The conference room had that eerie quiet that follows a tense conversation. Our executive team sat at the table, a mixture of Japanese, Americans, and Europeans attempting to come to grips with the dramatic numbers in front of us. Over the preceding year, the company's revenues had dropped by nearly 30%. Three of its four profit centers were hemorrhaging money, and the fourth was struggling to break even. Our stock was taking a pounding.
It struck me then that we were in the Doom Loop—the downward spiral described by Good to Great author Jim Collins that is characterized by a parade of leaders, shifting strategies, and consistently poorer results. Having held a variety of leadership roles during my 10 years at the company, a provider of professional services, I knew that there were big problems well before this current crisis. This was not the moment of truth. Whether or not we had noticed, this was just the latest in such moments.
You may currently be in a company that is stuck in the Doom Loop, unable to flee to one that's thriving (since the job market is anything but robust). Or, like me, you may feel a sense of responsibility or even opportunity in staying. I wish my team had learned from others who had experienced a Doom Loop. Unfortunately, one of the symptoms is that you're so overwhelmed by crisis you feel there's no time to learn your way out. We learned—the hard way—that that's not really true.
>> Focus ruthlessly on reality
I noticed a disturbing trend in the Doom Loop. We were constantly overoptimistic or overpessimistic. In the beginning, we didn't want to believe the trends. We looked for all kinds of "reasons" for our poor performance: the dotcom bubble bursting, the collapse of several major markets, September 11. We hedged and hoped, and the results always came in below projections.
Only much later did I realize what happened. People in crisis are trying to protect themselves. Sales managers, for instance, want to project a positive picture because they don't want to be the next casualties. They engage in wishful thinking (at best) and concealment (at worst). As executives, we made projections based on these unrealistic forecasts. The result won't surprise you: We missed forecast after forecast.
Then a subtle change occurred that was worse than the missed forecasts. We lost confidence in our ability to plan and control the business. We stopped believing that we could get the numbers to work. A dispassionate look at the numbers for the past three to five years would have revealed the trends to us.
>> Beware the two great enemies of effective leadership: anger and fear
In the Doom Loop, what's most required is a coolheaded leader and a senior team that can stick together. The facts are almost always ugly. How we deal with those facts has a lot to do with whether they stay ugly. No two emotions are more corrosive to sound decisions and solid working relationships with colleagues, customers, suppliers, and stakeholders than anger and fear. In our conference room that day, you could sense the fear—in our language, our demeanor, and our obvious lack of sleep. Several meeting participants saw their lives' work and fortunes evaporating before their eyes. But panic was getting in the way of good judgment. It was almost as if fear had severed the connections between ears and brains so that some of us were deaf to reason.
Many of us were also becoming more and more dominated by anger. The occasional ugly confrontation in a meeting revealed only 10% of the disagreement in the group. Some began opposing ideas not because they were bad but because its advocate was someone they disliked. We spent as much time second-guessing and fighting one another as we did attacking our problems.
Only careful thought and reflection can combat these inevitable feelings. You have to ask yourself: What am I afraid of right now? How likely is that to occur? What can I do to prevent or minimize it? How are others feeling? Once you step back and ask these questions, it's wise to have a sounding board to bounce ideas off of. With the help of my personal coach, I created a group of people, largely from outside our company, whom I could call for objective counsel. They often confirmed my instincts. But there were also instances when a single word of encouragement or a different opinion clarified my thinking.
Soon after I became a vice president, I ran through all my challenges with one of these advisers. After hearing me out, he said something that shocked me: "Ted, I've never known you to be a fearful person, but you sound really frightened by this job. I see it as an incredible opportunity!" I hadn't even thought I was scared, but he heard it 500 miles away over a phone line.
>> You have time to learn or time to FAIL
One of the features of life in the Doom Loop is a false sense of hurry. With the sky falling, everyone acts as if there is no time to do tasks that don't appear to contribute to results. Of course, this belief runs counter to what we all know from real life. Improved results come from better decisions and more effective follow-up, learning, and practice, and not from obsessive focus on the outcome. You simply do not get better without practice, and the practice required of most of us in the Doom Loop is to engage in ruthlessly honest reflection on what's happening in our business. How often do we stop for an hour to ask those involved in key initiatives, "Why are these results happening or not happening?" Some of the most important insights we gained came from asking why we lost to certain competitors or why specific projects went over budget. When we were able to turn those insights into better ways of working and improved decisions, we made progress in reversing the company's course.
>> Compromise on people decisions at your peril
Getting the best people in the right places became my obsession. After assuming my new leadership role, I began by interviewing each of the 50-plus people on my staff. I asked them four simple questions: What's your background? What do you love about working here? What bugs you? What ideas do you have to improve our business for customers and/or employees? Then I simply observed what was happening. Within three months, I knew that I had several people out of position. I then spent the next quarter expanding the leadership roles of some, removing others, and putting a few on a mental probation list.
People changes inevitably cost money and time—the two commodities that people are loath to spend in the Doom Loop. Layoffs are costly, and there's no guarantee you'll find better replacements. Yet I wish I had taken more and faster action here, freeing up more budget to make first-rate hires, even though I took what appeared to be rather radical staff actions.
>> You do have enough time and money for what's important
One of the statements you often hear in the Doom Loop is, "We just don't have enough time, money, or energy to do things right." What we're effectively saying is that we have enough time, money, and energy to do things poorly. In fact, we failed to focus our resources adequately. We were excellent at spotting and chasing potential "opportunities of a lifetime." But many of these initiatives stalled because they were starved for scarce resources. Any one of them could have been a winner. But in combination, we created a massive loser. Worst of all, the pattern of starting and abandoning initiatives demoralized our best people. As one of my departing friends put it, "I feel like I'm being sent out to battle with a wooden sword."
No one was worse than me. I was involved in more "important initiatives" than I could count. Only after I identified the top five most important ones—and focused—did I start to feel like I had traction again. I kicked myself for not applying Peter Drucker's maxim sooner: First things first, second things not at all.
If you're in the Doom Loop now, the lessons of our experience may help you turn things around (my former company has made strides in improving its fortunes). Having to learn them was lousy, but knowing them is sweet. nFC
Ted Harro (Ted_Harro@ameritech.net) is the founder of Noonday Ventures, a performance consultancy.
A version of this article appeared in the Table of Contents - May 2004 issue of Fast Company magazine.