Contingency Planning How to Prepare for the Unexpected

Contingency Planning: How to
Prepare for the Unexpected
C
ontingency planning is the fifth of the five types of business
plans (see Figure 11-1). While it is very important, it is also one
of the most neglected elements of a business plan. Because so much
energy is put into the basic strategic and operational plans, plan-
ning teams seldom give attention to a portion of the total plan that
could put a company out of business. This chapter presents two
types of contingency planning. The first is long-term, true contin-
gency planning that is designed to counter deviations from your
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CHAPTER
11
business plans when your assumptions fail. The second is more
common and comes quickly to mind. This is disaster planning or
crisis management planning, both of which are in vogue with cur-
rent business and social trends.
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Figure 11-1. The contingency component triggers when alternatives to the
basic plan are needed.
For those planners who would tend to stop reading at this
point, let me emphasize again the need to be prepared for the
future. No one can predict the future but we can be prepared for it.
General Norman Schwarzkopf had this to say about prediction:
“The future is not always easy to predict and our record regarding
where we will fight future wars is not the best. If someone had
asked me on the day I graduated from West Point, in June 1956,
where I would fight for my country during my years of service, I’m
not sure what I would have said. But I’m damn sure I would not

have not said Vietnam, Grenada, and Iraq.”
1
Like all thinking executives, the general didn’t sit around
unprepared. Over a long and successful career he perfected his skills
as a leader, a manager, and a warrior. When the day came for his
country to call upon his services he was prepared. His execution of
Desert Storm places him in the history books with five-star col-
leagues such as “Black Jack” Pershing, Dwight D. Eisenhower, and
Douglas MacArthur.
C
ONTINGENCY
P
LANNING
: P
REPARING FOR AN
U
NPREDICTABLE
F
UTURE
Contingency planning is being prepared. It is actually that simple.
Philip Crosby said it with a little more eloquence: “The centurions
will have to learn how to manage so that they can deal with what-
ever happens, and at the same time, anticipate what is coming.
They will have to be in a permanent situation of awareness in order
to tell the difference between fads and reality.”
2
One of the earlier
strategic planning gurus, George Steiner, also uses a simple but ele-
gant explanation. He defines contingency planning as “. . . prepa-
rations to take specific actions when an event or condition not

planned for in the formal planning process actually does not take
place.”
3
If we listen to Steiner, anything that falls outside the con-
ditions or goals of your strategic and operational plans should be
considered a condition for contingency planning.
This business planning model goes one step further.
Contingency planning is not outside your planning process. It is a
critical component found inside the planning process to position
your plan in case of deviation. “The fundamental purpose of con-
tingency planning is to place managers in a better position to deal
Contingency Planning
299
with unexpected developments than if they had not made such
preparations.”
4
Without this preparation managers are always in a
reactive mode.
T
HE
F
IVE
K
EY
T
ERMS
U
SED IN
C
ONTINGENCY

P
LANNING
Early in this chapter we need to sort definitions to ensure we are
not talking at cross-purposes with definitions. There are a number
of terms to be used when writing about activities that cause devia-
tion from the plan. Some of them and their definitions are:
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Term Definition
Contingency planning The overall activity that looks at
the complete situation and
plans accordingly.
Contingency plan The documentation of contingency
planning, it is the hard copy of
your thinking and intentions.
Crisis management Actions you take to manage the total
environment when facing a
disruptive situation.
Crisis intervention Actions taken to correct a developing
situation. As the name implies, there
must be an entry into the process of
the situation.
Disaster plan A step-by-step plan of action available
for immediate implementation in
times of crisis or disaster.
T
HE
T
WO
C

OMMON
W
AYS
T
HAT
P
LANS
R
UN
A
MISS
This business planning cycle and model uses contingency planning
as the overall umbrella term to describe what has to be done. The
range of contingency situations you’ll face can be broken down
into two categories, each of which seems to be connected to the
time period involved. Trend deviation is connected to the strategic
portion of your business plan whereas the crisis element seems to
be connected to the tactical or operational plan because of its short-
term orientation. A full range of the model is shown in Figure 11-2.
Contingency Planning
301
Figure 11-2. The map of different contingency situations can help you
tailor your responses.
Trend Deviation: When You Miss the Mark
One type of deviation is experienced when the results of your plan-
ning are not developing as you expected. Bluntly speaking, you are
missing the mark. You may not be hitting your sale goals because of
internal company behavior; maybe management is not performing.
Another reason could be due to outside influences. Still a third rea-
son is that the market is moving in a different direction from what

you assumed, expected, or planned for. In any case your plan is in
trouble.
Crises: Circumstances Beyond Your Control
A second major type of deviation is the abrupt or sudden disruption
of your plan because of circumstances or events usually beyond
your control. These crises are usually related to natural disasters and
catastrophic events. These situations are usually the ones that come
to mind when we think of disruptions and dangers to order and sta-
bility.
T
HE
N
INE
C
RITICAL
C
OMPONENTS OF A
S
UCCESSFUL
C
ONTINGENCY
P
LAN
The 1-Page Contingency Plan must have at least nine basic compo-
nents (see Appendix F). Certain considerations are important when
facing a deviation from plan over a longer period of time; others
become especially important when in a crisis mode. These nine
components must be reviewed in a contingency situation no mat-
ter what triggered the requirement. In developing your contingency
reactions, ask the following questions:

