By Bob Vanourek, Senior Consultant, GEM Strategy Management, Inc.
Posted March 6, 2017
Why is it that a corporate financial crash seems obvious in hindsight? The “Monday morning quarterbacks” cite the warning signs that were brewing. But why weren’t those signals heeded beforehand? Is your organization headed for a financial implosion?
Sometimes major external shifts cause a company to go under – shifts such as a major industry crisis or technology transformation. More frequently, a company implodes because of internal deficiencies that leaders ignore. But internally driven crashes don’t occur without emitting warning signs. These warning signs are not financial signals, such as revenue declines, shrinking margins, slowing inventory turns, deteriorating working capital ratios, and falling profits. Those metrics are lagging indicators.
Leading indicators are more important to watch because leaders can address them before the financials go south. What are some early warning signals of a potential crash? Based on my experience as a leader in eight industries and as the CEO of five very different companies, here’s my list of 50 red-flag indicators covering a wide variety of signals. I list 50 leading indicators because, even though some are louder warnings than others, all are important to understand the future of your business
You and some trusted colleagues can score your organization on these warning signals.
50 Early Warning Signals of an Organizational Crash
5 points = this happens often
3 points = this happens occasionally
1 point = we don’t have this problem
To ensure you have an objective assessment, have one or two trusted colleagues also score your organization, even if they have to make some guesses at some answers. Assure them they will not be penalized for an honest assessment – you are trying to avoid a disastrous crash.
If your organization scored:
· 50-125 points: Congratulations, you are unlikely to crash and burn.
· 126-200 points: There could be trouble ahead. Some changes are needed.
· 201-250 points: Disaster looms.
Review and discuss any metrics with a 1 or 3 rating. Then you and your team can brainstorm solutions and prioritize action plans. You’ll unleash their creativity and heighten their engagement.
There is no reason for you to be blindsided by an organizational crash. Pay attention to the warning signs of leading indicators.
Bob Vanourek is a senior consultant with GEM Strategy Management and is the former CEO of five companies and a frequent speaker, consultant, and coach on organizational leadership. He is the co-author of the award-winning book, Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations. Bob’s latest book is Leadership Wisdom: Lessons from Poetry, Prose, and Curious Verse http://tinyurl.com/zr2peng You can see Bob’s entire profile on http:gemstrategymanagement.com or reach him at 970.390.4441.