Reorganization and crisis management - Milan Krajnc
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The causes of crisis situations can be different. If we are the owner or director, we must first find fault with ourselves and not resort to dismissals, stricter controls and violent cost-cutting, because such measures reduce the quality of services and worsen relations. We must first make sure that employees feel better at work and have all the prerequisites for high-quality work. We reduce costs by optimizing the work process, increasing employee motivation, encouraging development and investing in ourselves.

We hesitate to say the word “crisis” because it does not do any good, so we say it in various unbearable situations. So it is an uncomfortable situation over which we have neither the control nor the power to change it. So a crisis is only a state that shows a disorderly course.

We speak of a crisis in a company when the company loses control over the key factors that influence its operations and work processes.

We speak of a real crisis when we admit it. It only depends on what stage it is at. So we can say that the company is already in a crisis when we do not have any business premises or when customers are dissatisfied, maybe when expenses are higher than revenues, or. when we do not even know what is going on and where it’s all going… Above all we have to pay attention to the little things.

It’s good to be aware that most crises are solvable and that none of them is endless in time. More important is that we feel the crisis and find out why it happened. With a detailed analysis of the situation we will find out what we are solving. If we operate with false data, we can trigger an even bigger crisis.

Before we start solving the crisis, we must set ourselves the goal of what we want to achieve with the solution.

How can we recognize a crisis?

There is no scale that shows us that the company is in a crisis. After all, we decide for ourselves when we are in a crisis, to define the term. There are parameters that say that the company is successful, so if the company does not meet this parameter, you could say that it is unsuccessful, or. that it is in a crisis.
The first indicator is certainly the ratio of income to expenditure, and unfortunately this is the only thing that most directors monitor.

Reorganization and crisis management - Milan Krajnc

We often find that individual employees complain about relationships and conditions… and then management says, as long as the outcome is good, it’s best to keep it that way. And that is where the biggest mistake lies. After all, the director only considers the success of the company in terms of financial parameters, but this does not ensure the long-term stability of the company. We must be aware that the company is based on people (human capital) and that they shape the work process. Through their work they contribute to the growth of the company. Just as the success of a company is influenced by their work, it can also be influenced by the failure of the company. A company is a whole, like a human body, which consists of certain organs that can function normally. For the body to feel comfortable, all organs must function well. It is the same in a company, everyone contributes to the success of the company, and everyone must feel comfortable in it. That is why we in the company must pay attention to the “climate” or the well-being of the employees. Here we see the first steps that
can lead to a crisis. We must pay close attention to the comments of the employees. We have to examine the comments carefully, as we humans are naturally inclined to find shortcuts and laziness.

Employees who are directly related to customers can also pass on their dissatisfaction to customers. Customers will not only be dissatisfied with the attitude towards them, but above all with the service and quality of the products. We must also measure customer satisfaction, complaints, the return of old
customers… this information can tell us the most about the actual state of our company. If we find that complaints arise or even increase because of our mistakes, that old customers do not return, we can say that we are on the verge of a crisis situation. In this way, costs start to rise, and at the same time each new customer will bring a bad reputation with other potential customers, so that the demand for our products starts to decrease, which will later be reflected in the difference between income and expenses.

Because it is difficult to measure the climate, because we do not know when employees are telling the truth or what complaints depend on, we must pay attention to the unconscious factors and signs that our employees show. Let us look at a few examples:

 

I was called by a friend who is the director of a computer company with ten employees. He heard that I wanted to set up new offices, and he wanted to introduce me to a remote control system that would be installed at an early stage of construction. During the presentation, he was repeatedly interrupted by the phone or someone looked into the meeting room. I noticed that he was getting impatient. He began to lose the connection between the sentences. I stopped listening to him as a client and began to observe him as a client.

The signs he was showing were the first signs that the company might be in a crisis, for which the director would transfer responsibility to the employees or other factors. After all, responsibility is the ability to react to decisions made, to defend and justify them. The person who accepts the consequences of his actions is therefore responsible. He is always ready to justify and explain his work
and the situation, and above all he is responsible for his actions. As a rule, we are all ready to take responsibility for success, we all want to sign the community’s recognition, and it is more difficult for us to acknowledge the responsibility for failure. Therefore, the essence of responsibility lies in the impartial assessment of the situation and recognition of responsibility for negative consequences.

