Corporate Canaries

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Corporate Canaries

by Gary Sutton

Nelson Business © 2005, 140 pages, $19.99 (ISBN 0-7852-1299-X).

Avoid Business Disasters With a Coal Miner’s Secrets

According to corporate turnaround expert Gary Sutton, the key to business success is ducking catastrophe. He explains that he has written Corporate Canaries to help companies detect the threats that could cause them irreparable damage. In the same way that coal miners would hang canary cages in their tunnels a century ago to detect poison gas in the mines, his five “canary warnings” provide managers with the knowledge they need to “sidestep disasters, boost morale, make more money, stress less, and put broad smiles on customers’ faces.”

Grandpa’s Fables

Each of the canary warnings Sutton offers begins with a fable from “Grandpa Sutton” in which his coal-mining experiences are translated into thoughtful advice for modern business leaders.

The first lesson Sutton imparts is “You can’t outgrow losses.” Sutton writes that the most common cause of business failure is when a company tries to sell its way out of losses. This chapter starts with a story about a coal mine owner who refused to listen to young Grandpa Sutton’s advice to follow the veins of coal in the mine instead of blasting straight tunnels and hoping for the best, and went out of business because of his stubbornness.

Luckily, Grandpa learned to diversify his skills and make friends while working, so he was quickly re-employed by a leaner, more efficient mine operator after he was fired from his job. Sutton follows this fable with a translation of the story in which he describes how Grandpa’s hustling and hard work paid off later, even though his advice was ignored. Although Grandpa’s efforts to express himself and improve his company’s work got him fired, Sutton points out that expressing yourself only fails with insecure management.

The larger business lessons to be learned from this fable are those that come from looking at the story’s big picture. “Getting more sales is the second most important goal for any business,” Sutton writes. “The first goal is making sure those new sales add new profits.” Many real-life examples from Sutton’s experiences as a business turnaround guru follow. In them, he explains how he learned the lessons he imparts, and how the knowledge he gained applies to many other businesses and types of industries.

To complete each chapter, Sutton solidifies his tips into a compact box titled, “Your Business Is in Trouble When ...” After the first chapter, he lists three indicators of a troubled business, including, “Company revenues have grown at twice the rate of net profits for three years,” and “The sales force is commissioned on volume, without regard to profit.”

Sutton also provides several actions that managers can take to overcome problems before they get worse. For managers who have the problems on his first list, he writes, “Your company must change the sales incentives to recapture profit growth. Add bonuses and contests to make the switch fun while challenging.” He also writes that modifying the system again after 60 days and doing simultaneous cost cutting can turn things around.

‘Puzzle Through That’

In the second chapter, “Debt’s a Killer,” Grandpa Sutton offers more wisdom from the mines while pointing out smaller lessons that emerge along the way. When Grandpa describes his advancement in the mining company, he shares this advice with his grandson, “He who hires managers smarter than himself is smarter than the men he hires, if ye can puzzle through that.”

When Sutton describes “spacing the beams too far,” he refers to the practice of some mine owners who save on lumber costs by spacing support beams in a mine shaft farther apart than they should. Although this might work most of the time, sometimes it leads to deadly cave-ins. In a similar way, Sutton explains, when a company leader takes on massive debt by borrowing, he or she is making the same mistake as the short-sighted mine operators.

Sutton points to Enron, WorldCom, Tyco and AT&T as examples of companies that could not be saved from their debt by larger companies acquiring them because each was the largest in its field. Sutton writes: “The best solution for an over-leveraged business is to sell it to a bigger business. Let the leaders of that business swallow your debt before the next recession. They can assume it and survive. You can’t.” ~

Why We Like ThIs Book

The charm of Sutton’s folk tales from the mines and his experienced tips on business strategy combine to offer a fun read that delivers many sound examples and much advice for managers looking for ways to recognize trouble. With lessons that can help any large or small business, Corporate Canaries provides smart business insights in a small yet powerful package. ~

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