Culture and People

When a company faces a financial crisis—red numbers, falling margins, negative cash flow—it is tempting to often jump to the easy fixes: cost cuts, price hikes, or chasing volume.

But if a company is in a true financial crisis, the core problem is rarely the unit economics. Focusing solely on the P&L treats the symptom, not the disease. 

Sustainable recovery requires moving beyond the spreadsheet to diagnose the true root cause: an underlying rot that cascades from two non-financial sources:

Root Cause #1: Flawed Culture 

Culture is your company's invisible operating system. If it's flawed, it creates perverse incentives.

For example, if leaders penalize bad news, your employees will choose to hide or manipulate reports rather than face the heat. You lose all visibility. Remember Wells Fargo? I do. Their crisis wasn't a flaw in pricing; it was a culture of fear driving employees to open millions of fake accounts. That's a system problem, not a numbers problem.

Root Cause #2: Misaligned People 

The People factor is about accountability and alignment. It happens when management rewards short-term wins while ignoring major long-term liabilities like product quality or customer churn.

Even worse, when a leader’s ego or personal vision dominates, bad decisions go unchallenged. 

Look at Theranos, which is in the news again today.  They didn't fail because of the market. They failed because Elizabeth Holmes fostered a culture of extreme secrecy, prioritizing valuation over scientific reality. Deception was incentivized over honest work.

Sustainable recovery starts by fixing the structure. Resist focusing on cost-cutting first. Address the culture that broke the information flow and the people who failed to be accountable. 

Fix the organization, and the P&L will follow.