Do you know ALL the reasons why your company is underperforming, or can you only pull apart some of the reasons?
Figuring out why shareholder value is deteriorating can be easy if the issues are really obvious. It can be hard and confusing if the overall situation is a quagmire.
The 9Stucks collection identifies the most common causes of why a company isn’t meeting shareholder expectations. For those of you who have looked at the 9Stucks, each standalone Stuck is straightforward and uncomplicated. Most of the significant, contributing issues that cause a company to be stuck are not hard to uncover if you know where to look.
However, the 9Stucks are usually not limited to just one or two. A stuck company always has A COLLECTION of the 9Stucks. The breadth of the collection determines the overall organizational ‘stickyness’.
This tangled, unique mix of the 9Stucks acts as a significant impediment to figuring out the real, challenging issues in the organization because it is often difficult to extricate and isolate the individual components of the mix, let alone fix them.
I call the mix Stuck Salmagundi.
Pirates would sometimes serve up a Salmagundi…a stew…a concoction of meats, fishes, and ‘whatever is left down there in the hold’. While the pirates’ salmagundi did have individual components that when combined together produced a meal, it would be difficult if not impossible for the pirates to name the particular ingredients of this unique, simmering stew (and not only because they were tilted a bit with rum). You most likely will not find their creations in the annals of Julia Child. The pirates’ salmagundi was a bit mysterious (“What is that in there?”).
The piece de resistance for someone like me is to uncover the Stuck Salmagundi ingredients in a company stew. The goal of digging into the stew is to drill down with the right set of questions and analyses to determine:
- which 9Stucks are present
- how the 9Stucks are connected
- what to do about them – what is the sequence of events to fix them?
A Stuck Salmagundi example
After spending some time with a company’s team, I begin to pull together on paper my thoughts and observations about change initiatives.
The drawing below illustrates one of those real life (disguised) examples of the Stuck Salmagundi at a manufacturing company that I’ll call StewCo.
(Clicking anywhere on the image enlarges the picture)
Which Stucks are present?
How do these 8 stucks interact?
As you can see, there are a number of significant issues that are linked together. Look at how the lines weave across the diagram.
It would be too long to discuss all the issues and all the change initiatives (see below). The colors highlight 3 different ‘tracks’ that I’m going to summarize.
The Yellow Track: People and Culture. This family-owned company had a number of people challenges that encompassed Ditch (family conflict and tough style of leadership), Slow Lane (unmotivated team) and Moment (lack of planning).
The Green Track: Market Segments and Product Mix. The lack of a rigorous planning process (Moment) combined with a weak understanding of the industry/competitive position created a complicated business model with a number of money losing products (Fog). Excessive price discounting (Traffic) sent margins into a tailspin and hurt cash flow (Maze).
The Blue Track: Poor Cash Flow and Old Facilities/Equipment. Strong cash flow cures a lot of ills; in StewCo’s case, excessive owner/family compensation coupled with weak margins (Maze) severely limited the company’s ability to finance regular maintenance and upgrade the plant/equipment (Rough). The older equipment created quality problems and high warrenty claims that added to the cash crunch.
Fixing the Stuck Salmagundi
When there is a great deal of emotion flowing through the stuck situation, I find it is ‘easier’ to create a change process leading with the more data-driven, tangible issues. So, in StewCo’s case, I attacked the Green Track first, the Blue Track second and blended the Yellow Track into the process along the way. The change program headlines were:
- eliminated unprofitable products and product line by getting the management team to focus on the overall business model; gross margins improved
- the business model review was sort of a ‘back door’, practical approach to strategy; got ‘buy in’ with the analytical, non emotional method
- stopped (but not completely) the unnecessary price discounting
- convinced the family to restrict the amount of cash being taken out of the business
- laid out and began to implement capital expenditure plan for equipment upgrades designed to improve plant safety and product quality
- resolved the excessive warranty claim problem
- coached the CEO on his personal management style
- established a new incentive plan for the senior team based on milestones and performance reviews
The Result? The process of objectively deconstructing StewCo’s pirate salmagundi revitalized the company. The team effort produced a more focused business model, improved cash flow, higher profits and increased shareholder value.