From an employee's perspective, what are some obvious signs that a company is about to go under?
closed as primarily opinion-based by user9158, Thomas Owens, AndreiROM, user8365, Joel Etherton Feb 3 '16 at 18:24
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Good ones I've seen:
- Senior management openly hostile towards one another.
- Suddenly difficult policies for minor purchases or expense approval.
- Accounting staff re-arranging their offices to keep workstation displays hidden.
- Sudden VP and director-level resignations. (C-Levels usually ride the ship down.)
- Managers unwilling or unable to explain business objectives.
- Vendors asking if you can "Ask accounting about their invoices."
- Direct deposit payroll "slipping back" a day or two here and there.
- Overtime for line-level employees requiring higher-level management approval.
- Discreet inquiries from your manager about "Are you looking for other work?" and "Do you know if anyone else is?"
- A new bank processing payroll checks.
- Office consumables (pens, paper, coffee, etc.) inventory not being replaced.
None of these on their own are cause for alarm. It's when you see several of them coming up that you should worry.
Additions - Summarizing from commenters:
- Delinquent tax notices are often public. (See if you can find where your county/state delinquencies are posted.) - HireThisMarine
- Company reports are delinquent / expired check your state's Secretary of State's office (For U.S. States) and make sure they're current, and no new "equity partners" such as financial institutions have been added recently.
- Not replacing managers or key employees, but "redistributing" their functions on remaining staff, stretching them beyond capacity, and with very short-term deadlines on projects. - Dan
- Salespeople (especially veterans) leaving. No sales = No commission. - Chris L
Here are some early warning signs to look out for before your paycheck stops arriving:
A decrease in morale. As executives become disillusioned, this will trickle down throughout the company in subtle and less subtle ways with the ultimate effect of reducing morale.
A decrease in long-term planning. The captain of a sinking ship is no longer interested in steering it. A company with 3 months of runway will generally not concern itself with updating the 5 year plan.
An increase in deck chair arrangement. Managers can only influence a company by managing. As such, they often attempt to right a sinking ship by shuffling tasks and/or staff around, calling more meetings, and otherwise causing more busywork for their staff.
People leave, especially management. Like the proverbial rats, people who are aware of the company's impeding doom are likely to leave before it affects them.
Freezes on budgets, hiring, travel, etc. Every belt is tightened in an attempt to prolong what little runway is left.
Suspiciously specific denials. "No, our VP of Growth Hacking definitely did not leave because our company is about to fall off a cliff. He wanted to spend more time with his family."
Besides the obvious where the company is failing to make payroll or layoffs have started, I would say the increase in meetings is a sign.
There are two types of meetings you'll see as the doomsday approaches.
The first is the "Drink The Kool-Aid meeting." This is the one where Management knows things are bad, but doesn't want to see any of their top end talent leave. There will be a meeting, probably around lunch, and they'll say how great things are. How people just need to rally and circle the wagons and come out stronger.
The second is the "Coming to Jesus" meeting. This is the one where management all sits down and realizes they are in a bad way. You'll see higher ranking people constantly in meetings, shuffling deck chairs on the Titanic.
Just to add to the list:
The obvious one, people aren't getting paid! (on time)
Cutting costs is not in itself a bad thing, but when costs are cut at the expense of quality (that is, a product/service your company is consuming) or attempts are made to avail of a free alternative, that isn't as good as the paid one you were using, especially if the drop in quality will cause a corresponding drop in quality of your outgoing product / service.
Maybe the difficulties are acknowledged but the managers are promising better times ahead. Their talk should be taken with a grain of salt as they would likely say the same thing whatever the situation is.
People who leave the company are not being replaced.
People spend extended periods of time "on the bench"
Even just having a bad manager in a high level position is indirectly a bad sign in itself.
Company changing its brand & name!
I think one point missing in the answers is the direct sign - bad financials. Probably not everybody has timely access to these, but a successful company will keep the employes apraised of the success regularly. I would take it as a bad sign if the information policy would change in this regard at some point. In Germany, all limited companies must publish at least annually, I suppose this should be similar in other countries. Depending on the maturity of the company / industry this might give sufficient warning.
- Increase in non-operating profits to make up for losses in operations
- Increase in stock of finished goods (less prevalent in services)
- Cutback in R&D and/or marketing
- Duration of liabilities much shorter than of assets (e. g. Capex financed by short-term loans)