Don't wait until the bomb drops
Start your emergency planning before the crisis hits you, says Stephen Evans.
One of the best pieces of advice I've ever had is to think about the worst possible outcome in a particular set of circumstances and decide what you would do it if happened.
The good thing is that this makes you face the unthinkable well ahead of time and, if it does occur, it doesn't come as a surprise.
Fortunately, I've experienced only one occasion when it did, and I was ready for it.
It was with this in mind that I sat down with my fellow directors of a particular company in November, to plan an Armageddon budget. We asked ourselves: "If sales were to drop by 40%, what would we do?"
We based our assumptions on the existing current year budget. It's no good telling people that you're going to prepare a worst-case scenario and then asking them to prepare an honest budget. They will build in all kinds of contingencies and simply take them out again for the worst-case version.
After several hours of juggling the figures, we came to the conclusion that we would need to cut costs by 25% to achieve a cash breakeven situation. Some of it could be done by temporarily shutting down underused space but most of the cuts would mean making people redundant.
Having worked out the depth of the cuts, we reconvened to look at which job functions we would have to lose. From this, we had a list of names of people who would have to be made redundant, in the order in which we would have to let them go.
It sounds cold and calculating, and frankly, as I am a team player, this exercise does not sit easily with my normal methods of working. However, in an Armageddon situation, tough decisions have to be made.
By facing the possibility before it becomes a fact, you have the time to discuss the situation rationally. If you wait until later, panic sets in. There is a danger that decision-making is driven by emotion and you can lose some of the people you need to retain, because they feel the management team is acting unfairly.
In difficult times, control is the key.
The board of directors with whom I went through the process have seen sales drop, but only by a little over 5% to date. They have made two people redundant as a result. It wasn't a happy decision, but it was based on clear business reasons and, as such, accepted as fair by the rest of the team.
I have suggested a similar approach to the other businesses I am involved with but I hope that, once written, the plans stay firmly locked in the chief executive's top drawer.
Stephen Evans is chief executive of Food That Delights, a bar and restaurant consultancy; non-executive director of Dineline; chairman of First! Venues; and a member of the Restaurant Association national committee.
