failing organizations the dump truck syndrome
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Failing organizations the dump truck syndromeTRANSCRIPT
Failing Organizations - The Dump Truck Syndrome
Author: Aurobindo Saxena
Background
• A recent survey on start up failure rate indicated that 25% of start ups fail in the 1st year itself; 36% by 2nd and almost 44% by the 3rd year. By the end of Year 10 over 70% start ups fail.
• The worst performers are players in the Information and Communication space.
• The research cited incompetence of the promoter group as one of the biggest reasons for these failures.
• The best part is that most investors "bury their dead very quietly,". They talk about their successes but abstain from talking about the failures at all.
• Working in organizations on the verge of collapse can be one of the worst experiences of one’s career.
• One day I saw a dump truck offloading material at a construction site. I observed that this is quite similar to how organizations typically collapse. I have build a theoretical model and plan to back it up with empirical evidence collected through primary research.
• The objective of this thought piece is to show how failing organizations emit patterns that are similar to that of a dump truck offloading material, how does the dynamics within these organizations evolve. This thought piece also attempts to provide directions for employees stuck in this situation and indicates when to press the panic button and put a stop loss.
Key Question
• Is there a similarity in patterns emerging from a failing organization with a dump truck offloading material?
Key Difference
• The key difference between these two cases is that while the material being offloaded by a dump truck is inactive, the people who are part of a failing organization are both active and reactive
Key Assumptions
• The key assumption here is that the company has a professional management which is separate from the owners. This would include a professional President / CEO / MD.
Correlation between failing organizations and dump truck offloading
Sen
iori
ty
Visibility within the organization
President
CEO Business Heads
Business Heads of Smaller Divisions
Business at Launch….a stable ship
• Exhibit 1
The First Wave of Departures
• Exhibit 2
The Second Wave of Departures
• Exhibit 3
Key Hypothesis 1. People who are most senior in the organization in terms of designation and have a higher
visibility within the organization are the first to leave the sinking ship or failing organizations.
2. Since the job market often tends to be more favourable towards the entry level people, these set of employees are part of the second wave of departure.
3. People who wish to remain with the organization for as long as possible are more likely to reduce their visibility in the organization as downgrading of their seniority may not always be the most practical scenario
4. The last to leave the sinking ship would be people who are at the middle of the pyramid in terms of designation and also have a low public visibility in the organization
5. Another tangent to this problem is the quantum of value add that an individual does. Here people who are at either extremes are the first to exit. So the impact is that of a candle burning from both ends.
Key Hypothesis
• The second line of command has three options:
Scenarios Relative Seniority
Relative Visibility
Overall Impact
Outcome
Elevate themselves
Increases Increases Improves Turn around success story
Deteriorate Quick Move out
Maintain their status
No Change No Change
Improves Seniority may improve
Deteriorate Delayed Move out
They get into a shell and retreat
Decreases Decreases Improves Relative Seniority may decline
Deteriorate Last set of people to de-board the sinking ship
Symptoms of Failure
• Declining top line and bottom line
• Erosion of the Net Worth
• Shutting down of one or more business lines
• Working Capital Crunch
• Knee Jerk Reactions by the Management
• Challenges in Bank Financing
• Delay in Salaries
• Default in Statutory Payments
So what’s the best strategy?
• Big Question 1: So what should one do when the ship starts sinking?
I think one has to play this one on the front foot rather than on the back foot.
So, take charge of things, try and get relatively senior within the system
Put your best effort to save the ship and contribute as much as you can
The worst strategy is to go into a shell and try to postpone your exit / termination, as later on, the bad word may have spread all around and all the opportunities prevalent in the market may have been exploited by others. Also with passing time, one’s negotiating power is only set to come down.
• Big Question 2: So when should an employee press the panic button and move out?
When the CEO / President level people have moved out
The people in command reduce their visibility in the organization
When the entry level people start leaving the organization in big numbers.
When the vendors and creditors start banging your doors
