How People Ops can navigate crises with contingency planning

At the beginning of 2020, the department store Neiman Marcus was riding high. Luxury Daily named the company “Retailer of the Year” for the bold moves it made during 2019. Neiman not only expanded its beauty line but also opened its first store in New York City—a three-floor, 188,000-square-foot space in Hudson Yards.

Source

Fast forward just four months, and Neiman Marcus is filing for bankruptcy. The company closed all 43 of its shops in response to Covid-19 and hopes to pay off $4 billion in debts by the end of the year.

Neiman clearly wasn’t planning for a 2020 economic downturn, though others were. If the brand was worried about a recession, it probably would have made fewer big bets in the year prior—including the NYC location, one of the company’s largest debts.

No one expects Neiman, or any other company, to predict the future. But businesses should have preparations in place for handling change, even if they can’t anticipate the timing of crises. How? With contingency planning—identifying potential risks and deciding how to react if they should occur.

In the midst of a global pandemic, it seems obvious that companies need contingency plans. But thanks to a number of cognitive biases, it’s easy for leaders to overlook risks. Confirmation bias may cause leaders to focus on information that fits what they already believe. Or leaders may fall into the trap of groupthink—pushing for consensus during contingency planning instead of considering all risks.

The key is not letting these impulses take hold. If executives want to prepare for the future, they must take a deliberate, thoughtful approach to contingency planning. To do that, they’ll need the help of People Ops.

Why People Ops should drive contingency planning

A company’s most valuable resource is its people.

If employees can’t complete their work, their employer can’t operate fully and efficiently.

Yet C-suites traditionally don’t pay special attention to people ops risks—threats that prevent employees from doing their jobs. They expect People Ops to prepare for its respective threats independently, just like other departments.

Source

This approach creates tunnel vision. Your team only sees risks that directly relate to people ops, instead of all potential threats facing your organization, so it’s less able to plan for workforce disruptions.

The solution? Integrating People Ops throughout the entire organization’s contingency planning. If the department is able to collaborate with others in the company, they’ll be able to see the overlap in crises. With this high-level view, the team will be better equipped to keep the organization running in the event of a people ops risk.

3 steps for People Ops to create contingency plans

There’s no one better suited to prepare for workforce disruptions than your People Ops team.

Lead the way for your organization by following the three steps below. Prioritize the most critical people ops threats facing the business, and plan what actions your company will take in response to them.

Our process assumes that your team can collaborate with other departments. Don’t worry if that isn’t the case at your company. Our three-step process will still help you consider different department perspectives in contingency planning, so you’re able to identify more risks and solutions.

1. Identify the most likely threats to your workforce

Contingency planning starts with acknowledging the risks that face your company. After all, you can’t prepare for workforce disruptions if you don’t know what they are.

Start broad by building a list of potential People Ops risks. You won’t be creating a contingency plan for every threat you identify. But if People Ops reviews many ideas initially, you’ll feel more confident choosing the hazards that do need a plan.

To gather ideas, ask your team members to anonymously share the workforce risks that they believe are the most serious. Collect these responses through a questionnaire tool, like SurveyMonkey or Google Forms. Talk to other departments about the risks they’re prioritizing, too. If these threats impact employees’ ability to work, add them to your list.

Narrow down the list to hazards that need a contingency plan by prioritizing threats based on likelihood and severity.

Gauge these factors by anonymously polling employees across departments (again, SurveyMonkey and Google Forms are both helpful). Ask employees to rate the likelihood and workforce impact of each identified hazard on a scale of one to 10, with one being low likelihood and low impact and 10 being high likelihood and high impact. At the top of the survey, clarify what you mean by “workforce impact,” so everyone is on the same page.

Once employees submit responses, set up small discussion groups for everyone to discuss their ratings and reach a consensus. If your risk list is particularly long, you might divide threats across groups, so less time is needed for these meetings. Depending on your industry, you may also want experts (internal or independent) to weigh in on risks’ likelihood and workforce impacts and explain their reasoning to People Ops.

Using a combination of employee and expert responses, determine final ratings. Map out the data in a table or scatter plot to visualize the seriousness of each hazard. If the total in your table is greater than 15, or if a scatter plot point falls in the top right corner, it’s an urgent risk.

Table showing risk likelihood and impact. Source

Scatter plot showing risk likelihood and impact. Source

Decide which threats require contingency planning based on likelihood and impact scores:

• High impact and high likelihood: Contingency plan is required as soon as possible.
• High impact and low likelihood OR low impact and high likelihood: Contingency planning is useful but not urgent. Don’t prepare for these risks until you’re done planning for threats with high impact and high likelihood ratings.
• Low impact and low likelihood: Contingency planning is not necessary, but you should monitor the risks for probability or impact changes.

