The Cost of a Disruption

“If you could get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.” This quote comes from Patrick Lencioni’s book, ‘The Five Dysfunctions of a Team.’ Through this quote Patrick credits his friend who developed a start-up into a billion dollar business.

Generally, most people will not put up a lot of resistance to a concept like this, but many will wonder how it is done. That I get.

However, what is the cost of not rowing in the same direction? How much does it cost to recover from a disruption?

If you search for data on this you, as I did you may be surprised just how long it can take. Nissan / Renault is dealing with a crisis. Their Chairman, CEO, and turnaround architect, Carlos Ghosn, has been arrested in Japan for under-reporting some $80M* in income (*the final number is still being worked out). Renault is also dealing with the rash of ‘Yellow Jacket’ protests in France. They estimate that a single of day of disruption takes two weeks of recovery to balance. 1 work day disruption -> 10 work day recovery – so a 10:1 ratio.

Ok, what else?

A rapidly growing professional service firm is recovering from an internal HR issue which dragged executive focus away from growth and management for a two-week period. When I asked the chief executive what he learned from the experience, he said (paraphrased), “That this confirmed his suspicions that HR issues are a real threat to his company’s growth.” He estimated that the disruption cost him two months. 2 week disruption -> 2 month recovery – so a 4:1 ratio.

These seem like reasonable brackets for this issue; a range of 4 – 10 x recovery time for each disruption.

Will this hold for every industry at every time?

Certainly not. Just ask Kevin Spacey how long his recovery time will likely be . . . .

However, it does paint a picture, and it also illustrates the importance of staying true to values (not lying about your income) and making sure that team members are working well together.
If you are wondering if there is a common theme here, I say it is in the company Values.

Your business starts with your Values. If your team has not defined them, or if they have grown stale, it is time to reassess, consolidate, and crystallize those values, because you will evaluate your future hires, partnerships, and opportunities through the lens of your values. Doing this only takes a day or so, but provides a tremendous ROI for your company.

How have well-defined values helped you in your business / career? How have poorly defined values hurt?

Your business valuation will follow your values.

Thanks for your time. Have a great week!

Go You!

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