Iron Rule # 5: A manager or entrepreneur who is not fighting a crisis is probably too insulated.
May 20, 1997 12:00 PM, Ron Davis
We've all heard of management by objectives, management for excellence and zero defects management, but how many of us really understand the concept of management by crisis? Management by crisis is nothing more than an owner or manager of a business reacting to circumstances rather than creating them. Sound difficult? Well, it is. But one of the characteristics we use to judge an effective manager is the ability to fight a crisis. And unless that kind of fight occurs on a regular basis, the manager is too insulated. She is not dealing with the realities of the day-to-day management of a business.
Let's take a look at how this works. In a typical installation business, residential, commercial, whatever, the business generally revolves around a specific cycle. All elements necessary to running a business are pretty easy to understand. You've got your marketing, administration, finance, operations and general management. But as you track an installation to conclusion and payment, you can see a lot of pitfalls that can cause even the most experienced among us to lose our way. When that happens, it's good. You see, if we make mistakes and learn from them, this learning process is incorporated into future business plans.
Here's an example of the typical cycle. A sale occurs through whatever marketing means -- direct mail, advertising, referrals, etc. A salesman or owner-manager makes an estimate. He submits a design. The purchaser approves the system components and design; the contractor orders whatever products are not in inventory. Installation instructions are given, and the work begins.
Opportunities for crisis are everywhere. Do you look forward to them? Do you appreciate them? What do you do with them when they happen? This is what we mean when we say an executive not fighting a crisis is probably too insulated: He's not developing reactions that will later be proactive.
Look at this scenario. A system has been designed for a customer. It requires five widgets, three whatzits and an assortment of whosits. Manufacturers and distributors are called, and delivery is guaranteed well in advance of the installation date. Everything seems in order. Then you get the call on the day the product is to be received. The call starts with: "I'm sorry to have to let you know this on such short notice, but the product you ordered, blah, blah, blah ...."
Now you are the executive in the middle of a crisis. You have to react now so you will be prepared -- proactive -- later. The typical manager in almost all of the installation industries yells, screams, bemoans his fate and then starts picking up the pieces and finding out where he can get the products he needs. It's frustrating. It's time consuming. It's something that probably couldn't have been avoided, at least this time. But what about next time? What did we learn from the whole process?
What we may have learned is something as simple as the need for establishing relationships with two or more suppliers, keeping more of an inventory for products we need more often, especially when our business has been growing, or establishing partnerships with our competitors who may have those parts and components in stock. Regardless of how you conclude this crisis, you are establishing policy so the same crisis does not recur.
When a situation becomes proac-tive, you're no longer dealing with a crisis but rather establishing policy that eliminates that particular crisis later. Does this mean that as your business grows, your crises become fewer? Absolutely. The more you eliminate crises, the fewer things can go wrong. They'll never stop completely. What you have to do is make sure crises are managed properly and help establish policy for future decisions.
Think about this: If you're too insulated, you probably don't deal with any crisis. If you're not insulated enough, your day is spent putting out fires. The truly effective executive is always aware of everything that goes on, but always has the beginnings, the middle or the end of a crisis to deal with. I guess that's why they pay executives the biggest bucks in almost any organization. They don't earn it because they've been there the longest or they're the smartest, but rather, they know how to anticipate, deal with and put out managerial fires. And the smart ones, the really smart ones, are the ones that learn from every crisis and make that information a chapter in their how-to book on management.