Signs of a Failing Enterprise —— For Enterprises That Do Not Want to Fail to Reflect Upon
Author: Zhang Guoxiang, 2011/9/27
Some people say that successful enterprises are all different, but failing enterprises are often similar. Therefore, it is particularly difficult to find the code for success, whereas summarizing lessons from failure is relatively simple. Facing increasingly severe market challenges and environmental tests, numerous surviving enterprises are more about boldly preventing failure than tirelessly pursuing success: how to remain invincible has become the greatest pressure for small and medium-sized enterprises. In my humble opinion, I have analyzed and sorted out some cases of enterprise failure since the Asian financial crisis at the end of the last century, deducing and summarizing ten major signs of failing enterprises. These are provided for reference by enterprises seeking survival and also shared with peers engaged in enterprise management research or consulting for discussion.
These ten signs (in no particular order) are:
1. Market demand exceeds supply, yet large inventories accumulate.
By logic, if the product market demand exceeds supply, there should be no inventory, let alone large accumulation. Why does an occurrence that shouldn't happen? Winning the market and orders through publicity, tactics, and opportunities without reasonable production planning and thorough production organization results in products that cannot be delivered on time or meet quality standards. Today, three pieces are substandard; tomorrow, two need rework. Over time, the shortage of products in the market increases monthly, as do the company's inventory levels... Products without quality assurance can only accumulate in warehouses. Enterprises that focus solely on the market while neglecting production often create such paradoxes: unable to meet market demands on one hand, while creating "inventory" on the other. Such contradictory phenomena appearing in a single enterprise is not a good omen.
2. Continuous recruitment, gradual loss of backbone employees.
Enterprises that recruit daily with banners claiming "ample orders, excellent pay, year-round recruitment," while ignoring the departure of veteran employees or key personnel, may even secretly rejoice: "Old employees leaving is good; their salaries were high, so their departure reduces expenses." They fail to realize that the waste of time and materials caused by new employees far exceeds the wage expenditure of old employees. They never consider improving employee living conditions or working environments, always hoping for a steady stream of newcomers to help save labor costs. They don't realize that inexperienced new hires dilute the quality and value of enterprise products, as well as the company's cohesion. Employees see movement as normal; who would plan for long-term cooperation?
The loss of core staff is the most dangerous signal of enterprise failure.
3. Boss breaks trust, subordinates engage in deceit.
If an enterprise's boss breaks trust, it is difficult for his subordinates to remain trustworthy. If the boss doesn't keep his word, his subordinates have only two choices: either maintain integrity and resign, or stay and take charge. The result is obvious; enterprise employees begin to feign compliance and deceive superiors.
If an enterprise cannot find a responsible, trustworthy supervisor, its decline begins.
4. Suppliers change frequently, payment terms extend monthly.
Enterprises find various excuses to frequently change suppliers. If you don't want to be eliminated, you must accept the enterprise's proposed deferred payment conditions, while increasing delivery volumes and reducing receivables. Moreover, payments to old suppliers are indefinitely delayed. New suppliers often receive special favors during their first delivery, even if components have defects, they can smoothly pass inspection. However, I must remind you, new suppliers should not...
(Note: The original text ends abruptly, hence the translation reflects this incomplete conclusion.)