Let us return to the example given. The fact that a friend’s phone was on during the presentation meant that he was not picked up completely and that he was afraid of losing (so as not to miss anything). I assumed that he was overwhelmed because he had no organized organization, did not trust his co-workers, and did not create authority (this became apparent when others entered the meeting room).

At work, we pay too little attention to everyday things. We do not observe how the employees behave or feel, we do not even notice ourselves. We mainly focus on global factors in the company, such as sales, stock, purchasing, costs…
If we notice that the quality of the products is poor, that customers are dissatisfied with the services, that profits are falling and costs are rising, we will not talk about indicators of a crisis, but about a state of crisis. However, we need to think much earlier about all the above-mentioned causes of the crisis. We must not even allow them to happen. When we are a director or business owner, we should pay attention to everyday things.

We have to ask ourselves how we feel in the working environment, whether we like the colors of the walls, the arrangement of furniture in the room, whether we are satisfied with the clothes and the relations in the company, whether we like the company of colleagues, whether we like working with customers…
Many of the causes of the crisis can be traced back to such self-evident facts. Let us look at an example:

A design firm with ten employees bought its first premises. Because they ran out of money for the equipment, they bought it at the auction of a company that went bankrupt. They whitewashed the rooms, set the tables in “L” and started working. Everyone was happy to be in their premises. The work they did was always well done and the customers were satisfied. After two years of operation, technologies began to change and the company continued at a steady pace. Although their work was still being carried out successfully, the profits were declining. The company did not invest enough in development, and at the same time there was no stimulating atmosphere, as if time had stopped two years ago. As more people were now needed for the same work, the company decided to hire a business secretary. Her first action was to redecorate the premises – as there was no money for new furniture, she changed the layout, added some flowers and gave the white walls some “spring” shades. Slowly the employees got new ideas for improvements, exchanged opinions, looked for new marketing possibilities… Changes happened even though nobody forced them to.

If the company remained stable, it would experience an organizational and financial crisis within a few years. The reason would be a constant work that does not adapt to the market. However, the colors on the wall have partially changed their view of the work they have been doing for many years.

Another example:

The young entrepreneurs with seven employees have created a successful production company in five years. They used to work eighteen hours a day. As the demand for their products grew, they decided to expand the premises and hire additional staff. They themselves continued at the same pace. Despite more employees and more modern technology, the quality of the products deteriorated. One of the partners was interested in a girl and found out that he had forgotten his appearance, so he started fitness. He gained physical endurance and encouraged his partner to do the same. Over time, they noticed that the quality of the products improved.

The reason for this was that they had been too tired before and did not notice their own mistakes due to their commitment to the environment. With increasing physical performance they became more resilient and relieved. If it had continued at the previous pace, the errors would have increased and with it the costs, as their productivity would have decreased. All they had to do was divert attention
and realize that even the body would be emptied like a machine if we did not maintain it.

Another example:

The director and owner of a successful service company with thirty employees decided to reward the family with an extended holiday because they had not been on leave for so many years because of his work. After three weeks he returned to the company and almost suffered a stroke. There were more complaints than in ten years, the services were not provided within the agreed deadlines… He called a meeting at which he threatened the workers with dismissal and insulted them. Relations within the company have deteriorated, as has the quality of services. The director found that he no longer felt comfortable in the working environment. Since he did not want to dismiss them all at once, he decided to find his deputy or a new director. The new director restored the old situation and even increased the
level of services and profits.

The former director quickly became aware of the mistake of reacting in the wrong way. He blamed himself for the consequences, as he did not teach anyone to do his job. Then he wrongly condemned the staff for the situation they could not forgive him for, destroying trust or good relations. He had two options – either to dismiss everyone and hire new employees, or to leave the management position himself and thus eliminate the cause of the situation, otherwise the situation would eventually lead to the collapse of the company. He took responsibility for his actions.

