The COVID-19 Crisis
Regardless of your company’s size, running a business is hard work. If you throw a crisis into the mix, daily tasks become anything but routine, especially during a global crisis like the COVID-19 pandemic. At James River Capital, they understand the challenges of running a business. That is why they have developed a crisis management plan for leaders.
First, the leader must admit there is a crisis. Denying that a problem exists only delays the time needed to find a solution. If the leader of a company is not admitting there is an issue and actively working toward a solution, their employees are unlikely to. Leadership isn’t about making the easy decisions, it’s about making the right ones.
Second, Whether the problem is due to people, products, or places, it always affects profits. Therefore, a strong leader should find ways to reduce your operating expenses and make sure the business can survive any non-catastrophic hit to the bottom line. Trying to preserve the numbers does nothing but put the company in jeopardy long-term.
Third, manage your emotions because others will be watching how you react to the situation. Your ability to remain calm will give them peace-of-mind and reassurance that you have things under control.
Fourth, communicate with stakeholders and ask your team members for input on how they think the situation can be mitigated. Good leaders value their employees’ input and act on it if their input proves to be the better option. Taking your team members’ advice and input will show you are a pragmatic leader and value their input. Ultimately, their buy-in to the process will assist in their acceptance of the outcomes.
Fifth, be proactive. The time to act is when you first learn of a situation that is affecting your business. Being proactive can limit liability and mitigate negative outcomes. Waiting to see what may happen often lends time for irreparable damage to occur.
Sixth, and perhaps most importantly, be truthful. Hiding the facts about the health and safety of your business from your employees and team members doesn’t benefit anyone. Though they may not be happy with the reality, people will respect you for telling the truth.
While all situations are different, the crisis management plan developed by James River Capital can help you successfully navigate through any given crisis.
Leading Through a Company Crisis
Running a business is hard on a normal day. But when you throw in a health, financial, safety, or PR crisis in the mix, it can wreak havoc on your business. Whether you’re a small business or an enterprise, a crisis:
- Limits your earning potential.
- Makes your team uncomfortable and confused, leading to chaos.
- Removes any potential paths forward to growth, threatening your business’s very existence.
Crises are obviously never fun to deal with. Cyberattacks, data breaches, theft, public relations nightmares, and natural disasters might threaten your business, but they’re also likely to happen at some point in your leadership tenure. In many ways, crises are a crucible that turns regular managers into effective, seasoned leaders.
Even with the best crisis prevention methods, emergencies still happen. But how you and your team react to this crisis is key. You can either make the crisis blow over quickly, as a blip on your radar, or let it turn a full-blown nightmare that takes down the company. The choice is yours.
Fortunately, as a leader, you have the power to shape the future. Take the reins to navigate your company through times of crisis. Better days are ahead, but only if you take charge and address the crisis head-on.
James River Capital co-founder, Paul Sanders, shares his tips from 25+ years in leadership, offering a blueprint that leaders can follow in times of crisis.
About James River Capital & Paul Sanders
Along with his business partner, Paul Sanders acquired James River Capital back in 1995. In the 25 years since founding the company, Paul has served as CEO and Chairman of the Richmond, Virginia, company.
James River Capital offers alternative investment programs that are designed to optimize risk and return. The company operates out of Richmond, Virginia, and focuses on diversified portfolios.
In his more than 25 years in a leadership position, Paul has navigated his business through a litany of crises. He suggests leaders follow these 6 tips to not only survive during a crisis but become stronger for it.
6 Strategies to Cope with a Crisis
Acknowledge the Crisis
Paul’s first tip is simple but important: don’t bury your head in the sand. It’s tempting to cross your fingers and hope that a crisis will go away on its own, but that’s just not effective leadership. Like most things in life, you can’t change things until you address the elephant in the room.
Denial is a powerful drug, but it won’t pull your business out of crisis mode. If you realized you can’t make payroll this week, ignoring the problem will only make it worse.
Instead of wishful thinking, be courageous. Tackle the problem head-on. Sure, a crisis isn’t fun, and it can often expose your weaknesses as a business or as a leader but it’s necessary. The minute you realize something’s amiss, meet with your leadership team to come up with a game plan. That’s much healthier and more productive than denying the crisis.
Many crises have a financial component. Whether you’re dealing with a security breach, a natural disaster, or a health crisis like the new coronavirus outbreak, you need financial resources to deal with it.
If you have the luxury of time on your side, meet with your accounting department. Do a full audit, taking a critical lens on every expense. Look for things like:
- Non-essential travel, including mileage payments.
