“How Did This Happen?”
I am often asked to evaluate a business from an operational and financial perspective. This request usually comes from an executive who is trying to understand why their business is “suddenly” struggling and not performing as well as they think it should. After presenting an assessment, which can be sobering, their response is often “How Can That Be?”. There are a few usual suspects.
The “do it all” exec- often an issue with a smaller firm is an owner/CEO trying to wear too many hats as the business expands. They still want be hands on in all functions (strategy, sales, IT, HR etc) regardless of ability. As a business begins to evolve the problem becomes more acute. Instead of delegating tasks and responsibilities so they can focus on key drivers, they insist on “doing it all” and end up doing nothing well. This leads to a misalignment of perception that things are fine since they “handling” them vs the reality that there are cracks in the foundation.
Believing the hype - this can occur in an environment where every new sale is celebrated but every lost client is ignored. Every positive P&L month is shouted out but every disappointing month is just an “blip”. Inevitably, the good months become less frequent and the bad months become the norm - but people can’t quite understand why. By the time they take a clear-eyed look, the problems have mounted often to critical status. In the end the remedy is not to diminish solid accomplishments but treat business performance with the objectivity and scrutiny it deserves.
Lack of foresight - this can occur when reporting and analysis are “today” based and there is no future forecasting being performed. Owners and key leaders will be fully cognizant of how the business is performing but not how it is likely to perform given certain conditions and circumstances. A good example is when a company lacks a formal sales pipeline reporting. Whether using a SAAS system or manual tracking, it is critical to understand the sales landscape. I have seen companies tumble along with the refrains like “we always have a good xxx quarter” with absolutely no real data to support it. Many times sales do come in and things are fine. But it is when they don’t, and no other contingency has been made, that is easy to answer the “How can that be?” question.