Company Appearance: Examples of Company Failur Based on the Look of Your Business

Is your office sloppy or disorganized? You could be sending a bad signal to your customers.

If you think the pigsty condition of a business has no bearing on its bottom line, you are mistaken! I believe that a company’s appearance predicts its success or failure. If the offices, warehouse or plant are dirty, sloppy, and disorganized, I say the business is in trouble. In my opinion, if it is a physical mess, most likely, its financial records will be inaccurate, its quality control procedures faulty, and its management will lack pride.

Just as we judge a person by his or her appearance, so do we a business. If your business is dirty and disorderly, you are making a strong statement about your leadership. If your employees have a poor impression of your business, so will your customers. If your suppliers think you are about to close your doors, they may get nervous.

I believe poor appearance is an advertisement of incompetent management. Under the “refuse” lies inaccurate and incomplete record keeping that can cause your business to fail. If you are ignorant of your costs, your expenses, your sales volume or your cash balances you are putting your company at risk. A disorganized office is prone to error. Even under ideal conditions, it is easy to pay a bill in error, or neglect to invoice a customer.

To prove my point, let me tell you about a ten-year-old, $20 million company that I watched slide into ruin and onto the auction block. From the beginning, the owners’ management style was erratic, unethical and short-term. Crisis management was their way of life. The initial success of the company was luck and a growing market, but once the market slowed and competition increased, the company began to falter.

The appearance of the company reflected the owners’ management style – it was a mess. Dirt and debris everywhere. The computer center looked more like a storage center for refuse than the nerve center of the company. Filing cabinets and desks were covered with paper work. The employee lunchroom was unappetizing with the odor of garbage. The production floor was littered with semi-finished product and raw materials. Not an attractive place inspiring confidence in management’s talents.

As hard times set in, the sales manager became liberal with credit and was quick to reduce prices, believing his tactics necessary to remain competitive – and forcing the production manager to substitute cheaper raw materials and component parts. As a result, the quality of the product was compromised.

Unethical survival tactics became common practice. Invoicing mistakes routinely occurred; billing customers for product never shipped. If discovered, the owners apologized – blaming it on computer error. As the situation deteriorated, more shortcuts were taken, using cheaper and shoddy manufacturing materials. Any semblance of quality assurance disappeared altogether. Attempts by employees to notify the owners of problems were ignored as well as any suggestions, as if it were none of their business.

A few months before the collapse, management, desperate for cash, increased its borrowing from the bank, using daily shipments as collateral – their only concern money. Nothing else mattered. Some employees suspected that the owners were pledging fake invoices to the bank.

During the final weeks, with the loss of so many customers, the production line dropped from three shifts to two shifts to one shift and then a single half shift with handful of employees. The production floor took on a quiet, eerie feeling of pending disaster. Half the office staff had been laid off as well, adding to the feeling of doom. The owners spent a major portion of their day in meetings behind closed doors, which fostered rumors. Everyone now feared for his or her job

Suppliers and customers soon became aware of the problems. Many suppliers stopped shipping in fear of bankruptcy. Customers became weary of future delivery and some started looking for new product sources. The mail began to contain certified letters from lawyers and the Internal Revenue Service.

Finally on a Tuesday morning, when the employees arrived for work, they were told by security that the company had closed, they should remove any personal items, immediately leave the premises and their final paychecks would be mailed to them. Two months later, everything was auctioned off and the building closed.

This business tragedy did not need to happen. The company’s outward appearance accurately stated that the company was sick. With care and professionalism, the errors could have been prevented. Most were just stupid and careless. This was a business disaster that cost employees their jobs, suppliers millions of dollars, and the founders their company. As it slid into ruin, they had many opportunities to change the situation. Yet, they didn’t. The appearance of their company was a barometer of failure.

(C) Copyright 2001 Dr. Paul E. Adams. Syndicated by ParadigmTSA

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