Telltale signs that you need to abandon your “sinking ship” company

A view shows a cargo ship after it collided with a boat on Huangpu River in Shanghai February 1, 2010. Three sailors were rescued from…
A view shows a cargo ship after it collided with a boat on Huangpu River in Shanghai February 1, 2010. Three sailors were rescued from…
Image: Reuters/Aly Song
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This question originally appeared on Quora: What are telltale signs that you’re working at a “sinking ship” company? Answer by Michael Wolfe, five startups and counting.

Leo Tolstoy’s Anna Karenina principle states, “Happy families are all alike, but every unhappy family is unhappy in its own way.” He saw that unhappy families were each doomed by unique problems of their own making, while happy families were those who steered clear of such problems.

The corporate world suffers from the reverse of the Anna Karenina principle. Successful companies each seem to invent their own unique paths to success. But failing companies follow predictable death spirals that have been followed by many other companies preceding them.

Often these “sinking ship” companies can seem to be doing just fine, especially to employees who don’t have the experience to recognize the obvious signs. This is handy guide of what to look out for.

If you work at a startup, look for:

  • You never hear how much cash you have in the bank or hear what was discussed in the board meeting. When you ask questions, your executives say, “I need you to stay focused on your work.”
  • When you get your stock option offer, no one will tell you how many shares are outstanding or that the last round of funding came with a 5x liquidation preference.
  • People never talk, coordinate, or even leave their desk because they “hate meetings.” (They actually hate each other.)
  • You “rehearse” for board meetings and spend a week on board meeting slideshows that are prettier than your customer slides.
  • You have more MBAs on the team than engineers. They all do “business development” since sales is beneath them.
  • You have a Chief Strategy Officer. No one knows what he does. He disappears one day and is not replaced.
  • Your CTO just came out of a PhD program and wants to “commercialize his research.”
  • You have a raucous launch party that is attended by no customers, only your friends.
  • When the product doesn’t sell, you complain about how the customers “just don’t get it” and aren’t “visionary.”
  • You’ve fired three VPs of Sales because each one told you, “The customers don’t want the product.”
  • Your CEO has a “great” customer meeting that he says is sure to lead to a closed deal before the quarter ends this Friday. All he needs to do is meet with procurement, negotiate price, win the deal, agrees on terms, write up up contracts, negotiate them, sign them, and invoice the customer. The deal closes 175 days later.
  • You add features because board members want them.
  • Your CEO calls himself a “visionary” in his bio.
  • The CEO keeps everything secret because, “That is how Apple does it.”
  • The CEO approves all of the design decisions because, “That is how Apple does it.”
  • The technical co-founder is a bad manager so agrees to hire a VP of Engineering to replace him. He thinks that VP will report to him since he is the “visionary.”
  • Your site is going to be ad-supported, and you have 1500 users.
  • You get free lunch but have no customers.
  • Your free lunch is taken away.
  • Your boss renegotiates your salary and asks you, “how much do you really need to live on?”
  • He offers you more stock options. He still doesn’t tell you how many shares are outstanding.
  • You get laid off and become a creditor to the company because they didn’t reimburse your last five expense reports.
  • The liquidation yields five Aeron chairs and a Nespresso machine, and Ashton Kutcher’s stock is senior to yours.

If you work at a big company:

  • New opportunities are evaluated and shot down based on their impact to the old legacy businesses. (See: The Innovator’s Dilemma).
  • Managers are paid for making quarterly and annual targets, so they avoid investments that pay off in the future since they detract from their bonus numbers. As the business declines, they simply negotiate lower bonus targets each year.
  • You benchmark your performance against your direct, legacy competitors instead of the new disruptive entrants in your market. You think you are doing well versus your competitors without being aware that you are competing in the equivalents of the Seniors Tour.
  • Mediocre employees are not fired since their managers know they can’t recruit better ones anyway.
  • When asked, “Why do you like working here?” your employees talk about the dental plan.
  • Your managers roll their eyes when you point out that how new technologies like Apple Watches, Twitter, and Amazon Web Services will impact your business. They call them “toys” and say, “Our customers will never trust their businesses to those!”
  • Your co-workers use Blackberries from 2009. They say, “I already know how to use it, and I don’t need that distracting new stuff.”
  • You spend the first week of the quarter talking about long-term strategic planning. You then forget about it and spend the next twelve weeks scrambling to make the quarter.
  • Instead of firing bad leaders, you create cross-functional committees to solve the problems those bad leaders created.
  • When those problems persist, you disband the committees and bring in consultants to solve the problems the bad leaders (then the committees) created.
  • All conversations about new grown end with reluctant middle management saying, “Only if you give me more budget!” The budget never comes, and you all go back to what you were doing.
  • You integrate acquired companies so quickly that you destroy their businesses and their best people leave.
  • Or, instead of integrating the acquired companies, you keep them as independent business units and get no synergies. You integrate them in a hurry a year later during a cost-cutting exercise. The best people leave.
  • Your CFO spends 5% of her time talking about innovation and revenue growth and 95% talking about cutting costs. She says, “That’s my role here.”
  • The HR department thinks their job is administration, compliance, and keeping employees from suing, not ensuring the company wins in the market by having the best team.
  • To pay $9.99 for an Evernote subscription, you need to wait a year for the “Information Technology Steering Committee” to approve Evernote as a vendor.
  • You have a Chief Strategy Officer. People say, “I don’t know what he does all day.” He disappears and is not replaced.
  • You don’t target the best companies and try to hire their best people. Instead, you put three-page job descriptions on your website and wait for candidates to find them, fill out a form, and apply.
  • People argue over offices. They all use the same excuse: “I’m on the phone a lot.”
  • You launch “innovation projects.” When it looks like you’ll miss earnings by a penny a share a few quarters later, those projects are cut.
  • After those risky but innovative projects are cancelled, the people working on them are laid off, getting richly punished for their risk taking. No one ever signs up for an “innovation project” again.
  • “Succession planning” has become a euphemism for, “When the boss quits, just promote someone on her team so we don’t need to pay for a search.”
  • You have five CEOs in five years. The board then announces the company is getting broken up and sold. They act like that was the plan all along, then lay off you and half of your co-workers.
  • You ask your laid-off co-workers why they joined the company in the first place. Their answer: “Job security.”

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