■ Facilities. Will you have enough physical support? Are
your warehouses and offices located in the right places?
■ People. Will you have enough people with the right core
competencies to carry on the work? What will be the
burnout time for people who must work around the
clock?
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■ Information. Do you have enough facts to make decisions?
How risky is it to initiate actions on what information is
available? Are you able to get the information you need?
■ Time. How fast must you react to the situation before it
gets even worse?
■ Image. What must you do to protect the public perception
of your company during the situation?
■ Technology. Can you leverage technology as a replacement
for time or people?
■ Tools and Equipment. What special tools are needed to
carry out your mission? Is any special equipment needed?
Where and when will the tools and equipment be needed?
■ Leadership and Managership. What leadership and man-
agership behaviors are needed to instill the confidence of
the public in your company?
■ Assumptions. What assumptions have failed, requiring you
to take action? What is the antidote for these best guesses
you have made about your business?
T
HE
T
WO

T
OUGH
Q
UESTIONS FOR
T
ARGETING
P
OTENTIAL
P
ROBLEMS
When preparing a contingency plan the management team must
consider all possibilities and potential target areas, then cut the list
down to what is reasonable, realistic, and practical. To start the
review, the team asks itself two very hard questions:
1.
What is the one thing that could put us out of business? Every
organization has a weak spot or area of potential danger.
Look for the one thing considered the most dangerous to
your operation. Account for this happening in your con-
tingency plan. If you work in the software business, a new
code or program could put you out of business.
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303
2. What is the one thing that could seriously damage our busi-
ness?
There are other events that will not bankrupt you
but can nonetheless do enormous damage to your ability
to conduct business. Each of these must be accounted for
in your contingency planning. Write specific situations
and actions for these variations. An example might be

when funding for a project is not approved by the board
of directors.
A good technique is to conduct a think tank or “blue sky” ses-
sion to get the management team to examine the problem. A week-
end retreat in a nice creative environment would be a way to get the
creative juices flowing and out-of-the-box thinking to occur. Think
how powerful a two-question agenda could be for the participants.
T
HE
F
IVE
A
REAS
T
HAT
A
RE
V
ITAL TO
Y
OUR
C
OMPANY
’
S
W
ELL
-B
EING
Next the team determines where the answers to the two questions

are found in the following list of five conditions. From this list,
develop actions to form your contingency plans:
1. Business conditions
a. What things are changing in your business that you
see as trending patterns?
b. What things are changing in your industry that you
see as trending patterns?
2. Social conditions
a. What influences are changing social conditions
having on your business behaviors?
b. What management behavior from the past is no
longer considered socially acceptable?
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304
3. Political conditions
a. What kinds of government influences are you experi-
encing that are different?
b. How have the conservative or liberal government
positions influenced your business?
c. How have the conservative or liberal government
positions influenced your industry?
4. Economic conditions
a. What global economic incidents have influenced
your bottom-line profits?
b. What are the general economic conditions for
your industry as compared with other professions
or businesses?
5. Environmental conditions
a. What environmental issue could put you out of
business?

b. What compliance situations are getting so restrictive
that they endanger your operational behavior?
T
HE
S
IX
C
ONDITIONS
T
HAT
C
AN
T
RIGGER THE
N
EED FOR A
C
ONTINGENCY
P
LAN
To effectively sort out the possible deviations from a well-written
business plan, there must be some logical grouping of information
into more detail than just two broad crisis or trend types. I identify
six kinds of events:
1. Natural disasters
2. Violence
3. Sudden shifts in business paradigms
4. Unknown problems
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305

5. Known potential problems that are ignored
6. Excess growth
In this section, let’s further define what creates the need or condi-
tions for you to write a formal contingency plan.
Natural Disasters
Pick up the newspaper or turn on a news channel on any given day
and it appears the weather world is in total chaos. El Niño dominat-
ed reports for a major portion of 1998. Every disturbance, natural or
unnatural, seemed to be blamed on that one phenomenon. The fall
season brought hurricanes and extensive damage to parts of the east-
ern coast of the United States. Texas experienced floods. In
December 1998, Virginia was locked into a serious ice storm that left
tens of thousands of people without power for several weeks.
Tempers were frayed but sanity and order prevailed as the Christmas
season came and went by in candlelight for many families.
With some time and effort, reactions to these natural disasters
can be planned and implemented. The problem seems to be that
planners are misjudging the scope and scale of the natural occur-
rences. The hurricanes that wiped out the Mississippi Gulf Coast
and did extensive damage to Louisiana in the 1960s and 1970s were
not predicted. There have always been floods in the Houston area,
but did anyone expect the extent of the one in 2001? The Amite
River has always flooded the town of Denham Springs, Louisiana,
but no one expected the two or three floods in the early 1980s that
set new 100-year flood levels. The message for the disaster contin-
gency planner is to think big, then think even bigger. If the flood is
smaller, your excessive planning is okay.
Violence
Unfortunately, violence in the workplace, both on-site and off-site,
at home and abroad, is more than a headline in the newspapers. It

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