Once you understand which threats have the greatest potential for halting your workforce, you’re ready to collaborate with executives and other department heads and plan responses.

2. Brainstorm Team restructuring

There’s no clear-cut answer on what a people ops strategy should include. Organizations will naturally take different approaches based on the unique risks they face.

With that said, every people ops contingency plan should somehow account for the workforce disruptions that the risk causes. Creating alternative team structures is a powerful way to figure out how your organization will move forward—either by replacing employees or reorienting operations.

Say, for example, a company is preparing for a risk that would lead to a VP leaving the company. This high-level role is critical to the business’ operations, so the plan would most likely be to hire a replacement as soon as possible. On the other hand, a company anticipating an economic recession may decide that some employees would need to be let go without replacements. To accommodate the smaller workforce, the business would plan to decrease output.

How do you know the best way to restructure your team? Ask company leaders for their input. Organizational changes—whether through hiring, transferring responsibilities to current employees, or reducing business operations—affect all departments, so these decisions ultimately need approval from executives.

At the same time, your expertise as a People Ops leader is invaluable in these conversations. Help executives and other department heads weigh these decisions by sharing your hiring and team structuring knowledge, such as:

• Recruiting timelines. Explain how long it may take to fill a role, so the group can decide whether a temporary internal replacement would be needed.
• Hiring and training costs. These figures empower company leaders to evaluate whether replacing employees is financially feasible or not.
• Workload balance. Executives may be quick to save money by assigning a position’s tasks to current employees instead of hiring a replacement. Share whether you think this reallocation of work is reasonable or a recipe for burnout.
• Span of control balance. Executives may also look to consolidate teams under fewer managers. Use this framework to define the ideal span of control for management positions to ensure managers can effectively support their teams.

Use organizational charts when exploring different team structures. This visual aid puts potential changes in context—showing hierarchies, team size, and more—so everyone understands what alternate structures mean for the company at large.

ChartHop makes it easy to explore different structures without needing to create entirely new organizational charts. Just create a Scenario and drag and drop positions on your existing chart. With every change, ChartHop will show the adjustment’s cost to the organization.

After you create an alternate structure for a risk, invite company leaders to review, make their own contributions and leave input, all within the platform.

Once you and company leaders have agreed on how the team should be restructured, share the final result with HR and Finance. With this finalized copy, your organization will have a roadmap for responding to threats that impact your workforce.

3. Create and revise a contingency planning resource

If and when a threat occurs, some people may not remember the reasoning behind the proposed restructuring and may feel unsure about implementing it. Minimize confusion down the road by creating a comprehensive contingency planning resource.

Fully explain the preparations for each risk with these three sections in your document.

• Risk assessments: Describe your methodology—the 1 to 10 rating system for likelihood and impact—and share the final ratings for every threat that was serious enough to have a contingency plan. You also might include notes explaining employees’ and experts’ reasoning behind their scoring.
• Risk management: Share the team structures that you and company leaders created in response to each risk. Include notes on every chart explaining the reasoning behind this reorganization.
• Plan maintenance: Set rules for how often you and company leaders should meet to review and update this contingency planning resource. We recommend discussing contingency plans at least quarterly—if not more frequently—considering how frequently circumstances change (as the sudden rise of Covid-19 shows).

This resource will be your company’s guiding light for contingency planning in the future. Use it to assess whether identified threats and restructuring plans are still relevant for the organization or need an update.

Don’t make changes to this resource without input from executives and other company leaders. But if you would like to start planning before an official contingency meeting, you can always experiment with different team structures using ChartHop. Just create a new Scenario (/blog/best-practices/scenarios-getting-started/), as described in step two, and you can play around with reorganization. If the plan seems viable, share it with company leaders to discuss at your next contingency planning meeting.

Putting people first in contingency planning

Covid-19’s nightmarish business effects—store shutdowns, layoffs, and more—are pushing companies to take contingency planning seriously. Knowing how quickly economic fates can change, businesses don’t want to be caught empty-handed the next time a crisis happens.

For your organization to plan for future risks, you and your People Ops team need a seat at the table.

Contribute to contingency planning by anticipating how threats may disrupt your workforce and suggesting restructuring responses. With this collaboration, your company will be better positioned to maintain operations if and when a crisis hits.