Is your company at risk?        Text Here are some early-warning signs that pinpoint business troubles. By John M. Collard   Strategic Finance Magazine SECTIONS: Article Text About the Author About the Firm

Is your company at risk?

Too often, companies die unnecessarily. Why? Because most managers haven't learned to recognize the symptoms of oncoming illness in their business. Management doesn't know how to manage in this situation. They haven't had to in the past, and are ill equipped when trouble sets in.

The obvious signs of business trouble are rarely its root causes. Losing money, for example, isn't the problem. Rather, losing money is the result of other problems.

When you wait too long to recognize deteriorating characteristics the company seeks bankruptcy protection . . . only creditors, attorneys and accountants benefit from this process. It's the astute manager that recognizes infallibility, and has the foresight to ask for help . . . before serious trouble sets in.

Corporate managers and directors, you share in the business risks of the companies you serve. You accept additional risk when the company is heading for trouble. By recognizing some early warning signs of business trouble on the horizon, you can eliminate, overcome, or, at the very least, side step those risks.

Whose work are they doing? When they continue to perform functions that should be done by others (once the business has grown to a more complex level), they're over extended.

A sure sign of underlying problems is rapid employee turnover. Employees know when problems exist, the good ones will leave early. This condition can be the result of a faulty hiring process, inadequate training, poor management . . . the list goes on. The price for ignoring this problem is high: low morale, lost wages, recruiting costs, lack of productivity, and ultimately, forfeited business.

Ineffective meetings, management information, or inter departmental coordination can destroy a business from the inside out - even as it is growing.

Chronic failure to achieve stated business goals suggests a problem far more serious than a lack of performance. Often, it implies a lack of clarity regarding the owner's goals, and usually indicates a failure to secure management team 'buy in'.

While it seems obvious that programs should clearly and directly reward for successful job performance, it's remarkable that many companies unwittingly set up compensation structures that reward performance altogether different from that outlined in the job description. A word of warning if this is your practice: Be careful what you pay for - you might just get it.

If so, you are out of touch with the marketplace. High prices, unresponsive proposals, and giving more than is required of you are the typical reason companies lose bids.

Determine if a decrease in business from long time customers is due to poor market conditions in their industry - or poor service from your company. If it's you, you're probably no longer meeting the customer's needs. Worse - you may not know.

Products developed before market needs are assessed can waste resources and be difficult to sell. It is less expensive to create awareness of a product or service that meets an existing demand, than to develop a new market for existing products or services that doesn't exist.

Financial and operational reports must be accurate, timely, and pertinent. Too often, management receives only traditional accounting measures of company value, instead of cash flow or new business generated. Also, information is often prepared at the wrong level, making it difficult or impossible for management to know what's going on inside their operations.

Setbacks drain businesses of cash, time, and morale. When companies fail in one effort, management tends to 'pull in its horns' the next time out. The result? Suppressed hopes for growth or expansion. Efforts fail because of inadequate cash, poor management, lack of thorough market analysis, or improper control systems.

Managers who run independent operations must be adept at problem solving, decision making, team building, and managerial analysis; skills which are not obvious. Understand why your company is successful in its present marketplace, and try to 'model' those conditions in a new marketplace.

Recognizing trouble requires no hocus-pocus. Likewise, solving trouble's accompanying problems takes no smoke and mirrors. Seldom is there only one reason for business troubles; more than likely, you'll discover two or three. Getting to the real issues is the catalyst toward change - and recovery.