The causes of crisis situations can be different. If we are owners or managers, we must first find fault with ourselves and not resort to dismissals, stricter controls and violent cost-cutting, because such measures reduce the quality of services and worsen relations. We must first make sure that employees feel better at work and have all the prerequisites for high-quality work. We reduce costs by optimizing the work process, increasing employee motivation, promoting development and investing in ourselves.

The company has to be “in design” at all times. It is advisable to step down as the owner from the position of the managing director and participate as an “external” professional partner without arousing emotions; we must always listen to the comments of employees and other business partners. We try to encourage the creativity of our employees and take responsibility for our own actions.

Another example: 

They called me from a construction company with twenty full-time employees where they want to use Microsoft Project at work. After a brief conversation with the director, I prepared a series of presentations in which they were to teach their “project managers” how to use MS Project. After five hours, I found that the audience did not understand what they were learning and had difficulty understanding the basics of the program. They said that they would rather build the house than make a schedule of how to build it. It became clear to me that they do not even know what a project is and that their work is probably not organized, but there is a kind of organized chaos. The seminar on how to use the project management program became an analysis of their projects, how they start, run and finish them. We analyzed one of their past projects, entered all the starting dates and changes that took place during the implementation, and also took into account the financial side. We soon found that the project ended up in the red, although they themselves were convinced of the opposite. The director asked me to analyze three other major projects they are currently working on. The results were disastrous. He found that if the company were to operate in this way, it could be shut down. He found that they were in crisis. The director decided to use Microsoft Project because he was aware that he was not managing the projects and that everyone was late. However, every delay costs something, but he did not know how much. The introduction of a control system in such a situation would lead to an even greater crisis than could have occurred if the work had been carried out as before. At the moment there is a kind of “organized chaos” in which everyone is in, but it is primarily based on the feelings of individuals who have the whole concept of work in their minds. The work continues, but the loss is gradually increasing. However, the company would not notice this until two years later, when some projects would be completed. First the whole company had to be analyzed. First, all the projects that had been carried out were listed and the order of what had already been done and what still had to be done was specified so that the project could be completed. We determined the duration of each activity and the person responsible and evaluated it financially, so that we could get an overview of the current situation. We determined the occupancy of all employees and subcontractors working simultaneously on several projects and received a financial comparison between the planned and already spent funds. The data obtained showed us that most of the employees were overworked, that some work and machinery was planned carelessly and that the projects would end up financially with a huge loss that would ruin the company. From the data obtained, we were able to draw a diagram of the flow of information, i.e. a diagram in which each box represents an activity. We drew them in the order in which they followed each other and connected them to the persons responsible. This gave us an idea of how the communication between the workers was going on. We also identified lack of or incorrect information that was the cause of delays or unnecessary work. At the same time we also carried out a personality analysis and found that some people were in conflict, which caused additional communication difficulties. The director got a comprehensive picture of his company. This was followed by the question of how the crisis could be resolved. In our case, the director did not inform the company’s employees that the company was in a critical situation, but remained calm. He called a meeting to explain the finding that most employees are overworked and that he wants to change the way they work so that employees feel better at work and the burden is reduced when they return home. The employees accepted the new way of working without comment. All projects were completed on time and the savings were used to compensate for the previous loss. We eliminated the crisis in this company before it actually occurred. It was only necessary to calm our nerves, to order all currently important activities correctly and to follow the path we had chosen in the implementation. The reasons for the crisis were mainly vaguely written responsibilities, too much social sensitivity of the managing director towards the employees, miscommunication and bad attitude.

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How can the crisis be overcome?

It is not recommended to solve the crisis by the internal team of the company. This is the team that caused the crisis. And because everyone is in the “problem”, they do not see it. So the crisis can be solved by someone from the outside who is not involved in the company. Depending on the size and nature of the company, it is advisable to hire an external expert or an external team. The crisis manager must be an impartial person and must not believe 100% what the customer tells
him about the problems and the reasons for them in the company. But he must see it with his own eyes. This is checked by a detailed analysis. The analysis gives him the causes of the crisis and the answer to what is going on in the company at all.

