Mitigating Crisis in Business: Lessons from the Field
Updated: Oct 27, 2020
Covid-19 has disrupted and redefined every aspect of our lives, businesses, and futures. It has made supply chains vulnerable, created logistical nightmares, destroyed livelihoods, caused companies to shut down, and created unlikely heroes.
Consulting companies across the globe are now capitalizing on specialized "coronavirus business strategy solutions", while companies are rethinking what their workforce and manufacturing locations will look like tomorrow. The magnitude of this world-wide economic and society-crippling pandemic is not to be undermined, but it is also not the first time systems are disrupted, nor will it be the last.
The Not Petya cyberattack on Maersk, Samsung’s Galaxy Note 7’s spontaneously combusting, Boeing’s Max 737’s crashing on take-off, Nikola’s stock-crash after the Hindenburg report, a prototype injuring civilians during testings, a sexual harassment suit, a security breach, a corruption charge, or a manufacturing facility embroiled in an international ethical and human rights incident: these are all examples of business “disasters” that happen, and will continue to happen. Many are preventable, but others are unforeseen. So how can companies prepare for the unknown?
There’s no need to re-invent the proverbial wheel. In my time helping organizations and businesses scale at home and overseas, I realized that the lessons learned from the field - whether leading disaster response operations, planning mitigation and recovery with city and state governments, or my years in the Marine Corps - were more applicable to preventing crisis in business than I could have imagined.
Disasters in nature are becoming more prevalent each year. Devastating hurricanes or wildfires were once just that: disasters. The definition of the word in itself connotes something sudden or accidental. Not the norm. However, hurricane season is now delivering its destruction back-to-back and to the same areas, such as Hurricanes Laura and Delta, which hit Louisiana within six weeks of each other this year. Governments and first responders have become accustomed to the disaster cycle: it’s guaranteed to happen, and it’s only getting worse. So what can businesses learn from emergency management in order to become more agile, prepared, and responsive to the “disasters” of business?
Amongst emergency managers, government organizations, and nonprofits in disaster response, the “disaster cycle” is a strategy staple, but for many citizens, disaster response is often-times the only one they’re familiar with.
What many don’t realize is that if all we do is respond to disasters, we’re too late.
A disaster/crisis management cycle should include: mitigation, preparedness, response, and recovery. This cycle is what company leaders need to incorporate into day-to-day strategy and operations.
Mitigating Crisis Through Culture and Risk Management
It all starts with identifying points of failure: weaknesses and vulnerabilities within a company’s strategy, operations, and resources. It is important that leadership not brush these aside, postpone addressing them, or discredit their potential to disrupt the success of the company. At times the goal at hand to turn for profit, scale operations, or close a contract can take priority front and center, but a small oversight such as not having a travel-safety plan or K&R plan for global employees can cost millions in recovery efforts and lawsuits, potentially dissolve a company...and more importantly, could cost a life. Company leadership, especially early-stage startups might not focus on these risks at first, comfortably riding in the eye of the storm, oblivious to the dangers and risks inherent ahead. So how can this be prevented?
Many young startups run lean on human capital and management. There's a CEO (usually the one who came up with the idea), and sometimes even a COO (though many wait until their operations are big enough or they decide it's time to get to the next level before they give up equity to bring on a COO that will help them grow), a team of core engineers for product development, and maybe one "recruiter" that is also wearing the hat of HR and the "People" team. This person might also be responsible for culture. Usually young, innovative, and optimistic, these individuals consider themselves culture experts after having read a few books such as Powerful: Building a Culture of Freedom and Responsibility or Extreme Ownership. Great books, by the way, but these company cultural pillars have little to no experience as leaders. Furthermore, flat organizational structure, though crucial to develop fast innovation, can also suffer from lack of direction and management experience. So creating a culture falls on the shoulders of a few at first, spun by trial and error and often a revolving door of poor culture and subpar Glassdoor reviews.
