How to fix your company

CC 2.0.,Photo courtesy of 401(K)

(MoneyWatch) Your company has a glaring weakness that is probably invisible to you because you're too close to see the problem. To find it and start to work on it -- right now, before we head into the new year -- you need to look at four vital factors and see which of these is causing the biggest headache for your business.

The goal here is to quickly determine what's "wrong" with your business -- or more precisely, the critical area to focus on.

The way to find your company's weakness is to do a quick scan of the major parts your business, and then get more specific in examining the troubled areas. About three weeks ago, I was in a major car accident. When the ambulance unloaded my stretcher at UCLA medical center's emergency department, the main question going through my head was: "What's wrong?"

As the medical staff talked to me and ran me through tests, they mostly checked things off their list. Did I have brain damage? A CT scan said probably not. Were my eyes injured? A physical exam said my eyes were fine. Did I have any fractured vertebrae? The radiologist said no, after looking at a CT scan of my neck. Again, the question they asked -- and the one I would have asked if I were able to talk -- was "what's wrong?"

When they got to my jaw, everything slowed down. A lot was messed up, but what? After hours of scans and exams, they determined I had shattered my jaw and lost two teeth. The next day (just over two weeks ago now), I had six hours of surgery to reconstruct my jawbone, and return my ear to something that looked like a product of nature, rather than of a car accident.

I'm relaying this incident because the management literature is filled with cases, examples and theories to explain why business leaders often don't ask "what's wrong?" until it's too late. Consider this blog post a trip to the ER for your business. If things are going well in your organization, then think of this post as a way to determine what is shaking loose now and may erupt as a full blown problem years from now.

Let's handle two quick issues. First, for those who want to appreciate "what's right?" or "what's working?" instead of asking "what's wrong?" please read my personal blog this week, "Why There are No Silver Bullets." Second, for those who want to focus this message on themselves as leaders, rather than leading their business, please read a post blog I mostly wrote at UCLA, before and after immediately after my recent surgery, which highlights crises and crucibles in the making of a leader.

The "what's wrong?" diagnostic funnel

To find what's wrong with your business, think like an emergency room doctor. After my car accident, the trauma team initially looked for the most serious injury, so they were focused on the major parts of my body -- my brain, spine, spleen and so on. With the life-threatening problems removed as possibilities, they then turned to my jaw. The question was: "What has to be done right now?" The answer was some quick stitches that could be redone later by a plastic surgeon, then admit me for observation and surgery.

With your business, we want to take a similar approach. Start with what my research team and I call the "vital four factors," meaning the big areas, and then narrow down to specifics. You want to scan your business in terms of these four areas, and fast.

(This approach is an extension of "empirical leadership," which I wrote about earlier in the year. And before you read further, I invite you to take a free one-minute instrument to help you spot which of the four is the danger point for your company. You can do so on the How to Fix Your Company tool. It's best to do this before you read the descriptions of the possible answers, to limit your bias.)

Be "vital"

The instrument will return one of four answers, each one of the "vital four." If all four are working and properly synchronized with the each other your company will tend to be "vital." Vital literally means "life giving." Vital companies thrive. They max out engagement surveys. They cannot not innovate. They see setbacks as opportunities. They are immune to everyday problems like retention, recruitment and compliance with laws. They want organizational structures that make sense, and they will not tolerate tyrants, bureaucrats or low performers. Vital companies aren't just "change ready," they are changing, all the time.

The first vital factor is strategy. Management theorist Michael Porter defines it as "the unique and valuable proposition to the market." If people both inside and outside your company don't understand what's unique about the business, product or service, you have a strategy problem. And if that's the case drop everything else and get this right. I was visiting a company recently and asked what their strategy was. They said, "to become No. 1 in our market." Dead wrong. That's a goal, not a strategy. Imagine going on a sales call and telling the potential customer they should buy because "we want to be No. 1."

The second vital factor is structure. This is your formal organization, including the people in key spots, their jobs, their authority and who reports to whom. A company in trouble often focuses on structure because it's the easiest to work on. For instance, GM was for years in a state of almost perpetual reorganization while they lost market share, and their quality fell further behind imported cars.

The third vital factor is your processes and systems. That includes all the formal methods of getting work done. Key processes include staffing engagements, prototyping technology, experimenting to test business assumptions, performance appraisals of employees and business units, and customer relationship management.

The fourth vital factor is culture. We in the Tribal Leadership world define that as what people say about themselves, their work and each other, and whom they say it to (the informal structure).

You want to pay attention to the factor that is working the least well. When a company is in a death spiral, all four will be going crazy. And if all seem to be working, focus on the one that's most likely to shake loose the soonest.

The "vital four" is an alignment model, meaning it suggests you focus on whichever one is most of out whack with the other three. There are many other alignment models out there, including the "McKinsey 7S" and the "STAR" model. I'm a big fan of these models, and suggest leaders pick one on occasion and use it to see what insights they gain about how to focus in the next year.

A note to scholars and those interested in going deeper: Our team added the "vital four" to the available catalog of choices because we believe it fits better with the most recent research. In a phrase often attributed to Albert Einstein, "Everything should be made as simple as possible, but no simpler." By moving from the widely adopted McKinsey 7S to the five components in the STAR model, management consultant Jay Galbraith added value for business leaders. We hope we are building on the work of giants by further reducing these five to the vital four factors model.

What to do next

If you want to make the time count between now and when the business world comes back after January 1, here's what to do. First, have your key team all take the "how to fix your company" questionnaire.

Second, have a brief meeting for the sole purpose of discussing what answers each person received.

Third, schedule a meeting (or even a phone call) in December to decide how you'll make rapid progress on this area in the first quarter of 2013. If you can start January by focusing on your biggest issue, you'll be well on your way to solving it in time to see results by March.

Because the great doctors at UCLA followed the "what's wrong" diagnostic model, I left the hospital one day after six hours of reconstruction surgery. I'm on the mend, and every day feel about 10 percent stronger. The scars are fading and every day I can do something I couldn't do the day before.

Imagine if the same were true in your company starting immediately.

Photo courtesy of Flickr user 401(K) 2012

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    Dave Logan is a USC faculty member, management consultant, and the best-selling author of four books including Tribal Leadership and The Three Laws of Performance. He is also Senior Partner of CultureSync, a management consulting firm, which he co-founded in 1997.

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