10 Signs Your Company Is Going Under


If you have ever read Who Moved My Cheese? you'll know that there are warning signs everywhere about an impending job loss. But what about the company itself? Is it safe? Or is it in real trouble? If you're having a few doubts about the future of your company, look out for these 10 red flags. (See also: 11 Financial Moves to Make the Moment You Get Fired)

1. There's a Hiring Freeze

When a company is doing well, it will be actively looking to expand and add talented new people to the roster. When times are tough, the HR department will initiate a hiring freeze. This is never a good sign. It can be done in a few ways. If the company management does things in a transparent way, they'll be up front about it. You'll be told that there is a hiring freeze until things stabilize.

However, most of the time, you'll be given no warning. Positions that should have been filled will be left vacant. When an employee quits, one or two other people will take on their responsibilities. Take a look at the current openings at your company — they should be listed on an intranet, or publicly on job boards. If you don't see any positions out there, or there are positions that have been open for many months, or years, then your company is probably in the midst of a hiring freeze.

2. Closed Door Meetings Are Everywhere

You walk through the halls of the company and office doors are closed, or sometimes slammed in your face. You peek in to see people clearly upset with raised voices, red faces, and there's a lot of shrugging shoulders and hair pulling. Unless your company has a specific reason to keep a lot of secrets — perhaps there's a top secret new product in development — then this can only mean one thing: bad news. Management will not want rumors to start running rampant, and will tell the decision makers to keep everything under wraps. Not only that, but when you ask questions about it, you'll get vague replies. These closed door meetings are not only bad for morale, but a sure sign that there are conversations happening about the future of the company.

3. The Good Employees Start Leaving

Good is a relative term, but in your company you will have employees who are known to be excellent at their jobs. They are good for the business, they are passionate and driven, and they are working on the important projects. When these employees start leaving on their own accord, for jobs that may be seen as a lateral move (or even a downward move), you know something is wrong. The rock stars of any company have a good handle on things, and their gut (plus inside information) will tell them to escape while they can. If upper management starts quitting, that's an even bigger sign of trouble ahead.

4. Layoffs and Reorganizations Are Constant

A company doing well does not need to lay people off, or continually restructure. A company performing poorly will look to cut staffing costs, and shuffle the remaining employees around. It's a Hail Mary approach that rarely works. Layoffs may result in some of the better employees being let go due to salary, or internal politics. The increased pressure on the remaining staff to do more work will take its toll. Mistakes will be made. Problems will escalate. Before you know it, six months have passed and the company is in even worse shape. And then there will be more layoffs, and more reorganization. When this loop occurs, the doors will be closing imminently.

5. Playing It Safe Is Encouraged

Taking risks is part of the business — any business. After all, starting a company is a risk, and risks are often required in order to grow and succeed. When risk-taking is suddenly frowned upon, you know the company is on shaky ground. What was once considered a bold move will be rebranded as dangerous, or problematic. Your company will slide into patterns of doing only what worked in the past, despite market changes and demographics shifting. Instead of making decisions that will elevate the company, management will pull back, and "play it safe." Expansion disappears. Innovation crumbles. Everything that made your company a success will be relegated to the back benches, with "tried and tested" solutions taking the lead. When playing it safe is the mantra, it's a big sign of weakness.

6. Everyone Is Unhappy

The conversation in the kitchen is all about how much the culture sucks. At lunch, employees everywhere are complaining about the state of the company, and the future it probably doesn't have. Smiles are in short supply. Everyone is stressed out. The entire staff is walking around with the weight of the world on their shoulders. This is not the kind of culture you'd see at Pixar or Google. Energetic, enthusiastic employees are the sign of a thriving company; the opposite is true of companies that are on the ropes. When everyone is down, the company is going in that very same direction… and quickly.

7. There's No Money to Do Anything

Cash flow is extremely important to any company. It's the lifeblood of the business, and without it, it's hard to pay salaries, order products, and advertise. In the past, getting the money you needed to get the job done was no problem. Now, it's a struggle. Your requisition for new supplies is denied. Pay raises are eliminated. People are asked to take salary cuts, or even worse, work for free — furloughs are very real, and very scary. Bills are not being paid. Vendors call you angry about not receiving money they are owed. These are all classic signs of serious money troubles. They are usually followed by closing the doors, for good.

8. The Company Stock Is in Free Fall

If your company is on the stock market, you can track the share price. Every stock has its ups and downs, but if the only way is down, your company has issues. Now, this may be because of a recent press release, or a piece of news that directly impacts your industry. However, if your company is in good shape, it should be a small fluctuation. When the stock starts tanking, and continues on that downward trajectory, things are bad. What's even worse is when major shareholders, including management, start selling off a majority of their shares. If they want out, the end is near. Get out now while you can, and don't let what happened to Enron employees happen to you.

9. Benefits and Freebies Dry Up

Your company was once great at giving employees the benefits they deserved. Not just health care and vacation, but things like free sodas and snacks, parking reimbursements, college tuition, and matching 401K. When times are tough, the perks disappear. If you now have to pay for a lot of the things you used to get for free, your company is in financial trouble. What's worse is that these perks, or lack of them, impact employee morale. Being asked to do more for less is never going to result in a great workforce, which then results in poor performance.

10. You're Not Busy

Your days used to fly by. You were frantic at times, but always had a lot on your plate. Now, you find yourself staring out of the window, or sending emails to people asking for something to do. When it's just you, it could be a clear sign that your position is about to be eliminated. But when there are many people in the company twiddling their thumbs, things are looking bleak. No business can afford to pay a staff to do nothing. If you're not busy for a long period of time, it's time to move on.

What are some other signs that a company is in trouble? Share with us in the comments!

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Guest's picture

Other signs include things like coffee service and vending machines not being replenished. If the entire vending machine is empty, this is a huge red flag. Either the office is closing or they are changing vending suppliers. Ask around.

Cutting back office cleaning is another one. If it goes from every evening to twice a week or they cut back to only doing trash every day but vacuum once a week, this is a bad sign. If stacks of bathroom tissue rolls appear in the bathroom with the idea employees will refill the dispenser instead of a janitor, this is a sign they are not paying the janitor any more.

Bringing in auditors to document every piece of furniture or cubicle partition, or IT people suddenly doing physical inventory on every computer, mouse, keyboard and monitor.

If there is warehouse space, suddenyly seeing large numbers of empty racks which used to be full, or seeing strangers in the back tearing down the racking. Bad signs.

If representatives show up looking to repo leased office machines, this is bad.

Guest's picture

Or the direct deposit of your paycheck starts going in late.

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