No, I’m not speaking financially troubled (though that’s probably around the corner if these signs apply). I’m talking about a company full of unhappy, discontented employees. They’re all around us. You may be working for one right now.

Here are five signs of a troubled company

1. A focus on policy rather than principle

Troubled companies often have too many people making rules at the expense of principles. Principles should be the guiding forces behind everything a company does. The most important principle: Customer Satisfaction. A company that initiates a rule for every potentiality without considering how those rules will affect a front line employee’s ability to attract and retain customers will have frustrated employees and dwindling customer transactions.

The best companies have the best principles – can we agree on that? So what are the principles that a good company uses to propel itself into a great company?

• Honesty - telling the truth to employees, customers, and stakeholders. Companies that focus primarily on policy will lie to or withhold information from employees about how much things costs (such as total corporate office expenses).
• Understanding - going beyond policies to understanding how those policies affect everyone on the front lines and modifying them accordingly so that employees are better able to grow the business.
• Knowledge of the market - beyond just having knowledge, top companies are committed to growing their knowledge base by constantly interacting with customers and employees.
• Utilitarianism - knowing how each and every single decision will affect the bottom line. Nothing can get a company in trouble faster than a CEO who doesn’t know what things cost … and how they will affect the return on shareholder’s investment. That is, unless the CEO just doesn’t care.

2. An inordinate concentration on today rather than tomorrow

Troubled companies don’t try to be inventive or innovative, instead they come to the marketplace with the same old, tired marketing, the same tired old advertising, the same old, tired products, and the same old, tired processes. There is no desire for change, no desire to innovate, and no desire to become better by becoming different. Then management wonders why it gets harder and harder to grow profits.

Customers are accustomed to a company mixing things up every now and then. Just make sure the changes are quantifiable and that the changes to the bottom line are positive. It does no good to spend $250,000 remodeling a showroom unless you’ve done the research to understand HOW or even IF it will make more money for the company.

3. Leadership doesn’t live up to its promises or know what it’s doing

Troubled companies are full of managers (they really aren’t leaders) who want increasing revenues, but never meet with the source of those revenues (customers); they make grandiose plans for productivity increases, but never commit resources to deliver them; and come up with programs for change, but never do anything to implement those programs. The changes that are implemented are for aesthetic reasons only and at that point, it’s just money out the door.

4. A lack of confidence in customers

Troubled companies keep the customer away from anyone that isn’t directly tied to a sales position. Customer’s usually return the favor by refusing to share their needs or frustrations and as a result, take their business elsewhere. When a customer doesn’t return it’s because:

• They move away (3%).
• They become friends ^[2] with your competitor’s sales staff (5%).
• They find a better deal at your competitor (9%).
• They are dissatisfied with your products (15%).
• They experience rudeness and unresponsiveness at your business (68%) - for the record, rudeness and unresponsiveness is a management problem.

5. A distrust of employees

Troubled companies believe that employees are lazy and worthless. If you treat people this way, they will either behave how you expect them to act, or spend their time and energy building a case that you’re wrong. In either case, both the customer and the business loses.

I’ve personally witnessed executives who believe that virtually every employee is nothing but a child – so guess how employees are treated? Maybe the problem isn’t with the perceived childish behavior of the employee, but with the absolute dogmatic insistence that the executive’s every command be followed to the letter – regardless of whether it works or not.

BONUS:

6. Promotion of unqualified employees because of WHO they know

Nothing can spell disaster more quickly than putting into positions of leadership people without the relevant experience to properly do the job. What inevitably happens is those people will discount the experienced people under them because they feel threatened by their own lack of it. From that point, there’s no end to the bottom.

What should the good business leader do?

• Define your core principles and design policies and procedures around them.
• Make goals that stretch out from the next quarter to the next quarter century.
• Install a leadership team that knows how to keep its promises.
• Insure your management team is in tune with your customers.
• Hire trustworthy employees and then trust them.
• ONLY ONLY ONLY promote people because they have EARNED the position.

About the author

Ron has written 1080 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal ^[3] in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a partner in a national building materials company.

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