Tuesday, May 26, 2009

The Need for Turnaround When Smart Companies Do Dumb Things

We see examples of smart companies doing dumb things every day and there are books that have been written about this phenomenon. In fact, business news is full of stories about companies, senior executives, CEOs and Boards of Directors that have done something that from the outside or in hindsight looks to be dumb. In many cases it has required turnaround expertise to bring the company back to profitability and to survive.

Why do we see so much of this in the press?

First, bad news is much more newsworthy than good news so we see a lot of it being reported.

Second, hindsight is 20/20, so those of us who look at the results can see when there have been mistakes.

We need to remember two things

First, if mistakes are not being made by companies, very little learning occurs and the company will ultimately die. No one is right 100% of the time. So companies and senior executives need to be making mistakes (small mistakes) and hopefully learning from them.

Second, in most cases, the people who have led the mistakes didn’t start out to do dumb things. They really thought they had a winning idea.

But what are some of the root causes that turn what was expected to be a winning idea from the outset into a result that gets branded as dumb?

1 Operating without a clear strategic plan. Without the plan, the company is almost guaranteed to have unfocused resources and multi-direction activities. The result will be a number of failures, some that are going to be seen as dumb ideas.

2 Poor communication. Often a plan is devised by the executive group and then not well communicated to the organization. Hence the execution is flawed leading to lack of success.

3 Not heeding changing or changed market conditions. Once a program is underway in development, it generates a momentum all of its own and people/companies are hesitant to make changes, particularly if one has ownership in it. What was a good idea at the start becomes a dumb idea in a changed economy.

4 Insisting on consensus. The old adage is that the camel was designed by committee with a forced consensus. The more people involved, the harder it is to reach a workable solution and once reached, to change it in any way. This is not to recommend that all decisions be made unilaterally, but that a committee decision is viewed carefully.

5 Pride and arrogance getting in the way. It causes decisions to be based on “who is right” not “what is right”.

6 Unrealistic expectations. It is good to dream big dreams. However, realism must come into play and overreaching, overextending resources and over estimating causes disasters.

7 Budgets and budget changes. Often the original proposal has sufficient resources to achieve the result. However often either the resources are cut back for a variety of reasons or there are extensions to the project. Budget shrink and project creep set in and the result is always not good.

How could companies minimize the chances of making dumb mistakes?

1 Develop a clear realistic business strategic plan.

2 Get some expert help from someone who has been there before and has relevant experience

3 Make fact based decisions.

4 Act on what is right not who is right. Just because the CEO says they like it doesn’t necessarily mean it is a great idea. The organization knows their capabilities.

5 Do not force consensus.

6 Communicate, communicate, communicate.

7 Don’t shoot the messenger of bad news. Reward them for coming forward and avoid the huge dumb mistake.

9 When either the project or the budget changes, make the appropriate modifications.

10 Expect mistakes. Learn from each success and failure so that the small dumb mistakes become learning and never become big dumb mistakes.

If you have already made the dumb mistakes and are in trouble get some turnaround help quickly and get back on track. Squash the pride and arrogance and go for positive bottom line results.



John Maver
Maver Management Group
(925) 648-7561
Maver Management

View John Maver's profile on LinkedIn

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