Does Your Company Have Any of These Red Flags?

As a board member, you know how to spot red flags when hiring an employee or choosing another company to partner with. But what about potential red flags within your own organization? 

Company leaders are uniquely equipped to spot potential disasters when they’ve just begun. If you act quickly, your company will be able to more or less carry on like before. If you don’t, the problem can have far-reaching consequences. 

Your team of executive directors will usually be able to spot red flags among the people and teams they supervise. However, they tend to be blind to red flags among themselves. In order for the company to function as it should, the CEO and the rest of the leadership team must fulfill their duties. 

Here are some examples of potential red flags and how you as a board member can proactively look for them.

A Toxic Culture

This is not a problem unique to your executive leadership, but it often comes from (or at least is not countered by) those in company leadership roles. A toxic culture can be hard to define. It’s something intangible — some people might say it’s a “vibe” that permeates the workplace. 

Here are some signs that might indicate your organization has developed a toxic work culture:

  • Noticeable office cliques, bullies, and gossip
  • Continual confusion about which employees are responsible for which tasks
  • Consistent stress among employees
  • Lack of motivation and engagement from many employees
  • High staff turnover rates

So what do you do if you spot a toxic culture? Negative workplace culture might feel omnipresent, but it can often be narrowed to a handful of causes. One of the best ways for board members to investigate what’s causing that negative culture is to carefully read and analyze exit interviews to identify common themes.

Strained Relationships (Often at Multiple Levels)

As you know, successfully running a company is a team effort. So when interpersonal dynamics are dysfunctional and relationships are strained, it can be a sign of major trouble ahead. Here are some more specific red flags to look for:

C-Suite Relationships

Your C-suite team is bound to have periodic disagreements. But when there’s constant tension, that’s a major red flag. 

Some types of strained relationships between executives are worse than others. One especially dangerous one is if your company has a strong-willed CEO and a weak CFO. Having a confident financial expert in charge of your business’s finances is important; a strong CEO might be able to bowl over a weak CFO in order to make financial decisions on their own.

These kinds of strained relationships are easy enough to spot in the boardroom. The way you and other board members choose to address the issue will depend on your company’s circumstances. Sometimes, you might start with a discussion. But if problems are egregious, you might need to prepare to remove at least one of the executives involved.

Staff Retention

Strained relationships within your company tend to be quite visible at the lower levels. Often, your business will have trouble retaining employees for any length of time. An especially telling red flag is if new employees consistently leave right after being hired. These quick departures tend to happen when employees get a taste of a company and dislike it.

You might be familiar with the old adage, “People don’t quit jobs. They quit managers.” While this isn’t always the case, problems with staff retention often point to strained relationships between employees and supervisors.

Vendor Relations

When evaluating relationships in your organization, don’t forget to consider your company’s relationship with outside entities. If your business works with vendors or suppliers but fails to pay them on time, this is often a major red flag. 

It might be a sign that your finance department is badly organized. It also might suggest that certain members of your leadership team aren’t involved enough to rectify what should be a simple issue.

Conflicts and Communication Problems

Healthy corporations — and even very large ones — maintain communication across departments and from leadership down. Here are some specific communication red flags to look for:

C-Suite and Board Relations

Tension between two executives is bad news for a company. But so is tension between the CEO of the company and the chair of the board. If your board’s chair and the company’s CEO cannot work well together, that’s a major red flag for the company.

If you have this issue, take steps to resolve it as soon as you can. The board and C-suite don’t have to agree on every little thing, but they do have to be able to hold calm, respectful discussions — not all-out fights or stony silence.

Communication Between Executives and Management

Your C-suite should be able to clearly and effectively communicate key information and important changes to your management team. However, healthy communication goes both ways. Senior managers shouldn’t be afraid to challenge executives.

For example, if a senior executive has handed down a decision that senior management thinks will cause problems, managers should be able to freely communicate their concerns without fear of repercussions. If managers are afraid to do this or executives regularly dismiss communications from management, that’s a red flag.

Communication Between Departments

One well-known red flag is when a company has developed “silos.” This is when each department effectively becomes its own bubble. Each “silo” isolates itself, refusing to share valuable information with other departments. This problem should be remedied right away.

Spotting Problems Before They Start

When it comes to running or overseeing a business, everything must be in balance. It’s essential that you and other board members be on the lookout for red flags — but don’t be so vigilant you start to see red flags where there are none.

Fortunately, if you do spot a red flag, you don’t have to figure out how to resolve it alone. When you work with the rest of the board, you can come together and make a decision that’s in the best interests of the company.