x Abu Dhabi, UAETuesday 25 July 2017

How can you tell if your company is sinking?

The Life: In these uncertain economic times, employees need to be aware of signs that the company they work for is in trouble. But what should the look for? Experts explain.

If your usual morning coffee has just been replaced by an inferior brand, or your expenses are becoming more tightly scrutinised, start worrying.

Because, while they may appear to be financially prudent cost-cutting measures, they could also be signs of a sinking ship.

"Often the first thing that's noticed by the majority of the firm is that training budgets are slashed, company policies are tightened. Travel expenses and perks are much more tightly scrutinised, and frequently paid at the absolute last minute, and other intangibles are subtly downgraded," says Dr Simon Fletcher, a senior organisational psychologist with Innovative Human Resource Solutions in Dubai.

Companies then frequently start to tighten up on other areas, he adds, such as timekeeping. Pay rises are deferred and bonuses stopped. And a sure sign of trouble is when all of the finance team simultaneously update their LinkedIn profiles, adds Toby Simpson, the managing director at the Gulf Recruitment Group in Dubai.

"Everyone who is connected to them gets an update that they have added to their profile, so you can guess that someone is either trying to sell something, or find a new job," he says.

A sudden increase in the number of closed-door meetings among management, particularly if they are held at odd hours or arranged at short notice, is another warning sign - as is the sudden departure of a senior executive prompting a meeting or company-wide email to explain their exit was voluntary, says Dr Fletcher.

"One tell-tale sign is when long-serving employees, core 'company men', start leaving; they not infrequently have a good view of the position of the company simply because of their history in the organisation and their long-term knowledge of how it operates and what the good and bad times from the past feel like," he adds.

In large companies warning signs may include management dismissing technologies like iPhones or Twitter as "toys" customers will never use, says Michael Wolfe, the chief executive of Pipewise. New opportunities are framed in terms of how they impact the existing legacy businesses. And no one can answer, "why work here?" except to talk about the dental plan, adds Mr Wolfe.

In small companies, beware if the chief executive starts describing himself as a "visionary" in his biography. If he does not share the company plan, finances, shares outstanding, or any of the information people actually care the most about, it is another sure sign, as is a launch party that includes no customers, only other companies, says Mr Wolfe.

Failing organisations may also start to measure their performance, in the vain hope that measuring more frequently will somehow improve what they are measuring.

"Not infrequently, they place more and more emphasis on what they are measuring - they start to value what they measure rather than measuring what the company values," says Dr Fletcher.

Rosabeth Moss-Kanter, from Harvard Business School, describes these factors as "organisational pathologies" - self-reinforcing beliefs and behaviours that spiral the organisation towards an almost inevitable decline," he adds.

But sometimes some of the best turnarounds take place because companies are truly in trouble.

They are forced to evaluate their core strategy, and many companies take the opportunity to ask the tough questions, says Paul Leinwand, partner at the consultancy Booz & Company.

"Taking full advantage of a difficult situation may mean more than just reallocating cost; it may mean making tough decisions on the portfolio of businesses. Companies that get this right recognise that some businesses will better match up with those few capabilities the company is or will be great at," he adds.

gduncan@thenational.ae

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