Denial Is More Than Just a River in Egypt
It was a century-old company, once pre-eminent in its industry but in recent years beset by declining revenue and profits. By the time the bank insisted that company executives get help, they were so deeply in debt to both the bank and multiple manufacturing partners, there was no hope of recovery As a result, the assets were liquidated and the company no longer exists!
Why would the leadership of a company let their business die rather than seek help? Of course the leadership of a business doesn’t intentionally let it die, but the most frustrating thing that those of us in the turnaround business face is companies that could have been saved if they had sought help earlier.
We’ve learned in our years of doing turnarounds that there are certain early warning signs that a company is in trouble. But too often, the people who are slowest to see the signs, or to decide to react to them, are those who are running the troubled company.
Executives of a business who even THINK they have a problem should push ego and fear aside and talk to their attorney, accountant and definitely the bank.. They shouldn’t wait until they suddenly realize that they are in a hole is too big to climb out of.
It’s amazing how often we find, in our turnaround work, that a business executive is afraid to tell his or her banker that there’s a problem. They believe that the banker will modify or even call their loan. And yet, the banker is often in the best position to help if they learn of the problems early enough.
But when the bank realizes you are in trouble, and you’ve made no effort to discuss the problems with them, you may suddenly find that your friendly banker, who is always helpful because they want to keep you as a customer, has been replaced by what’s known as the Special Asset Group. The job of the folks in that unit isn’t to hold your hand as a customer, but rather to insure the bank gets their money back. With or without you as a customer.
When we do finally get called to assist a troubled company, they’re still sometimes in denial about the fact they’d better do something. And the very executives who frequently lament that their customers don’t understand that you have to pay for a quality product are now lamenting that the lawyers or consultants who can help are too expensive.
The point is not the expense, but what you are going to get for that cost. And what won’t you get back if you don’t incur it. ROI is and should be the basis for any business investment, but when it comes to facing the need to invest to solve corporate or financial problems; many executives don’t look at things the same way.