As a turnaround specialist I am frequently asked, “What do you find is the common cause of failure in organizations?”  Unfortunately, that is not an easy answer.  Every case is different.  As lawyers are often criticized for saying, “It depends.”

I once had a group ask me to send them a case study of one of my turnarounds so that they could get a good feel for what I do and evaluate my candidacy for their CEO position.  I did.  A few weeks later they came back to me and said that they were not going to fill the position, but were going to handle it themselves.  Apparently, they chose to use that case as a guide for improving their business and save themselves some money.  I am guessing that they were inexperienced enough that they did not realize that each situation is different and requires careful diagnosis – data gathering and analysis – in order to chart the correct path to success.  It is now two years later; the business is still in the red; and, they are desperately looking for new sources of financing.

My observation is that the most common area in which leaders fail is in accurately diagnosing organizational issues.

Having said all that, there is one common area from which organization failure emanates…Leadership.   At times, people get a bit frustrated with that answer because they do not understand what Leadership is.  Leadership is a somewhat nebulous term…it has many aspects…it is not black and white.  Being a leader requires having many skills; it requires recognizing what skill is required for any given situation; it requires moving rapidly from one skill to another as the situation demands.

Further, I can say this.  My observation is that the most common leadership failure is in accurately diagnosing the organizational issues.  People feel the need to act quickly and often do not take the time to accurately determine the problem.  They fail to collect the right information, if they collect any information at all.  They fail to ensure that the data they are collecting is accurate and complete.  As a result, they solve the wrong problem.

As an example, I once observed an organization that was growing nicely but was not making any profits.  Year by year they grew in sales, but they never put any profits on the bottom line.  They assumed that the problem was that they were not managing their costs correctly, so they started cutting back staff.  Unfortunately, this put a heavy workload on the remaining staff and quality issues soon followed.  With the quality problems came customer dissatisfaction, declining sales and further losses at the bottom line.  The actual problem was that they did not understand their cost of doing business, and as a result were under-pricing their services.  They did not take the time to correctly diagnose the problem.  As a result, they solved the wrong problem, and actually created a bigger one by doing so.

Data is fundamental.  Analysis is critical.  As a leader, you need to take the time to accurately diagnose the causes of the symptoms you are seeing in your organization.  As one well-known CEO once said, “You can’t skimp your way to success.”