Crisis management

We are in a pretty deep hole right now. Jun didn't spend too much time to convince me that the worse thing to the current economic situation is our children, and children's children will have to spend considerably long time to pay for the economic debt we are creating right now. Increasing public spendings, lower the saving rate to encourage personal spendings and investment are all trying to stimulate the spending power, consequently create needs for working with sufficient cash flow. All these spendings will need to be balanced or paid back one way or another from either tax policy or decrease of benefits which our offspring will have to face with. This is what I could comprehend so far.

What I would like to talk about here is more of a miniature within a business organisation, which I call it crisis management to distinguish with terms like risk management, budget management etc.

We are all witnessing what is the unavoidable effect on individual business under current circumstance - decreasing budget, shredding jobs, cutting head counts, shrinking investment. All other things being equal, I could not easily find a logical outlet with such reactions. I also do not see how these reaction would help a business and positively produce contributions to global economy either. All the immediate reactions could only destroy consumer's confidence and power to spend. It is more like the start of the snowball. We can only pray for that at certain point in the future, the slope starts to slow down and things will pick up slowly.

Instead of reacting, there are at least certain things we could do. Economy climate change always has a hint, a signal of some sort. Honestly, as naive and dummy as I am in finance, the first time when I picked up the news that greedy mortgage lenders sell mortgages to customers without any appropriate evaluation, there was a voice in the back of my mind that something was not quite right. As an organisation, there are many signals, measurements could be used to trigger the alarm system. Management decisions should really at least be rehearsed before the crisis really hit us. One thing we should have learnt from the bank and logistics is that to simulate all different scenarios before hand is not a trivial job, which should really be the focus of our strategical management, if that really happens.

Personally, it is just not good enough to tell the people working for me that I do not know where we are heading towards, nor do I have better ideas or directions of what we should be doing other than simply react to the bigger environment. Let's face it, reaction, as one of the fundamental biological behaviour, is rather rudimentary. It can hardly be considered as intelligence. Rather than only being honest with employees, a good leader should do his homework - knowing what options we have, what are the fallback positions, and this is the time when the rehearsed strategy could be put in effects. A good leader also should realise that crisis could also be good opportunity to redefine the market, revisit your product portfolio, restructure the team, basically, you can create a whole new game, given that you are well-prepared enough and tough enough to get through the winter. You may not be able to keep the company going no matter how many heads to be cut off. That alone will not help you to push the ball uphill. We need to bear in mind is that the goal is not to save cost, which is only means, arguably may not be the best one though. Rather than destroy the morale completely, it might give you different perspective by fight with all backs against the river.

So, whenever I have free time slots, I keep reminding myself of the importance of home work - always be prepared before the rain comes. All those boring figures, charts, predictions, numerous versions of plans of attacks (no doubt most of them will go to the bin), they are worthwhile.