Stay Strong: How Smart CEOs Are Learning to Detect Early Operational Warning Signs of a Troubled Company (Part-1)

By WebSiteAdmin Posted July 13th, 2017

It’s simple in theory. You want to remedy any deficiencies in your business before it’s too late, before it requires a massive transformation to turn things around. But how do you know you’ve got a problem in your business that, if left unattended, will put the health and future of the entire organization at risk?

I often say that there’s no magic fairy dust to running a company. Success in business comes down to executing well on the fundamentals, just like in sports. For example, in football, blocking well enables the offense so many options to run the ball, to pass for short yardage, or to go with play-action and throw the ball deep. An inability to block will translate into stuffed runs, defensive backs sitting on short routes, and no time to let a receiver release down the field. In business, the fundamentals include having a sound strategy that’s made clear, an organization that is aligned with the strategy to serve customers, a staff that’s empowered and accountable, well-defined processes, along with clear goals and metrics.

To help you detect early signs of a troubled company from an operational perspective, we’ll look more into these 5 critical areas. The good news is, if you can identify them, then you can take action to address them. In part one of this article, we’ll evaluate the first two signs.

1. Communications

Effective communications are one of the main keys to success in business. In fact, you can view communications as the umbrella that covers all the other factors, as it starts at the top and extends all the way to the front lines of the business. An Inc. magazine article describes the overarching importance of communications by stating that “Strategy has evolved from a corporate process to a series of ongoing conversations and decisions.” First, the executive team is accountable to set the vision and make it plain so that the rest of the organization can run with it. A great vision and strategy does nothing if it can’t be communicated throughout the organization in a way that is meaningful to everyone. People want to know how they fit in, how things impact them, and their role in a situation. The “what’s-in-it-for-me” mentality is true of employees and customers. It’s just human nature, and a good communicator knows you have to address this mentality to get others to listen before there is any chance that you achieve true consensus or buy-in.

  • How well does everyone in the organization understand the company vision and their role in helping to achieve it?
  • Are staff members clear on how and who makes what decisions?
  • How well are changes to policies, processes, pricing, and other company decisions communicated to customers?
  • How empowered are front-line employees to make immediate customer service decisions?
  • Do they know the strategy and the goals they need to meet?

2. Customers

The vibrancy of your customer base is one of the primary means of measuring the health of your business for the long-term, after all, this is where revenue is generated. Customers are one of the first groups to recognize when things are taking a turn for the worse. This is the group that most often experiences the outcome of new management policies, staffing decisions, system changes, and the like. In fact, leadership and marketing guru Simon Sinek states in his book, Leaders Eat Last, that “Customers will never love a company until the employees love it first”. So here are some questions to help you understand your position with your customer base, especially if you’re not actively tracking customer satisfaction ratings or administering Voice of the Customer surveys.

  • Are your existing customers satisfied with the quality of service you offer? How do you know?
  • Are they pleased enough to recommend your company to others?
  • Do customers complain about the same issues over and over?
  • Are customers starting to complain about new problems?
  • Are the only customers you attract and retain the ones that pay the lowest rates, drag their payments out, and complain the most?
  • Are you experiencing an increased rate of customer attrition?

Turning around performance in these two areas will get you on your way to business success. However, stay tuned for part two, which covers the other three vital areas of the operation.

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