Published
Articles
Originally
Published in The Business Journal of CNY.
DO
YOU NEED A COMPLACENCY CHECK-UP?
For
the same reason that you should go to a doctor for an annual check-up
(even though
you feel great), you should have an annual outside, objective check-up
done on your company. The easiest time to correct a flaw is in the
infant stages; not after it has become a drain on the company's
cash. Insiders are often too close to detect these (so far) minor
flaws, while an outsider advisor will offer an unbiased, unemotional
opinion. Listen carefully; they will often raise important questions
regarding your company (along with a few stupid ones). I have seen
too many companies pay a huge price because they waited too long
for that "check-up". Some were not able to recover. It will inherently
be much more difficult and time consuming to correct a longer term
undetected flaw then a minor problem that is quietly and unnoticeably
building into a crisis.
Many businesses
become complacent after having several successful years behind them.
You must guard against this! The competition is now constantly
looking over your shoulder. Competitors generally are much stronger,
smarter, more creative, and have more resources then ever before.
Complacency is a fatal flaw that drives many businesses into trouble.
Ask your banker, attorney, or CPA. You could get away with this
in the 70's and 80's, but times have changed dramatically. On a
1-10 scale, in the good old days, your company could be a 3 or a
4 and still shine against the competition and compete in the marketplace
favorably. The new players coming into the market are as described
above. They are 6's, 7's, and 8's and if you remain the 3 or 4 that
you were (which worked for you before) and hold steadfastly to your
ideals and resist change of any sort, there is a good chance that
your business will suffer severely.
I wish that
I could get owners who have gone through the above problems to go
on the record for this article, but there is an obvious aspect of
human nature which precludes that. I know that the majority would
say that (in retrospect) they wish that they had sought out the
proper help much earlier.
I did, in
fact, attend a meeting last year where three owners whose businesses
had failed had the courage to go on the record and talk about why
they failed. The consensus was that they did not seek the outside
operational help that they needed early enough. They all thought
it was an expense they could not afford at the time. As it turned
out, it may have been the one non-decision that most cost them their
businesses.
We all have
this feeling of infallibility; that it can't happen to us; maybe
the competition, or all the people we read about in the papers and
business journals everyday; but not us; we know what we are doing!
Not always true! Owners usually tend to procrastinate on
the need and related expense for outside business advice. This procrastination
leads to a decision delay that costs the company much more in the
long-term then a positive decision would now. What I would give
for a crystal ball to look into the future with owners/Presidents
of companies.
A question
I am often asked is how could someone from the outside who knows
nothing about your business possibly help you, an owner who has
run your business (sometimes from inception)? Easy! Good sound business
sense is a common thread that runs through all successful businesses.
Having the foresight to call in an outside advisor makes good
sound business sense. It is a sound economic decision. A good
consultant who has experienced (and resolved) the problems others
have run into can bring much to the party. He/she has the experience
to know where to look for signs of impending trouble, thus saving
the company long term problems and expenses in a relatively short
period of time.
There are
many reasons that business failures are at record levels, but I
believe the primary reason is the inability or refusal to adapt
to a rapidly changing economy. Studies show that more businesses
fail or regress due to lack of attention to early warning signs
then any other reason. The signs are almost always there. You do
however, have to be willing and able to see them, accept their reality,
and deal with them now. The major problem I see in the field
is that they are not perceived as "real" signs; only short term
problems that will be fine in a few weeks. They also may be seen
as related to "uncontrollable or external factors" where nothing
can be done, while the competition is being proactive to these same
factors because they recognize that this is the real world
and they still have to do business in it.
Some common
signs I have seen in the turnarounds I have been involved in are
a lack of a feeling of leadership; no specific sense of direction;
and a feeling by both the rank and file and middle management of
apathy. This is generally the result of a lack of downward communications.
Middle management feeling accountability and responsibility with
no commensurate authority and employees who were enthusiastic but
are now becoming 9-5, "not my company" employees are others. Miscast
or peter-principled management left in place while saving pennies
on pens and pencils is a classic sign. The real problem is that
human nature dictates that given two choices between a negative
or unpopular decision (even thought it is the right and necessary
choice to make for the good of the company) or no decision will
generally lead to no decision.
The best
example I see is no coordination of sales and marketing efforts
among all the departments who should be involved, and, ultimately
will be. The push for volume to make up for eroding margins is a
perfect example. A steady erosion of margin (with or without an
increase in sales) is a clear warning sign. Too often business problems
are masked by one or two highly profitable products or lines, while
the balance of the business is not paying its way. Soon, competition
will eat away at your profitable business and leave you with the
commodity products or services that sell strictly on price. Not
a bright future!
Companies
also tend to believe that they have the inside expertise to deal
with all problems. This is rarely the case. Companies now run lean
and there tends to be a shortage of management, not an overabundance.
Simply put, even if there are people capable of solving the problem
on the payroll, they are usually bogged down daily putting out fires.
They are almost always willing, but, due to time constraints, not
able. Important long-term projects always get back-burnered to current
fire-fighting. This is unquestionably detrimental to the near and
long term future of the company. Thus the need for a dedicated outside
expert.
Just as
doctors specialize in various aspects of medicine, so do outside
business practitioners. Your banker and attorney will try to offer
assistance in good faith, but, in truth, few have ever actually
run an entire business such as yours; plus they face difficult legal
issues regarding running your business. Your CPA may say they have
a specialist on staff who is just the right person. Be very cautious;
ask for credentials and history of helping others. Is this their
full-time job or are they just filling a need with the best they
have on staff? Again intent is there, but is the ability?
I believe
that there is a fourth key business advisor. Bankers, attorneys,
and CPA's each have their special area of expertise that they do
very well. The business advisor/consultant serves an entirely different
need. They are the inside, nuts and bolts, hands-on people who role
up their sleeves and jump headfirst into problems because they genuinely
enjoy doing that. A successful company will depend on all four disciplines.
Relating
back to the visit to the doctor; although preventive medicine does
cost money, it is cheaper and less painful then surgery, or, in
the worst case, the demise of the business. A thorough checkup of
your systems, procedures, products and markets, and personnel assessments
by an outside source will provide valuable input and turn over any
rocks that need to be turned over before it is too costly. SEE
A BUSINESS DOCTOR NOW!
Dennis Hoppe is President of Change Management Implementation, Inc. in Brockport, NY. He has been a small business advisor to owners of hundreds of companies since 1989. Visit his web sites at www.dhoppe.com and www.hmcexecutivecoaching.com, or call him at 800-724-3525.
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