Headcount Planning

3 tips for creating a business contingency plan

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by ChartHop Team

January 5th, 2021


The ChartHop Team

No one saw COVID-19 coming, at least not at the scale it reached—and continued to reach—as 2020 came to a close. Many companies did not survive the year, while others had no choice but to creatively pivot their business strategy in order to stay in business and keep their personnel employed.

Restaurants implemented large-scale curbside pickup services, while some even acted as makeshift grocers, selling full-size inventory items like dairy, meat, and paper goods. Major retail companies like Apple switched their in-store retail employees to at-home online customer support, while companies around the globe asked their office workers to work from home.

Having a Plan B, otherwise known as a contingency plan, makes business continuity possible. It also allows companies to manage risk and better execute disaster recovery efforts. To ensure your company is ready for the unexpected, your leadership must adopt a strategic contingency planning process.

Why leadership should drive contingency planning

As a leader, you are in a unique position to challenge traditional approaches to contingency planning and implement tools and practices that take a modern approach to risk assessment and risk management.

Gartner published a study in March 2020 that revealed only 12% of business leaders considered their companies prepared for COVID-19. Only 8% of CFOs had factored a second wave into their business contingency plan.

This lack of confidence shows that many organizations approach risk management in an outdated and ineffective manner,

Matt Shinkman , VP Risk & Audit Division @ Gartner

These outdated and ineffective practices have department leaders assessing risk and creating contingency plans unique to their department. But this siloed approach fails to look at departmental risks that could impact the company as a whole. As a result, companies are ill-prepared to address crises that spread into other departments.

What is enterprise risk management?

Traditional contingency planning favors department-level risk management, which can negatively impact the company. (Source)

For example, PeopleOps risks can have a ripple effect throughout the entire organization. Turnover, furlough, and unexpected leave all impact staffing levels, which impact a department’s ability to deliver on their goals.

Fewer personnel in customer support translates to longer ticket times and phone queues, and a shortage of software developers greatly impacts a company’s ability to release features, fixes, and enhancements promised to their customers and stakeholders.

Looking at risks from a more holistic view eliminates tunnel vision. As a leader, you can make this happen. Encourage your departments to collaborate with others in the company, so they’re able to see the overlap in crises. When a plan and budget are finalized, align your teams to it as your org’s source of truth. With this high-level view, your departments will be better equipped to keep your company running in the event of a crisis.

How to create and collaborate on a business contingency plan

The below steps help you incorporate different department perspectives when contingency planning, so you’re better able to identify risks and brainstorm solutions.

1. Assess potential risks to your company

Contingency planning starts by acknowledging the risks that your company faces. After all, you can’t create a backup plan if you don’t know what you’re trying to overcome.

Invite department heads, team leads, and/or employees to anonymously participate in a risk assessment. Using surveys, have respondents identify risks they believe are important. Encourage participants to include both internal and external sources of risk. Next, have them rate those risks on their likelihood and severity. Include a rating scale of one to 10, with one being low likelihood/low impact and 10 being high likelihood/high impact.

Once responses are in, gather leadership and additional department heads or team leads, if desired, to review the responses and ratings. Use a risk assessment matrix or scatter plot to visualize the severity of each risk.

Risk management matrix

Risk assessment matrices help identify risks requiring immediate attention. (Source)

Planning for the Unexpected: Human Resource Risk and Contingency Planning

Scatter plots help visualize risks based on likelihood and impact. (Source)

These visualizations can help your team identify urgent risks and determine an appropriate course of action.

  • High impact and high likelihood: To ensure business continuity, your team should create a contingency plan immediately.
  • 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: Normal business operations are less likely to be impacted by these risks. While a contingency plan may not be necessary at this time, you should monitor these risks for potential impact and probability changes.

2. Consider business continuity options and their implications

As you move forward with creating your contingency plan, consider how a particular course of action will target the crisis and impact your workforce and company.

Creating alternative staffing scenarios, for example, helps you better anticipate how your company might manage team members during a crisis.

Let’s say a particular risk points toward a VP leaving the company. Having this high-level role empty can negatively impact business operations, so you might decide to hire a replacement as soon as possible. On the other hand, anticipating an economic recession may require letting go of employees with no plan to replace them. To accommodate this smaller workforce, your company might plan to decrease output.

Collaborating on crisis responses also provides your departments with an opportunity to voice concerns and share how each crisis would impact their teams.

PeopleOps, for example, could share metrics for how long it might take to fill vacant roles in the event of layoffs and the subsequent costs of hiring and training new employees. Team leads for product development and customer service might share concerns regarding workload balance as a result of a staff reduction, specifically, reallocating work among remaining team members and the potential for burnout. And your marketing teams might want time to prepare an appropriate crisis communication plan for interacting with the public.

Acknowledging the trickle-down effect these risks—and your response—will have across your company and being transparent in your collaboration practices empowers your leaders to figure out how to respond on the department level.

3. Create and revisit your contingency planning guide

Contingency plans are a Plan B you hope to never use, but they will be there months and years from now should the risk present itself. Minimize leadership and company confusion down the road by creating a comprehensive contingency planning guide.

How much detail you put into a guide will depend on the factors in play. A data breach, for example, would involve specific team members and stakeholders, with specific recovery strategies outlined. But a natural disaster that takes out the main office would involve a number of stakeholders and a broader plan to manage resources.

As you compile your guide, make sure to include the steps your teams took to assess the risk, the various scenarios you drafted (even ones you may not have selected), and recommendations for how often leadership should review the plan.

Contingency plan example

A simple view can summarize key actions of a more thorough contingency plan. (Source)

You can go into as much detail as your team feels is necessary. Some companies might draw up a minimalist table view to make triggers and actions visible, while other companies may rely on thorough documentation to capture all aspects of their contingency plan. Your approach will ultimately reflect the needs of your company and the complexity of the risk.

If you need to revisit a plan, cycle back through these steps with your team to identify the best course of action. If you need to reassess a threat that wasn’t high risk or important before but has since become urgent, enlist your leadership team to talk through where the risk now falls, and then proceed to create a new contingency plan or revise an existing one.

Time is of the essence with contingency planning

There’s no hard rule for how long you should spend creating your contingency plan. You might opt for a stable enough plan that’s ready to go at a moment’s notice or invest more time in making your contingency plan iron-clad. The only thing to remember is disaster can strike at any time, and whatever plan you choose, it’s better than no plan.

Don’t be caught off-guard when a crisis strikes. Have data-driven scenario planning tools at your fingertips with ChartHop. Reach out to our team today to schedule your customized demo.

Do you want to read more about contengency planning? Check this article.


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Written by ChartHop Team

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