Ways to Know If Your Business Is Failing, Part 2

In my previous article I shared my observations on ways to know a business is failing and here are a few more;

1. When I first get involved with a new company, I interview the key people and in subsequent days, I informally speak with as many people in the organization as I can. Whenever someone can’t tell me quickly and clearly what he or she does, this is a red flag. I find that people that are clear on their job functions can tell you what they do quickly, concisely and energetically. For the people that can’t, there is an opportunity for me to see where the disconnect is. Are these employees encouraged in the organization? Are they where they want to be? Are they clear on the value the add to the overall process? Is management actively pursuing the goals of those they manage?

2. Ask people how their work fits into the overall work flow. Why are they doing what they do and how does it add value to the organization? As organizations age, processes often get put in place that solve specific issues. As time goes on, these issues often change and evolve but the processes in place don’t get changed. Look at the value stream of the company and how everyone is an integral part of it. Look for tasks that do not add value for your customers and realign those jobs. I guarantee you that people are much happier knowing they perform work that has meaning and adds to the success of the overall organization.

3. Look at inventories. Any kind of inventories. This goes from office supplies to bins of parts and nuts or bolts on the factory floor. The more inventory there is, the bigger the problem. Purchasing agents might tell you that they get a discount when buying large quantities but is this in line with your cash flow limitations? Is your purchasing manager aware of the cash restrictions and profit targets the company has month to month? Besides inventory “leakage”, you also have an opportunity cost. Wouldn’t you rather invest in items that generate money rather than in ones that just sit on the shelve for months? Look at “best in class” inventory turn overs and set clear targets on how to get there. Also be aware of “safety stock” as this camouflages uneven work flow in the factory and masks production control problems.

4. Look at your most profitable products. Is everyone in your organization aware of what they are? Are your resources aligned with these? Selling big ticket items might get all the attention but in reality it is often the little replacement parts that make the money. Is your organization aligned with this? Are people compensated accordingly? Are you developing products specifically aimed at your most profitable business segments or are products developed for a segment dear to your engineering department?

These are just a few quick ways to know if your business is running well or needs help. Look for more of my quick tips next week.