- Expensive client meals.
- Unused software subscriptions.
- Under-utilized memberships.
- Wasted supplies.
Scrap anything that you don’t need. Consider renegotiating other expenses, like card processing fees, manufacturing terms, or your rent, too.
If you’ve cut these expenses and you’re still in dire straits financially, consider your labor costs. This is the sticky part of business management that no one likes to talk about, but labor is one of the biggest costs to your business (often upwards of 30% of your expenses).
Before you start slashing employee benefits or pay, think critically about your business structure. Are there any employees or positions that are dead weight? It’s a hard choice to lay someone off, but you need people on your team who are 100% committed to their job.
First, look for non-productive workers. This includes employees who:
- Frequently go over budget.
- Never meet deadlines.
- Exhibit unprofessional behavior frequently.
- Loaf around and do the bare minimum.
Again, if you have the luxury of time, you can always try a performance improvement plan (PIP) to turn these employees around.
Of course, the best way to avoid layoffs entirely is to keep your business streamlined from the start, preventing staffing bloat in the first place. When in doubt, hire contractors first, establish the case for hiring full-time help, and then hire employees.
Control your Emotions
A crisis is bad enough by itself. But the one thing that makes a crisis worse is panic. As we’ve seen with the coronavirus panic-shoppers, emotions are powerful during times of crisis. That’s why you, as the leader, have to remain composed no matter what.
No matter how stressed you are, you can’t fly off the handle, blame employees, or redirect your anger towards your team. Remember, they’re looking to you for guidance. If they see you coming unglued over a financial crisis, employees are going to panic, too. And if employees panic, it’s likely they’ll leave your business.
Try to look at the situation objectively. Trust the facts and don’t let your emotions run rampant. Instead of freaking out for no reason, Paul suggests leaders approach crises in a factual, cool-headed way. And even if you’re panicking, you can’t let it show. Put on your best poker face, even when you’re delivering hard news to the team.
Of course, even if you try to be objective, it can be hard to manage your stress. You’re only human, after all. Find constructive ways to deal with your stress. That might mean chatting with a counselor, seeing your doctor, meditating, or taking a walk on your lunch break.
Write a Crisis Communication Plan
The worst thing you could do in a crisis is spread wrong or badly-worded communication, both internally and externally. You have to deal with crises with finesse, and that means following a crisis communication plan.
Ideally, you should write this long before there’s a crisis, but it’s low on the priority list for most companies. If you’re facing a crisis, you can call the team together to compose a crisis communication plan for this particular crisis.
Bring PR/marketing, legal, HR, IT, and other stakeholders in to write your communication plan. This designates a spokesperson, details which team members are responsible for what, provides appropriate scripts, and gives a play-by-play of your crisis solution for the company to follow. The good news is that, once you write a crisis communication plan, you can use it as a template for future crisis plans.
Many businesses try to sweep crises under the rug. That’s understandable, given that a crisis can hamper public trust—it can even lead to regulatory action if it’s serious enough.
But no matter how painful, leaders have to be transparent during a crisis. Don’t cover anything up. Be upfront about what happened, why, and detail concrete steps to solve the issue. For example, if you were hacked and you leaked customers’ personal information, give customers free access to identity theft protection to rebuild trust.
Transparency is hard in business but while honesty can feel difficult, it’s much better than being caught in a lie.
Be Proactive Instead of Reactive
The best way to navigate a crisis is to avoid it in the first place. There’s no sure-fire way to prevent anything bad from happening to your company, but you can take measures to prevent crises from happening in the first place.
That means taking measures like:
- Enhancing and following safety procedures.
- Signing confidentiality agreements and contracts with all third parties.
- Running background checks on all employees, including leadership.
- Retaining an emergency IT team.
- Having an in-house lawyer or a lawyer on retainer who specializes in your industry.
It’s best for business leaders to be proactive. This saves you the stress of making reactive decisions in the moment, which are often fraught with anxiety and poor planning. Do good by your company and plan in advance as much as possible. If you’re currently going through a crisis, use this situation as a learning experience, creating a plan for potential crises in the future.
The Bottom Line
If left unaddressed, crises have the potential to do serious harm to your business. Failing to address a crisis results in unhappy customers, low sales, a bad reputation, and even going out of business.
Be a strong, proactive leader. Understand that all businesses are prone to crises. Create a crisis plan now to help you make better, faster decisions in the face of the unknown. That will keep your business afloat while everyone else struggles against the tide.