April 10, 2020

The 3 Phases of Leading Through a Crisis

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Leadership during a crisis calls for a combination of determination, resiliency, and optimism - whether you’re leading your business, your community, or your family.

COVID-19 brings profoundly unique challenges. The speed of onset, the shortage of healthcare resources, and the sudden global economic shutdown puts us in a position we’ve not been in before.

Having said that, there are important parallels to 9/11 and The Great Recession that are worth calling out. In the case of 9/11, the entire world was dealing with societal unease and a threat to our personal safety that felt very similar to the fear many of us are experiencing in the midst of today’s pandemic. The Great Recession reminded us how connected our global markets. Businesses and individuals suddenly confronted financial ruin unlike any of us had experienced in our lifetime. The last 30 days in the financial markets seem eerily familiar thanks to COVID-19.

I don’t want to minimize the unprecedented challenges we confront today. Sadly, we are learning on a daily basis about the remarkably dynamic human and economic toll of this pandemic. But if this is your first time leading an organization through a crisis of this magnitude, I offer you this simple comfort: in a sense, we’ve been here before. And every single time we made it to the other side. With bumps and bruises and hard life lessons, but we made it.

In that spirit, I offer a few learnings from navigating periods of societal and economic crisis in the past. My hope is that perhaps you’ll be reminded of the remarkable resilience of the human race and also encouraged by knowing that the world will restore itself because it must. 

To that end, I offer the three phases of managing through a crisis: the triage, the capitulation, and the new normal.

Phase 1: The Triage

First and foremost: be safe. Be safe. Be safe.

Ensure Safety

Immediately following a crisis, your first priority as a leader is to ensure the safety of your employees and their families and your customers and their families. The safety of your people is what matters most always, and in the immediate days following a crisis, it becomes your #1 daily priority as a leader.

Focus on how to support them through this moment. Learn what their essential needs are and figure out how you can help them. A few ideas are: 

  • Set up work from home capabilities
  • Cancel unnecessary meetings
  • Allow employees to take a day off
  • Support their need to step away and take care of family
  • Give your people the space to process the crisis at hand before you jump into your commercially-minded action plan.

Respect the Crisis

It’s important to err on the side of over respecting this moment by honoring the severity of the situation. Great leaders will prioritize the humanity of this moment. Sure, we are running commercial enterprises, but we are first and foremost leaders of human beings and there is nothing quite like a crisis of this magnitude to bring that reality to the front.

My advice: Focus on clear, confident communication with your team.

Share what you know, but don’t try to solve everything at once. You’re working with very little information so pay close attention to discerning what decisions need to be made now and what decisions can wait for later as the situation evolves further.

The winner in this phase is the survivor. And, armed with the necessary perspective that we will indeed get through this, the “survival message” needn’t be a message of fear but instead something that can galvanize inspired and creative action together as a team. 

Hope For the Best, Plan for the Worst

Finally, as you assess the financial picture you now face, hope for the best but plan for the worst.

I know that sounds a bit dark and negative, but the important thing here is to recognize an asymmetry of risk at this moment. Under-estimating the business impact you will experience carries a potentially far greater cost than over-estimating.

If you’re running a recurring revenue SaaS  business, you’re likely to be in a more fortunate position than most. Software is traditionally a resilient business and, generally speaking, people who work in software companies can successfully pivot to work from home mode. But even the most resilient businesses will be affected so remember to slow down your thinking in the midst of this chaotic environment so you can make smart, thoughtful decisions.

My advice: Manage your business from the balance sheet, not the income statement. 

Identify where you can conserve cash, both now and in the next 12 - 18 months. 

  • Can you reduce or eliminate your marketing spend?
  • You won’t be attending events for a while so you’ll likely have savings there. 
  • Can you freeze hiring?
  • Reduce or eliminate any discretionary budget for the rest of the year.

Stating the obvious, focusing on survival during this triage phase is critical.

The reason to take a brutal stance on discretionary spend is that it may be the thing that allows you to keep your team intact. To be clear, it won’t always be possible to avoid layoffs but as a leader, you will want to do whatever you can to preserve your team during this time. The layoff creates a serious individual hardship during a time when finding new work will be difficult and losing key team members will make it harder to bounce back when conditions improve.

As for your customers, ask yourself - what do my existing customers need from me right now?

The answer is likely a big dose of understanding and flexibility. And it’s quite possible what they need has nothing to do with the software you provide. So be creative and agile as you do whatever you can to support your customers.

