Small businesses often, if not careful, fall into the upside-down business cycle. This cycle often means the total demise of the business. There is no particular timeline for this cycle. It typically only lasts a few years but can last much longer
The beginning of the cycle is in fact the end product. Shiny and new, the company introduces itself to its customers with fanfare, excitement, and celebration.
And so it begins, the day to day operation, maybe even some initial growth. The company is customer focused, with every detail checked, questions constantly being asked and management observant to every activity.
But as time goes by routine sets in. Managers get distracted. Additional jobs get assigned. Maybe more employees join the workforce. But there is no concern because there is no evidence of weakness in the structure.
Then mistakes start being made. Small ones, initially, that management can easily handle, but the odd customer receives a little less of the service than they deserve. But mistakes happen and management can handle it, and there is after all, no serious detrimental effect on the structure.
As time passes, more mistakes happen, management starts to react to events that in their minds should not happen. After all they did not happen earlier in the company’s history. They had time then to supervise and teach employees. Management’s time now has more demands on it, each issue must be addressed in a shorter time. Management must address the issues more directly and more forcefully. The structure is beginning to show weaknesses. As the weaknesses start to show, management’s reactions become even more urgent and even less tolerant
Mistakes start to be hidden and covered up, in order to avoid management’s attention. When they are identified, management reacts to an even greater degree to the coverup than to the mistake. This drives more cover-ups and greater weaknesses to the structure. Customers affected by the mistakes take note which further weakens the structure
And finally, the customers, and or suppliers react to the service issues caused by mistakes and the company deteriorates. If the company experiences this cycle in a short number of years, it usually fails
Avoiding the Upside-Down House
The Upside-Down Structure can be avoided, but it must be avoided before it begins.
During the earliest days of the organization the policies and mission statements of the organization must address this future threat head on.
Mission statements which clearly define the organization’s approach to addressing errors must set the expectations of and for both employees and management.
Expectations of Employees will typically include an expectation that mistakes and errors will be reported to management, while there must be a clear message of what kinds of mistakes will receive what kind of management response. Management must also clearly identify the difference between an error or mistake and deliberate negative behaviour.
Once these issues are addressed, appropriate procedures must be formalized and communicated with an appropriate feedback process to ensure that the understanding is common throughout the organization. This communication and understanding must also be enshrined in the on-boarding process.