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Culture Clash

Learn to recognize the warning signs of a business on the verge of collapse.

Is your company headed for trouble? Long before a business fails, you can count on warning signs to start flashing. "If you have your eyes open and know what to look for, you can anticipate and avoid big problems," says Fran Lipson, a vice president and managing director with Boston-based Burke Strategic Consulting Group who specializes in turning around businesses that have hit a wall and are nearing collapse.

Although there's no disputing the role of shaky finances in small-business failures, there are other issues that may be equally important. "Human issues--problems in the corporate culture--can play a big part, too," says Lipson.

When a company's culture--its internal belief system, values and methods--turns sour, productivity tumbles. "The culture in trouble is one that's turned away from the common, collective good and focused on egocentric concerns," says John Nirenberg, Ph.D., business consultant and executive director/chair for the department of doctoral studies in business at the University of Phoenix. Put more plainly, in a company that's going bad, workers stop putting out any effort on behalf of the business as a whole; they do what's required to get by in their jobs and nothing more. "That's not an attitude that spawns business growth," says Nirenberg.

Even so, discovering this before the disease turns terminal may be difficult for an entrepreneur because the desire to succeed can be so powerful, it overwhelms the ability to perceive trouble spots. "Entrepreneurs just don't pay enough attention to [their company's] developing culture. By the time they notice what's occurred, the culture has fully formed and it can be very hard to change," says Ron Riggio, director of the Kravis Leadership Institute, a leadership research organization at Claremont McKenna College in Claremont, California.

Fighting the tendency to ignore problems and seeing problems when they're still small enough to be quickly and easily remedied is crucial. So how do you monitor the business on an ongoing basis? "Stay in synch with your employees," says Lipson.

"Get out among your employees and listen," agrees John Peterson, managing director of the Los Angeles executive search firm Greger/Peterson. "A CEO told me, `Every good decision I made, I was out in the field; every bad decision I made, I was sitting at my desk in my office.' Talk to people at every level in your organization. And listen hard to what they're telling you."

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This article was originally published in the November 1997 print edition of Entrepreneur with the headline: Culture Clash.

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