A crisis is the moment of truth for many companies. A central question is why some companies face this moment of truth and respond successfully to its challenges while others are doomed to reorganization and eventual bankruptcy. Excuses of uncontrollable external factors can not be accepted in a high percentage of cases. A changing economy, increasing competitive pressures, changing consumer tastes, government legislation and a host of other external challenges are part of doing business and running a company.
Most problems are caused by leadership, but leadership often will not admit its errors. The causes of decline are set in motion long before their outward manifestation. Companies can be declining when the performance record shows they are going up.
The Ostrich Approach
In many cases leadership went about their business unaware of the gathering storm until it was too late. A stagnating or declining company seems to first need a deepened threat or shock to spur it to action. Steadily poor performance, so long as it does not develop a crisis, seems to be tolerated. This seems to occur most frequently in privately held companies. The principle reason for this blindness centers on the top leader's ego. An entrepreneur who developed a market often can't bring himself to withdraw from it.
Often leadership is so close to the problem and so enmeshed in the detail that their overall vision is clouded. They overlook the real problems, as well as opportunities that could have brought success. Even when trouble is brewing, many leaders are so busy doing the things they like to do that there is no time for the things they should be doing.
When a company is not doing well, leadership may refuse to admit it and put forth impressive arguments to justify the poor showing. Dodging the truth can go on for some time. Convincing leadership to take action when there is a general realization a problem exists can be hard.
Reality Arrives
Eventually, a company that is sliding downhill has to admit to the seriousness of the situation. Leaders then begin seeking answers to their problems and can no longer be satisfied with excuses. This is the critical time, for what they do and how they do it will determine whether they survive. Most leaders in this situation are not prepared to face the many negative forces at work when the company reaches it crisis point.
The process of self-extrication is inevitably painful, but it seldom needs to be as agonizing as many companies make it. Often a company's losses .... financial, strategic and psychological .... can be substantially reduced if leadership takes a systematic and rational approach to the problem.
The blame for decline can be laid on leadership's desk in all, but a few cases. But if decline is the agony of defeat for leadership, then leadership can also claim credit for the thrill of victory. The achievement of a successful turnaround is mostly a victory of leadership performance. It is also a testament to the foresight of directors, the courage of employees and the loyalty of customers and creditors.
As a leader of your company, will you face reality sooner rather than later if your organization is getting off track..... or ..... will you wait until a liquidity crisis hits and you run out of money?
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