Wednesday, March 21, 2012

Strategic Planning Analogy #443: Panic Attack

I know someone who has a tendency to get panic attacks. She’s not alone, as it is estimated that 18% of adults have this condition. My friend’s problem has to do with crowds. If she is in an enclosed area jam-packed with people, she finds herself in a mild panic.

Her solution? Make a point of avoiding crowds as much as possible. For example, you will never see her Christmas shopping at the stores on Black Friday.

People aren’t the only ones who get panic attacks. So do companies.

Pressures at the company mount. Anxiety rises. The crisis of the day reaches epic proportions. Everyone begins to lose their cool and starts yelling at each other. Each department tries to shift the blame to somebody else. Progress grinds to a halt as the company collectively freezes into a panic attack.

Corporate panic attacks destroy productivity. Great thinking rarely occurs when one is in a panic. Since coping with the immediate is more than one can handle during a panic, long-term concerns fall completely off the agenda. Rather than thinking growth, one is focused on survival.

This is not good for the company. It is even worse for effective strategic planning.

The principle here is that even the best approaches to developing strategic plans will fail if a company’s mental state is not ready for it. If a company is in a panic, you are wasting your time. This also applies to strategy implementation. If the company is in a panic, implementation will fail.

So what do you about panic attacks?

1. Getting out of the Panic Becomes the New Strategy
If your company is currently in a panic attack, then traditional approaches to planning will fall on deaf ears. Therefore, the immediate strategy must be to first eliminate the panic.

This is not to say that you need to completely eliminate the source of the panic (like competitive threats or economic conditions). This is also not to say that you need to have a comprehensive solution for the current panic, either. After all, even if you had the solution, it might get trampled on in the crisis of the panic.

No, the task is to eliminate the feeling of panic IN SPITE of what is currently going on. Panic attacks are typically brought on by two feelings:

a) A feeling of being threatened (pressures rising); and
b) A feeling of not having control of the situation (can’t make the pressure disappear).

These feelings do not have to be rational. It doesn’t matter the factual extent to which the threat is real or if the lack of control is real. What matters is the extent to which the BELIEF is real.

Therefore, to quell the panic, you need a strategy which attacks the belief system. Again, your job at this point is not to eliminate threats or create control per se, but to change the beliefs about these areas to the better. THEN, when everything calms down, you can focus on fixing the mess and moving forward.

Attacking the belief systems usually requires a focus on symbolism. In other words, do things which provide a clear sign or signal to the organization that perceptions should change. And symbols tend to need to come from the top of the organization to create the greatest impact.

To quell the feeling of being threatened, one needs symbolic actions which show that the threat is not as threatening as one thinks. The right action depends on the nature of the threat, but some examples could be:

a) A believably optimistic demeanor in the people at the top.
b) A continuation of investment into the company.
c) A pledge that no jobs will be cut.

To quell the feeling of helplessness and having no control make bold moves in areas you control and can take immediate action. To some it extent, it doesn’t matter whether action makes a big difference to the immediate crisis. The point is that you are doing SOMETHING and that proves you are not completely helpless. Examples could be things like:

a) Changing the organization chart or shuffling executives around to new responsibilities.
b) Changing the advertising focus.
c) Forming a special committee.
d) Introducing a new innovation.

A century ago, RCA was shocked when Columbia introduced the 33 1/3 rpm record. It threatened to abolish the entire 78 rpm record business RCA depended on. To stop the panic, RCA needed to do something…anything. As it turns out, RCA had an innovation languishing on the shelf that they had decided not to pursue. They quickly changed their mind and introduced this innovation to the public to show that panic was unwarranted. And that is how the 45 rpm single was introduced.

Scott Adams, the creator of Dilbert has said that it really doesn’t matter what the business does when it changes. The mere fact change is occurring encourages people and stimulates positive action.

Remember the Hawthorne Effect? Back in the 1920s and 1930s, Western Electric tried all sorts of productivity experiments at their Hawthorne facility. No matter what they tried, productivity went up. The conclusion was that the mere fact that management was focusing on the situation and measuring it was enough to get more out of the employees. It wasn’t WHAT was done. It was the fact that SOMETHING was being done. So do something…anything. And show people that it is important by focusing a lot of attention on it.

2. Avoid Future Panics
Once a company is out of the panic and had time to move forward, it is important to try to avoid future panics. Here are two ideas for doing so.

a) Seek Blue Oceans
As my friend in the original story discovered, if crowds create panic then avoid crowds. This is sort of the principle behind the Blue Ocean strategy. The idea behind the blue ocean strategic approach is to try to position your company so that is not operating in a crowded space in the marketplace. In other words, if you go after a new, uncontested position in the marketplace, you will avoid a lot of the forces creating panic.

In a new, uncontested space, there are fewer competitors creating hellish battles over pricing and market share. It’s more monopolistic in nature. You get to make the rules. In other words, there are fewer external pressures bearing down on you and you have a sense of being more in control. That sounds like a good place to minimize panic.

And, by the way, Blue Ocean strategies tend to be desirable from a strategic perspective as well.

b) Trigger Points
One way to avoid walking into panic-inducing situations is to have advance notice. That’s where trigger points and measurement tools come into play. Determine what can trigger panic. It can be external factors and internal factors (like employee attitudes). Measure them on a regular basis. When the results of the measurements are moving in the wrong direction, take action to halt the trend before it reaches panic level.

For example, the Gallop organization has proven that the level of employee engagement has a direct impact on performance. If an employee is not engaged, performance suffers, regardless of the strategy. Panic is an extreme form of disengagement. Gallop has developed a tool to measure engagement so that specific actions can be taken early to avoid the disengagement.

A panic stricken company is not an environment where good long-term strategic planning can take place. Before one can tackle the strategic concerns, one must first eliminate the panic. This usually involves symbolic actions which show the company that the threat is either not a bad as believed or that the company is more powerful than they believe in being able to tackle the threat. Once the panic is gone, serious planning can take place. In addition efforts at reducing future panics should be part of the plan.

Although planning looks at the long term, panic abatement is more of a one-day-at-a-time approach. That is why it is so hard to do planning when panic sets in.

1 comment:

  1. Gerald Nanninga,
    I loved your statement towards the end "Panic is an extreme form of disengagement". I agree fully. Applying strategy when people are disengaged is like like somebody chasing a thread of smoke. The environment has to be right. Giving a cake to a sad person is different from giving it to a happy person. Strategy is the cake