The question is, do these truths apply to contingency planning. How does the act of planning for disaster affect your confidence level in your company’s ability to recover from disaster? Can you rest with the knowledge of a job well done? Does power and confidence come when you know you are prepared?
Then there’s Slugger; he’s not prepared for a disaster. You know a Slugger; his computer backups are next to the CPU in the office. All the personnel records are in the same room, and they are not backed up. He should be scared to death that a flood, fire, or earthquake could impact his entire business unit, or worse. You wonder how he can sleep at night. He knows you have a “plan” but doesn’t understand what all the fuss is about. In any case, he has a computer backup and if the computer crashes, he is confident it can be restored. What more could he need?
What Slugger doesn’t know is that disasters affect businesses in varying degrees of severity. Research consistently supports the theory that a business is more likely to survive a disaster if it has a contingency plan in place. Yet, as you already know, in spite of these facts, many organizations do not have a formal contingency plan. Additionally, small to medium sized businesses are the largest sector of the business community operating without a contingency plan.
Several possible explanations for why businesses fail to plan for disasters have been covered in the literature. They may have inadequate resources to develop a plan. Additionally, decision-makers lack knowledge regarding the need to develop a contingency plan.
Decision-making research has indicated that business owners and managers may underestimate the likelihood of a disaster affecting their business. This could explain Slugger’s lack of concern.
I was like Slugger, too. I did not really understand what all the “hoopla” was about and why systems people were so concerned about contingency planning. Then I took a class in disaster recovery planning and began to understand the importance. I found that the contrast between business managers who are educated and prepared for disastrous events, and the “Sluggers” of the business world is startling.
Since I took that class, I have often pondered the differences in these opposing attitudes. What are the underlying causes of such differences in decision-making philosophies? I found myself wondering:
• Is there a general misunderstanding among small to medium-sized business decision makers about the importance of contingency planning?
• Are the confidence levels of these business owners and mangers affected by knowledge of contingency planning? (i.e., If Slugger had more knowledge, would it affect his confidence level?)
In an attempt to answer these questions, I conducted a study involving small businesses in the Central San Joaquin Valley of California. A written survey was used to obtain information about their businesses policies and procedures with regard to contingency planning. This survey attempted to:
• Find out how knowledgeable the decision-makers, within these organizations, were regarding effective contingency planning.
• Identify if small business managers’ and owners’ confidence about the possibility of their business experiencing and surviving a disaster varied as a function of whether or not they had a contingency plan in place, and whether or not that plan was written.
• Identify whether confidence levels are affected by completing a detailed questionnaire about specific contingency planning.
The surveys were assembled using questions that measured variables in three main areas, with the first being to what extent specific planning processes were in place. Second, I tried to identify the respondent’s confidence levels in their organizations ability to survive a disastrous event. Specifically, respondents were asked, “Please indicate how confident you are that your organization is prepared for potential disaster.” This was the first question on half the surveys and last question on the remaining surveys. The purpose of different formats was to help identify whether the educational process of completing the questionnaire affected participant’s confidence levels. Finally, I attempted to identify the confidence levels of those decision-makers with a formal written contingency plan.
The results of the study suggest that the more one knows about contingency planning, the less confident he or she is about their organization’s ability to survive a disaster. Decision-makers’ confidence levels were significantly lower after merely completing the detailed questionnaire. This could be attributed to the knowledge they gained during the process of completing the questionnaire.
It is interesting to note the more prepared a decision-maker was for a disaster, the less confident he or she appears to be. Even more surprising was the fact that confidence levels were significantly lower when owners and managers had a contingency plan, particularly when it was in writing.
This could suggest that those business owners and managers actively involved in effective contingency planning had lower confidence levels because of the knowledge they gained through the process of writing a contingency plan. This seems to imply that, as knowledge is gained in the area of contingency planning, it becomes apparent how complex planning and recovery processes can be. In other words, knowledge regarding the complexities of recovery may cause confidence to decline.
It is somewhat alarming that those who are the least prepared for disasters are the most confident about their ability to manage one! Perhaps this “overconfidence” prevents businesses that are the least informed from seeking out the necessary education and training. However, it is also encouraging that the simple act of completing a questionnaire about contingency planning may serve to reduce this “overconfidence.” Whether this act would lead to formal planning for disasters is uncertain.
Other observations derived from the survey responses indicated there might be some confusion regarding contingency planning, computer recovery planning, or data recovery. Respondents indicated internal expertise, packaged software, and off-site data storage, were the most available resources for education about contingency plan preparation. These resources may support “computer recovery” more than “contingency planning and disaster recovery.” These responses may support the idea that misunderstandings exist in this area.
The findings of this study were consistent with previous findings that most businesses lack formal contingency plans. Only 11 percent of respondents indicated their organizations had a formal written plan. This is slightly lower than the previous findings by Comdisco and the Prove It Index that indicated between 12 and 24 percent of all businesses have formal written contingency plan.
However, the data from these studies was obtained from larger organizations, which may explain the slight difference in the current findings. Other findings suggest that smaller businesses lack information about contingency planning and its benefits. Vijayaraman and Ramakrishna found that small businesses are unaware of the potential risks of running a business. This research may explain the slightly lower percentage of organizations with a formal contingency plan determined by the current study.
These findings also suggest that the majority of small to medium-sized businesses, in California, are currently operating without a formal contingency plan. The economic implications of this should not be ignored. There is a tremendous need for education among this population of business owners and managers. Small businesses, particularly, may be more vulnerable to the effects of a disaster and recovery is rarely possible, if they are not prepared.
This is the first study to focus on small- to medium-sized businesses and their confidence levels as they relate to contingency planning knowledge. The results may be more important today, due to the current circumstances surrounding power shortages and rolling blackouts affecting California. The power situation in California could have far reaching implications for the nation.
The power situation promises to be an obstacle for this sector of the business population. Without proper planning, these businesses will not be able to recover from the potential disasters that power losses can generate. This could surely impact the nation’s economy.
The good news is that you’ve done your homework. The plan is in place. You will be able to guide your businesses through the effects of a disaster with more success than the “Sluggers” of the world.
Although the complexities of contingency planning may cause your confidence to waiver prior to a crisis, you will be able to guide your organizations with confidence when that confidence is needed during a crisis.
Where will Slugger’s confidence be when that same disaster affects his organization?
Laurie Taylor-Hamm graduated with honors from the Craig School of Business, California State University, Fresno where she is currently a MBA student. This article is based on her honors thesis for which Dr. Charlotte Hiatt and Dr. Julie Olson-Buchanan served as mentors.