Failing organizations the dump truck syndrome

1. Failing Organizations - The Dump
Truck Syndrome
Author: Aurobindo Saxena

2. Background
• A recent survey on start up failure rate indicated that 25% of start ups fail in the 1st year
itself; 36% by 2nd and almost 44% by the 3rd year. By the end of Year 10 over 70% start ups
fail.
• The worst performers are players in the Information and Communication space.
• The research cited incompetence of the promoter group as one of the biggest reasons for
these failures.
• The best part is that most investors "bury their dead very quietly,". They talk about their
successes but abstain from talking about the failures at all.
• Working in organizations on the verge of collapse can be one of the worst experiences of
one’s career.
• One day I saw a dump truck offloading material at a construction site. I observed that this is
quite similar to how organizations typically collapse. I have build a theoretical model and plan
to back it up with empirical evidence collected through primary research.
• The objective of this thought piece is to show how failing organizations emit patterns that are
similar to that of a dump truck offloading material, how does the dynamics within these
organizations evolve. This thought piece also attempts to provide directions for employees
stuck in this situation and indicates when to press the panic button and put a stop loss.

3. Key Question
• Is there a similarity in patterns emerging from a failing
organization with a dump truck offloading material?

4. Key Difference
• The key difference between these two cases is that while the material
being offloaded by a dump truck is inactive, the people who are part of a
failing organization are both active and reactive

5. Key Assumptions
• The key assumption here is that the company
has a professional management which is
separate from the owners. This would include
a professional President / CEO / MD.

6. Correlation between failing organizations
and dump truck offloading
Business Heads of
Seniority
Smaller Divisions President
Business CEO
Heads
Visibility within the organization

7. Business at Launch….a stable ship
• Exhibit 1

8. The First Wave of Departures
• Exhibit 2

9. The Second Wave of Departures
• Exhibit 3

10. The Empty Nest
• Exhibit 4

11. Key Hypothesis
1. People who are most senior in the organization in terms of designation and have a higher
visibility within the organization are the first to leave the sinking ship or failing
organizations.
2. Since the job market often tends to be more favourable towards the entry level people,
these set of employees are part of the second wave of departure.
3. People who wish to remain with the organization for as long as possible are more likely to
reduce their visibility in the organization as downgrading of their seniority may not always
be the most practical scenario
4. The last to leave the sinking ship would be people who are at the middle of the pyramid in
terms of designation and also have a low public visibility in the organization
5. Another tangent to this problem is the quantum of value add that an individual does. Here
people who are at either extremes are the first to exit. So the impact is that of a candle
burning from both ends.

12. Key Hypothesis
• The second line of command has three options:
Scenarios Relative Relative Overall Outcome
Seniority Visibility Impact
Elevate Increases Increases Improves Turn around success story
themselves
Deteriorate Quick Move out
Maintain No Change No Improves Seniority may improve
their status Change
Deteriorate Delayed Move out
They get Decreases Decreases Improves Relative Seniority may decline
into a shell
and retreat Deteriorate Last set of people to de-board the
sinking ship

13. Symptoms of Failure
• Declining top line and bottom line
• Erosion of the Net Worth
• Shutting down of one or more business lines
• Working Capital Crunch
• Knee Jerk Reactions by the Management
• Challenges in Bank Financing
• Delay in Salaries
• Default in Statutory Payments

14. So what’s the best strategy?
• Big Question 1: So what should one do when the ship starts sinking?
 I think one has to play this one on the front foot rather than on the back foot.
 So, take charge of things, try and get relatively senior within the system
 Put your best effort to save the ship and contribute as much as you can
 The worst strategy is to go into a shell and try to postpone your exit / termination, as
later on, the bad word may have spread all around and all the opportunities prevalent in
the market may have been exploited by others. Also with passing time, one’s negotiating
power is only set to come down.
• Big Question 2: So when should an employee press the panic button and move out?
 When the CEO / President level people have moved out
 The people in command reduce their visibility in the organization
 When the entry level people start leaving the organization in big numbers.
 When the vendors and creditors start banging your doors

15. Thank You
Please send in your feedback on this thought piece to aurobindo@gmail.com