10 Signs of a Stagnant Company

Todays, work environment is changing at a rapid pace; within 40 years, we have gone from using typewriters to computers to smartphones and tablets. We have gone from two to three to four-dimensional design. From writing letters to typing emails to texting to video chat. Technology has greatly impacted the work environment and many companies are finding it difficult to keep up. 

I work in the Engineering and Construction industry, where advancements in software have changed how we design our industrial plants. In the nineties, there was a big movement from two-dimensional drawing design to 3D software models and as a result, many designers could not adapt. Sadly, if they were not able to find an applicable position that they could bring value too; they left the industry. Many designers simply could not adapt their perception and vision to go from 2D to 3D design and therefore, they became obsolete. Calling once talented people, obsolete, may seem cold but if your skills are no longer required and you cannot learn and adapt to what is needed; you are replaced with people that possess the required skills; this is the reality of the work environment. 

The same principle is applicable to companies; once relevant, vibrant, and booming companies are becoming dated and losing their market share.  As soon as you buy a cellphone, within weeks it is outdated. At times, it can be overwhelming trying to keep up with the competition; yet Apple, Samsung and Google have found a way to compete, while Nokia and Blackberry didn’t. Finding new ways to be competitive has become a necessity in today business world; the companies who cannot keep growing and evolving, are falling behind their competition. If you look at the current top Corporations in the world, many did not exist a few decades ago and many of the large dynasty companies have fallen further and further down the list. 

As you can see from the list, the only companies from 1980 that are still in the Top 20 are: Exxon Mobil, Shell, and AT&T. General Motors and Ford are no longer in the Top 5 but still remain in the Top 30. The rest of the Top 20 from 1980 are much further down the Fortune 500 list or cease to exist. Being able to adapt, grow and evolve are required to remain competitive and relevant in today’s business world.  

From my experience, there are telltale signs of a Company that has become stagnant and will soon fall behind.Watching a company lose their market share is not a pretty sight and best to observe from a distance. If you find yourself working for a company that appears to be stagnant, look at the below list and see how many signs your company suffers from. If they suffer from multiple items on the list, they may or already be, on the brink of falling behind the market. 

1.    Best Employees are Leaving. Has there been a steady stream of talented people leaving the company? Are talented people who bring results often overlooked for promotions? Does your company appear to promote similar people over and over? Does your company highly invest in talent development and training? If you are working for a company that has a high employee turnover rate, and the reason does not appear to be obvious; take a hard look and analyze why this may be happening. If a company cannot retain their best people, especially young innovated people (their future), the company will have problems, if not already. When there is a high employee turnover rate, often there is a deep-rooted issue plaguing the company.

2.    Hierarchy System is Ancient. Does it take forever to be promoted? Does a title demand respect regardless of the individual’s contribution? Does it appear that higher ranking employees get a lot of perks that their results don’t justify? Are you expected to follow leadership blindly? Does the company have a closed-door policy? Do poor leaders remain in their positions, even after constant failure? Many old hierarchy systems have a ‘do as I say’ unwritten rule. They have leadership teams that lack diversity and their decisions remain in the status quo realm. The old buddy club is in full swing, and it’s more of who you know then what you know. If this appears to be the case at your company, an old hierarchy system is at work. A sure sign of leadership failing badly is when Leadership begins to play musical chairs; they rarely get removed, instead they just keep moving to different positions and even at times, have positions created for them. 

3.    Lacks Transparency. Is the Organization’s direction, goals and mission unclear? Does your company discuss how critical decisions have been decided? Does your company lack transparency in their discussions and decisions? A company’s vision and current business strategy are often shared with employees; for an employee to fully understand the direction a company, is why this information must be shared. This is where some Organizations fail, they do not share how these strategies came to be and what is driving the decision. For staff to fully understand a strategy, they need to understand why the company is pursuing the current plan. If your company always has closed doors, even though, the company promotes an open-door policy, it would appear the company is not being transparent.