Creating a culture of openness and responsibility, where employees at every level in the company feel that they can openly bring up issues, failures, vulnerabilities, and fears - and are listened to without repercussion - is a first step. Enabling operational risk assessments at every level of a company by creating awareness and embracing vulnerability can lead to ameliorating risk and preventing the unforeseeable. This doesn't mean that employees are weak, or that leaders are weak, but rather that vulnerability can create an environment of positive action toward identifying risks - whether risks in human behavior or risks in the operating environment - and managing them. Taking the time to create space for these conversations is crucial to productivity and innovation. This can be further imbued through proper onboarding and regular training to identify risks and the creation and implementation of risk management framework in standard operating procedures.
Preparing for Crisis: The Leadership Continuum & System of Redundancy
So we work hard to prevent disasters we know can happen. We train our employees in risk management. We have brilliant standard operating procedures and a culture of vulnerability. But what about the unknowns? How do we prepare for disasters we can’t see coming? Here again, we like to highlight a system from emergency management: the Incident Command System. In summary, it is a standardized approach that provides a framework for how command, control, and coordination will be organized between internal and external components of an organization responding to an emergency. It’s used by FEMA, fire departments, police departments, non-profits, city governments, etc.
Companies hire human capital based on organizational gaps and the specific skills needed to fill these. However, executive and management teams need to also think about how their teams will perform during crisis, and establish a course of action ahead of time for response. Your most skilled engineer who leads a small team during “blue skies” (normal operations), might not be the best person to lead the team during “gray skies” - he might lose his grit, not perform well under pressure, or not have the decisiveness required to make quick decisions in tough situations.
What happens if there are gaps in management? What if the most qualified person is on vacation or leave?
In the military, service-members are often reminded to “know the rank above and below you”. Combat can quickly turn a young 18 year-old Private First Class into a fireteam leader if her Corporal gets injured or killed in action. In business, leaders should not just foster upward mobility, but encourage employees to learn the ‘next role’ up, and managers to know the role ‘below’.
Leadership continuum is critical in time of crisis, especially when people start stepping down, employees become unavailable or incompetent in the face of crisis, or the need for extra resources demands individuals to step into roles other than their normal one. Having a plan for resource management when response is needed is critical, but only if leaders know their people's skills and strengths. Reiterating the need for a culture of vulnerability.
Another preparedness technique is creating redundant backup systems. We back up our lives constantly: data backups, alternate routes to take to work (or was that before Google Maps days?), or plan B for when the babysitter cancels. Companies should back up leadership (as noted above in leadership continuum), product safety systems (for example what happens if a motor in your UAV fails), security systems (and no, Operation Kevin with Roomba is not it), and in case of supply chain disruptions: vet vendors ahead of time (click here for our article on supply chain agility).
In high-performance environments where resources are scare, resource allocation toward creating redundant systems, ensuring training and onboarding is cohesive and complete, investing in leadership and management training, and taking the time to record operating procedures from the get-go, can often be after-thoughts. Young executives get rabbit-holed into fast turnarounds, product development, and showing investors that their money is going to not become a part of the 90% startup failure rate. Resource allocation decisions can easily (and understandably so) get prioritized toward short-term ROI’s, tangible KPI’s, and putting out household fires that are happening every day within the company. However, taking the time to take a step aside and adjust focus to the long term risks, preparedness, and planning for crisis could mitigate the high turnover rates, leadership failures, and constant reactivity that many companies face in their early years before they succeed.
Investing time to pause, analyze, orient, and put on the armor to train for battle, even in peace, will make your business more agile and increase chances of survival in times of crisis. As the Marines say, “the more you sweat in peace, the less you bleed in war.”
When disaster strikes and it’s time to respond, being prepared and having the right people in place who know their role during these “dark” times will not only make recovery easier and faster, but also ensure that your company remains agile and can adapt to a new normal.
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