You're reading: Business Sense: To survive crisis, businesses need to stay calm, plan, invest in staff

Sure, times are tough. The crisis is rocking the world and it is not really pessimistic to say that the worst is still ahead. We all have heard the bad news but here is some good news for a change. The storm will be over one day and the sun will surely rise again – and there are ways for enterprises to reduce the risk of being swept away in the meantime. It is time to stop complaining and rather find a way to make the ship safe and ready for the higher waves to come.

In a recent survey, which the IFAK Institute conducted among 500 German companies based in Ukraine, more than 60 percent claimed to be positive that they would improve their business situation within the next year. One third of them are even planning to hire additional staff within the next 12 months.

Of course, there is a slight bias in this data because companies which are in the process of liquidation or are facing bankruptcy tend not to take part in surveys like this. Therefore, the situation is slightly less optimistic than the figures show. But even this, taken into account the numbers, is surprising. Especially if you take a look at the comparison group of international non-German companies, which are far less optimistic, with just 38 percent being positive about their business development in Ukraine and a mere 10 percent planning to hire additional staff within the next 12 months. This is even more striking as Germans tend not to be notorious optimists or naive. Whoever has worked with Germans knows their longing for perfection, their strategically planning skills but also their skepticism, not to say pessimism. Either the majority of German companies have gone nuts over the crisis or there is something more behind it.

Let us not look at German companies alone. The magic question is: What is it that those companies do differently, the ones which have the highest chances of survival?

Analyzing company behavior during earlier crises (in the early 1990s or in 2000) you can group companies into three behavior patterns.

The first is what we call the “passive group.” Their reactions are those of an animal in panic: either freeze and look in shock and awe at the headlights about to hit you, or to cuddle in an embryonic position, close the eyes and hope that everything will be over quickly. This is surely a ridiculous way of behaving in a crisis. But this behavior is far more common than one might expect.

Companies with this behavior are easy to identify. Their people can be seen in business gatherings knowing all bad news by heart. They are doomsday prophets, but if you ask them for a solution, they won’t have one. They just know things will turn out really bad and hope that they will not get struck too badly. Naturally, the mortality rate among this group is the highest.

The second group – the “re-active group” – is the largest of the three. They see the crisis, face it and react in ways which they think might be most suitable to face the storm. They gather information in the news and through talking to their customers or clients. They gain some generic and fundamental data and prognosis from general data services and general market reports, which cover their segment. Based on this information they react and cut expenses, revise their marketing budgets, fire people … and what not.

It is quite obvious that this group has a far higher chance to survive the crisis than the passive group. At first glance, their actions look smart and determined.

But there is still a group with far higher chances of survival. They are the strategically pro-active companies. Their approach resembles that of the re-active group, but in fact, they take a far more thorough and strategic approach.

First of all, they do not rely on basic generic data alone. They do their own research, segment their clients and potential clients and evaluate their behavior in a crisis. This gives them the ability to react accordingly, re-allocate their budget and know quite sure where they will lose money or where to invest more. They might find out that a formerly high potential client segment might break away and suddenly a client segment which was at pre-crisis times considered irrelevant suddenly has a much higher potential than their former top-client group.

A company following this path can then reallocate their resources accordingly and can make up for their losses in other areas. The approach is very analytical, sometimes cold-blooded but surely success-driven.It is about developing and adapting a strategy upon valid, individual market data. They also check their marketing efforts and can effectively re-allocate their budget. It also allows them to shift other resources – such as their staff and logistics – based on the revised strategy.

The strategically pro-active companies look differently at their staff. They know that their staffs are an investment and that required skills need to be built up. So it is their approach to look beyond the crisis. They take a good look gauging which are the best employees, how to avoid firing them, work on flexible plans to reduce costs without losing them.

Now if you are in a managing position or an employee of a business riding through the storm, ask yourself these questions: Do you know which of your clients are most likely to drift away? Who are your potential clients or customers? What is their value for you now? Do you know which marketing campaigns have the most success? Do you have a plan for your staff on how to make them better, how not to lose your best people, and how many employees you need at all?

And last but not least, do you have a strategy which will look beyond the crisis? Do you know how to carry on after the storm is over?

At a recent Russian marketing conference, the CEO of a construction material manufacturer asked me: “You know … if we can’t tell when the crisis will be over and whether we will survive it, what good is it then to think now about the days after the crisis?”

To answer, let me use the image of a ship riding through the storm. You could throw everything overboard, cut down the sails and fell the mast. This might help you survive the storm, but after the storm is over you will be floating on the sea, helpless like in a nutshell, lacking the ability to navigate and starving to death, wishing you would have thought about the time after the storm earlier.

Riding through the storm will be tough for any business, but there are ways of improving your chances. It is a matter of calm analysis and thorough planning, calculating your odds and placing your bet accordingly.

Kishor Sridhar is head of international research at IFAK, an independent market research institute based in Germany. The group established a Ukrainian subsidiary in 2007. Sridhar can be reached at [email protected].