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  • Writer's pictureMatthew Jenkins

Why companies blindly walk off cliffs!

Five months into 2018 and the headlines are becoming all too familiar. I’m not talking about whether Brexit is any closer to having clarity, or whether a political leader has stirred something up via social media but rather the sheer number of headlines we hear these days regarding yet another “formerly successful organisation” falling from grace and into the abyss. It appears it is all too easy these days for these once successful organisations to fail without having taken enough measures to prevent it.  

This year alone, we’ve seen Carillion fail very publicly and with much disgrace. Toys “R” Us and Maplins fell into administration and M&S, Tesco and Mothercare have all recently announced store closures as part of a shake-up or as a mechanism for preventative measures. We’ve even had the debacle of KFC not being able to deliver chicken to its chicken shops and Oxfam embroiled in not so charitable behaviours. These are not start-ups trying to work out how to take on the world, these are established entities that at points in time, were top of their class, being led by leaders that should know and do better. These days it would appear it is more difficult to run a successful business than it is to blindly walk a previously successful company off a metaphorical cliff.

This is the reality of the world we live in today. Past success is not guaranteed and leaders who fail to pay attention to what’s going in their organisations (either through wilful blindness or blissful ignorance) are getting caught out by just how rapid the fall from grace is. This isn’t new though; history is littered with companies that once were hailed but are no longer around to spin tall tales. Kodak, Blockbuster, Nokia, Blackberry, Tower Records, AOL, Woolworths all fell into history in similar ways to that which Carillion, Toys “R” Us and others have this year. 

You could rightly argue that for many, they simply didn’t see the future coming or failed to react to it quickly enough. For some it may even be plain ol’ bad luck. It’s well publicised though that Blockbuster didn’t consider Netflix to be a threat and within two years of announcing that, the organisation had gone under. Steve Jobs successfully predicted the retail sector’s transformation as far back as 1997, yet many retail giants, like Blockbuster, didn’t see it coming until it was too late.

This isn’t about innovation, correction, it’s not all about innovation. It’s self-evident that companies need to “change in order to survive” (a bit of Darwin for you there) but this on-going trend of companies failing comes back to something far simpler than failure to evolve. It’s about leadership. It’s about a leader’s ability to know the inner workings of what’s going on in their organisation in order to ensure that it remains healthy, humble and hungry. The game has been changing for some time now and emerging technologies and approaches are making it all the more simple to hear and listen to the heartbeat of a company, its people. Whilst “people” in the broad sense of the term may not be able to speak with total conviction to the financial security of a company or the latest EBITDA position, they can speak with absolute truth the extent to which fires run through an organisation.

Leadership is a broad term but the buck stops at the top. Read the reports that get publicly socialised after a collapse ensues and usually within it lies a story of how people in the business tried to flag the problems much earlier in the process or how leaders stopped paying attention to what was necessary in favour of protecting their own ego or their own financial reward. The recent report into Carillion found exactly this with headline statements reported like, “even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses.”

Toys “R” Us saddled itself with debt that meant it couldn’t invest money in the upkeep of its rapidly dating stores. Hardly the “magical place” its adverts shouted about back in the 90s. Alongside this, it’s well reported that “despite sharply declining sales, Toys "R" Us was also extremely late to the game in closing stores. At the time of its bankruptcy filing, the chain had 1,697 stores" - more than it had ever had. Poor leadership again; be that past leadership or the regime at the end. Throw into the mix the recent bashing of the big four accountancy firms / consultancies and we begin to shed light on more of the same problems within another sector. This, “cosy club” as the Carillion report suggests, took £72m in fees over a decade leading up the failure, yet somehow missed the signs of a failing business. By all accounts, the solution many leaders turn to in order to survive (consultancies) looks from the surface to be part of the problem.

Leaders need to stay in touch with what’s going on in their business and recognise that this means being “in the know”. Not just in the know around finances and revenue against targets but really “in the know”. For instance, knowing how the business is performing, from its people’s perspective: where are they experiencing pain?; how can a fire be put out while it’s still a developing ember rather than wait until it’s a blazing furnace?; how are people feeling and how is the leadership style within the organisation influencing their experience as an employee?; is culture working for the organisation as a strength or is it a fatal flaw just waiting to take the company down? 

Okay, so this is a bleak reflection on a proportion of the business world today. From my slightly negative stance, what has played out this year as a continuation of recent years could be interpreted as “last one standing, please turn out the lights”. It doesn’t have to be this way though. The landscape is changing and traditional approaches for knowing what’s going on in a business need no longer to be people-driven (interviews, focus groups, etc.). It can be dramatically sped up and automated through rapidly advancing technological approaches (e.g. RPA and robo-advice). Like robo-advisors have disrupted the financial industry, similar tools exist to help leaders rapidly assess the health of their organisation. Decision-making and action can be taken around what matters in real-time. Leaders just need to be curious enough to want to use them and vulnerable enough to hear the results. Leaders hold the fate of their destiny in their own hands at the end of the day….. the robots are coming as they say, just put them to use early enough to make a difference. A leader’s job is to look closely enough in the mirror to see the imperfections and adjust with the times to use approaches and tools that can help an organisation adjust appropriately.

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