About the author: Mr. Pattabiraman Nagarajan is a HR professional, Consultant, trainer and an ICF certified coach. Has managed organization change and aligned HR practices to ensure business growth. He holds master degree in Social work and a PG Diploma in Business Management from IIM Trichy. He could be reached at npattabiraman@relyonus.in
In this current pandemic are you feeling that your physical and psychological reserves are tested? Do you think there is a threat of imminent crisis? You are not alone as the current pandemic is taking its toll on everyone.
While the pandemic has impacted everyone, what would explain the differential performance. IPL 2020 was successful while IPL 2021 had to be abandoned. Countries like New Zealand, Australia, Israel, South Korea have managed to contain covid infections while others like India are witnessing a huge surge? How is Tesla managing to continue strong performance while other auto majors are struggling? If the pandemic was to cause a damage it should have impacted all.
The answer to this question lies in the belief that Adversity causes crisis. We have little control over the events. While it is true that an adversity like the current pandemic has the potential to cause crisis it is not the only outcome. While it is true that we may not have control over these macro events, that does not mean we could do nothing about it. In my assessment what causes crisis in an adversity is our response. The way we perceive the adversity and what actions do we take (or we do not take) results in we are emerging successful or falling into crisis.
American psychologist Martin Selignam, in his book titled “Learned Optimism” provides a very simple framework as to how could we learn to be optimistic when faced with an adversity. He talks about the ABCDE model which us given below.
ABCDE model
He says that Optimism could be learnt and that would help people manage adversities. This applies to leaders as well. Reason being we have been facing one adversity or other every 10-15 years.
This model speaks against the idea of giving up when faced with a difficulty and stresses on the benefit of more positive inner dialogue. This skill could help everyone cope up with problems and realize their potential. It forces us to believe that problems are temporary and limited in scope.
Leaders would benefit immensely by reading this book which would change the way they perceive adversity.
In this article, I would like to share my experience from my corporate experience where the organization I was working with managed a severe adversity and apply those actions to this ABCDE framework.
With 50% of our raw materials being imported, we saw a sudden 20% depreciation of INR, huge spike in raw material prices and Payment delays from customers owing to huge credit crunch caused by global slowdown. In matter of 45 days, we had a huge hit in our Gross margins, sales revenues with mounting working capital management problems. So, theadversity was a sudden dip in both topline and bottom line. This made us believe that noting was under our control and expected the business to further decline. The consequence of this belief was fear, panic, and negativity. Then we started to think as to what we could do given this situation and started to dispute our belief. This was where our organization took a different part than our competitors. We dismantled the issues part by part and started thinking as to what we could do to mitigate. Given below are the actions;
Currency fluctuation – We concluded that this issue is going to be of perineal nature and wanted to be in a position to not to let it affect our margins. We wanted to hedge the risk and after lot of discussions, we decided to achieve natural hedge by focusing on exports which was done in US$.
Payment delays – An analysis of our AR issues revealed an interesting trend. Those customers who used to pay on time, continued to pay on time and those who used to delay did not pay at all. The answer was a tight credit policy
RM Prices – Out of the 2-3 raw materials that had the highest value, we found one of them did not have a local substitute. Hence, we decided to partner with the suppliers of this RM on a global basis with a focus of managing the cost of use. This was a liquid, and we were buying them in barrels. Barrels were expensive because handling, storing, and disposing them required lot of efforts and resources. We decided that we needed bulk storage and approached a supplier with a long-term contract if he agreed to build a storage tank at his expenses in our premises. This worked and we could achieve significant savings.
Tiger teams were formed to get these projects moving and we had clear goals with set milestones. This was communicated to all employees to build energy around these actions and shift focus on the adversity. The belief that we could not do anything, and the feeling of fear were replaced with credible actions and hope. Our organization emerged stronger from the adversity while several of our competitors were still struggling to gain the lost ground. No wonder that this organization maintains a healthy 23% CAGR.
As a leader we may need to focus on taking credible actions and inspire others to work toward ways of successfully accomplishing our goals. We should not let adversity impact our ability to help our organization succeed. Noted American singer Jimmy Dean said “I can’t change the direction of the wind, but I can adjust my sails to always reach my destination” very true.
