While surfing cable channels recently, I caught one of the all-time favorite Western movies, "The Good, the Bad and the Ugly," in which three disparate low-lifes form a treacherous alliance in a quest for Confederate gold. The Man with No Name (Clint Eastwood) is the good guy, Angel Eyes (Lee Van Cleef) is the bad guy, and Tuco (Eli Wallach) is the ugly guy. During their search, they alternate between trying to kill each other to saving each other’s lives, depending upon the circumstances. By the end of the movie, it’s not clear anymore who is good, bad or ugly ... although you can probably guess who ultimately triumphs.

As I watched the drama, I realized I’ve encountered a lot of companies with similar stories. Although most companies have different characters with varied backgrounds and experiences, in the beginning everyone usually shares in the same quest for corporate "gold". Then somewhere along the way, things like mismanagement, poor decision-making, greed and lack of attention to detail crumble the alliance. Soon people
are pointing fingers at everyone but themselves and CYA politics (the business analogy to a Western ambush) becomes the norm.

Whether the business dies a painful, bloody death or survives to ride triumphantly into the sunset depends upon how far into trouble it gets before reinforcements (new management) arrive and how many bullets (financing sources) it has. Reviewing the following tales of good, bad, and ugly companies may be helpful so that businesses don’t suddenly find themselves cornered in a shootout.

The Good

Good companies know which trails to ride … and don’t veer from them. Good companies write business plans and then focus on execution. First, they analyze external market forces and are objective about their strengths and weaknesses. Then they establish long-term goals and objectives and develop externally driven strategies
which guide them in where and how they’re going to compete in the marketplace and gain a competitive advantage.

But they don’t stop there and let their plan gather dust on the saloon counter. Good companies then consistently communicate the plan until every employee knows his or her role in the big picture and names and timelines have been assigned to the goals. Then the focus turns to action and execution of the plan. They remain focused, not
drifting off the trail to new market temptations or competitive reactions without careful analysis.

Good companies know the value of gold. Cash (gold) is the lifeblood of a business and without it, a business bleeds to death. Although companies of every size need cash, it’s my experience that larger companies get complacent, losing sight of that fact until times get tough and they realize their gold has been squandered away.

Good companies create daily cash flow projections for the short-term, then weekly for the intermediate-term, and monthly for the year. Armed with this information, it becomes easy to see where the cash deficits are and which areas should be attacked with all guns a-blazin’.

Good companies realize good ranch hands are valuable. Many companies have mission or corporate value statements proclaiming their employees are the company’s most valuable asset or resource. Good companies know that these statements without investments into communications, training, benefits or their work environment makes those words just horse pucky.

As the economy changes from an industrial-based economy to one that relies more on information and service, good companies are the ones that emphasize developing their intellectual assets. They make substantial investments in employee training and development, offer extra benefits and competitive compensation, and
build pleasant workplaces.

Good companies are adept at panning for gold AND don’t gamble it away. Good companies know how to balance their efforts between growing the top line and watching the bottom line. They do all the right things to grow revenues, like knowing their markets and customers well, creating realistic sales projections, and having a motivating rewards system for achieving those sales goals. They do portfolio analyses of their products and / or services to know which ones are value creators and which ones are value destroyers.

At the same time, good companies are prudent about managing expenses; they don’t put themselves into debt thinking that they can sell their way out of it. Good companies are proficient at managing the productivity of their resources, can manage their cash wisely, and don’t take unnecessary or uncalculated risks. They are resultsoriented, holding themselves and their ranch hands accountable for reaching the company goals.

Good companies know when to pull the trigger. I like the saying, "Ready, Fire, Aim!" because it describes a company that relies on its intuition and can make quick decisions. They don’t get bogged down by analysis paralysis, aren’t afraid of their own shadows, and are willing to take calculated risks. They know when to be opportunistic and when to pull back because they stay in touch with their markets and are close to their customers.

