In our business we’re all too aware that no company, big or small, is immune to crisis. In fact, according to a global report by PwC, 80% of CEOs say they’ve faced financial crisis at some point.
Crisis triggers can be diverse, from operational inefficiencies to poor staffing to economic downturns. But regardless of how trouble starts, survival depends upon the right actions being taken at the right time to turn things around.
While every situation is different, based on our experience and the insights of others, here are some effective tactics you can employ to steer your company back to black.
1. Acknowledge the problem and act
It can be easy to miss the early signs of crisis, but even easier to refuse to acknowledge them to avoid admitting mistakes. Unfortunately, not recognising there’s a problem is a sure fire path to Liquidation.
As soon as there’s even the slightest indication of crisis, you need to concede and act quickly and decisively. Jumping on the problem straight away not only boosts your chances of survival, it also demonstrates strong leadership – a critical trait to win and keep stakeholder confidence.
2. Reassess your business plan
Business plans should always be regularly reviewed and updated at least every 12 months to ensure their continued viability. If you’ve hit crisis, it’s definitely time to take a look.
Are your goals realistic? Has the market changed? A big shortfall in many Australian businesses today is a lack of innovation – could this be an issue?
Once you’ve identified any problems, rewrite your plan, setting yourself strict targets. For example, if we don’t achieve a certain level of performance by this date, consider a new tack.
3. Communicate with stakeholders
While good communication is always important in business, it’s essential in a crisis. What you say and, just as importantly, what you don’t say, can seal your destiny. So start talking, fast, providing updates on a regular basis.
What should you say? Our best advice: be honest and keep the story consistent, whether you’re telling it to staff or shareholders. This will help rebuild trust and increase engagement. In addition, ensure communication is two-way. Ask for opinions and encourage discussion – what you hear could prove to be valuable strategy fodder.
4. Turn to your board for advice
Boards are often seen as a necessary evil, there to mediate the important decisions and appease stakeholders. However, your board or advisory team can be an incredibly useful resource in helping you successfully manage a crisis.
Firstly, they have great insight into the company and can keep you up-to-date with progress. Plus by getting together regularly to review the risks, as well as you business plan, they can help you retain focus.
5. Focus on cash and cash returns
In the midst of a financial crisis, stress levels soar and, as a result, common sense can fall by the wayside. It’s easy to get lost in a haze of complex metrics such as earnings before tax and interest (EBIT) and return on investment.
To shine a light through the fog you need to go back to basics and turn your attention to one thing only: your cash flow.
This means not only keeping a close eye on your bank balance but also creating mid and long term forecasts so you know what’s coming. Once you simplify your finances in this way, a course of action will become clearer.
6. Strategise for quick wins
While it’s important to instigate changes that will result in improved cash flow over time, such as changing suppliers, you should also look to achieve some quick wins.
These are smart tactics, such as introducing tougher policies on travel, limiting stationary orders and stopping unnecessary services. Not only are they easy enough to implement but they can improve your bottom line faster, boosting morale and appeasing shareholders.
7. Remodel your incentives
You no doubt already use incentives to motivate staff. However, their potential in a crisis often gets overlooked. They can be an extremely effective way to re-engage employees and get the results you need to start turning things around.
If you want to see a $250,000 improvement from pricing, make this the goal for your sales team. Similarly, if you want to cut $75,000 from procurement, set a target for your chief purchasing officer to meet or beat. Importantly, only reward goal hitters.
8. Critically assess your workforce
Making staff cuts can be one of the toughest parts of a turnaround plan. Even if you’re able to maintain headcount, this shouldn’t be your only concern.
Letting go of underachievers as well as a couple of people at the top who are resisting change can really improve the dynamic and help you push things forward. It also sends an important message that you’re not afraid to make tough decisions.
In addition, seek out the hard workers. These may be people you have previously overlooked, but who will actually take change more willingly. They could turn about to be the new leaders who can help you through.
From crisis to growth
When you’ve reached crisis point, how you handle things can make all the difference. By taking smart, swift action and managing the situation with confidence, you can lead your company out of the red and into a new profitable period of business.
If you’d like to bring in a professional to help lead your company out of crisis, contact us today for a free, no obligation consultation.