Corporate crisis: The myth that nobody saw it coming

Companies don’t slide into a crisis overnight. There are usually clear warning signs long before chaos breaks out, but these signs are often overlooked, ignored, or misinterpreted. Why does this happen, and what can companies do to take early countermeasures?

In this series, I focus specifically on problems in companies with various causes. A corporate crisis usually arises from a symbiosis of poor personnel management and leadership, communication, decision-making ability, willingness to take responsibility, and ability to learn. In this blog post, you will find out the warning signs for crises, why they are often ignored, and how you, as an entrepreneur/manager, can arm yourself against them.

Nobody saw it coming is a myth. In almost all cases, someone saw it coming.

In all crisis cases, it is evident in retrospect that companies were warned of problems months or even years in advance, and the signs were there. However, the warnings fizzled out or were not taken seriously.

Warning signals for corporate crises

Only the present counts
All lights must flash red when a company is only concerned with the present. If a company no longer talks about opportunities in the future but about dangers, then there is fire under the roof. Let me compare: a couple in love who are sure they will stay together make plans for the future. If the relationship crumbles, the couple will be happy if they survive the next argument. Healthy couples, and therefore healthy companies, look to the future.

Everything will get better…
If you, as a manager, feel that your employees need to be more honest with you, there is a massive problem with your internal communication. Unfortunately, this is often the case. The employee fears for their job, excuses, and relativizations are quickly found. The truth is often unpleasant; for example, an employee who returns from a moderately successful trade fair usually knows precisely why. He should come clean with you as his superior and explain that the products/services are too expensive, for example, that competitor XY does it better or that the market has changed. Instead, appeasement and denial are used – everything will get better. It won’t; I can guarantee that from my many years of experience.

The miracle fails to materialize
Declining customer ratings or a high turnover of existing customers are clear signs that your company has failed to meet market requirements. The miracle of your products/services suddenly selling like hotcakes again will not happen. We humans tend to ignore or play down information that implies failure. Hope dies last, but by then, it is usually too late for the company.

Why are warning signals overlooked in companies?

There are many reasons why managers and employees ignore or do not recognize warning signals.

• Short-term thinking: Companies often focus on short-term success and quick profits, while long-term strategies are ignored. Especially in good economic times, structural deficiencies are frequently overlooked.
• Culture of silence: In many companies, employees are afraid to address problems. Instead, they prefer to keep up appearances so as not to provoke conflict.
• Lack of clarity about responsibility: If there are no clear responsibilities in the company, problems can easily be overlooked. Everyone relies on someone else to notice and solve the problem.
• Optimism fanaticism: Managers focus on the positive and underestimate or minimize adverse developments.
• Complexity: In large and complex company structures, signals can get lost in the mass of information. Data is collected but not analyzed correctly.

How can companies recognize warning signals?

Companies need to set up an early warning system to prevent a crisis. Here are some steps that can help:

• Promote a proactive corporate culture: Companies should encourage a culture of open dialog where issues are addressed openly and not swept under the rug. Employees must feel that their concerns and suggestions are taken seriously and make a difference.
• Controlling: Regular analyses of the company’s performance and the market help identify weaknesses early. KPIs (Key Performance Indicators) and regular customer surveys can provide valuable information.
• Create feedback loops: Managers should establish regular feedback rounds in which employees can address problems. These feedback loops should not only be perceived as a formal obligation but should be used to discuss any challenges.
• External consulting as a precaution: An external perspective can often be more objective and valuable than an internal view. Interim managers help to identify blind spots.

Conclusion
Overlooking warning signals is one of the most common causes of corporate crises. The good news is that warning signals are not blows of fate; they can be recognized and addressed in good time. The decisive factor is a corporate culture that promotes transparency and proactive problem-solving. Those who deal with potential problems early are better equipped to avert crises and keep the company on course for success. Prevention is better than cure! I would be happy to accompany you to a preventive check-up.

Finding new paths together.
Think boldly – dare to change
Alexander d´Huc