In the first post in this series, we uncovered two brutal truths: most leaders aren’t equipped for turnarounds, and time is your enemy when cash is oxygen. If you miss the early signs, you end up in Stage 4 before you even know it.
Now let’s get brutally clear about what matters most in a crisis: focusing only on the problem that is—and letting go of plans that no longer matter.
Problem #3: The Problem That “Is”
In times of crisis, it is critically important to focus exclusively on the “problem that is” … and usually there is more than one. (There is never just one cockroach in the kitchen… It is only a matter of time before you meet all the cousins.) If the patient is in the emergency room with congestive heart failure, the docs will not start a debate about whether the patient’s problem is a result of too many filet mignons or was it the Captain Crunch breakfasts.
In a crisis, the temptation is to find everything that is wrong and work on two dozen things at once. The reality is that there is only one initial priority: Preserve cash by stopping the bleeding, right sizing the expense structure to reflect today’s revenue generation, exiting weak/nonperforming employees, selling assets, collecting receivables, liquidating inventory, delaying payables, suspending Cap X, eliminating marginal business units/products, talking to bankers about moratoriums and interest rate reductions… and so many more. (I realize that is more than one thing… but all these initiatives are designed to help with the one thing: Cash is oxygen so preserve and protect it at all costs.)
The second priority is stabilizing the team and minimizing the stampede to the exits. This requires honesty coupled with a plan. Your team will tend to stick with you if you can show them the path to getting extracted from the mess. But if you play it safe, you will lose their trust. Acknowledge what is truth, tell them the plan, give them hope and ask for their support.
The third priority is to protect the customers you currently have. The cuts and reorganizations you execute should be invisible to the customer. If you lose their trust, you might as well turn out the lights and lock the door behind you.
Problem #4: Scrap the Previous Plan
One of the most difficult parts of turning around a business is the ability to pause and ignore/delete previous plans, initiatives and opportunities for future growth. In the emergency room, no one is thinking about whether the patient will be ok for his vacation to Paris next month (except perhaps the patient who is delusional from the morphine). Future plans are of no concern when your chest has been cracked for open heart surgery. The opportunities two weeks or a year from now are of no consequence and deserve no attention until the crisis is under control. Anything that detracts attention away from survival in the moment is toxic and to be guarded against at all costs. Survival is the key, regardless of future planned events.
If you're in the hospital room, lying on a bedpan because you have broken your back and I walk in and ask, “How you doing?” And you say, “Well, you know, I can’t feel my feet or rollover without the nurse.” And I say, “So what's your biggest problem?” And if you tell me, “My biggest problem is I am concerned I won’t be able to run in next year's Boston Marathon”, I will look at you and say, “Dude, your biggest problem is you can't get out of the bed and go to the bathroom, which is why you're on a bedpan. The problem is not next year's marathon. The problem is you can't get out of bed today.”
Once again, this is an example of a psychological problem incumbent leaders have when tasked with saving a wounded business. It is extremely difficult to jettison planned future initiatives in favor of focusing exclusively on putting the fire out.
In 1912, the Titanic sank, and hundreds of people drowned because they were trying to tread water while clutching their 50-pound suitcase with the clothes they were planning to wear to the Gala when they eventually arrived in New York. Wrong problem. If you are treading water in the middle of the night in the freezing Atlantic Ocean, the problem is not the Gala in New York in a couple of weeks.
This is where 95% of all CEO’s fail during times of extreme crisis… They have a death grip on what might be needed for the future. As a result, they make the mortal mistake of hanging onto the 50-pound suitcase with all their might. Their reasoning is they might need that party dress once the crisis is over, so better hang onto it just in case… and they drown.
You don’t have to be wicked smart to work out that the length of time you can tread water and avoid drowning is severely curtailed if you are carrying excess baggage and weight. The more stuff you try to save, the less oxygen and strength available to allocate to the real problem… Survival. In a crisis, the problem is never the original vision of “world domination” … It is survival, and that requires making hard decisions and letting go of past expectations, projects, initiatives, dreams and plans.
Bumper Sticker: When you fail to recognize the problem that is, you waste time, energy and resources attempting to solve the problem that isn’t. Dumb and often Deadly!
Up Next: Why shrinking—not growing—is the only way to survive a turnaround. Read it here.
