How to identify a crisis in a company?

Learn to identify the warning signs of a business crisis , and to make the right decisions at the right time.

A crisis identified in due time can be resolved without too much difficulty, and can even become a lever for positive action in your company!

Here are the signals to quickly identify to thwart a business crisis.

Recognize and identify the signals of crisis in business o

• Financial indicators

The first indicator of crisis is generally a drop in profitability:

If your business is no longer making a profit, it may be time to start taking action to prepare for a crisis .

This decline in profitability generally translates into impaired performance:

• You lose customers
• You find it difficult to achieve the objectives set,
• You are not reaping the fruits of your efforts,
• You experience a decline in activity and turnover,
• Your margins are shrinking,
• Your cash is falling,
• You have difficulty paying your suppliers,
• The valuation of your business is less important

These elements should lead you to implement corrective actions as quickly as possible.

• Human indicators

Human signals must also be taken into account to anticipate a business crisis :

• The turnover of your employees: if you face a wave of resignations, take this signal seriously and prepare to take the necessary measures.
• Tensions in the company: you notice the rise of rumors and rumors of corridors? It’s time to quickly resolve the tensions.
• Difficulties in hiring: if you are having trouble finding competent new employees, this is usually a clear signal.
• A rise in absenteeism

So many indicators that you must take seriously to prepare for and resolve a crisis within your company .

• Societal indicators
• A “ Bad buzz “ : the media are interested in your company, rumors are circulating on the financial markets, investors are no longer as confident, customers are unhappy… If this type of situation arises, you will have to react appropriately. efficient and take the necessary measures quickly.
• The arrival on the market of a competitor: The arrival of a new competitor on the market modifies the balance of the latter and can lead to price reductions, reductions in margins, etc.

These societal indicators allow you to have an overall view of the situation of your company and will enable you to take useful measures to anticipate a crisis.

Some techniques to manage a crisis in business

• 1) Be transparent and explain the crisis to the media

Explaining the crisis to the press restores investor confidence by putting the company’s values back in the forefront.

It is therefore essential to communicate about the crisis in complete transparency in order to inform your customers, partners and employees as much as possible. They must be informed of the reasons and implications of the crisis, but also of the solutions that you put in place to resolve it .

• 2) Ensure availability for your teams

A crisis is not just a matter of communication, but also a social event that impacts team morale. It is therefore necessary to take into account the emotions of your employees and allow them to express themselves on the crisis affecting your company.

Speaking time should be made available to them so that they can express their concerns and frustrations. They must be reassured about the maintenance of their employment and future prospects in the company.

• 3) Take back control of operations and ensure a strong presence in the field

In the context of a crisis, it is necessary to ensure a strong presence on the ground in order to reassure your customers and partners. It is also necessary to establish immediate communication with the investors and the teams to explain the reasons and the consequences of the crisis . This strong presence must be synonymous with confidence in the company.

Putting local management back in place and showing that you are aware of the issues is absolutely imperative.

Call on an interim manager at the first signs of a crisis in the company

The implementation of an interim management is often necessary from the first signs of crisis in your company. His mission will be to check whether the organisation, processes and crisis management are operational.

An interim manager must be able to assess the real impact of a crisis and adapt his strategy according to the risks incurred. The main issues that he will have to manage are the following three:

• Crisis prevention:

Even if crises are, in principle, not predictable, it is always possible to put in place actions to prevent them. For this, it may be necessary to set up a crisis unit or to strengthen the internal organization. The idea is to prevent the crisis and limit its consequences.

First of all, in the context of preventive actions, the interim manager will assess the risks and threats. It is important to know the risks in order to be able to anticipate and prevent them.

Prevention can go through the recruitment of new people with skills in risk management.

It is up to the interim manager to anticipate the risks incurred by the company and to bring his expertise to make the right decisions in a very short time.

• Crisis management leadership:

It is sometimes essential to modify the company’s strategy in depth once the crisis has declared itself. For this, the interim manager must be able to analyze the situation and react quickly. If the interim manager has prepared his action before the crisis, he is in a position to assess the type of crisis that has arisen and to launch corrective actions .

The type of crisis will largely depend on the company’s strategy and the company’s position in its market. For example, if the company is in financial difficulty, it is necessary to anticipate a financial crisis with cash flow problems. On the other hand, if the company is a large supplier of a large company, it is necessary to anticipate a crisis on the market.

The role of the interim manager is therefore, depending on the reasons and challenges of the crisis, to quickly put in place a structured action plan to envisage a reasoned way out of the crisis.

In any case, the crisis can be of varying intensity: It is important to plan several scenarios and adapt your strategy to each situation.

• Management of the exit from the crisis:

Once the crisis has been declared, effective action must be taken to resolve the problems. For this, the interim manager will strive to implement all the company’s resources in the service of the solution. He will also have to set up communication with investors, creditors and customers and partners.

In an economic and political context that is experiencing constant upheaval, the interim manager is required to set up action plans in order to manage risky situations and to constantly adapt their skills.

Transition management is a profession of problem solving , adaptation to change and risk management. You have to be able to deal with permanent uncertainty and see beyond the immediate problems. It is a job of anticipation, which often presupposes a long-term vision.

The signals indicating a crisis in companies are therefore of varying intensity and can be more or less impactful.

In this context, it is up to a manager to make the necessary decisions. Calling on an interim manager is an effective technique for managing a way out of a crisis in good conditions.