In my March blog, I introduced the three phases of long-term planning: goal-setting, succession planning and contingency planning. The April blog focused on goal setting. The June blog focused on succession planning. Now, let’s take a look at contingency planning.
Contingency planning asks one question: What if? If there is a chance, however remote, that an event could disrupt everyday operations, we must plan for it. Think about situations involving employees, customers and vendors. Anticipate what you would need to do if something happened. The object is to eliminate surprises. A surprise in any one area can cripple a company.
Areas that need contingency plans are IT, equipment, finance and people. IT is relatively simple. Back up your information every day offsite. If the server crashes, a tornado destroys your building or there is a power surge, you can still retrieve yesterday’s information. Equipment is also simple. Keep spare parts on hand. Have an extra glass rack in case one gets bent. Have extra wheels for the polishing machine. Keep an extra glass cutter or cutter wheels in your toolbox. Also, make regular equipment maintenance part of your contingency plan. Planned maintenance reduces the possibility of equipment failure.
Finance is simple as well, albeit more complicated than IT and equipment. A bank line of credit is a contingency plan. Use it to manage the fluctuation of cash flow. Don’t use it as a long-term loan. Another financial contingency plan involves life insurance. Is your company an owner of a life insurance policy on your key people? A life insurance policy’s proceeds will help a company weather the impact of the untimely loss of a key person. My company has such policies, and we have let our primary vendors know they are in place, thus reassuring them they will be paid and giving them an incentive to keep selling us products. We have also let our bank know about these policies. Business insurance is another aspect of financial contingency planning. Does your company have business interruption insurance? It allows a company to continue to operate while it relocates or rebuilds.
In the people area, all companies should have a deep bench. If a company has one person that is skilled at a particular task and that person is away from work, who does the job? If someone is on vacation, they are sick, or they’re at lunch, who is the backup? My company is two-to-three deep at most positions. Of course, the third stringer is not as good as his or her predecessors, but they can keep the operation going until the more skilled person returns. How will your customers react if you tell them you can’t do a job because Joe/Jane are on vacation (sick, busy, etc.) this week? Having a substitute keeps the business flowing and helps generate repeat customers.
Contingency planning is often overlooked when we are consumed by the daily pressure of business. It doesn’t take a lot of time to do this. Most people don’t plan to fail, they just fail to plan.
The author is president, Evans Glass Co., and chairman of the board for the National Glass Association. Write him at email@example.com.
The opinions expressed here are those of the individual author and do not necessarily reflect those of the National Glass Association, Glass Magazine editors, or other glassblog contributors.