Should You Have A Contingency Plan?

By Greg Niemi . September 24, 2013


If you have a written contingency plan no need to read any further.  If you don’t; read on.

Why Have A Written Contingency Plan? 

Because stuff happens.  You know this.  Thus it is best we fess up to this possibility to be all the better prepared rather then to avoid the reality.  

When a business downturn happens it is extremely difficult to think clearly.  A plan which is prepared in advance, in a calm state will be better thought out and more rationale. 

A contingency plan is just another play in the playbook if things do not go according to plan A.  What we we know is the best laid plans can and often do change on us.  When this happens would your team know when to act and what to do? Plan B 

The fact is most leaders act too late.  Most have told me, in hindsight, they wish they would have acted sooner to lessen the impact of the blow.  So what would trigger your contingency plans into action at precisely the right time?  

Think of a stoplight with green, yellow and red indicator lights.  What are the indicators on your business dashboard which signals when all is clear (green), when caution is required (yellow) and when it’s time for drastic action (red)? 

The indicators on your business dashboard are the KPI’s (Key Performance Indicators) you are already monitoring for your business.  Some of the more common key performance indicators monitored are: 

Customer Indicators:  Satisfaction, Net Promoter Score, Retention, # New Customers vs. Plan, Leads, Conversion Rate, Acquisition Costs, etc. 

Company Indicators:  Rolling 12 months Revenue vs. Plan, Cash vs. Plan, Profit vs. Plan, Net Worth vs. Plan, Balance Sheet Ratios, Bank Covenants, etc. 

Employee Indicators:  Productivity, Revenue per Employee, Retention, Satisfaction, etc. 

When the business is performing on or ahead of plan the stoplight is green.  The contingency plan documents at what point, at what measures below plan, that the KPI’s on your dashboard are signaling to take yellow action or red action. 

The plan outlines, in bulleted form, the specific actions to be taken when those thresholds are hit.  The plan documents the first level of actions, the second and then the most severe.  The plan also identifies who, or what role, is in charge of taking the action. 

Share your contingency plan with your management team, board of directors and any other key stakeholders.  Seek their input and involvement.  Seal it in an envelope and save in a safe place.  Revisit and update as needed. 

It is best to be proactive versus reactive when leading our companies.  It is for this reason I encourage you to take the time to develop your written contingency plan.  In subsequent blogs I will also write on the importance of having a media crisis plan and a disaster recovery plan.  

It is mission critical in all of these situations to maintain continuity of business operations.  This is when we earn our stripes as a leader.  

Greg Niemi 

© 2013 NIEMI TRUST, LLC – All rights reserved.

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