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Three ‘Pre-Crisis’ Signs to Look For: Avoid the Cycle of Crisis in Business

Corporations spend billions of dollars each year on books, seminars and consultants in order to advise senior level managers on how to guide their company through critical times. In a 2014 study by Bersin by Deloitte, researchers found that corporate training grew by the highest percent in seven years (15%) to over $70 billion in the US and $130 billion worldwide.*

*Source: The Corporate Learning Factbook 2014: Benchmarks, Trends, and Analysis of the U.S. Training Market, Karen O’Leonard, January 2014. Available at http://www.bersin.com

Common Types of Corporate Crisis

corporatetrainingspending_bersindeloitteThe most common types of corporate crisis include downsizing, mergers and acquisitions and restructuring, as well as the frequently misunderstood and misused concept of “re-engineering.”

The fact is that most cases of corporate crisis could be avoided if senior level management would identify and respond to the most common causes of such crisis when they begin—these causes exist and can be dealt with during the “good times.”

Three Pre-Crisis Symptoms to Watch For

In the medical field there are symptoms that are considered “pre-cancerous.”  This doesn’t necessarily mean these conditions will definitely lead to cancer, but they are common to people who later develop cancer.

Similarly, there are several “pre-crisis” symptoms for corporations.  Here are three of the most common:

1) A reactive work force. 

Senior level managers understand the expense and effort involved in adding people to the payroll and going through the onboarding and training process, and thus can be quite reluctant to do so at first.

In times of unbridled growth, this reticence  (though justifiable) usually means that by the time there is approval for a new hire, the department that needs to hire has developed a reactive style and culture as opposed to a proactive one.  In other words, they are inundated with work and have trouble distinguishing the “urgent” from the “important.”

This reactive style will be taught  (inadvertently or not) to the new hire and will eventually become a way of life for all, resulting in lower productivity, a lower level of customer service and micro-management.

2) Insufficient training. 

Soon, a company’s reticence to hire is overwhelmed by a need to “get people in here!”  During this phase it is common for companies experiencing unbridled growth to hire “fast and hard” to better meet the demands of their growing customer base.

This can lead to lower hiring standards and minimal training for the new hires in order to get them up and running as soon as possible.

The result is a work force with a less-than-desirable understanding of their job and how they fit into the company’s “big picture.”  This scenario, more often than not, will serve to exponentially escalate “fractionalization” and “reactivity” of the work force.

3) Micro-management. 

Perhaps the most insidious and crippling of all the dangers of unbridled growth is micro-management.

Micro-management is like a cancer that can start at any level of the company and spread.  It usually begins when people in middle management are promoted based on their skill level with little regard for their management capabilities.

Then, due to time constraints (and the reactive culture they are coming from described above), they’re insufficiently trained for their new positions.  This leads to one of two prevalent management styles: the new manager will begin to either micro-manage or fall prey to the natural, human tendency to “bureaucratize” the department.

Under both scenarios the employees are not fully utilized and very little if any attention is given to improvements in the areas of direction, focus, customer service and potential growth.

Eventually, when the growth spurt begins to slow down, and senior management is forced to evaluate and improve performance, the tendency to micro-manage will spread to the senior level of management.

Senior leadership often condemns the micro-managed or bureaucratic environment perpetuated by middle management.  (Rarely will they own up to helping to create the environment that spawned these problems in the first place.)

This in turn will cause senior level managers to turn their attention inward and they’ll begin to behave more like managers and less like leaders.

The end result is quite familiar to most of us, as it usually leads to heavy corporate shake-ups, restructuring or reorganization, confused and disoriented work force, unsatisfied customers due to a lack of focus, and ultimately, an inability to properly position the company for future growth.

Success Leaves Clues – And So Does Failure

It is said that success leaves clues.  Well, so does failure.  Corporate crisis in its early, or pre-crisis stage is easily identified.  Senior management would do well to look for the symptoms during the “good times,” while they’re relatively easy to remedy.

But, unfortunately, we do live in a crisis-oriented society.  And the reality is that there likely always will be three basic types of corporations: those that repeat their mistakes, those that learn from their mistakes and those that learn from the mistakes of others.

What type of corporation are you? That depends on how you and your leadership team respond in a crisis, (or avoid them in the first place).

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