Monday Mornings with Madison

The Value of Plan B

Word Count: 1,440
Estimated Read Time: 6 min.

If Plan A is Awesome, Why Have a Plan B?

Plan B, also known as “The Backup Plan”, is often frowned upon by the business world.  At best, it is seen as a “worst case scenario” Plan; a product generated by uncertainty and fear about the path forward that only the Apprehensive-Aarons of the world will create.  At worst, it’s perceived as a lack of total commitment to and belief in Plan A.  In other words, Plan B is seen as the approach taken by the Debbie-Doubters who feel lukewarm or halfhearted about the business’ vision.   Either way, it is seen as the course of action to take when failure looms… the lifeboat to use when the ship is sinking.  However, it doesn’t need to be.

For entrepreneurs, who have big dreams of success and are willing to risk it all to start a business, a Plan B is a sensible part of the Business Plan.  But it is also a smart strategy for execs and managers at all levels.  With a Plan B, there is an opportunity to plan in advance a variety of approaches, taking into account alternative business models and routes to success and determine how to deal with the uncontrollable measures that could potentially stand in the way.

Having a Plan B does not indicate a willingness to throw in the towel or a propensity to cut losses and run when the going gets tough.  For a business, it means that the leadership is smart, strategic, and relentless, all of which are superb qualities for a business leader.  Every business leader should have a Plan B, and expect others in the organization to have them too.

So exactly what should a Plan B include?  Plan B describes the course of actions or steps that the leadership and staff need to take in response to an event, or series of events, that could potentially happen in the future.   The disruptive event could be something that only affects the business such as the company’s computers being hacked or the CEO passing away, or it could be something that affects an entire geographic area, such as a hurricane or fire, or it could be something that affects the whole country or world, such as the current Covid-19 pandemic.  Plan B therefore plays a significant role in the company’s survival and continuity, risk management and/or disaster recovery.

Plan B helps prepare for unexpected occurrences and minimizes their impact. It also outlines steps for conducting business after the event has occurred.  Some think of Plan B as a Disaster Recovery Plan or a Succession Plan but Plan B should consider all the man-made events, natural disasters and possible other disruptors including economic, political, and management.

In Plan B, the B stands for Beneficial

Without a Plan B, a company opens itself up to unnecessary risk.  The benefits of a Plan B include:

  1. Faster reaction to negative events. Plan B lists the actions that need to be taken and everyone can focus on what to do without wasting time panicking or even planning.
  2. Lessens damage that can happen from a negative event. Plan B minimizes loss of productivity.  For example, companies that have built-in emergency generators and phone trees can have a team operational after blackout / a loss of power within hours, rather than days or weeks.  Or, in the current situation, a company that has a plan for moving the entire organization to remote work is able to be operational from one week to the next.

Once it is agreed that the company, division or department needs a Plan B, then it should be crafted with the same care, thought and detail that went into creating Plan A.  Even if the hope is that Plan B will never be needed, this does not diminish its importance.  Since it might actually have to be implemented in the future, it needs to be sufficiently forward-thinking and bold to be as worthy as Plan A.  Here are some steps for preparing a viable Plan B that works long-term.

Creating Plan B

1. Identify Key Risks

It is not easy to identify the myriad of major events that could negatively impact a business, and what areas of the business would be impacted.  The best way to think through all of the possibilities is to involve others including division and department leaders, consultants and experts, and mentors to get a broader and deeper understanding of things that could cause problems and jeopardize the organization.  Researching on the Internet can also be useful but it is no substitute for the kind of industry-specific, business-targeted thinking and insights that staff and others that have an intricate understanding of the business can provide.  Organize and categorize the information gathered from staff, experts, mentors and consultants.  The major risk categories and their impacts could look like this:

  • Time – Schedule overruns; deadline changes; missed deadlines; government shutdown (such as with Covid)
  • Cost – Unexpected expenses (such as cleanup of BP oil spill);  over budget
  • Resources – equipment breakdown; lack of space; loss of a major supplier in supply chain; loss of a key manager; out of inventory; limitation of necessary materials (such as PPE in hospitals)
  • Environmental – weather delays due to snow; extensive fire, wind or flooding damage (such as after Hurricane Sandy or Wilma or the CA fires last year); virus/contagion
  • Technical – software virus; hacking (such as the hacking of Target’s computers); system crash
  • Social – leader or employee scandal;  lawsuit; social unrest

2. Prioritize Risk

Because there are so many possible risks and threats, there is no way to create a Plan B for each eventuality.  So the next step is to consider how much risk is related to each of the possible events in each risk category.  Events can be divided into four risk quadrants based on probability and impact on the business.  For example:

  • High Probably/High Impact (computer hacking of a high-profile technology company);
  • High Probably/Low Impact (snowstorm blackout);
  • Low Probability/High Impact (meteor strike);
  • Low Probability/Low Impact (software virus).

This can be made into a chart.  This becomes a handy tool to evaluate and prioritize risks based on the severity of their impact and the probability of them occurring, and then create a Plan B based on those with the highest probability and impact.

3. Develop a Plan B for Major Threats

While it may not be possible to create separate plans that outline the actions for each possible risk, it should be done for all of the ones that are most impactful and likely.  Determine what needs to be done in order to resume normal operations after the impact of each event. Clarify employee responsibilities, timelines of when things should be done after the event to restore communications and processes, how to accomplish them based on limitations; and the steps taken in advance to reduce losses when the event takes place.

This should first be drafted, and then reviewed, and then designed with graphics and visuals so that it is easy for anyone to pick up and begin implementing.  This takes a lot of time, so Plan B preparation should be something that companies work on over time, and should involve all of the key members of the team.

4. Share Plan B

Once Plan B is formulated for the most important risk events, they must be made accessible to all employees and stakeholders.  The easiest way to do that is to provide it on a shared file on the Cloud.  But, in case of power and WIFI outages, there must be paper copies available in various locations for employees to access, as well as preloaded on tablets and phones along with hand-crank chargers and superchargers.  There is no point to having a Plan B if no one can access it in a crisis.

5.  Update Plan B

Like all plans in life, Plan B (however many different versions there are) must be reviewed from time to time and updated as needed.  As positions, technology and processes change, Plan B will surely need updating.  It should be a task that is assigned and performed by a team annually.  Then, best practice dictates to share that again with employees, highlighting any changes to roles and responsibilities.

Planning is good.  Having a solid Plan A to identify direction is a must.  And then, having a Plan B for when Plan A simply does not work, is key to survival in this fast-paced, volatile and unpredictable world.  It is impossible to plan for every eventuality, but it is smart to plan for at least the most impactful and likely scenarios.  And hopefully Plan B will never be needed.

Quote of the Week

“The most successful people are those who are good at Plan B.” James Yorke

 

© 2020, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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