Tips for Managing a Financially-Troubled Business

I just came across the following article that was authored by Mike Periu. I think it has particular relevance to forensic accountants, lawyers, bankers, turnaround consultants/advisors, and others who serve financially-troubled business clients. As professionals, we should encourage our distressed-business clients to heed the suggestions outlined in this writing.

How To Manage A Crisis

As the owner of a company, you have a great responsibility to your employees, customers, suppliers and other stakeholders. This responsibility becomes urgent when something unexpected happens—something that could lead to job losses, salary reductions or even the closure of the company. Like they would to any leader, people will look to you in a time of crisis. They depend on you. And you most likely don't want to let them down.

Your followers need support, reassurance and ultimately validation that the situation is being managed as best as it can be. Even if the final outcome isn't ideal, people will remember how you handled the situation more than the final outcome. The cliché "it’s not whether you win or lose but how you play the game" could not be more appropriate.

Some people have a natural leadership ability. This sixth sense is an enviable character trait to have. But even if you are a natural-born leader, you should still learn to manage crises appropriately. Over the course of my career, I've experienced a number of crises—as both a leader and a follower. Here are the five things that have helped me and will help you in the zero hour.

There is no prep time. When the bad news spreads, people will look to you immediately. Your initial response will be critical. Acting scared, losing your composure or not seeming like you are in control from the first instant is a critical error. You'll be playing catch-up if you allow yourself the luxury of freaking out before getting down to business.

Don't keep people in the dark. The vantage point of the leader during a crisis can distort your understanding of how others see the situation. You have far more information than they do. Not knowing what’s going on is what causes panic during an emergency. It’s easy to forget this while you are busy trying to resolve the situation. So make a conscious effort to inform employees at regular intervals. By no means do you have to reveal sensitive information that could damage the resolution of the crisis, but regularly updating people, even if it is to tell them that nothing has changed, will reassure them.

Don't micromanage. Many business leaders, especially those who founded their company, have a tendency to micromanage when disaster strikes. The idea that your baby is in trouble triggers the hidden control freak that's inside of all of us. It's exactly the opposite response we should have. We need more help, not less; we need to trust, not doubt. If you've done a good job as an owner, then you will have surrounded yourself with good people. Leverage their talent to help you and your company survive the crisis.

Be the first to sacrifice. If the solution to your critical situation requires some type of sacrifice, make sure the sacrifice is shared among everyone. The owner should be the first to take a pay cut, the first to work extra hours and the first to expand their scope of duties. Most people will want to pitch in and help if they feel it’s a team effort. But if the CEO arrives to work in his new Maserati after making his employees take a 10 percent pay cut, then you will engender resentment and poor morale among the people that will ultimate save the company.

You may make mistakes while leading your organization during a crisis. That’s to be expected. But if you follow these pieces of advice, employees will remember your valiant effort and not your errors.

Comments

[Spencer Hale]

This was a really good post. I agree with you that even if bankruptcy ends up being the best option for a company the people will remember how you handled the situation. I also really feel that it is important to avoid micromanaging employees.

[Accounting Business for Sale]

In the day were financially troubled businesses are relatively common there is some very good advice in your post. From an accountanting standpoint it is not always as easy to navigate through some of the waves. I suppose that's why we continue to see mergers and acquistions through out most industries.

[Tracy Pierre]

I completely agree with you. When a crisis happens, whether you win or lose, what matters most is how you've handled the situation. In times like this, it's prudent to have a lawyer by your side to guide you on the legal process.

[Ecommerce]

Financial problem in business is surely a very serious problem. A business needs proper financial management to make it go on.

[Unibusiness Webs]

If you cannot see the road ahead of you, you cannot drive your car safely; likewise, if you have no idea where your business's money is going, you cannot possibly be successful. Even an inexpensive computer and software package can help you keep track of all of your financial reports; look into Quicken Quickbooks or Peachtree products to match your business type.
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[Bennie Sawrey]

When you find your business in trouble, it is apt to immediately look for a solution before things get worse. Careful brainstorming will be key to finding a solution to your financial problem. You would also do well to seek advice from financial experts.

[accounting firm nj]

Great advice, especially the one about not keeping everyone in the dark, altho sometimes it's useful to prevent 'stampeding'.