Anti-crisis management of a company or recognising when it's time to take extreme measures

Sometimes, even a previously thriving and prosperous company can encounter a crisis that necessitates urgent and extraordinary actions to save itself.

Experienced managers know what to do: they turn to crisis management. By implementing this approach, the company can recover from bankruptcy and insolvency, boost its profits and sales, establish efficient production methods, and strengthen its brand's standing in the market. Let's find out in more detail what crisis management is, what tools it includes and what stages are involved.

Crisis management is...

Crisis management, or risk management, is a method for preventing a crisis in a company or using the opportunity for good whilst minimising risks and negative consequences. In other words, crisis management is a system of measures or actions that helps prevent or overcome a crisis without any business losses. Crisis management encompasses guiding the company through a crisis, evaluating its current market standing, and formulating a brand-enhancing strategy.

Simultaneously, it is crucial to specify the duration for executing a crisis management project. This could be three months, six months, or one year, depending on the intricacy of the crisis scenario. During a well-defined timeframe, the primary objective is to avert bankruptcy, bolster the company's market position, and enhance its competitive edge. Furthermore, crisis management entails establishing specific objectives to attain the central goal and timelines for tracking progress.

When is it time to take extreme measures?

Crises extend beyond mere bankruptcies or profit declines. Waiting for total insolvency before implementing crisis management is ill-advised. Additionally, crises can manifest in various forms, such as:

• Production - for example, when obsolete machinery or outdated production technologies hinder the creation of top-tier products that meet stringent standards, which leads to increased costs

• Managerial or organisational - may be associated with an inadequately designed management structure or insufficient training of the company's management team.

• Social - occurs when company employees do not find mutual understanding or support and are forced to work in an unfavourable psychological environment, which reduces their productivity.

• Financial - this could stem from an imprudent allocation of the company's budget.

External and internal factors contribute to the occurrence of a particular crisis situation. Among the most common external causes contributing to the emergence of a crisis in a company are:

• The dynamics of exchange rates

• The escalation and expansion of competitive forces

• The inflation rates

• Rising unemployment and shrinking incomes

• The predictability of tax policy, etc.

Internal crisis factors are influenced by the specific actions of the company's operations, production characteristics, and management structure. Among them are an imbalance between the quantity of production and the number of products sold, the disparity between the price and quality, inefficient use of resources, and low competitiveness.

Therefore, we can identify the main "symptoms" of the approaching crisis:

1. Decrease in financial indicators.
2. Deterioration of the company's reputation and image, lower ratings.
3. Decrease in product and service quality, resulting in customer loss.
4. Fall in KPIs-quantitative indicators of achieving results.

Suppose you notice at least one of these points in the company's department reports. In that case, you should turn to the principles of crisis management.

The principles of crisis management

Effective crisis management hinges on several key principles, which, when followed, will bring effective and quick results:

1. Prevention. This principle means: "It is better to prevent a crisis than to deal with its negative consequences."
2. Flexibility and state of "combat readiness". This implies that the company and its employees must be ready not only for unexpected situations but also for bold and risky choices and be capable of adapting those decisions based on the results achieved.
3. Fast response. Crisis situations require efficiency, so this principle involves making decisions quickly and introducing anti-crisis procedures.
4. Balance. It is important to understand that the costs of crisis management and the necessary resources must be adequate for the current threat level.
5. Transparency. In times of crisis, it becomes vital to uphold open and fully transparent internal communication within the organisation and with external stakeholders, including partners, investors, and suppliers. This principle also entails transparent documentation and compliance with all requirements for official documents and other materials.
6. Training. Crises require unique skills and competencies. Therefore, managers should prioritise their team members' training and professional development to be prepared to manage effectively and take urgent action.
7. Teamwork. During crises, employees need to unite to overcome the current situation. This principle assumes the cohesion and unification of efforts from all involved parties. The manager needs to establish a particular role for each employee, assign their area of responsibility, and maintain coordination among all participants in crisis management.
8. Constant analysis. When implementing crisis management, it is critical to analyse and assess the evolving situation regularly. In other words, all stages of the anti-crisis strategy must be examined: how effective certain tasks were performed, how this affects the final goal, and what should be improved and enhanced.

The stages of crisis management

Crisis management involves several key stages or steps:

• Observation and prevention of crises

During this stage, the company closely monitors its performance and identifies early warning signs or crisis indicators. Preventive measures, in turn, mitigate the crisis's initial indicators and halt its progression.

• Definition and analysis of the crisis situation

Suppose preventive measures did not help and a crisis nevertheless occurred. In that case, it is necessary to determine which indicators are falling and why. It is crucial to pay particular attention to the reasons for the crisis.

• Strategy development

Following this, it is essential to define the goals and objectives of crisis management, along with the tools and resources required for this purpose. Ideally, a comprehensive plan should be crafted to navigate this situation. This plan should include a detailed description of each stage, a list of tasks and employees responsible for their implementation, clear deadlines and an adequate budget.

• The implementation of the strategy and adoption of emergency measures

Subsequently, following the plan, it is imperative to make the most effective decisions to stabilise the situation. This could be, for example, cutting costs, negotiating with investors, or changing the company's business model. Furthermore, when implementing an anti-crisis strategy, it is essential to remember the crisis management principles mentioned earlier. For example, ensuring open and transparent communication within the company, maintaining coordination between all team members, training employees when necessary, and constantly assessing the effectiveness of actions.

• Monitoring and evaluating an anti-crisis strategy

In this stage, we assess the company's adeptness, speed, and competence in navigating all crisis management stages. Additionally, evaluating whether the previously devised strategy was fully executed. The results of crisis management should be discussed with the work team. Necessary modifications must be implemented, mistakes rectified, and pre-crisis procedures elevated to a new standard.

Inevitably, a crisis can engulf even the most accomplished and formerly profitable company. Hence, why managers must be ready to execute crisis management strategies. However, it is better to prevent instability than to adjust to the consequences of a crisis. Simultaneously, in any scenario, there lies the potential for fresh opportunities and growth prospects for a company. To achieve this, one must cleverly harness the business's hidden potential amidst uncertain circumstances.