Management by Panic

We have all been there in our personal lives. Well, most of us anyway. Whether it was that term paper that you thought was due next Monday and not tomorrow, or the loan that is due, the interview for the job that you didn’t prepare for, and of course, in honor of the day on which I am writing this, you forgot to get flowers, a card, reservations or a gift for your significant other on Valentine’s Day. Panic!!! That oh so human reaction to impending doom!!! So what! We survived, all the while vowing that it would be the last time that we let ourselves or others down like that. And yet, we continued to play with fire and risk impending doom.

Unlike Management by Exception, Management by Objective and countless other management toold and styles, Management by Panic is not widely discussed, understood or recommended by anyone. What happens when we resort to Management by Panic for running a business? Impending Doom!!! Management by Panic may actually result in a catastrophic loss which could cost you your business.

I could be wrong but let’s look at the facts.

Panic can be defined as “a sudden and often overpowering fear”.  What caused us to panic? You guessed it. Impending doom!!!  In order to fully understand the Management byPanic mode we need to look at the five R’s of Panic Management. Those are Recognition, Reaction, Regret, Rationalization, and Repetition. We will examine each of them in turn.

Recognition

Recognition is more than the absolute point that we realize that the light in the tunnel actually is the proverbial train. It is also that point we realize that we have not planned for alternative courses of action. In fact, we have not planned for this event at all. It would be obtuse of me to not point out that some situations could actually be unforeseeable. In my experience however, it is rare that the “impending doom” we are facing does not come with adequate foreshadowing.

Scenario: Your major customer, you know, the one that your auditor or accountant or some other advisor cautioned was too much of your businesses. In this case the customer is a third of your business and suddenly without warning files bankruptcy while owing you a moderate six figure debt. Or was it? They were delaying payments, making bogus claims against products or projects, not returning calls, etc. Foreshadowing! The fact is that most events that give rise to management by panic have either an indication that something needs to handled or the ability to plan adequately to completely mitigate the risk.

Reaction

“Oh {expletive deleted}! That’s a train; I better get off the tracks in a hurry.” So, you run frantically, throw yourself off the bridge, or roll down the mountainside. When in a panic mode, the decisions we make are frequently not rational, well thought out, nor the best course of action available. So while you are hurdling through the air it dawns on you that the train was on a parallel set of tracks. Oops!!!

In another scenario, the business owner realizes that the project completion deadline is fast approaching and that he has no reasonable expectation that the project can be finished on time.  The reporting from the field was not adequate (or he did not read the job reports) for him to know the status of the project so he learns too late there is an issue. So, in keeping with the best practices of Management by Panic, the business owner calls the project manager and tells him he is sending reinforcements. Although the PM protests the incursion into his project, the owner proceeds to send “reinforcements” at great additional expense to the project. In this case, had the owner stopped and reviewed the situation he would have known that reinforcements were actually counter contraindicated. The project manager had notified the customer of a deficiency in the customer’s responsibilities for the project and a change order had been received. The necessary infrastructure was not in place to complete the work as scheduled. The “reinforcements” were simply in the way and had no impact on the completion time of the project. The owner still felt good, however briefly, because he was able to do something. 

Regret

In the above scenario the good feeling is quickly replaced by regret. You see, the owner realizes that not only did his hasty reaction cost the company money needlessly; he also realizes that he damaged his relationship with his project manager. That is how it is with Management by Panic.  This reaction is absolutely the antithesis of what we believe at B2B CFO^®. . Our slogan “Direction first, then Velocity^TM” really applies. In the case above the owner seems to apply the gas before he has a clear understanding of his direction.

Rationalization

This is my favorite “R” on the Management by Panic mantle. This is the one where we fix everything retroactively. A manger will say some of these things: “Well, it wasn’t pretty but we survived, we needed the sales so I had to, I thought there was more time”, and my personal favorite “we couldn’t really have done anything differently based on what we knew but we will know better next time”. Unfortunately, it is a manager’s ability to rationalize the puts him position for the next “R” in our list.

Repetition

The sad truth is that, in very many cases, we do not learn the lesson. We were able to rationalize the situation and so we are also able to forget.  It is like a rite of passage that we are able to adapt to panic situations and survive. But at what cost to the organization.  I would argue that cost is too high, in both monetary terns and stress on the personnel involved, to continue to operate a business in this manner. It is not necessary.

The Panic Avoidance System

The answer to eliminating Management by Panic within your organization is to install adequate processes and insure that they are followed. An adequate process is both your early warning system and your collision avoidance system.

While adequate processes will not eliminate all the unknown conditions that may affect your company, they will minimize the risk and provide guidance when action is required. Eliminating the bad habits that give rise to a panic situation in the first place by establishing processes will leave room for you to panic when you forget something really important, like your anniversary or a spouses birthday, etc.  I will cover how to define an adequate process and what a process model should cover in another article. Besides, you don’t have time right now.

No, Seriously!!! You forgot today is your anniversary. Yes you. Go the flowers and the card or face IMPENDING DOOM!!