What Kills Companies

May 25, 1998

With times as good as they are, particularly for architecture, engineering, and building-related environmental consulting firms, it’s hard to think about failure. But there are still firms going out of business and firms on the decline. There are also plenty of companies unaware of the danger just around the corner because all their numbers look good. Here are five things that kill companies: Lack of creativity. Too many firms get stuck in a rut. They do their work the same way every time. They are married to outmoded processes. They don’t listen. They don’t see new possibilities. They are afraid to try anything new. They won’t try new pricing strategies. They can’t vary their scope of services. They can’t try out any new materials. They can’t cut down on bureaucracy. As a result, they never make breakthroughs, never hit a home run, and never do anything much better than you would expect them to. This lack of creativity comes about by hiring the wrong people, by having leaders who don’t tolerate new ideas, and by arrogance that comes from thinking you already have the proverbial “grandma’s recipe.” Greed. The more you make, the more you want. It’s human nature. We all just ratchet up the scale as we become more successful. Unfortunately, this causes some people to forget what got them there, and, as a result, they suck too much out of the company. Little we do as firms (in this industry) can be accomplished by one person. Whether it’s making the sale or doing the job, it’s almost always some kind of team effort. The team has to feel like everyone is being adequately rewarded for their efforts. If the people at the top start to think it’s all them who made it happen, and view those at the levels beneath them as expendable, a day of reckoning will occur. No critics. If no one will tell the emperor that he (or she) has no clothes, then the emperor is bound to make some stupid moves every now and then. Some of the people running A/E and environmental firms are like emperors, particularly those in firms that have few owners or senior managers. They operate pretty much on their own and make decisions daily that affect the lives of all of their employees with little counsel from anyone else. Not to mention that they can be intimidating. If these people are so strong that they have no critics, either inside the company or out (such as an assertive spouse), then there’s a good chance their egos will go out of control. They’ll start to think they are infallible, and that’s when major mistakes will be made! Creeping bureaucracy. As you get larger, you tend to become more bureaucratic. Some of it is borne out of necessity. Much of it is borne out of convention. Little is more demotivating to entrepreneurial talent than a bunch of unnecessary steps or procedures (i.e., hurdles) that have to be gone through to get something done. Many of the budgets we create are a waste of time because we can’t say to someone “you can’t have a new pencil—it’s not in the budget.” The person has to do their job! Many of the forms we use for things such as reproduction, routing, fax covers, etc. would be better off recycled and replaced by a simple Post-It note. Many of our performance appraisal systems we could do without if our managers would simply tell people that they did well or poorly as it becomes known to them. Many of our bonus determination procedures could be scrapped if we had a good formula. A lot of what we accept as necessary on a daily basis is not, so we get all bogged down and forget what we are supposed to be doing. Arrogance. “We’re Number One.” I’ve said it myself. But we all walk a fine line between our roles as cheerleaders and our need to keep the troops ever vigilant, with a watchful eye on doing what it takes to stay on top. Generally, that means keeping your product or service the best, and not resting on your laurels or trading too long on your goodwill. A good example of corporate arrogance in another industry is General Motors Corporation. Since 1980, they have declined from a 50% share of the U.S. market down to a 26-30% share. They are now in danger of being overtaken by Ford, largely as a result of their arrogance and false belief that brand loyalty that came from doing a good job in years past would last forever. The aluminum-blocked Vega, the Cadillac Cimmaron, the Caddy V-8-6-4, and one fiasco after another can be directly attributed to this arrogance. Now, GM is getting ready to do it again with Saturn, a company that has been very well received but is getting starved by a lack of new products. The brand will only last so long. There are other things that cause companies to fail. The list is long! Poor cash flow, lawsuits, unplanned crises, and other situations can all lead to a firm’s demise. But many of these ostensible reasons for failure are, in my opinion, symptoms of higher-level problems such as those mentioned above. Originally published 5/25/1998

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Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.