Almost the only thing that is an absolute truth in a business is its cash position. Everything else is open to interpretation. Sometimes staff can build up false beliefs about their business or their industry, because they don’t have access to perfect information.
In my work with distressed companies, there’s usually a painful phase right at the start called getting to the truth. Leaders like you are no less prone to building up false beliefs than the rest of the team. The consequences for the business are worse, though…because very few employees will challenge the boss. Over time, the false belief takes hold throughout the organisation, and the leader’s mistake is magnified in a hundred small ways every day.
The root of these false beliefs is usually a negative generalisation. “My people can’t be trusted to manage inventory,” one CEO told me at the start of a project. “Our customers are addicted to discounts,” said another.
A generalisation like this rings true (especially after the boss has said it a couple of times). It becomes a useful shorthand justification for making decisions. Negative generalisations are always false. More often than not, it is a subconscious signal of the leader’s biggest fears.
Both the CEOs quoted above operated in the retail space; both of them were most threatened by margin erosion. Their false beliefs nearly sabotaged both their businesses. The “inventory” CEO created an inventory management system that actually caused bloats and shortages of crucial stock items (because it was designed to operate independently of his “untrustworthy” people). The “discounts” CEO created a marketing culture that had only one weapon in its armoury: discounts! In both cases margins were dangerously eroded. They had created the situation they most feared. In each case, we had to get to the truth before we could start building the solutions.
If you’re facing a problem at the moment, it’s worth taking a few moments to analyse the assumptions that underlie your definition of the problem. Treat anything that isn’t your actual current cash position as suspicious and open to question. And treat any negative generalisation you uncover as actively dangerous and misleading. Get to the truth. It’s usually not as bad as we fear, but if it passes you by it might be.
with best wishes,
Tom Pickering FIET
Winner 2015 Global Turnaround Firm of the Year