By Dennis J. Gerschick, Attorney, CPA, CFA In a prior article, I noted that the first step in solving a problem is to acknowledge there is a problem. I explored why getting people to acknowledge problems is a significant hurdle. However, assuming that problems have been acknowledged, the next step should be to determine what is causing the problems. Then, you can focus on the possible solutions.

Even when problems are identified or become obvious, many people will ignore them for a variety of reasons. One, they may tell themselves the problem is not that big and it will take care of itself. Two, it is a matter of priorities; people will generally focus on the things that cause them the most pain. “The squeaky wheel gets the grease”. Three, they see problems as irritants, not proof that something is broken. Like Scarlett O’Hara, they will “deal with it tomorrow.” Unfortunately, as time goes by, little problems often becomes bigger and bigger.

In diagnosing a company, a good starting point is to have the company do an honest self-assessment. I emphasize the word honest, because I tell executives if they start lying to themselves, the game is over. A self-assessment requires a company to explore many questions including:

Where is the company today?
What are its competitive advantages?
What are its weaknesses?
Compare the company to its competitors.
What are the competitors doing well that the company can emulate?
What market position does the company have?
What is the company’s business strategy? Is it the right strategy?
Is the company executing the strategy effectively? If not, why not?

Many other questions need to be explored. The key point is that it is important to get people to start thinking, challenging conventional wisdom, and talking openly and honestly.

A hurdle at many companies is that employees tell their bosses what they think they want to hear, instead of what they need to hear. Office politics is often an impediment to progress. Who knows what a company’s problems are? Executives should talk regularly with the company’s customers, suppliers, and employees. Bill Gates has written that the key to business is to make it easy for customers to complain. If you make it easy for them to complain, guess what happens – they will complain! While no one enjoys listening to complaints, it is important because it educates management from the customer’s perspective and provides an opportunity to fix the problem. Will management listen? Many don’t. Henry Ford once said customers could have any color they wanted so long as it was black! Was he interested in what the customer wanted? No! He was interested in what was easy and economical for his company. His decision allowed General Motors to gain a competitive advantage because GM started offering its cars in different colors. A company should solicit input from customers. How this can be done is an important topic, but one that is too big for this article.

Employees are another great source of information that can be exploited if done correctly. Unfortunately, many companies ignore employees who speak up or worse, punish them. Companies would be well advised to create a culture that encourages employees to speak up. As one step, a company should acknowledge within the company the employee’s initiative if they identify a problem and offer a practical solution. The employee should also be rewarded, because what gets rewarded gets done.

Some companies face numerous problems and they may seem overwhelming. I suggest they make a list that includes:

A description of the problem.
Evidence that the problem exists.
Possible causes of the problem.
Possible solutions and what the solution requires in terms of money, expertise, and time. (Time is important both in terms of how long will it take to implement the solution, and how many hours of labor by the employees and/or third parties will be required.)
The individual or individuals responsible for fixing the problem.

Management can then confer regularly with those individual(s) to monitor their progress. The list should be usually in order of priority. That is, the biggest problem should be addressed first. In some cases, management might elect to fix smaller problems if they will not take too much time or money. If they fix some problems, they send the message throughout the company they are serious about fixing them and if progress is seen by employees, morale often improves. One good step leads to another; it is a matter of momentum.

Summary of Key Points

1. Every business has problems; it is only a matter of how big or small the problem is. 2. The world is constantly changing. What worked at one time, may not be effective at a later time. Companies must continuously adapt to changing circumstances. 3. Even when problems are identified, companies do not always fix them promptly for a number of reasons. 4. Usually, it takes time to get into trouble, and it will take time to get out of trouble. The sooner a company starts to address its problems, the easier it will be to fix them. 5. Companies help themselves by having a culture that encourages employees, customers, and suppliers to speak up and addressing the problems they see promptly.

Copyright 2008 Dennis J. Gerschick All Rights Reserved. Dennis Gerschick is the President of Gerschick Business & Investment Counsel, LLC and can be reached at dennis@gerschick.com. Dennis would appreciate your suggestions for future articles.