I’m guessing that you’ve been following my series on business closure and the ethics thereof. This post does not seek to provide definitive advice. What lies herein is based more on intuitions, and a reflection point for leaders to consider where they are at. If you are wondering whether your organisation is terminally ill, or whether you should close, seeking support and advice from experts would probably be wise.
Some symptoms of struggling non-profits and businesses in decline can include:
- Prolonged inability to attract the external resources (funds) to maintain what is necessary to operate – I am not talking about additional resources for growth, just resources to operate at a level that means you can provide a professional, ethical and effective service.
- Massive changes to the market whereby the organisation is competing for resources, and unable to achieve that ahead of others.
- Lack of, or inability to attract the expertise, knowledge, commitment and drive to turn around the organisation – this needs to be at Board and staff levels.
- Pain and exploitation of staff through poor resourcing – rather than scale down operations, organisations can be guilty of maintaining services by exceeding the reasonable expectations of staff. Read more
Over the past week I have been exploring the ethics of business closure and the idea of euthanisation. It is time for me to explain myself – what do I mean by business euthanization? and why use this metaphor for talking about business life-cycles?
My sense is that how we treat business closure is actually symptomatic of a much wider cultural and spiritual issue around how we perceive and deal with death and dying (stay with me!). For many people, death comes as a surprise and can be full of heartache – not just for the person dying, but also for the family. Research around organ donation for example shows that many families do not discuss the wishes of their loved one prior to their death. This lack of discussion and planning leads to sometimes difficult decisions needing to be made, and conflict amongst those left behind.
What can reincarnation teach us?
All cycles come to a close, and to the beginning of a new cycle. Yet we somehow treat business, strategy and life as if it is in a state of perpetual growth. This is simply not how life works. Of course all cycles will end. In life we have two main types of cycles – the major cycle of incarnation, and sub-cycles which could be seen as life stages. Each sub-cycle can include periods of creation (or innovation), growth, maturity, sustainability and eventually decline. Periods of decline can lead to business turnaround, which usually occur after some kind of midlife crisis or turning point.
Business is simple really – not easy – but simple. You create a product or service that offers value to a market, and that market acknowledges its value by purchasing it. If your product (or service) is not purchased, then you have to look at whether or how much the product is valued. In a way, customers are voters. With each purchase, the customer is voting for whether they like your product and/or your brand. You get lots of votes and you stay in business; you poll poorly and you are out of business.
Okay, so this is looking at business far too simplistically. There are many factors that go into a business working or not working. Indeed, you may well have a good product but haven’t figured out a way of marketing it or producing it at a cost that fulfills profit goals and a market’s price point. But that aside, let’s roll with our metaphor of the customer as voter.
This mechanism of voting/purchasing is based on a value exchange between the provider and the market. The business owner’s job is to be in constant relationship with the market to know whether or to what extent that relationship is healthy and there is a value exchange. If the relationship is healthy and the market perceives a fair value exchange, you are doing pretty well. Sales is a very clear feedback loop on how your business is tracking.
What about non-profits?
Small (and big) business owners know this and track sales constantly. It is like a doctor checking the businesses pulse (okay, no more metaphors). But what about the non-profit ‘market’? Read more
This series on business euthanization was originally inspired by two colleagues who as CEOs of two separate non-profits, had the courage to close them down. Both happened independently of each other, one in Melbourne and one in Sydney, and for different reasons.
The first case came about through a realisation that the purpose of the organisation, while noble, was not making the impact it set out to achieve. It had been working project to project and producing fine work. There were by all reports wonderful achievements, and a lot of goodwill surrounding this organisation. Despite that, when impact is the main game and resourcing that is essential, there comes a time when one wonders whether something else could be done with those same resources to achieve impact (and resources mean more than money here).
The decision was perhaps a surprise to some stakeholders. Why close a business that essentially is doing some good? If it was a commercial business, there would have been little evidence to close it. In fact if profit was the main game, this business could potentially have moved into markets that exploited staff capabilities and maximized return. But this was not a commercial organisation, and the drivers were elsewhere. The people wanted to make an impact.
The second case was in many ways more surprising. It was a market leader in its industry or target group. They had been around for a long time, Read more