In 2009, the world’s economy ground to a halt. The mortgage industry imploded—a black swan no one saw coming—and banks stopped lending money. Everyone started chasing their deposits, and concerns grew that there would be a huge run on the banks’ liquidity. But no one—not economists or government officials or financial experts—had any answers about how to stop the crisis. Then, banks and companies started closing all over the world. People were glued to the news around the clock to learn about the latest casualty. It seemed like the end of the world. Even if you had a job, you wondered if you would have one the following day. The fear was paralyzing.
The associates at SRC were scared, too—and for good reason. While the company had been through three prior recessions—it even got its start during the recession of 1983—this one was different. “Even the strongest companies were petrified,” says Jack Stack, SRC’s CEO. “It caught your attention. We had never seen anything like this. It came out of the blue.” One of SRC’s lenders had even called in its only loan of some $9 million—even though SRC had worked with them for more than twenty-five years and had $32 million deposited in the bank. The bank was trying to offer them a new deal where SRC would have to pay fees to access its own money. Rational thinking seemed to have come to an end.
The good news for SRC was that it paid off its loan and moved its money to a new bank. The company was still in relatively good shape financially—the details of which Stack laid out to his associates in a company-wide Huddle. “We wanted to stop the shock and awe,” says Stack. “We wanted people to understand that we were fortunate to have a healthy balance sheet and cash in the bank. We didn’t have to scramble to recover and start again. We also wanted to let them know what they needed to do to control their own destiny.”
That was the day Stack stated, “Today is the day we take fear out of the organization.”
Stack then laid out the company’s “end of the world” scenarios—which affectionately became known to our associates as the DEFCON steps, named for the defense readiness condition steps used by the US military—to explain what would need to happen for the company to actually close its doors.
That willingness to confront the worst-case scenarios worked. The associates now understood where things stood—which helped ease their fears. When SRC conducted morale studies during this period of time, they received some of the highest scores in the company’s history.
The next step was to take action. The company needed a long-term plan for how it was going to not just survive the recession but also take off when the economy finally recovered. Enter the High-Involvement Planning process.