Cracked Concrete – Is Your Business Foundation Sound?

Cracked Concrete – Is Your Business Foundation Sound?

My husband and I recently realized that we would soon have to repair or replace the circular concrete driveway in
front of our home. We thought it would last a lot longer than this. Instead, after only 14 years, several concrete slabs are sinking; weeds are creeping up in the spaces between them; a large crack is running through one, courtesy of a heavy delivery truck; another slab is scaling; and the snow plows that are a staple of Michigan winters has left scrape marks on other parts.

We never thought this would happen because they look so strong and thick. We could wait another year or two, but the situation will only get worse.  What we thought was a solid foundation with high structural integrity, wasn’t resilient enough to withstand a variety of above and below ground pressures. What if the quality or thickness of the concrete had been stronger? What if we had ensured that heavy vehicles didn’t pull into the driveway? What if we carefully used a walking snowplow each winter instead of hiring a heavy truck to plow it (not!). In hindsight it was hard to predict we’d be in this spot, but we now need to look at options to repair or replace all or a part of the driveway.

Fortune 500 Foundation

As I reflected on this disappointing situation, I happened to look at Fortune Magazine’s recently released list of the top 500 global companies. Their total revenue declined for the first time since 2010 by 11.5% to $31.2 trillion, and profits shrank by 11.2% to $1.48 trillion¹. Once strong sectors (such as Oil) and other stalwart corporations have stumbled, and are struggling to find their new footing. Companies that placed in the top 100 in the prior year, have now been displaced from the list.

Leaders, employees, and investors who at some point thought that their positions in these companies were sound, inevitably realized over time that there was a problem. Obviously all companies face similar challenges, the question is how well they withstand it. One can’t assume that just because a company has been Fortune 500, top performing, well regarded or with high revenues, that it will always remain in that position. There are a host of blue chip companies who have gone through bankruptcy (Lehman Brothers, Washington Mutual), been sold (Yahoo’s pending sale to Verizon) or split (HP and Xerox), or even ceased to exist (Enron). In fact, only 61 of the companies on the Fortune 500 list in 1955 were still on the list in 2014. That means 88% are gone.

I’m sure many of the leaders and investors in the 1955 list thought that the foundation of their companies was strong enough to last “forever”, and couldn’t have fully anticipated the internal and external forces that would come against them. But they discovered that their structural integrity was insufficient, their foundation was sinking.

How Sound is Your Foundation?

A sound business foundation starts with people. Leaders must possess the capabilities, capacity, values and cultural competencies to fulfill the organization’s vision, mission and objectives. They must understand competitive and market pressures, and correctly anticipate future events. The reality though is that even the largest businesses, with the highest revenues, and the best leaders, are subject to become like that cracked cement. So how do you prepare for the inevitable? Here are four steps to make sure your foundation is sound.

Awareness – Watch for signs of stress and pressure, not only as evidenced by your business metrics, but look for the small faint cracks that indicate a weakness in your strategy or approach. Ensure your company culture reinforces the importance of people calling it out to force a spotlight on the issue.

Plan – There’s a saying that a building is only as strong as it’s foundation. I used to work in a 40 story glass building. During extremely windy days, on the top floors, you could feel the building swaying, but it was built to withstand and bend with high winds. Occasionally, a glass panel in the elevator shaft would break, but it was always quickly replaced.  Ensure your business planning and contingency process has a solid foundation to withstand extreme forces, and a strategy to quickly adapt and adjust to changing conditions.

Act – Be decisive and resolute in taking action to address cracks when they show up. This is where you may have to make hard and unpopular decisions. An unrepaired crack on your vehicle windshield will only spread, and an unaddressed problem will only become magnified over time. What appears small on the surface may really be a huge issue below the surface, and require more resources to address later.

Reinvent – Be adaptable to restructure, reengineer or reinvent your business to address shifting market demands. HP recently split into two companies, and Xerox is in the process of doing the same, to meet changing market demands that 5 or 10 years ago their leaders may have never anticipated.

Just like cracked concrete, your crumbling foundation can be repaired or replaced. It may look different than it did before, but it will be positioned to withstand the future changing business environment.

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