My definition of a stuck organization is simple. The Controlling Parties*, the employees, or the outside advisors (pick one or more) have not been satisfied with their organization’s overall performance for quite some time…performance expectations are not being met.
The Controlling Parties’ expectations may be high or low, and their behaviors surrounding these expectations can be rational or irrational.
* Controlling Parties fall in one or more groups: Board of Directors or Board of Trustees, significant investors, family owners, founder or the CEO.
If the powers that be are not pleased, then something has to change. That doesn’t make it right or wrong; it’s just the reality of the situation.
Stellar, record-setting, surging, and ‘knocking the cover off the ball’ are all easy ways to describe an impressively performing company. Words get a bit more squirmy and bland when a sideways-heading company ‘fell short of expectations’, ‘experienced flat earnings’, or is ‘underperforming’.
Some people think stuck is a catchy term used to describe a severe turnaround or workout situation. Absolutely not!
Stuck organizations are not in grave danger; they typically are in “ok” shape but need attention.
A Stuck Organization Could Be:
- your place of employment
- the non-profit, club, or industry group where you belong or volunteer or visit
- your client
- the family business
- a portfolio company of your private equity or venture capital group
- the company you founded
- a government agency
- a sports team (before 2004 it was the Red Sox…:))
- a political group or campaign
- a school
Asleep at the Beach
There aren’t accounting definitions, economic formulas, or financial management tools that put stuck into a tidy box. Being stuck is not just based on ROI, EBITDA, or free cash flow.
Becoming stuck isn’t an instant event – it develops subtly over time. There is no on/off switch. Proactive steps can make a company more facile to meet challenges, preventing them from becoming stuck.
Getting stuck is more insidious than a sudden, severe crisis such as a drastic change in the customer base or a significant quality problem. Getting stuck is like falling asleep at the beach and waking up to see the water swirling all around you and your belongings.
Some common characteristics of a stuck company:
- Sales, margins and profits may be flat or declining. “We have a cost problem” is a familiar refrain. There are excessive costs that are hard to eliminate.
- Shareholder value is being eroded even though the owners/managers may be receiving very healthy compensation.
- The people in the organization seem to be always scrambling; they are working harder than necessary (‘corporate high blood pressure’).
- Or, just the opposite…the people are hardly working (there is no sense of urgency).