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Signs That a Company is Failing

by Louise W. Rice

It is something of a shame that this is the case, but when a company is in dire straits, employees are often the last to know. It may seem that there is a practical utility to this – for example, the desire to avoid any mass exodus of staff – but not informing employees of a company’s fortunes (especially when they could potentially help) is the mark of the company with a poor employer-employee relationship. Perhaps that’s why it’s failing in the first place.

A good employer will always intimately involve employees in the company’s fortunes, rewarding them when things are going well and being frank and honest when they are not. So much so is this the case that it can make for a good means of deciding whether the company you work for is worth sticking with or if the time really has come to jump ship. In other words, if you have to find out yourself – from an analysis of the typical warning signs – that a company is failing because higher management has failed to inform employees of this fact (or, worse still, have lied about the state of the company) then it certainly isn’t worth sticking around.

The Importance of Knowing When All is Not Well

But before you go trying to figure out your employer’s fortunes, you need to know what the signs of a failing company actually are. Not all companies that suddenly inaugurate a hiring freeze, for example, are necessarily going to tank. Nevertheless, a hiring freeze is one of the many signs, and if it is detected in conjunction with a few of the others, then you can begin to put together a conclusion. Only bear in mind that you should try to identify a few of the most common warning signs before you make any drastic decisions.

But be in no doubt, if you can put together a reliable picture of a company on the slide, then it is time to start considering other options. And when looking for new employment, consider the warning signs once more, as you could avoid the same fate repeating itself. Once bitten, twice shy, and all that.

Ultimately, no one is pretending that the business world isn’t cut-throat and that companies do not come and go all the time. A failing company is not necessarily a sign of a bad employer. So much of business is luck, and companies are always at the mercy of the wider economic trends that are continually making and breaking businesses. But then, unacceptable levels of neglect, or simply incompetence, could be behind a failing company too. Perhaps a company has been overreaching itself financially; perhaps a DPIA GDPR data security audit has shown up serious violations of data security policy. Never rule out dodgy practices until you are sure that’s not what’s going on. In many such cases, this is something the higher-ups are often keen to conceal from their employees, so be on the lookout and acquaint yourself with the signs.

Signs of a Failing Business

What you can always demand of your employer is honesty. So look out for these warning signs that all is not well, and if you identify several, things could just be coming to an end where your current role is concerned. It is often easy to see these signs in retrospect; very often, those employees caught out by a company’s sudden collapse will remark that they “should have seen it coming”. Well, perhaps they should have. To that end, these are the things to look out for:

High Employee Turnover

Not everyone in a company is privy to the exact same information regarding its fortunes. And sometimes, canny employees with access to useful information could see the writing on the wall before even the management. In many cases also, certain employees will be less tethered to a company, less invested in its fortunes, and command less responsibility for any failure. These could be the employees that decide to evacuate while those in certain managerial roles are obliged to stay.

So be on the lookout for any increased activity where employee turnover is concerned. If a lot of employees seem to be leaving important roles which are thereafter hastily refilled, they could have been tipped off to impending doom. In addition to looking out for a high employee turnover, it is also wise to simply gauge the general morale of the workforce to see how deep faith in the company really runs. If you notice a high turnover of staff, you could have time on your side: usually, it is a total hiring freeze that is a sign of imminent collapse.

Communication is Breaking Down

As touched on above, companies are often keen to conceal their woes from the workforce so as not to disastrously impact morale or prompt a mass exodus from the company. This is unfortunately extremely common in failing companies, and you should be on the lookout for a breakdown in communication between employer and employee.

If you have been working for the company for a while, then you should be aware of the culture of communication within the workplace. If you notice a drastic change in this, then things could be going awry. If rumors spread among the staff that the company is indeed tanking, then this can be a concern to put to your employer. If you cannot get a straight answer, then that is a very bad sign. Of course, even if they tell you all is well, do not rule out the possibility that they are lying.

Cash Flow Problems and Budget Cuts

Naturally enough, this can be one of the biggest indicators of all that your company is in trouble. Cash flow issues are often the result of bad debts that cannot be recovered. You should therefore be on the lookout for any regular bills that go unpaid or, better yet, sudden and drastic cuts to the company budget. Such cuts could take the form of bonuses being revoked, certain employee privileges being removed, and changes to the office infrastructure.

Focus your attention on the basics, however, and do not assume that every budget cut is the sign of imminent demise. There is a difference between cutting an extravagance such as the annual employee Christmas trip or cutting something more integral like commissions or holiday leave. Companies may be having a challenging time, but that does not mean that they are necessarily going under. There are many ways to measure a company’s success that go far beyond how fat the coffers are at a particular point in time.

It all comes back, fundamentally, to the question of honesty. You should be able to find out why something is happening within the company, why a certain change is being made. If information regarding this isn’t readily forthcoming, then the company could be in danger.

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