4.    Status Quo Rules Supreme. Are new ideas encouraged? Have procedures become more bureaucratic then helpful? Have procedures become dated? Is the company reluctant to change? Stagnant companies often live in the status quo realm, where innovation goes to die.

5.    Recycle instead of Invent. Do you often hear ‘this has always worked,’ ‘what did we do last time,’and/or ‘we have always done it this way’? Stagnant companies often rely on what worked in the past, instead of investing in new strategies and diversifying into new business lines. Kodak is one of the recent failed companies, that were not able to evolve from their past successes and failed to accurately see the progression of their core business.

6.    Rely on Past Successes and Reputation. Does your company rely on their past successes and reputation to bring in business? Are most of the Clients old? When was the last time your Organization brought in a new Client, account or developed a new product? If your company is relying on their brand to bring in continuous business and not developing new business or strategies; they may not be adapting to the business environment that is constantly changing. If your company is executing in the past, and do not trek new paths for their future, then their strategies are most likely dated.

7.    Innovation has No Lifeline. Do new ideas get immediately shutdown? Does the ‘out of box’thinkers get frustrated often? Are the ‘out of the box’thinkers leaving the company? Is the leadership team arrogant, entitled and/or not open to new ideas? Does your company make short-term decisions at the cost of long-term growth? If a company cannot formulate long-term goals with a shared vision, which they have communicated to their employees, they may soon lose their market share and most innovative employees. If a company lacks an innovative pulse, and any time you want to do anything new, different or against status quo, you need to reach for the defibrillator; the company is in trouble. You need ‘out of the box thinkers’in an Organization to be successful; if leadership has become arrogant, they have become blind and are more likely to lack diversity and suffer from group think. Organizations that suffer from group think, usually lack innovation and strongly rely on what worked in the past to create future successes; this is a dangerous recipe for continuous long-term growth. When a company has a core business and market share, as Apple has always had with their computers; they can still diversify as Apple did with their phones and tablets, while maintaining their reputation in computers.

8.    Risk Averse. Does your company want a guarantee return of investment on any new venture? Are their strategies often small incremental steps and try to sell them as disruptions to their industry? A company that is not willing to make calculated risks will never lead a disruption. There is a difference in not wanting to be first then making wise calculated risks; being first needs to be a tactic to gain a large market share, making your competition hard to catch you. My point here is, if your organization cannot tell the difference of when being first is the correct tactic and when allowing your competition to fail at a high risk venture, then you may find yourself working at Nokia, were new competition like Apple and Google took their market share. A smart company knows when they need to lead and when they need to follow. If a company wants a guaranteed return on investment, especially within a year or two; they will not break down barriers nor create a disruption within their industry; they are a follower and not a leader.

9.    No Research and Development. If a company invest zero money into research and development, then it is obvious that they are not interested in creating anything new; as they say, the proof is in the pudding. A company that wants and believes to their core in innovation; invests in their people and research and development.

10.  Showing Financial Trouble. The signs above (one through nine) can be early symptoms of a company heading for financial trouble. Generally, a company that is having financial trouble suffers from several of the above symptoms. Classic signs of a company in financial trouble are: hiring and pay freezes, share value has fallen, staff have begun to be laid off in large numbers, projects/products are being postponed, leadership continues to be re-shuffled and/or are playing musical chairs, work environment is continuously negative, key accounts and Clients are leaving, and stress levels have increased. 

If the company, you are working for suffers from many of the above traits; you are potentially working at a stagnant company. If you are not in a position of influence, where you can make the applicable changes to improve the company culture and growth, you may want to leave the ship, while there are lifeboats available. When a ship begins to sink and takes on water, there may come a time that it can no longer be saved, and you do not want to find yourself drowning in the aftermath. Take a lifeboat, while they are available and move on.

[1]https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue

[2]https://money.cnn.com/magazines/fortune/fortune500_archive/full/1980/