Preventing a business crisis!

1.   Issues most businesses are starting to face

With the current economic developments and (progressive) lockdowns, business owners and leaders are being confronted with three key problems that are starting to severely impact their companies: (1) shrinking markets, revenues slipping, while capacity is still fixed; (2) competitors going digital, reducing capacity and competing on price; (3) no control over operations; employees in lockdown and the operations seem difficult to manage.

In this short article I will share with you, how to get your company unstuck and prevent it from going into crisis mode.

2.   Economic forecast

You will be aware by now that the economy is shrinking in 2020. If it is not impacting you (yet), you will see your clients and suppliers starting to feel the impact, and you will be reading about increasing bankruptcies and unemployment rates in the newspapers. In the Netherlands alone, a 5% shrink was expected after the first lockdown. With a second (progressive) lockdown, a further shrink of 3 % is expected for 2021.

3.   Impact of not reacting timely and adequately

What I have learned from 22 years of Turnaround and Transformation work in 14 industries and with 35 companies, is that a company crisis usually starts with something happening outside the company, impacting its earning capacity. The company is then still in a comfortable state (a state of inertia), does not realise that the game has just changed and, therefore, does not react timely or adequately. The consequences, in short, are top line (revenue) issues, costs becoming too high, profitability decreasing, stress in the leadership and management layer, issues in the workforce and, shortly after, issues with its stakeholders (works council, clients, suppliers, shareholders, bank(s), supervisors).

By then, the organisation and its leadership are in a crisis, and organisational pathologies start developing. The organisation gets stuck in survival mode. But to really survive, the organisation needs to be moved out of that state as quickly as possible – through targeted interventions – because the solvency and the continuity of the company are at risk!

4.   A crisis is a blessing in disguise:

As we all know, no one goes through life without struggles. And a company crisis is just one of them. I am a true believer that every situation or struggle we encounter is simply a mirror to help us improve and move forward. To get us to reassess how we are leading. To help us rethink the future of the company and move it towards a healthier state and a sustainable and successful future.

Amid the struggle and crisis, we need to find the spirit and strength to embrace the truth, without the ego. To get up again and do whatever it takes to rise stronger. In (personal and corporate) Turnarounds and Transformations, the one who is willing to be the most uncomfortable will rise stronger. Leaning into discomfort is thus imperative! Entering the process with eyes wide open (for the facts, data and new answers), dealing with what emerges, and wholeheartedly embracing ourselves as human beings (with flaws and imperfections), but above all as brave leaders and change-makers who will get this fixed!

5.   Staying centred as Leader

Leadership matters most in crisis. To pull the company from its downward spiral fast and build a sustainable and successful future, leaders need to move the organisation from the state of collective ignorance, passivity and helplessness to one of ownership, engagement and the willingness and ability to move the organisation towards a better future.

Leading an organisation during times of crisis, running a Turnaround programme and managing dialogues, usually in a hostile environment, generate great uncertainty for leaders and their organisations. In these times of great uncertainty, the human body will experience persistent stress and will unconsciously linger too long in Action mode. The sympathetic system will remain active and will enable us to survive in these threatening situations; to fight, to flee and to perform. With a high heart rate, high blood pressure and high breathing rate. Getting stuck in this state prevents the body from going into physical relaxation, repair processes and regeneration and recovery. During times of great uncertainty, we are also confronted with the emergence of old programming (beliefs, imprints and traumas), which could trigger self-doubt, performance anxiety, anxiety, reluctance for public speaking, depression and sometimes phobias. The body will then be accelerating with the breaks on. Which is extremely exhausting and ineffective for oneself, the task at hand and our direct environment (home and work). Based on experience, I know that taking a – timely – day off and working on getting unstuck, on getting a fresh perspective on issues, is a must for restoring balance, for keeping healthy and resilient, and for going back to manage the Turnaround with even stronger beliefs and stamina

6.   How to move forward

The only way to reverse a company’s decline is to rewire its collective beliefs. A successful Turnaround is thereby one that combines a Psychological Turnaround and a Company Turnaround. One that initiates Group Dialogue and removes organisational pathologies and creates a healthier and sustainable future for the company. So, no shortcuts (simply slashing costs is not enough!), but a holistic approach working towards a sustainable future;

1. Showing clear, strong but empathic leadership within the organisation during the crisis.
2. Analysing and understanding the root causes of the issues and defining a clear vision on how to fix them and how to move forward.
3. Engaging, aligning, energising and developing the employees during the Turnaround and Transformation and getting them involved. “Together in this one!” (with a positive, calm and collected composure and through communication, dialogue, engagement and personal development).
4. Stopping the bleeding asap and stabilising the business.
5. Engaging all stakeholders (works council, clients, suppliers, shareholders, bank(s), supervisors) and turning them into mentors and sponsors.
6. Daring to make tough decisions, but always in a respectful and honourable way. Honouring promises and acting with integrity.
7. Rethinking the business model and defining the company’s future.
8. Moving fast but vigilantly and adequately and in conjunction with all stakeholders.

7.   Closing remark:

?My advice to you: “keep calm, keep grounded, and keep looking for the good in bad events. If you are one of the few, who keeps doing that, I am sure you will get out this recession as a winner!

About the author: Madiha Mouchtak, Founder and Managing Director of Answer Inside. We offer Executive Coaching to Owners and Business Leaders in Europe, during times of crisis and all pervasive change. We help them Fix, Reset and Accelerate their businesses in 12 months. I am an Ex-Strategy Consultant. Turnaround CEO & member of the Turnaround Management Association (UK). Rapid Transformational Therapist, with the Marisa peer Institute. Advisory Board Member of the Global Artificial Intelligence Forum. And positioned 34th on the Board Empowerment Ranking in NL (in 2016). I have been working for over 22 years in business transformation and the rescue of failing companies, turning around businesses from losses to double digit profit and growth in 2 years. Since the Pandemic hit, I shifted my focus towards where help is needed most; The medium Enterprise. My dream is to help these companies survive and thrive in these difficult times, by making Business Rescue and Transformation skills accessible for them at an affordable price (through the deployment of digitization, AI and Robotics).