Running Head: CONTINGENCY PLANNING IN MANAGEMENT

Topic: The Importance of Contingency Planning in Management

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Introduction

In spite of how meticulous the day to day strategies of a given organization may be, all it

takes is one unforeseen event to make such intricate strategies fail. Therefore, the careful

formulation and implementation of contingency plan is what differentiates a progressive

manager from a manager who leads his/her company into disarray in the event of things going

wrong or upon the failure of strategies. This paper will analyse some of the reasons why

contingency planning is so important in management. This analysis will be conducted by

evaluating information provided in various journal sources.

Body

Regardless of how thorough management planning and strategies may be, they are

usually formulated to deal with foreseeable and predictable events. However, in any

organization, there are events that are almost unforeseeable. These events often affect businesses

negatively. Contingency plans are important because they help managers to make detailed

policies that are aimed at dealing with such unforeseeable events. The main reason why

unforeseeable events affect companies negatively is because of the element of surprise. When

managers are caught by surprise, they react to the situation with uncertainty which often leads to

business problems. It is therefore very important to formulate contingency plans to help

managers deal with the surprise element of unforeseeable events (Scott, 2003, pp. 188).

One of the major reasons why contingency plans are a necessity for effective

management in organizations is because such plans enable organizations to sustain their speed of

operations even in the face of a crisis. In most cases, disasters or crisis often cause organizations
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to come to a standstill. This means that normal operations of the company cease to take place and

all individuals within the organizations devote all their time and energy towards coping with the

disaster. This results in great loss for the company and after the crisis is over, managers have to

contend, not only with there cost of managing the actual crisis, but also with the loss of income

due to lack of maximization of production processes during and after the crisis. A well

formulated contingency plan enables managers to set up management guidelines on how to keep

the normal operations of the company at the optimum while the company is dealing with a crisis.

Once all the individuals within the organization are aware that there are reliable measures in

place to deal with as crisis, then they can all concentrate on their day to day duties and

obligations (Holan & Phillips, 2002, pp. 68).

Some of the worst management decisions are made in times of crisis. This is because

managers and their employees react in shock. Decisions made in a state of unbalanced mind are

often irrational and therefore detrimental to the company’s wellbeing. For instance, most

managers operate in a state of panic and focus on making policies that will help the company to

recover as fast as possible from the crisis. However, the long term implications of polices made

during times of crisis are often negative because their effectiveness is limited to catastrophic

situations. Contingency plans are therefore important because they enable managers to stipulate

well thought and rational policies which can be used in crisis situations. This ensures that

policies used at such times do not have any negative impacts on the long-term future of the

organization (Beardsley et al, 2006, pp. 59).

Woodridge, et al, (2008, pp. 1190), asserts that another reason why contingency plans are

so important in management is because they help managers to define the roles of each member

during situations of crisis. Crisis situations in most cases necessitate the reassignment of duties
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among different members of the organizations in order to deal with the crisis at hand efficiently.

Defining the roles of individuals helps the organization to avoid a situation where all employees

want to help with the crisis but have no idea about what role to play in managing the crisis. Once

all individuals know beforehand what they are expected to do during a crisis and whether or not

they are required to abandon their normal duties is crucial to attaining orderliness within the

organization. Managers who lack a contingency plan that clearly articulates the role of each

individual during a crisis usually resort to asking all employees to work long and irregular hours

to deal with the crisis; however, such measures are highly ineffective. Such measures only lead

to fatigue among employee which hampers the organization’s ability to move forward in times of

crisis.

Contingency plans are very important in management since they enable managers to form

management strategies that focus not only on the most likely scenarios but also on the possible

events (Sharma et al, 2005, pp. 277). There is a major difference between likely outcomes and

possible outcomes. When planning for likely scenarios, managers can only formulate strategies

that address problems that have been proven to exist within organizations in a certain sector.

However, contingency plans focus on strategies for possible scenarios and this means taking into

account problems that may not necessarily have occurred in the past, but may occur given certain

circumstances. For instance, most day to day operational strategies focus on factors within the

organization that may lead to a crisis. However, contingency plans focus on providing solutions

for possible crisis caused by external factors.

While it may be a good policy to formulate strategies that are focused on generating

positive results, excellent managers also take into consideration the possible negative outcomes.

Contingency planning is important in management because it helps managers to be prepared for

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unpleasant or negative eventualities of both the internal operations of the organization as well as

external forces (Roe et al, 2007, pp. 36i). For instance, if the production operations of an

organization are highly reliant on weather conditions, contingency planning enables managers to

be aware of how to sustain the organizations operations even in negative situations such as bad

or unfavourable weather as opposed to making strategies based on the hope that favourable

weather conditions will prevail throughout.

Contingency planning is very important in businesses because it enables managers to

have a back up plan that can be put in place if the existing organizational plan and strategies fail.

In any organization, plans may fail due to a number of reasons such as financial difficulties.

