IS YOUR BUSINESS IN CRISIS? How to Stem the Crisis and Turn Your Business Around to Good Health.

BY: DOUG VERLEY.

Executive Summary.

Recognising and addressing a business crisis is a critical skill for owners and managers. When left unattended, a crisis can threaten the very existence of a business, often catching management by surprise and manifesting itself in high levels of stress. In this article, I explore the characteristics of a business crisis, explaining why it often goes unrecognised and offering a step-by-step guide to effectively manage and turn a business around during a crisis. The article highlights the impact of stress on management behaviour, outlines the stages of crisis development, and concludes with recommendations for dealing with a crisis situation.

Understanding the Business Crisis.

Business crises often go unnoticed by management, as confronting the problem can be a highly stressful experience. Non-owner managers may be hesitant to admit a crisis due to fears of job security. However, denying or hiding a crisis can exacerbate the underlying issues, leading to a rapid escalation in the severity of the crisis. It is crucial to recognise the characteristics of a crisis situation before it's too late to intervene and prevent insolvency.

The Impact of Stress on Management Behaviour.

As a crisis emerges, it brings with it high levels of stress. This stress can result in anxiety, making it difficult for individuals to think clearly, make quality decisions, and perform at their best. Stress reduces attention spans, warps perspectives of time, impairs cognitive capabilities, and inhibits flexibility, tolerance, and sensitivity. These stress-induced behaviours undermine a manager's ability to gather information, consider alternatives, and make informed choices.

Stages of Crisis Development.

In the process of crisis development, there are four distinct stages that a business can pass through. These stages are:

1. Crisis Denial: Management tends to be complacent, arrogant, or overconfident. They may overlook symptoms of the crisis, living in a state of denial.
2. Hiding the Crisis: Management tries to explain the crisis away, hoping it will resolve itself. They attribute poor performance to temporary fluctuations or efforts to change.
3. The Business Begins to Fall Apart: Management takes some action but underestimates the level of urgency required. Tough decisions are deferred, panic sets in, and autocratic rule becomes the norm.
4. The Business Fails: Management runs out of options, money, and credit. Debts remain unpaid, and the business ultimately collapses.

Recommendations for Crisis Management.

To effectively manage and turn a business around during a crisis, consider the following step-by-step recommendations:

1. Acknowledge the Crisis: The first step is to recognise the existence of a crisis. Denying it will only allow it to worsen.
2. Seek Expert Help: Engage a crisis manager or corporate advisor to help navigate the situation. Their expertise can be invaluable in addressing the crisis.
3. Collaborative Leadership: Adopt a collaborative leadership style to bring key individuals together to address crisis stabilisation and initiate the turnaround process.
4. Stress Management: As a business owner or manager, manage your stress and encourage your team to do the same. Focus on mental well-being to ensure optimal decision-making.
5. Long-Term Perspective: Balance short-term crisis management with a consideration of the long-term implications of your decisions. Avoid rash actions that may harm the business in the long run.

In conclusion, recognising a business crisis is the first step toward resolving it. By understanding the characteristics of a crisis situation and its impact on management behaviour, you can take proactive steps to address the crisis effectively. Engaging expert help, adopting a collaborative leadership style, and managing stress are essential elements of successful crisis management. Remember, it's never too late to act, but acknowledging the crisis early significantly increases the chances of turning the business around and returning it to good health.

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DOUG VERLEY

Business & Life Coach, Business Advisor & Strategist

[email protected]

0405 122 345

Remember – “Good fortune & happiness favours the well-informed”.

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