good crisis

Business Crisis: Looking for the Opportunity in Difficulty

by Mar 16, 2020Advisory Groups

Business crisis: adversity creates opportunity

The best leaders understand that a crisis can lead them to the chance to make the kind of large wholesale changes their organization needs. They let the fire do some of the work for them to make the organization receptive to change.

In your journey as a CEO or entrepreneur, you will inevitably face a significant crisis at some point. Maybe it will be the loss of a key employee. Or perhaps it will involve getting in trouble with your bank or the failure of a new product launch. Maybe it could be a pandemic? The point is that something will go wrong in a way that you never planned for.

In the wake of such a crisis, it’s the natural tendency of CEOs and entrepreneurs to step in and fix the problem. We want to put the fire out. Maybe that’s jumping in to find a replacement for the person who left or even worse, taking charge of your R&D team. While those moves might help stop the bleeding, they aren’t likely to push your company forward over the long run.

That’s why I want to change your thinking on this topic. I believe that the best leaders recognize crisis can lead to shifts needed because it affords you the chance to make the kind of large wholesale changes your organization needs that you’ve also been putting off for too long. To put that another way, sometimes the best move is to let the fire do its work so that you can rebuild something stronger from the ashes.

Let’s return to the example of losing a top employee; let’s say it’s your best salesperson. While it might seem like the obvious solution is to rehire for that position, the smart CEO asks some questions instead: Is there a better way to go about this? Maybe you should hire two new junior people instead? Maybe the clients that ex-salesperson worked with warrant your VP of Sales stepping in to take over? Or, just maybe, you’re better off losing that client anyway.

Another scenario might be that, due to massive market disruption, you need to make dramatic changes in your headcount. Now, nobody likes laying people off–which is why most organizations lay off the smallest number of people they can. But what if the smarter decision is to cut deeper by getting rid of all of your C players, and then hiring back fewer, but far more productive A and B players instead? In this case, you would have used a crisis to upgrade the overall talent level in your organization.

The point is that when you encounter a crisis, it primes your organization to go through major changes it might not otherwise be capable of making.

Think about your organization as an oil rig in the middle of the ocean. If you were to order your employees to jump off into the cold salty water, miles from shore on any given day, they’d look at you like you were crazy. But if you explain that you’re in the middle of a real crisis–like if the oil rig is on fire–you’re sure to get far different results.

There’s an element of psychology at work here in that when we encounter crisis in our lives, we’re also programmed to deal with change in a way that, in more normal times when everything seems fine, we tend to reject.

That’s also why it’s critical for you, as a leader, not to minimize the extent of the crisis–which is another natural thing for us to do. If the company loses its biggest customer, for instance, you might be tempted to prop up the troops by saying something like, “It’s not a big deal, we’ll find another customer to take their place.” But that would be wasting an opportunity.

What you could do instead is be quite direct about the consequences of the crisis. As a result, the organization should expect several major changes to come about. That’s how you can turn a negative situation into a positive one because you can prime the organization to do things it might not otherwise have been capable of undergoing. And this type of transparent leadership will serve you well through tough times.

A crisis allows you to bring about change at a much faster rate than you would normally be able to bring about–that’s when a crisis can lead to change that was needed but not realized. So next time you get some bad news, resist the urge to go and fight fires. Take a step back instead to see if there might be a silver lining in the form of a big organizational change you probably needed to do to avoid the crisis in the first place.