Compounding the Big Mistake
I saw this on a reader board once. “Sometimes things happen for a reason. And that reason is because you are stupid, and you make bad decisions.” It still makes me laugh.
A basic formula used while writing a movie script is to have the main character of a film encounter a problem that leads to what should be a simple solution. The plot thickens when the solution then triggers other problems and the main character falls deeper and deeper into a cascading hole until there is a final solution that ties everything up into a neat ending.
In business the same thing happens, but often the ending isn’t so happy. It’s usually the opposite of a normal Hollywood movie. It’s where real life diverges from a typical Hollywood script. The initial wrong premise indirectly leads to a bigger disaster.
More frequently than I’d like, I’m forced to watch a company implode before my very eyes. I’ve watched the cascading waterfall of one bad decision lead to another bad decision to support the first bad decision, based on the assumption that the first bad decision was correct. It leads to a slow downfall that often isn’t even recognized for what it is until it’s far too late. Companies will often justify one bad decision by adding on another.
In medicine, if you misdiagnose, you mistreat. If you mistreat, you harm the patient and you never solve the original problem. More often, you introduce another problem and like the movie script, the solution starts a cascading waterfall effect that ends badly.
A doc friend was an expert witness to a case where a gross error in an original diagnosis led to years of mistreating the patient, who’s health declined as a result, all because of the wrong conclusion leading to years of incorrect treatment. The original problem would have required minor surgery. It was nothing more than a pinched nerve in the patient’s neck. The wrong diagnosis, assumed to be multiple sclerosis, resulted in decades of unnecessary medication and misery and ultimate deterioration. It was a series of treatments, while failing to understand the original problem. Every doctor after the original diagnosis assumed the other doctor was right.
When I walk into a company mess or observe a client’s decline in revenue, I often look for that last point in which a company was great. Often when I find that point, I manage to also locate that one mistake that led to the whole thing slowly rolling down hill, a little at a time, until disaster. Sometimes it’s all the result of a bad hire, or a flawed change in strategy based on bad assumptions, or a missed product, or even weak unqualified leadership.
As an outsider, I can see the company heading off a cliff, but in most cases what they see, is a drive down a slope without any awareness of the cliff ahead and no awareness that they made a bad decision. I could yell “cliff” at the top of my lungs and they would still drive right off, completely oblivious to their own chain of decisions.
Almost never, and I do mean never, have I come across a company where the CEO says, “You know, we’ve been making a lot of bad decisions lately and I think they have to stop.” They always do just the opposite, where they justify every decision they previously made as they accelerate downhill then off that cliff. Even when in midair, it’s never ever their fault. It’s always someone else.
We’re working right now on behalf of a creditor in a company that failed, and the founder is blaming the investors because they wouldn’t invest more bad money in their bad decisions. At no point did the founder ever stop and admit that they may have screwed up over faulty market assumptions.
I’ve also met individual investors who lost large sums of money because of a failure to do proper due diligence. Yet, was that really the first bad decision? Could it have been that they never listened to sound advice about the company in the first place, especially from those who from experience could already see a bad investment?
I’ve seen wealthy people and institutions try and save a buck by not building the infrastructure around themselves to prevent bad decisions from happening in the first place. Failure to spend the money ultimately cost them millions in losses. The losses are far greater than the expense of a good advisory team that would have kept them out of trouble. So where was the initial point of the cascading failure? I say it’s with the decision not to build the initial team and try and save a buck.
If you are in a company where you see trouble ahead, layoffs in front of you, and a failed growth strategy, stop and ask yourself how the hell you got there! Take a moment and think back and dig a little deeper than simply claiming the market changed. I’ll bet you were advised to do something you chose to ignore. It may have come from a board member, employee, friend of the company, but chances are, someone told you, “Cliff ahead!” a long time ago, and you didn’t listen. Why didn’t you listen?
Start with fixing that problem in addition to building the right crisis strategy for the mess you’re now in and don’t wait until it’s too late. Admit you made a mistake, go back and make it right. Do that, and you may stop your company from slowly racing towards a cliff.