Crises act to accelerate company performance – for the better or for the worse. Applying best practice approaches to managing unexpected crises has the potential to setting companies on a trajectory to emerge as winners when the dust settles. Thus, there is significant value to be gained, or lost, from how owners and managers approach adverse events when they occur.
True crises are unforeseen and strike unexpectedly. Each has its own DNA and strike companies differently. Thus, there is no “cure-all approach” to successful crisis management. What we have learnt in Credo Partners from managing our portfolio of companies successfully through several crises (including the financial crisis and Covid19) is that what really matters is how you approach and handle crises proactively, so you maintain freedom to navigate through the rough waters, and emerge as a relatively stronger contender in your industry as the crisis recedes and normality is re-instated.
Our “Credo approach to winning over crises” can be summarized in the following operational guidelines
Institute a very rapid response plan: Time is of essence in a crisis; thus, rapid response is critical for staying in control of the unfolding events – better 75% correct quickly executed, than 90% correct later. As Norway announced “closure” 12 March 2020 to mitigate the rapidly spreading Covid19-virus, we in Credo the same day requested all our 10 portfolio companies to come up with “Maximum response plans” ready to be launched within days. The response plans should adhere to the following guidelines:
Taking care of the safety of all employees
Identify scenarios for how demand likely would be impacted from a “Corona-frozen world” next 6-9 months
Address all costs and balance sheet items to meet identified scenarios
Identifying all programs available for alleviating effects of demand changes
Proactively address banks and investors to align expectations and communicate content of response plans;
Stay unusually close to business and execution throughout the crisis:
Short-circuit regular governance process – institute (minimum) weekly follow ups on actions and KPIs
Act as coach and sparring partner to CEO/C-suite – while relentlessly following up “state of the nation” (ie actions, KPIs, motivation, morale and outlook)
Leverage ownership role to assist companies with terms vs. banks and other key stakeholders
Invest in keeping key people throughout the crisis;
Ensure broad-based motivation throughout the company to succeed with response plan and emerge stronger from crisis:
Leaders lead by example: Ensure balanced contributions from everyone; e.g., pay-cuts from top management; fee cuts form Board members; specific contributions from owners, etc
Allow for entrepreneurship and out-of-the-ordinary initiatives – that will boost morale
Occasionally, communicate broadly to the entire organization to recognize progress and contributions
Show empathy and recognize efforts – people perform better when seen;
Leverage momentum of crises to implement required strategic changes:
Identify change imperative from crises: More online? Transition faster to online! More home office? Transition faster to home office! Etc.
Similarly, take consequence of what will not revert to normal; eg, change sales and marketing structures and competences to reflect “new normal”, eg more online/more home office, etc. – do not revert to “old” cost structure after crisis!
Act fast and forcefully, but do not take short cuts:
Be candid: People act better on realities than wishful thinking
Be fair: Crises call for changes; changes require focus; focus requires priorities – be fair with those that fall outside due to change imperative; how they are treated determines morale of the organization
Do not cheat, it will come back and haunt you ten-fold. If you do not qualify for state aid – do not pretend you do; if on furlough, do not work full time, etc.
We do not claim this to be a complete list, but sufficiently solid guiding principles for addressing an effective (and efficient) handling of unforeseen crises. We believe our approach to crises deliver results: As per 31 May 2020, ie three months into the Covid10-crisis, Credo Partner’s ten portfolio companies demonstrate the following performance:
Relative to EBITDA Budgets for 2020: 5 companies are more than 10% ahead of their budgets, 3 within +/- 10 percent of budgets, and only 2 more than 10 percent behind their budgets;
In total, EBITDA among the Credo portfolio companies in the period January-May 2020 is up 54% vs 2019; and total revenues are up by 8% vs the same period last year.
Although the current crisis is by no means over, and the outcome still unknown, we firmly believe that good crisis management improves a company's chances for survival and success. Crises represent a microcosm that accelerate different development trajectories in companies. Thus, applying best practices is particularly important in times of crises – when new winners are born, and late responders easily perish.
Credo Partners er et norsk investeringsselskap med spesialitet å utvikle verdier i mindre og mellomstore selskaper som aktive eiere. Selskapet har siden det ble etablert i 2003 aktivt deltatt i utvikling av ca. 20 selskaper, delvis i rollen som hovedeier, og delvis som partner til andre hovedeiere. Credo Partners har gjennom denne erfaringen etablert seg som en av Nordens tydeligste spesialister og kompetansemiljøer på verdiutvikling i små og mellomstore selskaper.