How to do scenario planning with leaders: a practical guide for you

One opportunity for you as an executive and leadership coach is to help leaders and managers plan for different scenarios about how to respond while the crisis unfolds. Ideally, leaders plan on a regular basis to prepare for risks, but we know that this doesn’t and hasn’t always happened. When a real black swan event(s) hits, this kind of planning becomes essential and you can bring tremendous value.

Here is a step-by-step guide to working with leaders to help them think through the crisis. By the way, the Center for Executive Coaching offers a number of these “instant programs” for you to offer to clients, with more details in our tools and methods. It’s another advantage of joining us for executive coach certification and training.

Step One: What parts of the organization and its operations will be affected?

First, have the client list the different parts of the organization that will be affected by the crisis. Examples can include: shifting demand for products/services, supply chain and vendor relations, staffing plans, production and/or service delivery capacity, customer relationships, technology contingencies, health and safety concerns, cash flow and balance sheet, management, investor relationships, liability/compliance, expenses (fixed and variable), property and facilities, employee benefits, recruiting, and marketing. Any one or all of these could change significantly depending on how the crisis unfolds. The list will vary depending on the organization, but these examples give you an idea.

Step Two: Choose scenarios to consider.

Second, create a set of scenarios that cover the spectrum of possibilities. One way to do this is by identifying the two biggest variables that matter most. For instance, with the virus, two relevant variables might be: 1. the length of the crisis; and 2. severity of the crisis. This sets up at least four scenarios: short/not severe; short/severe; long/not severe; and long/severe. To get more detailed, you can adjust this framework by assigning specific numbers to the time line and severity. You can also create mid-range scenarios.  For instance:

3-6 months/15-10% decline in revenues

3-6 months/20-30% decline in revenues

3-6 months/50% decline in revenues

12-18 months/15-10% decline in revenues

….and so on.

A second approach that seems to be in vogue for the current crisis is looking at the V, U, L, and W patterns. Each of those letters represents what the graph of economic decline might look like. A “V” pattern means that revenues will decline rapidly, hit a bottom, and bounce back quickly. The “U” refers to a decline, some period of time struggling with lower revenues, and then a recovery. An “L” represents a decline and a long period of stagnation at lower revenues. The “W” looks like a “V” but then there is a second decline and bounce. Once again, the analysts among us can assign specific numbers for how steep and deep the decline will be, and consider bad and worse case scenarios for each. You can also consider short-, medium-, and long-term scenario — especially for the “U” and the “L” curves.

Warning: Be careful of analysis paralysis. Start with just a few base case scenarios that cover a wide spectrum of possibilities. You can expand and refine them later. Otherwise, you and your coaching client can go crazy and get nothing done. For example, the “U” shape scenario alone can have multiple dimensions: a fast or slow decline, a long or short duration at the bottom, and a recovery that is slow (more like a wheel barrow than a formal “U”, or more like Nike’s swoosh logo shape) or quick. You could end up playing with dozens of assumptions about percentage revenue decline and number of months/years. If you stick with a few base case scenarios and do some planning for those, you can come back and explore more scenarios later.

Step Three: Put the first two steps together

Once you have coached your client to come up with the key areas of the organization that will be affected, and a few representative scenarios, you can put your work from the first two steps together.

For instance, create a grid with the parts of the organization and operations you considered in Step One above. List these elements one after the other in a column on the left side of a piece or paper, Word document, or spreadsheet. Recall from above that these elements include areas like staffing, production capacity, accounts receivables, marketing, and so on.

Next, add columns to the right that represent each scenario you and the client chose in Step Two. Starting with the simplest case, you might have columns for “V”, “U”, “L”, and “W.” Start with a single base case for each (e.g., for the “U” shape: 25% decline that lasts for 6 months and then slowly bounces back to normal).

Now you can coach your client to think through what will happen in each scenario to each element in the first column. You can start with a single area of the business, like staffing, and work through contingencies for each scenario. How will staffing change in a V shape, U shape, L shape, and W shape economy? What does the organization need to do to get ready and be ready. You can also do it the other way, and pick a scenario and consider what the organization has to do for each element of its business to prepare for that scenario. For example, how will each element of the organization and its operations respond to a “W”-shaped scenario? There are many ways to complete this exercise, and it all works out by the end.

The exercise can continue by exploring variations in scenarios and ultimately getting down to the level of planning budgets for each.

Step Four: Summarize insights.

After the above work, many leaders have important strategic insights about how the overall business has to change, whether during the crisis or after it is over. Examples tend to include:

– Go digital asap.

– Create a staffing model that easily flexes up and down.

– Store cash for a rainy day.

– Diversify our supply chain, and build in redundancies.

– Become strong enough to gain market share and/or acquire weaker competitors when the next downturn hits.

Conclusion: If you want an instant program you can offer to clients or leaders in your organization, this approach is urgent, relevant, and brings high value.

The Center for Executive Coaching has established itself as THE go-to executive coach training and certification program for seasoned, already-successful professionals. We offer many ready-to-go coaching methods like the above, in convenient toolkit format. If you are considering a change in your career, or simply want a great side business, join our program for practical, results-focused tools and methods to help leaders, managers, and up-and-coming talent to be more successful. We were a pioneer in remote learning even before it was the thing to do, and you can get Certified remotely anytime.

 

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