What happens when an “Unknown Unknown” hits your business?
In the closing paragraph of my January 2024 e-newsletter, I wrote:
As I scale back my work on this major client project, I'm looking forward to once again being able to work “on the business” – and not just “in the business” – to solidify THA's resilience in handling both opportunities and challenges.
Little did I know the resilience of both my company and myself would be tested just a few months later by a challenge that was totally unexpected.
The Rumsfeld Matrix
The phrase “Unknown Unknowns” was made famous by then-Secretary of Defense Donald Rumsfeld at a news briefing in 2002. Here's the key portion of this briefing:
Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.
Out of this briefing came what is known as The Rumsfeld Matrix.
The final two sentences have been on my mind since last spring, when Todd Herrman Associates and I experienced a major “unknown unknown.”
Building Resilience in 2020 and 2021
In 2020 and 2021, my business and I – along with numerous other companies and individuals – experienced a major “unknown unknown” when Covid-19 lockdowns began in March 2020. The pandemic really hit my company hard, since virtually all of our revenue comes from special projects, which is non-recurring revenue for us and frequently discretionary expense for our clients. Our 2020 revenues were down 50% and 2021 revenues down 40% from 2019.
Yet responding to Covid-19 helped build resilience for both the company and me. When revenues go down, cash flow goes down as well. Thus, I had to scramble to cut my company's expenses – and personnel expense accounts for nearly 90% of our total expenses. I had to let our Accounting / Administrative Associate go, change the pay arrangements of all remaining personnel (including myself), and work with my Business Development Associate to overhaul and greatly simplify our internal processes so she and I could handle all the accounting and administrative work by ourselves.
Fortunately, the combined effects of reducing personnel expense, maintaining revenue from a few projects not affected by Covid-19, cutting what I'd previously considered to be minor expenses, and receiving funds from several government programs for businesses affected by Covid-19 allowed me to keep my core staff intact and ride out those tough two years. Thankfully, 2022 and 2023 were strong years for our business, and I managed our cash to build up balances that would be sufficient to help weather a future “unknown unknown” event.
Resilience Tested in 2024
In April 2024, just such an event happened – another unknown unknown. The mother of a Senior Consulting Associate developed major health issues, forcing him to significantly cut back his work hours. This resulted in his client service hours dropping by 70% for four months, making a major dent in the company's top and bottom lines.
Having successfully dealt with the Covid-19 event and having set aside cash to ride out a similar event, the company weathered this hiccup. Even so, it tested my resilience in several ways, which I believe I handled successfully based on years of practicing personal accountability. Rather than throwing myself a “pity party,” I practiced the lessons of John G. Miller's wonderful little book, QBQ: The Question Behind the Question: What to Really Ask Yourself to Eliminate Blame, Victim Thinking, Complaining, and Procrastination.
A QBQ (Question Behind the Question) sounds like this:
What actions can I take NOW to best move things forward?
Because the ONLY person I can control is ME, I decided the best actions I could take to move things forward were to continue to pay this associate, using a combination of personal leave and vacation bank, and to be as empathetic as possible during our regular weekly check-in calls. Once I made those decisions, I quickly turned these ideas into actions, and was rewarded with a very grateful associate four months later.
Leadership, Learning, and Personal Accountability are Inseparable
The leaders I most admire are ones who practice personal accountability. They don't engage in blaming others, victim thinking, complaining, or procrastinating because they ask, answer, and act upon the Question Behind the Question.
The Truth About Leadership: The No-Fads Heart-of-the-Matter Facts You Need To Know, James M. Kouzes and Barry Z. Posner – authors of the multi-edition bestseller The Leadership Challenge – present ten time-tested lessons that all leaders should know and apply.
In Chapter 9, “The Best Leaders Are the Best Learners,” the authors note that strong leaders are not born that way – they are made through deliberate practice. They shared five elements of deliberate practice:
- It is designed specifically to improve performance.
- It has to be repeated a lot.
- Feedback on results must be continuously available.
- It is highly demanding mentally.
- It isn't all that much fun.
That last element seems to rub against human nature – it's hard to keep up behaviors that aren't fun. It took me a number of years working with my Coach to get past this roadblock, yet once I did, my performance improved dramatically. She and I discussed this recently, and these are the leadership lessons she summarized from our work together:
- Leadership requires listening.
- Leadership requires practice.
- Leadership develops over time.
- Leadership grows as self-confidence grows, because self-confidence allows you to see the right things, listen to the right people, have or obtain the right resources, and make the time to work “on the business” and not just “in the business.”
Fortunately, these leadership and personal accountability behaviors were already solidly in place by the time Covid-19 turned everything upside down. With them, I had achieved the resilience to move forward. Without them, I might very well have decided to close the business.
Looking Ahead to 2025
With our most recent “unknown unknown” behind us, I'm looking forward to a better 2025 for Todd Herman Associates, and I plan to do my part by leveraging the knowledge, experience, service portfolio – and resilience – developed over 35 years of running this business.
Sincerely,
Todd L. Herman
PS – Please check out our most recent video on Finding the Right Accountability Partner For You.
