4 signs a business crisis is coming

4 signs a business crisis is coming

It's no secret that every company goes through various changes during its lifetime and it is very important to identify and analyze in time how positive or negative these changes are. This is, to make decisions at the right time and avoid what we know as business crises.

Among the important factors affecting the viability of a company are innovation, access to credit, company size, financial structure, type of market chosen, among others. All of these are key elements in business development and undoubtedly determine the future of the company.

Generally, companies have KPI indicators that allow them to monitor and improve their operations along the way. However, on several occasions, for various reasons, mistakes or failures are often overlooked, which can lead to a company going into crisis, assuming that they are on the right track.

According to a study conducted by W. Weitzel and E. Jonsson at Cornell University in 1989, there are 4 prior stages that expose a company to the elements of a crisis, without being too visible in the day-to-day practice of managers. This is because they assume that they have a strategic structure and management that "knows" the situation.

In that order of ideas, the 4 signs of an impending business crisis are:

1. managerial blindness

At this stage, the company exhibits aspects such as low sales, increased labor conflict, negative variations in the rate of employee desertion (reference is not always made to representative variations, but rather gradual and continuous variations which indicate that something is happening and is not going well). good. ) or effects such as increased costs of negotiating with customers and/or suppliers.

This last factor is usually subject to phenomena that are generally not seen by companies because they are immersed in the business, but are easily noticed by those observing from the outside.

2. Not active

At this point, managers show a refusal to make substantive changes in operations, because they usually remember the company's best moments. They insist that times will change and that their products are the best on the market and buyers will not replace anything.

This type of situation usually occurs in management with extensive experience who over the years have solidified their business idea, preventing structural improvements because it affects the way they do things on a day-to-day basis.

3. wrong action

Once the problem becomes more real and the difficulty increases in complexity, management takes action, but without changing the old way of working, and that's when the popular saying is often heard: “in this company things are always done that way. ”, leading the company to increase the size of the problem and make it irreparable in the future.

4. Crisis

When what we call a "crisis" arrives, that's when real and immediate change is sought. At this point, the company has experienced progressive difficulties and on many occasions may have lost some of its market, its negotiating capacity and may even have experienced financial difficulties, forcing it to make decisions that are not in the interests of the board of directors. or shareholders of the organization.

It is worth mentioning that decision making at any of these stages does not guarantee a complete recovery of the company, but it does lead to progressive improvements that in the medium term will bring the company to an acceptable operating level.

What is important is to make radical and substantive changes that allow the company to rebuild its path and become sustainable for a considerable period of time. Being flexible and always supporting change and continuous market learning, will enable organizations to achieve their three main goals: Be profitable, grow and stay on time.

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