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Six Ways to Identify a Company in Decline

Wise business lessons learned from a social psychologist - not a financial analyst

By William P. Fisher, Ph.D.

Different business organizations project different images to customers, suppliers, consultants or other visitors. A former professor colleague of mine took great pride in his self-proclaimed ability to “size up” (or “size down”) any organization within the first two minutes he set foot on the premises. He was a social psychologist, not a financial analyst, and he based his conclusions on such things as the type, style and color of artwork that was exhibited in the environment, the rapidity and graciousness with which he was greeted, the way employees interacted with one another, the cleanliness of the public areas and the tidiness of office areas. He made some valid points and caused me to sharpen my own observation powers when I visited a company for one reason or another. Through the years, I have identified six major nonfinancial elements or clues that tell me a company is on the verge of, or has started, a decline even thought “the numbers” may not yet reflect it.

  1. There is a generalized preoccupation with business expansion to the exclusion of improving existing operations. Many companies on a fast growth track overreach their ability. It is one thing to “touch,” but another thing to “hold.” That is to say, such firms are so future-oriented that they lose sight and sensitivity to the market/customer base that needs to be satisfied now. Such companies don’t keep business. They lose it out the back door as fast as they bring it to the front door. They are “growth junkies,” seeking expediency rather than stability, living for a grand tomorrow with little thought of survival today.

  2. Risk is avoided at any cost. Some companies, once they have secured a niche in the marketplace and have enjoyed some measure of success, simply stop doing what made them successful in the first place, i.e., taking calculated controlled risks; experimenting with new ideas, products, services and systems; and bringing qualified people into the organization. In contrast to expansion at any cost, there is an avoidance of risk at all costs. Because the world is not standing still, the secure market/customer niche can be eroded as quickly as it was formed. Such companies may be “sparkling comets” during their ascendancy period, but they can burn out quickly, never to be seen again.

  3. The company attracts and retains people who are most concerned with occupational security. Such companies experience little employment turnover at management levels and do not attract energetic, creative personnel. The organization becomes the parent substitute where one gets along fine if one does what one is told to do, and no one gets in trouble by doing nothing. There is an emphasis on conformity. New ideas are not sought or appreciated. Mediocrity becomes the acceptable standard. Imagination is ridiculed. A high production level is considered to be “rate-busting,” and innovation is considered to be radical. Usually there is overstaffing. There is an excuse or delay mentality rather than a get-it-done outlook and there is little, if any, conflict because there is an absence of dynamic, constructive tension. The operation premise is that “if I go along, I’ll get along” and “I won’t make any waves.”

  4. There is an absence of self-development at senior management levels. Top management is too busy (or too uncomfortable) to undertake activities directed toward professional self-development. They, or their key people, do not go to conferences, seminars or other activities where there is an active exchange of ideas. They believe they have paid their dues and are entitled to sit back and recap the awards. They may delude themselves that they are staying current by reading consumer and trade press articles and reports. They do not realize that all trends have countertrends, that the marketplace is becoming increasingly differentiated, and that there are a lot of cross-currents and shifting winds that can have an immediate effect on the company. In some cases, once you have read about a trend, it is already over. That means it was a fad.

  5. The company operates in a dull, tired, gray environment. There is absence of pep and humor in the people who work in the company. Employees lack bounce in their gait. They wear frowns or expressionless faces instead of smiles. Their heads are bowed instead of uplifted, and they seem haggard instead of stimulated. They tend to procrastinate; be undisciplined in enforcing working hours, lunch breaks and coffee breaks; engage in social (not business) chit chat; and spend a long time reading newspapers or doing crossword puzzles. Telephones are allowed to ring several times before they are answered; telephones are left unattended; and mail remains unanswered for days. There is a listless pace except at quitting time. Physical facilities are scruffy and dirty, the landscaping is unkept, and the environment is just too lackadaisical.

  6. The company doesn’t ask, and it doesn’t listen. When visitors approach the company, they are viewed as necessary evils. Employees say, “This place would be great if it weren’t for the customers” or “The suppliers are the enemy.” Visitors are not looked upon as information resources, they are not asked for their opinions, and their opinions are not respected if they are volunteered. There may be “lip service” or “mail service” for obtaining feedback, but it is a mechanical exercise not an attempt for a constructively critical analysis. Senior management thinks it knows all the answers, so there is little, if any, use of outside consultants. Communication doesn’t flow, it drains. Employees do not get straight answers to reasonable questions; they get double-talk or “politically straddled” answers.

When one of these corporate maladies is present, usually other maladies show up soon thereafter.

William P. Fisher, Ph.D. is the Darden Chair in the Rosen College of Hospitality Management at the University of Central Florida in Orlando. A former CEO of the National Restaurant Association and the American Hotel and Lodging Association he is the recipient of numerous awards including the CHRIE Educator of the Year and the Michael E. Hurst Award for Educational Excellence, and is a Diplomat of the National Restaurant Association's Educational Foundation. An author and noted speaker, he serves on corporate boards in concert with his consulting assignments. A former U.S. Air Force Officer, he is a graduate of the Cornell School of Hotel Administration.

Reprinted with permission from Cayuga Hospitality Review.  All rights reserved.


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Also See: Do You Think Like a Leader or a Manager? / William P. Fisher. Ph.D. / October 2009

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You Need to Reset Your Exit Strategy / Jim Burr / September 2009

The Electronic Guestroom / Jules A. Sieburgh / September 2009

LEADERSHIP: The Basis for Management / William P. Fisher Ph.D. / September 2009

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