When this happens, most managers concentrate on formulating new plans which if implemented

would deal both with the inefficiencies of the failed plan as well as providing strategies on how

the organization should advance into the future. However, contingency planning helps managers

to have a ready made plan which can be used to replace an existing plan while the organization

concentrates on formulating a more detailed plan for future use. In such a case, a contingency

plan is usually designed beforehand to address any anticipated inefficiencies in the failed plan

which allow managers to concentrate on drafting a plan that is focused only on the future success

of the organization as opposed to plans that act both as a correctional measures and a plan for the

future (Sharma et al, 2005, pp. 280).

Coombs, (2007, pp. 169) asserts that one of the most important benefits of contingency

planning that is usually overlooked by managers is the ability of such plans to assist the

organization in utilizing opportunities. Contingency plans do not only address crises but also

positive opportunities. Most organizations have plans that give guidelines on how to retain their

current positions in the market. However, such plans fail to give direction on how to utilize a
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sudden opportunity in the market that may benefit the organization. For instance, when a major

competitor exits from the market or suffers financial challenges, most managers fail to utilize

such an opportunity because they have no plan to deal with such an abrupt opportunity. A

contingency plan in such a case usually gives guidelines on the best methods to utilize the

opportunity to the maximum.

Contingency planning is very important in management because it offers solutions on

how to deal with deficits that have not been anticipated. As much as organizations strive to have

a stable pool of resources to use in their production processes, deficits in resources often occur

due to unanticipated events or changes in the market. Contingency plans that outline how

organizations can fill deficits that had previously not been planned for are very important if an

organization is to maintain its production volume or capacity and continue to meet the demands

of consumers. Some of the deficits that contingency planning can help resolve include; raw

materials, human resources (employees), and decision making deficits when organizational

leaders or managers are not available to provide guidelines to be followed by employees. The

latter category of deficits that can be filled is especially important in management because

organizations that are highly reliant on the decisions made by one leader can be in crisis if such a

leader is not available. In such a case, contingency planning makes provisions that indicate who

should lead or what decisions need to be made (Verwaal, et al, 2008, pp. 429).

Contingency planning is a very important factor in management because it assists

organizations in formulating policies on how to manage success (Coombs, 2007, pp. 166). The

purpose of any organization is to achieve success in its endeavours. However, most managers fail

to take into account that there is a need to develop strategies that can be sued to sustain success

once it is achieved in the organization. This leads to a crisis situation where organizations do not
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know how to reap the maximum amount of benefits from their success or how to manage success

in a manner that facilitates further growth and prosperity. Contingency planning comes in handy

since it enables managers to address the possibility of success in advance and to put in place

timely measures that can be put into effect once an organization reaches a certain level of

success.

Apart from protecting shareholders, contingency planning also enables managers to

protect the interests of stakeholders. Stakeholders may include customers, employees and even

members of society who are affected by the activities such as people who live near the physical

location of a specific organization. Unlike shareholders, stakeholders may not suffer any

financial losses from a crisis but they are in more danger of physical harm. For example;

employees and communities can be protected from physical harm, the demands of customers can

continue to be addressed throughout the crisis, and the long term effects of the crisis can be

communicated to all stakeholders on time (Cowen & Cowen, 2010, pp. 118).

Montinola, (2003, pp. 544), asserts that contingency planning is an important element of

management as it can be used to turn organizational threats into opportunities. Most crisis

situations in an organization affect the entire sector of the economy in which a specific

organization operates. This means that all other organizations in the same sector have to deal

with the crisis. Contingency planning gives managers opportunities to turn around their

organizations during crisis’ periods. The manner in which organizations deal with crisis

situations often distinguishes those that are successful from the non successful ones.

Contingency planning enables managers to use the crisis situation as an opportunity to overtake

business rivals who take longer to deal with the crisis or who deal with the crisis inappropriately.

(Mitra, 2010, pp. 229).

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Contingency planning is important because it facilitates the successful completion of

audits by managers after a crisis is resolved. Because the unforseen events which necessitate the

use of contingency planning require the use of resources which were otherwise unplanned for or

were set aside for other purposes, it is important for managers to have a very well designed

contingency plan that can be used in the inevitable audit of the way in which the situation or

crisis was managed (Bolino, 2008, pp. 1084).

Finally, contingency planning is important because it helps managers to define their

management priorities. A contingency plan usually outlines the areas of management that may

require contingent measures according to their priority. Such an outline acts as a guide to

managers on which organizational activities, processes or priorities are most important crucial to

the success of the organization. By reviewing the processes that have been given priority, in their

contingent plans, managers can easily put their priorities in order which enhances their

effectiveness.

Conclusion

It is important to note that contingency planning may not result to risk aversion, but it is a

definite way to protect the assets and the corporate life of any organization. Planning in advance

does not only save life and finances, but also gives the organisation competitive advantages in an

industry as an organization with an elaborate contingency plan can manage an industry crisis

within a short duration of time hence taking leadership advantages. It is therefore important that

despite the fact that formulating contingency plans is an expensive undertaking, companies

should invest in it to ensure that no crisis gets them unaware of the possible happenings.
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