ructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistriSometimes things just happen. Maybe we lose focus and take our eyes off the ball. Maybe we don't recognize the signs. Sometimes it happens quickly due to a loss of a major customer or loss of a major product line. Sometimes it is a slow, gradual process. Market share seems to evaporate; gross margin exhibits an extended period of decline. Morale suffers, employee turnover increases, net profit declines, costs seem to get out of control and losses become imminent. Some Owners, Presidents and CEO's who find themselves in a situation facing these warning signs may actually contribute to the creation of “The Death Spiral” if they aren’t careful.

What is “The Death Spiral” and how do you know if your company is in one?

“The Death Spiral” is a fatal illness if not corrected immediately. This illness can be brought on by many factors including the process of building an infrastructure (“Ivory Tower”) prematurely based predominantly on the self-gratifying needs of our ego. It can also be created by the circumstances mentioned in the opening of this article. Whatever the reason, the warning signs generally appear and, if ignored long enough, red ink from losses on the P & L statement will become the megaphone that finally gets your attention.

If it becomes an infrastructure problem that doesn’t have a revenue stream of sufficient magnitude to support the fixed costs it generates, then the infrastructure must be torn down and rebuilt.

Unfortunately, however, late recognition of the problem can cause the CEO or Owner to resort to a mental mode of retrenchment that should be called “Panic Response Management.”

Panic Response Management is, in effect, crisis restructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistri

t of control and losses become imminent. Some Owners, Presidents and CEO's who find themselves in a situation facing these warning signs may actually contribute to the creation of “The Death Spiral” if they aren’t careful.

What is “The Death Spiral” and how do you know if your company is in one?

“The Death Spiral” is a fatal illness if not corrected immediately. This illness can be brought on by many factors including the process of building an infrastructure (“Ivory Tower”) prematurely based predominantly on the self-gratifying needs of our ego. It can also be created by the circumstances mentioned in the opening of this article. Whatever the reason, the warning signs generally appear and, if ignored long enough, red ink from losses on the P & L statement will become the megaphone that finally gets your attention.

If it becomes an infrastructure problem that doesn’t have a revenue stream of sufficient magnitude to support the fixed costs it generates, then the infrastructure must be torn down and rebuilt.

Unfortunately, however, late recognition of the problem can cause the CEO or Owner to resort to a mental mode of retrenchment that should be called “Panic Response Management.”

Panic Response Management is, in effect, crisis restructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistri

luding the process of building an infrastructure (“Ivory Tower”) prematurely based predominantly on the self-gratifying needs of our ego. It can also be created by the circumstances mentioned in the opening of this article. Whatever the reason, the warning signs generally appear and, if ignored long enough, red ink from losses on the P & L statement will become the megaphone that finally gets your attention.

If it becomes an infrastructure problem that doesn’t have a revenue stream of sufficient magnitude to support the fixed costs it generates, then the infrastructure must be torn down and rebuilt.

Unfortunately, however, late recognition of the problem can cause the CEO or Owner to resort to a mental mode of retrenchment that should be called “Panic Response Management.”

Panic Response Management is, in effect, crisis restructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistri

omes an infrastructure problem that doesn’t have a revenue stream of sufficient magnitude to support the fixed costs it generates, then the infrastructure must be torn down and rebuilt.

Unfortunately, however, late recognition of the problem can cause the CEO or Owner to resort to a mental mode of retrenchment that should be called “Panic Response Management.”

Panic Response Management is, in effect, crisis restructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistri

ructuring. There's nothing wrong with crisis restructuring by itself. However, in an ego-driven situation, this restructuring is more apt to occur from the bottom-up versus the top-down. In other words, revenue producing functions or people may be prematurely cut. These people or positions may be, at a minimum, covering their variable expense and contributing to some degree toward fixed expenses. This creates a redistribution of fixed cost which may now jeopardize the profitability of some other segment or division. This can create pressure to close other divisions and business segments or cut deeper into revenue producing functions that are contributing at least a portion to fixed costs, thus creating "The Death Spiral."

To most of you, this may sound ridiculous or even laughable, but it does really happen. The right approach is to view restructuring from the top-down, including taking a serious look at corporate and/or family overhead. You begin this diagnosis by asking questions like the following.

• How do you define your business strategy?

• How do you communicate your strategy to the employees?

• How would you define your company's competitive advantages?

• What are your strategic initiatives?

• What changes have had a significant impact on your business?

• What keeps you from being the most efficient and effective source for customers?

• What competitive advantages do your competitors have?

• What is the competency level of your executive staff?

• How do you rate yourself with respect to the success of the Corporation?

• What volume does the top 10% of your customers represent?

• How many of your customers represent 80% of your revenue?

• Do you measure account retention and growth?

• What is the turnover rate of your sales force?

• What is your overall corporate turnover in personnel?

• What percentage of your customers consider you to be their number one supplier?

• Have your average sales per invoice increased or decreased over the past three years?

• What single thing has had