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5 keys to effective leadership in times of crisis

Posted by Shivali Anand

November 15, 2021    |     5-minute read (873 words)

A single business crisis can test your years of experience and knowledge as an entrepreneur, regardless of how efficiently you run your firm or your level of success. Financial difficulties, consumer and media reactions and staff unhappiness are examples of issues with the potential of escalating to the extent where they tarnish your credibility and reputation. Even a seemingly trite matter could spiral into an unexpected crisis.

Sometimes, the issue grows so large that you cannot contain it, putting your company’s survival in peril. History shows that even the most successful businesses are not immune to a crisis and that they can strike at any time and last anywhere from a day to a few years.

Consider the following types of business crises:

Financial crisis

A business enters a financial crisis when it loses a significant amount of money or can’t pay off its debt. Bankruptcy, revenue losses, market shifts or inflation can precipitate a substantial reduction in assets that destabilize the business’s revenue. Although business financial crises are not uncommon, they sometimes result in disastrous consequences for a corporation. In the worst-case scenario, the company falls into a death spiral that leads to permanent closure.

Natural disaster crisis

Earthquakes, storms, floods, fires and any other natural disaster has the potential to cause a natural crisis. While these calamities are relatively infrequent, their effects on enterprises tend to be long term and chronic. Hurricane Katrina is a well-known example of such a natural disaster. Ideally, companies proactively develop contingency plans to safeguard their survival. If you know that your company's location is prone to certain natural disasters or extreme weather, you need to be prepared.

Technology crisis

Businesses rely on tech to help with their day-to-day operations, and that tech is evolving at an incredible rate. But when that tech falters, so too can businesses that count on it. For example, the eLearning industry is dependent on the internet. If the internet were to crash, the industry would be forced to halt until its restoration, resulting in revenue loss. A technology crisis is defined as a failure in technology that imperils a company’s revenue and/or product and reputation.

Organizational crisis

Organizational crises pertain to the business, management and customers. One example is a firm that takes advantage of clients for the business’s benefit. Customers may boycott the business and file class-action lawsuits as a form of redress. The only solution in this instance is forestalling such a crisis altogether by creating an organizational culture that prioritizes client needs and successes.

Employees can also be involved in organizational crises if management makes decisions deemed not in the best interests of workers or stakeholders. This could take the form of a company that engages in unlawful activities, disregards the interests of employees, puts stakeholders' money in danger or acts of deceit. The business may find itself in court, accompanied by a steep financial burden and reputational harm.

Workforce crisis

This type of crisis transpires when an employee engages in unlawful or immoral behavior that tarnishes the company's reputation. The company needs to be prepared to confront the problem and take necessary disciplinary action to preserve its reputation and minimize potential losses. If the media or competitors get involved, be sure to be as transparent as possible with them.

Crisis leadership toolbox

As a leader, you must always be prepared to contend with a crisis like those described above. How you and the company respond will greatly affect the brand’s reputation. Whatever sort of crisis you're dealing with, rely on these five leadership tactics to navigate the situation effectively. 

  1. Agility
Influential leaders are willing to try new things and the ability to deal with ambiguity. They make every effort to find a solution to a crisis. They also learn from their mistakes instead of reverting to old habits.

  1. Adaptability
Having the flexibility for dealing with any problematic scenario is essential for dealing with the adversity of a business crisis. Effective leaders don't just stick to plan A no matter what. When circumstances require it, they are ready to look at plan B, gather input, consider new viewpoints and collaborate to develop a solid crisis management plan when warranted.

  1. Proactiveness
Astute leaders recognize that they won’t have the solution for every problem or crisis, so they proactively form a crisis management team. When necessary, they are also willing to make quick decisions.

  1. Communication
Clear and concise communication during a crisis will help you get your message through accurately and avoid being misquoted or misinterpreted. Good communication during a crisis also necessitates maintaining composure and staying calm.

  1. Connection
It is important for leaders to connect and collaborate on an ongoing basis. During a time of crisis, they can gather support from their colleagues and professional network. Connection during crisis renders the ability to keep the team together, offer empathy and manage relationships.

Wrap-up

When it comes to crisis management for leaders, success comes from being responsive and proactive. You need to understand the crisis well so you can come up with solutions, but you also want to proactively work to prevent the crisis altogether. If you're having trouble implementing a crisis management plan, consider bringing on a crisis management expert.

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