Deep Change
Occasionally, great leaders push for change without being forced. It takes vision to say, “We’ve been successful doing ABC, but now it’s time for XYZ.” As described in The Pinball Theory of Business & Life, David Jones, founder of Humana, told me how he and his partner repeatedly reinvented their company. He was clear: Nothing in business is static. You must anticipate the trends and changes ahead that will reshape the current landscape. Otherwise, you’ll be left in somebody’s dust.
Their ability to stay ahead of the curve is inspiring—but it’s not the norm. In most cases, real change doesn’t happen in steady times. Strong leadership and well-run organizations drive progress, but major shifts usually require a wake-up call. And few things wake us up like money troubles. Big ones. They have a way of cutting through denial, shaking organizations out of complacency, and forcing the change that should have happened all along.
Slow Cash Flow
Most companies, most of the time, manage their cash flow without significant issues. It’s easy to ignore or downplay early warning signs, especially if there’s never been a severe cash crunch. But if a leader remains unconcerned despite real signs of trouble, someone must step in. Whoever sees through the smoke has a responsibility to shake the leader awake—before a crisis takes hold.
In Pinball Theory, I detailed the rise and fall of The RussianAmerican Finance Fund. That experience remains a defining lesson for me—how a small cash flow issue can snowball into a full-blown cash crisis, sometimes beyond our control.
Our CFO and I were in a sauna in an apartment in Perm, Russia, casually discussing our concern over a single letter of credit—completely unaware that big trouble was brewing. At the time, the USSR/Russia had never defaulted on financial obligations. That was about to change. The government’s cash flow problem became a national cash crisis, ultimately impacting our company.
I hope no leader faces the kind of unexpected, complex, and dire situation I did. But if you sense a serious cash flow problem simmering, act with urgency. If there’s still time, take whatever steps you can to stop a slow bleed from turning into a catastrophe.
Cash Crisis
In dealing with significant cash shortages, I prefer the word “problem” over challenge, concern, issue, or any other euphemism that waters down the reality: We have a problem.
A cash crisis is not the same as slow cash flow. Slow cash flow usually means a timing gap between obligations and expected revenue, manageable through a line of credit or temporary extensions from creditors. A cash crisis is different. It signals a fundamental breakdown.
Let’s say you’re in a CASH CRISIS. Software can generate detailed reports, projections, and cash flow charts. If all that data is overwhelming your team—if they’re analyzing the problem more than attacking it—here’s a simple, effective exercise I used with a client: Wall Chart.
Place continuous paper on a wall that will confront leadership all day long. From all your data, you know when you will run out of cash. Write the out-of-cash-drop-dead-date on the far right end of the paper. From that date, work the chart back to the far left end and write the current date. Use color markers between those two dates to show months, weeks, and days before you have no cash. It’s staring at you: I have this block of time to save the company (and myself).
In Pinball Theory, I outline all the steps, but the key is to deal with a short list of creditors who can put you out of business if you don’t pay them. In (blood) RED, write on the wall chart their names, amount of money you must get to them by a certain date. Do not try to escape their wrath through emails, texts, etc. Let your key creditors vent directly to top leadership. Bankers, IRS, critical creditors want to be kept candidly and regularly informed. They too prefer to avoid enforced collection if they believe you’re being straight with them. Be straight with them.
Updating and following the wall chart process on a daily or weekly basis will keep everyone appropriately alert, scared, and on track. It might keep a creditor from putting you under. It also might give you the chance to make necessary changes.
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Should we expect deep change in our organizations without a crisis? Author Stephen Knott explored how crises reshaped President Kennedy’s thinking and actions. “He did something unusual for a president—he changed… He continually challenged himself to think and act anew.”
We may not face a Cuban Missile Crisis, but business leaders often find themselves in situations that force transformation. And often, it takes a financial crisis to demand deep change. So, even without a crisis:
Can we continually challenge ourselves to think and act anew?