The crisis must never be solved by reducing material costs and layoffs. We can dismiss the wrong employees. Therefore, we should not take any action without a proper analysis.

It must first determine what the company’s goal and strategy is and measure whether the employees understand it. From this it can already be seen that the problem lies only in the wrong communication and lack of motivation. Then a detailed analysis of the processes and the flow of information is carried out, showing where there are time delays, how the individual people understand each other, where the burdens lie, what the results of the individual functions are. Parallel to this, a personal analysis of the employees is carried out, which shows their potential, their development possibilities as well as their perception of information and flexibility. With a picture of the employees’ personal characteristics and the flow of information, the origin of the crisis can be determined very precisely. An analysis of the information system and business documents is also necessary. The latter analyzes only show us the efficiency of IT and compliance with the law on business documents, so that random changes do not lead to new crises or unannounced crises. Very important is the financial and cost analysis, which must be compared with the analysis of processes, which shows where unnecessary costs or. where more can be saved and what are the costs without which the company could not survive.                                                Only when we have a complete “map” of the company do we see what the real problem of the company is and where the causes of the crisis lie. First of all, it is necessary to remove the causes so that they do not cause new problems when they are solved.

Practice has shown that most crises are caused by ignorance of the company’s goals and strategy, which later results in inappropriate communication, personality complexes come to the fore and the consequences become visible in bad customer relations, a bad climate in the company, irrational use of materials and time. later on, higher costs and complaints and finally, red figures in the balance sheet.

Resolution of the crisis

On the basis of the information obtained, management must decide which strategic decisions to take. The crisis manager must not leave the solution of the crisis to the management itself, but must guide it in its implementation. After all, they are still inside the problem and he is watching from the outside. When solving the crisis, the management must not forget themselves, because they are the ones who have led the processes so far, they are directly responsible for the crisis. And in order for the crisis not to continue, they must also change their habits.

The most difficult thing is to admit one’s own mistakes because we do not observe our actions or because we are convinced that they are the best. The most difficult of the possibilities is to analyze yourself without the help of others. For this we need a strong will and an unforgiveness towards ourselves, similar to the individual reaction when climbing on rocks or in the desert. However, with few
exceptions, people do not know how to be impartial towards themselves, so that such an analysis is rather hopeless. The second way is easier – by talking to an impartial observer (consultant, as in the analysis of processes) we can easily, without feeling agony and doubt, come to insights that reveal a clear view of ourselves, our own thought patterns, achievements, fears, doubts…; in short, by
discovering and skipping obstacles, we learn to walk and run with the consultant on “terrain” that has usually caused us problems.

In the analysis, the consultant is primarily interested in the behavior of the consultant; on the basis of communication, word usage, sentence type, posture, hand movements and other factors, the consultant decides on the occurrence of mistakes that he makes unintentionally and unconsciously. The counselor does not blame the counselor and does not try to blame him, but on the contrary – he
helps him to discover improvements and to become aware of the mechanisms that prevent his success. Behavioral awareness helps the counselor to get closer to the goals and improve life. We can say that the counselor somehow holds up a mirror to you, in which you look at yourself and correct what you do not like about yourself. Instead of destructive behavior, you will build up a constructive attitude based on the consultant’s observations and advice, thus preventing negative
emotions from jeopardizing your ambitions.

How do you prevent a crisis?

We have to start solving the crisis when we work best and have the most money. We always have hidden reserves in the company, especially in time. That is why we have to work on process optimization and the development of new technologies in addition to employee motivation. In this way we become more competitive on the market, we reduce costs and secure permanent employees.
We can only afford this if we have the financial and human resources to do so, and if we are in a crisis, we do not think about development at all, the employees are dissatisfied, and we do not pay attention to tools and materials, but try to produce them as quickly as possible. it will be possible to sell it, and in such a case the crisis is very difficult to solve. So do your best not to let it happen. The company and the employees must be constantly “blown” by the changes.

You can contact me for advice!

Avtor - Milan Krajnc
Author of the article: Milan Krajnc, pedagogue, entrepreneur & crisis manager I teach you to look “at yourself” as a third person. For more information or an introductory meeting, write to me at official@milankrajnc.com
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