Understanding how to lead your startup through a crisis could save your company’s life. But far too many startup leaders fail at crisis leadership and subsequently lose their jobs or destroy their enterprises. To succeed, you must know how to identify a crisis before it consumes the enterprise and how to make significant changes -- rapidly and repeatedly.
What's the first sign of trouble? When you find yourself exclaiming,“Oh, s--t! That’s not working the way I thought.” Anytime the world starts working in a way that you did not expect this might be a signal of an emerging crisis -- and that you face a real test of your leadership. Because startups have very limited resources and capabilities, the skills required to pass this test differ sharply from what's entailed for crisis leadership in business in general. Entrepreneurs lacking significant resources can do three things to be sure your company or ability to lead is not damaged.
First, create a simple process to identify crises early on, before they overcome you and the enterprise. Second, learn how to lead major, rapid changes to contain the crisis. Third, when a crisis strikes, plan around the mistaken assumption and eventually put in place fixes so that it cannot reoccur. You make a major step forward in your ability to lead at such times by simply recognizing that a crisis can mean the discovery that a fundamentally important assumption about the company is wrong.
Unfortunately, many entrepreneurs, feeling that their leadership is imperiled, remain in denial, refusing to admit that a crisis exists. They put off dealing with it, often using some combination of these familiar excuses:
“I don’t want to scare anyone by suggesting a potentially dangerous situation."
“If I admit that one of my assumptions is wrong, people might think I don’t exist.”
“There’s no need to distract people from what they are doing until I know how to fix the problem."
Mistaken assumptions do not go away; they only become more dangerous and difficult to deal with the longer the delay.
You should aggressively for as many mistaken assumptions as you can find because the earlier they're located the easier it is to deal with them. All the best entrepreneurs I have known created simple methods to describe to their teams what a crisis is. They then rewarded anyone in their organization who brought a mistaken assumption to their attention.
Great entrepreneurs understand that just by telling everyone to expect crises as part of working at a startup, they can drive out much of the drama that could arise. Something that is expected becomes much less unsettling when it arrives.
After a crisis has been identified, great entrepreneurs immediately become crisis leaders and form a crisis team, identifying all resources that might be needed and focusing the team on the correct sequence of actions:
1. Let everyone who might be affected know that there is a problem.
2. Contain the problem so it does not become bigger.
3. Implement a work-around.
4. Identify the root cause and implement a permanent fix.
5. Thank everyone involved for making the company stronger.
If you leave a step out, you risk making the problem bigger or possibly reliving the crisis. In either case, the team loses trust in the leader.
During the crisis, two common pitfalls should be carefully avoided. First, make sure the crisis team consists of the people who control the resources that may be called on to contain and rectify the problem but who will not feel personally threatened by potential solutions. People who feel they may be blamed for a crisis will obstruct or distract the team from objectively considering all the relevant information. You may ask them to help the team, but they should not direct where and how resources are used.
Second, avoid undercommunicating. Many entrepreneurs become secretive in a crisis, not realizing that undercommunication only heightens emotions, leading to speculation and misaligned actions. You can figure out how much to communicate by answering this simple question: Does everyone that may be impacted by this crisis have the information they need to understand its importance?
Most entrepreneurs don't realize that they are getting plenty of practice in dealing with crisis in their startup's early days, since so many of their assumptions (about who their customers might be and what they want) are proved wrong. When the company is still small and uncomplicated, then it is natural to huddle like football players, with the entrepreneur calling the next play.
But once the company is capturing customers and maybe even outside investors, it becomes harder to deal with a crisis. And that’s when most entrepreneurs would rather ignore it, invoking one of the familiar excuses for doing nothing -- and ultimately making the crisis worse. Entrepreneurial leaders, beware!