Down in the Boondocks:Early Warning Signs for The Organization in Trouble
During a recent assignment, my client asked me “Could I have known earlier that my business was in trouble?” By “earlier” he meant before the cash dried up and before profit was eroded, which was when we were engaged.
The answer is of course “yes” – normally you can tell. Experience tells me that most companies receive clear signals when something is going wrong, and well before they find themselves in the boondocks. The issue is whether or not the signs are recognized for what they are. It was no different for my client.
So what are some of the more obvious signals? And why are they ignored? The following is by no means exhaustive, but hopefully it can start the dialogue that will help you assess your organization today
Sign #1: You are Losing Important Customers
You find that you start losing customers whom you value and would want to keep. Matter of fact, as the situation worsens, you find that customers who had little organizational value, or should have been off your books, end up “firing” you.
Most organizations lose important customers over their lifecycle so sometimes we do not do the root cause analysis of each loss. The issue is also difficult to spot if you are in a growth phase, and are acquiring new customers faster than, or at the same rate that you are losing them. Here you have very low customer penetration and have not focused on customer mapping nor intimacy to increase your value with the account.
Just the wrong Metrics.
Sign #2: You are Losing Key Employees
You find that your key or high potential employees start to leave your organization faster than normal. And if you do the exit interviews you get reasons such as “better opportunities” or “better job security.”
While few organization retains all of their top talent for an extended period, the fact is that employees want to be sure they are in a job that will help them to realize their career goals, and if in some countries like the UK, that they are part of an organization that places strong emphasis on customer engagement.
An issue of engagement.
Sign #3: You are Focused on Activity, not Results
This is perhaps the hardest issue to spot since it is often shaped by the culture in the organization. The fact is that activity does/can measure productivity, but when are your metrics too activity biased? A company that is too activity-focused measures things like sales calls, buy not sales conversions, marketing spend as a percent to sales, not the marginal return on investment, and reports focus on past periods, not on future, high-impact milestones.
An issue of leadership.
Sign #4: You Start to Lower Price
Two of the most important things that an organization does is develop people and pricing right. When you start trading off on price in order to retain customers, then you are already down in the boondocks – only raw courage can help and proper business analytics.
Pricing right means that you have a clear understanding of (your customers’ perceived) value, and have the will to ask for it. The converse is true – you do have value but you lower price thinking that it will enhance customer retention
When you are in trouble, have the courage to hold to a basic truth; get value for money.
The Issue? Will and Skill
Sign #5: You are Leading by Happenstance
It is in using the signals of engagement and activity above as early warnings, that the company makes perhaps the most significant error; that these are the beginnings of the problem, and there is sufficient time to fix the problem as long as we do it “as soon as possible.”
“As soon as possible” therefore is not just the bane of accountability, but it is the death knell of the firm. Often the key issue is a leadership that lacks the courage to act now, does not “listen to the numbers”, and in terms of leadership style, is more democratic, affiliative or autocratic than is prudent given the situation that it faces. This is “leadership by happenstance”, things will happen in due course.
Issue: Capacity to Act
Sign #6: Anecdotal Control
You have been in those meetings...heavy on talk, and little on data and action/next steps. No one presents anything - they speak of and around it. This makes it extremely difficult to lock on to what is important or a result. In this case it might not be surprising if the company does not measure and take action on key indicators like cash flow, receivables aging, customer churn, performance management and staff engagement. And chances are it needs help to define, prioritize and implement.
These signs are by no means exhaustive. But if you take the time to listen to them and take decisive action, chances are you will need a strategic intervention, not the full costs of a business turnaround.