumpers” were. Yes, a crisis will tell you exactly whom you can count on, who your stars are, who is loyal and persevering. And who isn’t.

2. You get focused, innovative, and cost-conscious when budgets are cut. Fifteen years ago I hosted a group of venture capitalists in P&G and they had a look around the company. At the end of the visit, I asked them what they saw and what they felt we in P&G could learn from them. And I will never forget the answer: “Frankly, you guys have too much money, too-big budgets. Big budgets dull people’s sense of creativity — why find creative solutions when you can just throw money at an issue? Big budgets lead to waste and an attitude, “We are still on budget,” even if getting ripped off by a supplier. P&G could learn a lot of how to run a business lean and mean from venture capitalists.”

As I have learned so many times since, they were spot-on. Sometimes cutting a budget in half is the best thing one can do. Teams suddenly wake up and find innovative ways to still deliver on a reduced budget. They negotiate harder; try to find less expensive sources.  So many times now I can say that a financial crisis in the company led to budget cuts, which in turn showed how little innovation we had, how much waste we had, and how poorly we spent company money. I love budget cuts… because it brings out the best in good people (the bad just complain and say, “It’s impossible.”) and sharpens spending. There is not a budget in any company today that is stretched 100 percent and totally optimized. Fact.

3. You delayer the organization and take out unnecessary, non-value-added layers that cost money and add very little real value. You know how it is. In good times, organizations tend to “fatten” and justify new layers and new roles. We stack people on top of people — each creating new work for everyone else! We justify needing layer after layer to “train” or “oversee” things. And we end up with very hierarchical structures and many layers. This adds costs. Frustration for people at lower levels. And slows things down. Yet when a crisis comes, by necessity structures need to be re-evaluated. Layers are chopped out and along with them go excess costs, added bureaucracy, and slower decision making. Every time I have delayered an organization it has resulted in happier staff because decisions are fast and clear in how they are made and who makes them. Leaders in the company are more engaged and add more value, going beyond just “rubber-stamping” plans but giving more value based on a wealth of experience. Overhead costs are slashed and savings are generated. And good young people are allowed to “show what they got” and have room to step up and demonstrate their talents. Alexander the Great ruled the world by 33 years old, yet some companies refuse to let youth shine and smother them with “senior people,” which thwarts growth. Delayering allows young Alexanders to step up and take the reins!

So there you have it. There are many more benefits to a good crisis, but these are my big three.

A crisis is looming for every one of us in business. It is not a matter of “if” but “when.” If you don’t have a crisis now, well, you soon will!  And when that crisis comes, next time don’t panic. Don’t stress. Don’t go on Prozac. Relax. Embrace it as a time to get your business on solid footing. Let the people who want to leave, leave. They are showing you they don’t have loyalty or character and you don’t need nor want them around. Cut those budgets and let the savings flow while new creative ideas emerge. Delayer and free up your teams. Ensure everyone is working hard and delving into the right level of detail. Those who remain by your side will love the time of crisis as a unifying factor. And you will emerge from the crisis a stronger and fitter company.

As they say, “What doesn’t kill you makes you stronger.”

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Questions or comments may be directed to JamesMichaelLafferty.com.