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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298
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

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
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299
with unexpected developments than if they had not made such
preparations.”
4
Without this preparation managers are always in a
reactive mode.
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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.
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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

■ 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?
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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.
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Next the team determines where the answers to the two questions

b. What compliance situations are getting so restrictive
that they endanger your operational behavior?
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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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