When an organization finds itself in any type of crisis, the decision makers’ responsibility is to manage the situation in the best way possible.
Some organizations focus on merely stopping losses, others redirecting people mentally from the sense of distress to focus on; creative solutions to improve the situation for the long run, and making profits during a crisis.
Generally speaking, there are countless types of crises that financially affect the organization, such as, micro and macroeconomic, political, legal, reputational, operational. There are effected parts both internal and external, which are managed to successfully overcome a crisis. Internal parts are the stakeholders, employees, and finances, and the external ones are the suppliers, customers, PR, etc.
However, a lot of times companies neglect preventing what I call “crisis struggle” if they are not prepared in advance, with a crisis management plan. There are various aspects to tackling an economic type of crisis that threatens the organization
If you find yourself unprepared in a middle of an economic crisis, consider those aspects:
- Communication: Properly engage all levels of employees and parties involved with your company by providing insight to the situation. It is a fact that communication and engagement will result in creating a calm and motivated environment that encourages creative problem-solving.
- Beware of the grief stages: There are five psychological stages of grief; denial, anger, negotiation, depression, and acceptance, which people go through after experiencing a sudden loss or crisis.
Relevantly, unstable emotional reactions occur in crisis situations such as a decrease in household income. Thus, if decision-makers are aware of the grief stages, it will provide them with the control required to handle employees’ scattered emotions. Leaders will have the ability to transit employees from the denial and fear state to the acceptance state. Thus, employees will engage in minimizing losses and be aware of any possible opportunities presenting itself during a crisis.
- Advisors committee: Intelligence Committee: Initiate a team who has the skills and potential to ground employees and performance throughout the crisis cycle.
- Review expenses: It is a core element that reflects positively on the financial statements and minimizes costs during a crisis.
- Liquidity: Create a financial saving fund, if you haven’t yet, for emergencies and opportunities.
- Pricing: It’s important to reevaluate the rate of the product/service, and adjust it to the economic situation, competitors and current purchasing power.
- New product line: Consider coming up with a new product line, which could either be less expensive with additional features or targets a different market segment.
- Utilize technology cost-effectively: Explore all possible opportunities to minimize cost and expenses by utilizing technology. For example, capitalize on social media rather than advertising.
- Value Vs. Price: During crises, consumers and suppliers become more selective in their decision-making. Consumers tend to become more careful in their purchasing decision by looking after value and price altogether.
Some companies initiate a crisis test called drill, by creating a fake scenario in a role- play form to train and assess employees at senior and operational levels. It is a common practice to assemble a team in advance that referred to as Crisis Management Team-CMT.
In conclusion, preparedness is the first step in effective crisis management. Companies who have a contingency plan have a better recovery process and outcomes than those who don’t. On a final note, organizations that recover, revive, and improve fast during a crisis, are the ones who embrace a proactive frame of mind rather than solely reactive.