As a company executive, or a business advisor, we have to always be on the alert for indications that your business, while looking calm on the surface, has strong undercurrents starting that can lead to disaster. You don’t want to be in one of those high-flying companies, like Webvan, Pets.com, and eToys, that almost made it to the big time, before fading or crashing into oblivion.
You can’t always believe what you hear after the fact from company executives, or even industry analysts. Popular rationales include attempting to grow too fast, product quality problems, and missing the market, but the realities often go much deeper. Here are some early signals I see too often, which are recoverable if recognized and acted on sooner rather than later:
- Competing or toxic cultures start to build momentum. Everyone on the team must share the same purpose, values, and goals. Unhappy employees usually indicates that multiple agendas exist, such as some people driven by customers, and others by technology. The founder or top executives must set one culture by words and actions.
- Company leaders don’t maintain trust and transparency. When I do due diligence for investors, and I find team members hesitant or openly negative when talking about the leadership team, there is likely a trust issue, or at least a failure to communicate. Leaders need to “say what they mean and mean what they say” all the time and every time.
- More passion is being applied to a product that is not ready. If your solution doesn’t work, or can’t be delivered in the marketplace, no amount of determination or passion will save you. For high technology solutions, almost working is failing. Business leaders need to be realists, to understand when to pivot and when to fall back in recovery mode.
- Poor cash flow management is leading to bad decisions. Vendors and most people on your team need to be getting paid on a predictable basis, or their loyalty quickly turns to retribution. Soliciting timely and adequate funding is more critical than development. Too much money can have the same negative effect on focus and decision making.
- Uncontrolled team conflict is killing productivity and motivation. The best business teams don’t shy away from some healthy friction and heated debates between team members and leaders, to recognize innovative insights and make change happen. Yet we all know that there is a fine line here, beyond which heated debates generate so much emotion and drama that the entire team becomes dysfunctional, stalling progress.
- Great technology is touted as the long-term business savior. No matter how amazing your technology, a successful business requires marketing, solution delivery, and customers with a problem and the right amount of money to spend. Even if early-adopters are quick to jump, make sure the mass market appreciates your solution.
- Plans and priorities are changing at an accelerating rate. In these times of rapid market evolution, it’s good to see plan change agility. Yet, this change ability must be managed, and not allowed to degenerate into chaos, with less and less communication from the top. If you don’t know where you are going, you probably won’t get there.
- Putting more focus on blame than resolution and prevention. Every business makes mistakes when taking risks for growth and innovation. Companies in trouble tend to assume a victim mentality and blame factors outside their control, rather than learn from experience. Team members need to be rewarded for taking risks, rather than punished.
These signals are usually accompanied by a variety of others, including key leaders jumping ship, overall reduction in morale, rapid organizational changes, and micromanagement. If you see these symptoms in your own company, there still may be time for recovery, or it may be time to join the exit before disaster strikes.
The best antidote I know for heading off all these problems is building an advisory team early, consisting of no more than five external advisors, who have individual expertise and experience in similar business domains, and then actively listening to their perspective and recommendations. Don’t let the waves of change become a tsunami that you don’t see coming until it is too late.