Many organizations seek efficiencies during times of economic uncertainty. For many executives, “efficiency” equates to reducing costs. Two of the most tried and true methods of reducing costs are eliminating headcount and cutting back on support services that do not generate revenue.
Frequently, chasing these kinds of efficiencies means that you are also eliminating your crisis early warning system. These are the people who can tell you when and how something is going to disrupt business as usual. They are often the people who first realize an all hands on deck response is going to be required.
When those people and the services they provide are gone, then your crisis awareness goes with them. And that will make you inefficient when it comes time to respond to a crisis.
Crisis Efficiency
The mechanical world defines efficiency as the ratio of useful work to energy expended. It derives from the Latin verb efficere, which means “to accomplish.” Thus, one surefire way to increase efficiency is to decrease the amount of un-useful work. Seen this way, efficiency has nothing to do with costs – it’s about reducing the work required to accomplish something, like responding to a crisis.
Several elements reduce the amount of work needed for crisis response:
- Being aware of your risks
- Having plans in place for them
- Having a team and systems in place that are ready to respond
- Practicing responding to high-likelihood risks
- Having advance warning that a crisis might be building; and
- Having a firm grasp of mission and values and chain of command
For us at Kith, mission and values + chain of command = speed, and speed is the key difference between average and great crisis response. Speed doesn’t equate to efficiency, but we find them to be highly correlated.
So, if a cost-reducing effort ends up putting holes in your crisis early warning system, then you’re more likely to be surprised and caught flat-footed when the crisis hits. It’s also likely that you didn’t prepare to respond to such a crisis, and you haven’t practiced for it, because risk awareness and crisis preparedness often fall on the cost-reducing side of the budget ax.
And that’s a problem when you have a problem.
Cascading Inefficiency
If your crisis early warning system had alerted you to a budding crisis, then you would have seen it coming and either prevented it or at least gotten into a better stance to respond to it. Since the easiest crises to manage are the ones that didn’t happen, a hole in your early warning system can keep you from nipping the crisis in the bud.
Since you didn’t see it coming, the crisis is more likely to knock your organization off of its strategy and distract your executive team for longer periods of time. Had you seen it coming, you could have had appropriate conversations with leadership before it bubbled over and set out on a strategic path to blunt any possible impacts on your business. Instead, you’re reacting to it in real time.
Reputation suffers when people expect you to be doing one thing and you’re instead doing something else because you’ve been knocked off your strategy and your executives are distracted. This increases the likelihood those people will purchase someone else’s products, or invest elsewhere, or work elsewhere. You could have had a plan in place to communicate with the people who matter most so they know you are doing what a responsible business should do when faced with this situation. That would’ve protected your reputation from damage. Instead, you’re taking on water.
A damaged reputation leads to a lower bottom line. It takes time to recover from lost revenues, higher expenditures and disrupted operations, and it can take even more time to rebuild people’s confidence in your organization. You could have avoided the whole problem by simply investing in crisis awareness and preparedness ahead of time. Instead, you’ve spent far more in money and time to get far less in return.
That’s inefficient. A lot of un-useful work could have been avoided, and a lot of energy could have been spent on strategic business growth. And a lot of money could have been saved.
Invest in Preparedness
Crisis preparedness is like an insurance policy, except you’re investing in your capabilities. It’s ultimately cheaper, more effective and, yes, more efficient to spend resources now to get ready for, and prevent, a future crisis.
Yet, many executives take the other route – cutting crisis awareness and preparedness to save a few bucks today – and pay a higher price later.
So, when your crisis early warning system is on the chopping block in the name of “efficiency,” push back. Crisis efficiency is valuable – it saves work, it saves time and it saves money – and should be invested in, not eliminated.
