Last Updated Oct 2, 2008 9:02 AM EDT
It can happen at any time: market bubbles burst, companies crash and burn, investment portfolios become worthless overnight. Why? Overconfidence, greed, irrational exuberance, mass stupidity. Who knows? I sure don't.
Whatever the cause, the result is the same: Crisis.
Crises happen. They happen to all companies and to all people. They happen in our personal lives and in our professional lives. By definition, crises bring change, big change.
Markets are essentially zero-sum games. That means that crises can alter competitive landscapes, creating new winners and new losers.
In other words, a crisis can be an opportunity or a threat. That's why how you behave in a crisis, how you manage a crisis, is a really big deal.
People show their true colors in a crisis. Confident, capable, honest people rise to the occasion. They demonstrate leadership qualities. They play at the top of their game.
Dysfunctional people react or overreact in ways that tend to make matters worse. Not to get too psychological here, but dysfunctional behavior is often a result of the way people react to fear and anxiety - emotions often associated with crisis.
Last time I checked, companies are run by people. CEOs, executives and directors are therefore not immune to this phenomenon. How they behave in a crisis can change the fate of thousands of people, entire companies, or entire industries.
If you do business in America, the current economic crisis will affect you and your company. Rise to the occasion, and you may come out on top. Don't, and well, that's your call.
Here are five steps for managing a crisis, any crisis. They're derived from years of crisis management experience as a senior executive. They may seem obvious or simplistic, but then again, this isn't rocket science.
Assess. Fight every instinct to react or overreact. Take a reasonable amount of time to gather data, obtain objective guidance, and develop a relatively accurate picture of the situation.
Engage. Get your team together. Include key stakeholders, those with competence in this particular crisis, and possibly a planning facilitator. Keep this core group tight to facilitate efficient brainstorming and decision-making.
Plan. Once you have data and a team, brainstorm, analyze and plan. Employ some form of competitive or SWOT analysis, focusing on what's changed. Then develop goals, strategies and tactics designed to capitalize on the new situation.
Communicate. Drive the process down through the organization, communicating as transparently as is practical to obtain support. Ensure timely and effective external communication of material events. Timing is critical, as is respecting your audience.
Execute. You know the drill. Everything up until this point is pointless if you don't execute crisply and flawlessly. Most markets are so competitive these days that solid execution is a given, not an advantage. So don't blow it.
Bottom line: In a crisis, your instincts may be to react, keep things close to your vest, or even do nothing. Those are reactions to fear. Don't ignore them; they're normal. Instead, look fear in the eye and do the right thing anyway. That's called courage. Strong leaders have courage.
(Image courtesy CBS News)