The Bad

Bad companies think Jesse James and his gang are in town to make a bank deposit. Like the townsfolk who ignored the bank robbers, I’ve encountered many companies that have ignored early warning signs of trouble that, when left unheeded, have led to crisis and failure. One warning sign is high employee turnover that can result in decreased productivity and, ultimately, lost business. Other warning signs are the lack of timely and accurate financial information; a history of failed growth strategies due to the lack of cash, management expertise or poor market analysis; and uncontrolled growth in one area of the business (usually sales) causing neglect to other areas of the business. And, if profits aren’t put back into the business, but are spent on luxuries (like new chaps and 10-gallon Stetsons for all top hands) and excessive compensation for executives / owners,
that may be a warning sign that the company won’t be able to keep pace with the competition’s investments into new technologies or machines.

Hiding in the stable when the banker comes knocking at the door is one of the most frequent tell-tale warning signs of trouble. And, watch for the excessive build-up of accounts payables and unhappy vendors who aren’t getting paid and then start to put the company on a C.O.D. basis. If a business is in that situation … it’s not far from the noose.

Bad companies don’t know what their herd is worth and don’t care if they lose a few cattle. Too many executives and business owners simply don’t understand the economics of their business. They don’t know which products and / or services are truly contributing profit and which ones are not. Why? Because they are viewing revenues in aggregate and not isolating product / service revenue streams to determine which ones
are weighing everything else down and should be jettisoned and which ones are the keepers.

Similarly, I’ve had clients that got into trouble because they thought they could sell their way out of debt. They cut prices to overcome competitive intensity and sales grew. But then they realized too late that the increased inventory and overtime pay needed to fulfill the orders were burning up their cash. They failed to understand how cutting prices impacted the economics of their entire business.

Bad companies only have one bullet in their chamber. Bad companies rely basically on a one-year budget to describe their goals. Many executives / owners just keep strategies, goals and objectives up in their heads and, as a result, the strategies are not communicated to anyone and all the ranch hands become drifters.

In those bad companies, the value system is based on achieving the annual budget, as opposed to setting / achieving externally driven long-term goals where the value system is on creating the future. Bad companies are internally driven, instead of being market-driven. They practice a static allocation of resources as opposed to
dynamic allocation of resources based on an objective portfolio evaluation.

The Ugly

Ugly companies don’t talk to their ranch hands or their cattle buyers. Ugly companies don’t talk amongst themselves; nobody knows what anyone else is doing. Communication between departments, management and employees are ineffective or nonexistent; meetings are ineffective; and interdepartmental cooperation is like a
round-up gone bad.

What’s worse, poor communication habits usually spill outside the company’s walls. These companies don’t listen to what customers tell them but assume they already know what the customer wants. Guess what? Their customers start to do business with people who sell them cattle instead of sheep, when they want cattle.

Ugly companies don’t tell their board members, shareholders, bankers or other stakeholders what’s going on currently or what their plans are for the future. Then they wonder why these townsfolk don’t rally behind them when they get into trouble … especially if that means investing more money into the company.

Ugly companies are drifters. Ugly companies have unclear goals and strategic directions, provide little or no training for employees, hold too many unnecessary and inefficient meetings, and manage with an autocratic style that doesn’t listen or delegate authority. This behavior cuts productivity because no one wants to or is able to make operating decisions. Morale suffers, time is wasted, and everything looks pretty … ugly.

Ugly companies shoot in the back, cheat, and steal your gold. Ugly companies don’t have written corporate values statements that clearly state their ethics standards and expectations for behavior. Ethical problems usually don’t happen because someone intentionally did something deviant. They happen because good people weren’t trained properly, weren’t given the right information, or just made a mistake. Without a
corporate values statement, the company is just running in random motion, making up the rules along the way. It’s every ranch hand for themselves, which can result in getting shot in the back and theft of the corporate gold.

Hopefully these tales of the good, the bad and the ugly have sparked some ideas about your own company. If so, and your company sounds more like the bad and the ugly than the good, then you may want to take some quick corrective actions. And don’t just talk about it because time is running out. Or, as Tuco says, "When you have to shoot, shoot. Don’t talk."