Crisis management – Now is the time for real leaders
In the life cycle of a crisis, business leaders must take into account the evolutionary nature of the crisis and constantly adjust their actions as it unfolds. Changes result from the course and intensity of the crisis event itself, as well as from the measures taken by the crisis environment and business competitors.
Part 2: Agility
“To manage in crisis you need to be like a cat – super attentive to the environment, scanning it constantly for the new signs of danger or hope, and moving around with your legs half-bent, so you can jump away quickly.” (1)
Agility in times of crisis is the ability to learn faster than the competition, creating an essential and sustainable competitive advantage. Agility in crisis situations means constantly analysing the situation, anticipating probable scenarios that may arise and acting proactively with a high degree of flexibility. This results in the necessity of short feedback loops and constant learning from mistakes and successes to be able to make adjustments very quickly and with a cool head.
The CEO of adidas, Kasper Rorstedt, stated in an interview with the Süddeutsche Zeitung on March 25, 2020 that he currently sees his fellow board members more often than his wife. Instead of meeting once a month, the adidas Executive Board are meeting twice a day. All members of the Executive Board – two Danes, two Germans, one British, one Australian – are based at the headquarters. “In my position, I have to be here and face my responsibilities. As leaders, we must remain calm, look to the future and make the right decisions. (2)
What primarily distinguishes agile leaders is their ability to learn quickly and successfully. They are able to deal effectively with short-term uncertainty. They are also hypersensitive, constantly analysing internal and external environments in order to anticipate and manage opportunities and threats. They make fast evidence-based decisions using data and factual information, often putting speed before perfection. Agile leaders engage with others, motivate and inspire. (3)
In their book “How Small-to-Medium Enterprises Thrive in Turbulent Times” the authors Yiu Ha Chu and Kosmas X. Smyrnios state, “As the environment in a crisis becomes more and more turbulent, the analysis of different approaches to cope with dynamics and unpredictability as well as the ability to react quickly and effectively becomes crucial. In stable business environments, companies have less to lose by reacting slowly than they do in volatile, fast or unpredictable market conditions. Accordingly, demonstrating adaptability and agility should be a priority in strategic decision-making, and developing proactive or reactive strategies can be closely linked to varying degrees of environmental turbulence. At the height of a crisis, the adaptation of business strategies and related processes can take the form of rapid adjustments to existing business models or the development of new ones that address both internal and external challenges. “ For example, one company successfully countered a significant decline in sales by defining a new production development process (NPD) to reduce the cost and time of the development process. (4)
Rigid, inflexible systems are the enemy of successful crisis management. Agility is the order of the day.
Take just-in-time delivery, for example. Under normal conditions, this system is highly efficient and productive. However, nobody can build a product such as a car with only 99% of its parts. When Hyundai closed its assembly plants in South Korea for the first time in February, this was not because of the spread of COVID-19 in the country, but because the company could not keep its plants open without Chinese parts. In an inflexible, top-down organised system, such efficient processes can prove to be a source of severe disruption even in calm times. The effects of organisational inflexibility and the resulting problems in the supply chain have been felt by a large number of companies in recent weeks, including Apple, Toyota and Hasbro. At the same time, however, there were companies who were perfectly equipped to manage a crisis situation. While most manufacturers in China did not resume production until the end of February, Haier Group – one of the world’s largest manufacturers of household appliances – had already returned to full capacity utilisation in its factories. This was largely due to the company’s innovative organisational design. The company is not organised as a pyramid from top to bottom, but as a swarm of self-managed business units that can make changes quickly, dynamically and independently to adapt to new situations in times of crisis through agile management and processes.
Haier’s CEO, Zhang Ruimin had the goal of breaking through the bureaucracy several years ago and is known for the phrase “successful companies move with the times”. In 2012, he gave middle-level managers an ultimatum; “Choose whether to be fired or become independent entrepreneurs. ” He said it was “the hardest decision” he ever made, but it was to transform the company from a few monolithic enterprises into about 4,000 microenterprises (MEs), usually with only 10 to 15 employees. What followed was a significant increase in autonomy. Instead of being centrally coordinated, these MEs acted independently of each other and were given full autonomy to deliver the end product to consumers. Certain MEs produce specific components, while others provide services such as human resources or design. Haier also introduced several internal platforms to facilitate transactions between MEs, and compared the idea to an app store. It enabled coordination, but did not manage it. During the coronavirus outbreak, Haier’s microenterprises revived business. With the freedom to adapt their own supply chains according to their expertise and up-to-date information, each ME was able to act quickly to reduce disruption. As a result, the company as a whole was able to recover faster than its competitors. With supplier resources in North and South America, Southeast Asia, South Asia and Europe, Haier fulfilled 99.8% of orders in February, with 60% of products manufactured in factories outside China. (5)
Agile teams are small and multidisciplinary. Faced with a large, complex problem, they break it down into modules, develop solutions for each component through rapid prototyping and tight feedback loops, and integrate the solutions into a coherent whole. Agile teams prioritise adaptation to change over persistent adherence to a plan. They feel responsible for outcome (such as growth, profitability and customer loyalty), not output. (6)
Companies need the ability to make quick decisions at all levels. Those responsible for crisis management need a constant update of all relevant information to determine crisis models and must make decisions based on:
– whether the selected measures were relevant and effective in relation to the defined objectives, or
– whether iterations are necessary if the measures were not suitable to achieve the objectives, or because the crisis developed differently than anticipated when the measures were defined
The ability to learn faster than the competition is an essential and sustainable competitive advantage (7). The better the company’s information and data structure, the more successfully management can act during the evolution of the crisis. Companies that have a high degree of data maturity and have implemented a customer-oriented ecosystem – the seamless connection of product, sales, marketing, technology and data – have significant advantages in overcoming a crisis. In order to manage crises agilely and successfully, companies have to break down the silo structure often found in teams, processes, technology and data.
In summary, agility in times of crisis means:
1. Learn and make decisions faster than the competition – iteration over perfection
2. Breaking down silo structures with regard to teams, processes, technology and data
3. Making evidence-based decisions using data and information
4. Permanent updating of all relevant information and data and evaluation by the crisis unit
5. Turning large, inflexible tankers into dynamic and autonomously controlled dinghies
Do you have any questions or need support in crisis management? NOAA PARTNERS helps companies to analyse the initial situation in the short term and to implement solutions quickly and pragmatically to successfully manage a crisis. We can support you with many years of know-how in turnaround and restructuring situations and in the optimisation of your organisation, processes, technology and data structure.
This article is part of a series – Crisis management – Now is the time for real leaders. To read Part 1: Staying cool under pressure, please click here.
Footnotes not included above as hyperlinks:
(2) Süddeutsche Zeitung, 25.03.2020, p. 16 “In a haunted house – Adidas boss Kasper Rorstedt has to control a sporting goods company that has been paralysed by the Corona crisis. There is an oppressive void in the new headquarters”
(4) Yiu Ha Chu and Kosmas X. Smyrnios: “How Small-to-Medium Enterprises Thrive in Turbulent Times”, Routledge 2019
(7) Vgl. Arie de Geus, “Planning as Learning”, Harvard Business Review, March 1988
Photo by Kai Dahms on Unsplash