Key to Managing Crises is Practice

by Bonnie M. Brown, Ph.D.

“Assumptions are not good enough. They need to be tested.”

In arming your firm against crises, practice makes perfect, according to Bonnie M. Brown, Ph.D., president of Transition Dynamics Inc., an Oregon-based management consulting firm specializing  in family business transitions.

Family Business Forum members received a solid dose of preventative medicine at the Forum session on October 22, as Brown urged them to test their business’ ability to manage change and potential crises, whether expected or unexpected, before they surface. “Assumptions are not good enough,” she cautioned, “They need to be tested.”

In so doing, she relayed the story of a business owner she once met, who each year walks into corporate headquarters and announces to the first person he sees, “I’m dead.”  Within this company, the drill has been set and the course of action predetermined. The news is quickly communicated to all of the general managers, who then convene to review a checklist of issues and implement a contingency plan that the company has been refining over the years. This company is practicing for the unfortunate, yet inevitable day, when this is no longer a drill.

This anecdote set the stage for multiple strategic drills that can be helpful in managing long-range transitions by identifying underlying problems, which most often relate to money, power and love, before they explode and compromise the family business. These drills prompted self-reflection and discussion among members on issues such as entitlement assumptions (age, birthright, gender), performance reviews, lines of communication, succession planning, managing conflict and transitioning to the next generation.

Interspersed among the strategic drills were what Brown calls fire drills, which build contingency plans for unexpected change so that the business functions optimally during crisis situations. One such drill involved a family returning from an out-of-town wedding to find that their corporate headquarters had burned to the ground over the weekend. Another one dealt with a family unexpectedly receiving an offer to buy their business, and the conflict which ensued between the active and inactive shareholders over whether to sell. Members worked together in small groups to develop action plans related to the drills, identifying the most important things to do today, within a month, within a quarter, and within the next year.

Brown stressed that successfully managing change, whether it is expected or unexpected, requires time to plan. The best way defuse a crisis is by addressing it before it occurs, with the following critical questions:

  •  What is the issue or crisis and what is the impact on family needs, management needs and ownership needs?
  •  What resources (physical, financial, human) are needed to appropriately deal with the crisis?
  •  What is the timeline?

The session was extremely interactive, with the conversation often digressing to issues facing the member family businesses. Brown, a dynamic speaker, has a knack for stirring the pot and asking the right key questions. The evaluations for the session were excellent and several members remarked on how much the seminar had opened their eyes.