If your product is mission critical, you can continue prospecting because your prospects continue to need the “lights on, engine running” capability you provide. If your product is more discretionary in nature, it’s likely time to take a break from prospecting out of respect for your prospects’ need to focus on a radically different set of crisis priorities. Instead, think selflessly about what other things your company can do to help your prospects and customers survive. 

You will feel more connected than ever to your customer’s customer and at this moment, their mission becomes yours. And it goes without saying that your willingness to help without immediate commercial self-interest will be remembered and rewarded long after the survival mode ends.

Phase 2: The Capitulation

The capitulation phase comes next, and I have to admit, it always takes longer than I think it should.

Once you’ve moved from the triage phase, you are, generally, out of the “fight or flight” mode of managing your business. Your adrenaline has returned to near-normal levels and you’re settling in to assess what comes next.

My advice: Don’t assume former truths are still true.

Re-Evaluate. Re-Assess. Re-Invent.

The capitulation phase is about re-evaluating your ideal customer, re-assessing how you do things, and re-inventing, in some cases, your new unit economics. The reason why your customer bought your product in the past might not be relevant anymore. Start with some core questions:

  • What has changed about the way your customer works?
  • Which conditions will bounce back?
  • What will never be the same?
  • What do your customers most value about your solution in this brave new world?

It quite possibly is a different answer than 90 days ago. Maybe you need to reevaluate your product roadmap to prioritize features that better meet your customers changing needs. A good example is health care. Say you run a company that provides electronic health records (EHR) software to health care agencies. A few months ago, telehealth capabilities were a “someday soon” or “nice-to-have”. Suddenly, telehealth is priority #1 for clinicians in order to deliver elementary care.

The best way to understand whether your product-market fit has changed is to maximize the amount of time you are talking to your customers. Reach out, schedule phone calls, create a customer advisory board or set up recurring Zoom calls with your user group. Ask them about their new business reality:

  • What does this new world look like for you?
  • What has changed about the way you work?
  • What’s important to you now more than ever?
  • Do your new realities change your priorities for me as your software provider?
This active customer dialogue gives you a chance to stay connected, stay relevant, and build long term loyalty so that your core proposition stays closely aligned with your customer’s needs.

Perhaps the biggest consideration in this phase is recognizing that beyond the crisis period, the fear residue remains. It’s frequently the case that customer fear and apprehension post-crisis can last a lot longer than the initial acute period of crisis itself. No one knows for sure, but it’s possible the lingering effects of the COVID-19 pandemic remain until we reach a scalable vaccine.

As a leader, you need to set realistic expectations for yourself and your company. Your business will get through this, but the remainder of 2020 and possibly all of 2021 may not look anything like what the last few bull run years looked like pre-COVID. 

Phase 3: The New Normal

The good news we need to remind ourselves about is that new normal happens. The sun will, in fact, shine again. Of course none of us know exactly when and it will certainly be painful along the way. But one day we'll wake up and realize the world has found a new equilibrium. Thank goodness for that.

The airlines industry fundamentally changed during 9/11. Do you remember when you didn’t have to take off your shoes, jackets, and belts to go through security before 9/11? Hard to imagine nowadays. But, global air traffic volume eventually resumed and while we continue to face some lasting inconveniences at the security checkpoint, it all feels like new normal now.

Whenever we reach this post-pandemic new normal, be confident in the new phase. Let’s not dwell on trying to get back to the old ways of doing business. Instead, let’s understand that the new normal will be different than the old normal, but we will adjust and thrive again.

It's up to You Now

You have an enormous responsibility - to your business and your people. That’s the weight you carry as a leader. But building your business wasn’t easy either and you got this far, after all.

Have faith that the skills you acquired along the way are the same skills that will carry you through this crisis. And have faith in the remarkable resilience of the human spirit.

One thing I do know is that I’m hopeful. Every time we’ve had an economic shock it’s given rise to new opportunities. One door closes, but another door opens. If you were to bet on the software economy anytime in the last 25 years, you might have been temporarily wrong, but in the long run you would have been very, very right. And aren’t we fortunate to be in an industry that’s so remarkably agile and transformative?

We will make it through this. People will go back to work, new ways of working will arise, lessons will be learned and, in the words of Marc Andreessen, software will still eat the world.

Until then, please be safe and wash your hands. Godspeed.


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