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When the crisis hits Featured

8:00pm EDT July 26, 2001
When speaking with entrepreneurs who are seeking funding, I preach that a surprise can quickly kill a deal.

My spiel goes, "Tell me all the good news, for I like good news. Tell me all the bad news, and everyone has some bad news, so we can act upon it, but never surprise me."

A surprise is the fastest way to kill a deal, for even if the surprise is relatively minor, the people being surprised don't know what other surprises may be lurking. Avoiding surprises eliminates most self-inflicted crises. Unfortunately, other crises have a way of turning up during a deal, and they must be resolved effectively to reach your funding goals.

I'm involved in a deal in which the crises came in bunches, three of them within two working days. Two were resolved the same day they occurred; the third is being resolved almost as quickly. My client is a start-up company with a talented management team, but it is not an experienced crisis management team. But what it did so well to immediately resolve the crises can be a lesson for other start-ups and small firms.

The members of management did not panic, nor did they hide from the crisis. They saw a significant threat that needed immediate attention, and they faced it. They evaluated the situation, consulted with their advisers and charted a course of action. They confronted the crisis with integrity and the truth and acted in a timely manner.

There was no attempt to "spin" the problem away or duck the issues. Instead, there was every attempt to make things as clear as possible. Awkward phone calls were made and taken instead of evaded. Was it fun? Not at all, but it sure was effective.

If we've learned anything from political scandals, it is that the truth will eventually come out. If the truth is bad news that you knew about, shame on you, for it should have been stated up front to avoid your self-made problem. Whether the events that caused the crisis were external, previously unknown to management or even self-inflicted, the entire truth must be reached as quickly as possible, then shared with everyone affected, no matter what the embarrassment.

Sharing the truth doesn't mean groveling. It means setting the record straight. Two of the three crises my client faced turned out to be without merit once the facts were determined. Facts have a way of dispelling suppositions. The management team's initial reaction to one crisis was highly emotional, but they quickly regained their composure and confronted the problem. They went to the source of the crisis, confronted it, solved it and were done with it.

Their third crisis was caused by miscommunication. Is there blame to be assigned? No question. But assigning blame was not what this management team addressed. They went to the truth of the situation, and the awkwardness of the truth is far less painful than the death of their deal. They have subsequently taken action to make certain there is no repeat of their misstep.

Crises arise when doing business, and you will mostly likely face them while pursuing capital and after your company is in the marketplace. If you accept this, you can at least have criteria on how to act when the crisis hits. Your crisis most likely will not be of the magnitude of the "Tylenol Crisis" of nearly 20 years ago, but you can do worse than to learn how Johnson & Johnson brilliantly managed that monstrous event.

Its actions were timely, without spin and incredibly honest and forthright. That sure seems like a winning formula for business success.

Erwin Bruder is president of The Gordian Organization, which provides business planning and structuring services to start-up and growing companies. He can be reached at (216) 292-2271.