Upon its announcement of the departing CEO Christine Day, Lululemon’s stock price took a deep dive of 18%. The company has built a loyal customer base for its yoga wear. It has recovered nicely from an earlier kerfuffle around its ultra sheer luon yoga pants. The surprising announcement got the investors off-guard. The company didn’t disclose the reason for Ms. Day’s departure other than ‘for personal reasons.’ It raised concerns around its ability to push forward with its ambitious growth plan.
On the contrary, Hudson’s Bay Company also announced the appointment of its star president Bonnie Brooks to the vice-chairman role. Ms. Brooks has been credited with the turnaround of a tired retail chain in Canada. A successor who is a veteran at a sister company was appointed to the president position. Hudson’s Bay’s stock price dropped also but only a mere 3%.
Would knowing who will lead a company make such a big difference? It seems so. Having a plan B provides:
- A clear picture of what will happen next—there is a definitive strategy for moving forward.
- An indication of forethought—there have been discussions whereby options and risks have been assessed.
- An identification of who would be in charge—there are individuals who have been selected to carry on with the work.
- An understanding of the impacts—the company is able to share its plan to deal with the anticipated impacts on the business.
Without a plan B, a company is under much pressure to come up with a strategy to deal with the situation. In many cases, the timeline is so short that there is insufficient time to weigh the options and the associated risks. Reactive solutions are often inferior.
In your business, is there any aspect that would expose it to unfavourable situations leading to negative impacts? Do you have a contingency plan that could be rolled out quickly? What resources could you draw on to put things into motion? Are the parties informed so that they are ready to contribute? Do you have a communication plan to inform key stakeholders on what to expect?
Uncertainty leads to scepticism that hampers trust. Most investors are risk-averse. Lack of a plan B doesn’t boost investor confidence; neither would it sooth internal anxiety on how they would be affected.
© Connie Siu 2013. All rights reserved.