Lessons from the brink: three tips for leaders to help prevent their firm going under

How close is your company to the edge? Do you know? Or are you living in hope that it’s a long way off?

A few months ago, I was engaged by a company to help them turnaround performance. Much like the types of existential threat that have resulted in the failure of many well-known brands, this business was facing the abyss. Performance was terrible. Morale was terrible. And the executive team were lost as to what they should do next. With things only going in one direction the simple request that came my way from the CEO was ‘help!’

Along with other businesses I’ve supported with turning around performance over the last few years, this recent example drew into the spotlight what causes things to go so badly wrong. And more importantly, it highlights the power of the three actions executives can take to avoid their company heading towards collapse in the first place.

Where does it go wrong? In my experience there are three key mistakes that executives make that push them to the brink.

1. Ignoring the obvious – too often the signs are obvious that the company is in trouble, but leaders ignore those signs, focusing only on the data that tells them things will get better. This is akin to what was once described to me as ‘controlled flying into the ground’ where the people in the cockpit of the organisation are so fixated on certain data only to ignore the fact that they are about to fly straight into a mountain.
2. Using hope as a strategy – while some leaders recognise that things are bad, they over rely on hoping change will occur without needing to act. The result is they put off the tough decisions until it is too late, which some might say is like ‘closing the gate after the horse has bolted’.
3. Rearranging the deckchairs – drawing from the famous statement of ‘rearranging the deckchairs on the titanic’, this trap is where overwhelmed leaders tinker with their business, hoping that the small reactionary changes will yield results. But focusing their attention this way causes them to fail to spot that the real action needed is to plug the giant hole in the side of the ship before catastrophe results. 

To help us use these danger signs to drive the right mindset and action, there are three three things all leaders can do to protect their business from going under.

1. Develop an early-warning system – by defining the right metrics that show the true performance of your company you’re able to pay attention to what’s really going on. Using a mix of lead and lag measures extends this by looking not only at current performance, but also what the trends are for the future. And finally, building in thresholds against your metrics creates the early warning system where any breach of threshold tells you that action is needed.
2. Create your scenarios – when things are going well it is often difficult to consider what could go wrong. However, as many have said before, ‘success breeds complacency, and complacency breeds failure’. Drawing on this and using your early warning systems it is important to create a range of scenario plans for what happens if the thresholds on your performance metrics are breached. That is, what are our options for action if X happens? While this might feel like you’re tempting fate, all great teams use scenario planning to plan for the best and be prepared for the worst.
3. Mobilise your leadership team – too often when things start to unravel, leadership teams crumble rather than rallying together. Focusing on building and mobilising your leadership team means you ensure they are always fully aligned and working collaboratively together to think ahead. With this focus, when issues do arise it means the leadership team is already well practised at working seamlessly together. So rather than the challenges falling only to the CEO or executive team, the full leadership team stands together and takes the tough decisions needed to drive performance in the right direction.

While every leader I've worked with over the past 20 years hopes that their business will not fall upon hard times, the uncertainty in the current market has the potential to create strain on even the most successful company. By being conscious of the mistakes made by others and employing the three techniques listed above every leader can ensure they and their business are better prepared to navigate the stormy waters of the global economy. And to prove that this works, for every business that does collapse, I have seen there are at least five-10 that survive and then thrive by focusing on the right things, in the right way and at the right time.

Rob Cross is founder of The Purposeful Leader