When Organizations become excessively arrogant as a result of Success (Warning Signal #1), they pursue undisciplined Growth (Warning Signal #2), and they begin denying Risk (Warning Signal #3). The combination of these factors often results into Panic, Confusion and Desperate Actions (Warning Signal #4).

The descent into panic and confusion normally takes a turn to the worse when Organizations react to crises by going for quick fixes instead of kickstarting a proven, reliable process that could help rebuild long-term momentum with consistency.

Key indicators of Warning Signal #4

In How the Mighty Fall, Jim Collins gives a number of indicators that could be descriptive of this warning signal. These include:

• Silver Bullet Salvation: The tendency to promote drastic measures and frantically jumping from one initiative to the other in a pattern of chronic inconsistency.
• Looking for a Hero: The Board of Directors will react to difficult times by seeking a charismatic leader from outside the boundaries of the Organization who hasn’t gone through the different ranks at the Organization to inherently know what needs to be done.
• Erosion of core values and self-belief: The Company’s core values have been eroded to the point where they’ve become irrelevant, and people have lost their belief in succeeding or winning anymore.
• Weakened Financial Strength: The Organization experiences cash flow and liquidity problems. It further undergoes several chaotic and nonsensical restructurings, where options become increasingly restricted and strategic decisions become dictated by external circumstances.

Recounting the Impact of COVID-19 on Organizations

While it’s no longer a major global threat today, it is still painful to reflect on the memories of the COVID-19 Pandemic, on the millions of lives lost, the suffering and grief, and the myriad disruptions to livelihoods and Organizations.

Low or non-existent consumer demand, reduced earning and stay-at-home orders caused untold disruptions to Organizations. And out of panic and confusion, we saw many Organizations take uncalculated, desperate decisions and actions which made their situations much harder.

Under increasing pressure, CEOs made some difficult judgment calls to survive the crisis and, in the process, they made lots of detrimental mistakes. Many of them moved into crisis management mode, dealing with the many immediate problems, but failed to step out of it to create sound strategies and plans for the future. As a result, countless Organizations were declared bankrupt while others just closed shop.

Lessons from Steve Jobs and Apple

When Steve Jobs went back to Apple in 1997 as interim CEO, he was faced with the task of making Apple profitable again. But what he did is simply amazing: he turned the Company from losing $1 billion to a $309 million profit a year later, ultimately saving the company and setting the course for decades of remarkable growth.  And here are three key lessons we learnt:

1. Focus on core products: Jobs ordered Apple to cancel 70% of its redundant product lines and restore Apple back to its core ethos of offering personal computers. From this point on, Jobs’ plan was to have Apple produce four total products: two desktop computers and two portable devices.
2. Collaborate with rivals: Jobs formed a partnership with Microsoft, a long-time rival of Apple, to secure a cash flow injection. During difficult times, Organizations may benefit from seeking out unlikely partnerships or collaborations with competitors to find new sources of revenue.
3. Prioritize the customer experience: Jobs understood that Apple’s commitment to offering the best products would be undercut if short-term profit and cost targets were the sole criteria for success. During difficult times, Organizations should prioritize the customer experience and seek to meet their needs and expectations, even if it means making short-term sacrifices for long-term gains.

In the end, when an Organization is going through a difficult period, revival may only be possible when leadership returns to their fundamentals and gain clarity about what is core, what should be held firm and what needs to change!

To be continued…

Read More (Part I, II, III):

https://talisconsults.com/the-five-warning-signals-for-a-failing-organization-part-1/

https://talisconsults.com/the-five-warning-signals-for-a-failing-organization-part-ii/

https://talisconsults.com/the-five-warning-signals-for-a-failing-organization-part-iii-denial-of-risk-and-failure-to-confront-brutal-facts/

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