The Best Warning Sign of a Failing Company

🚀 How do you know when it's time to leave? - Issue #185

Recently someone asked me: 

How can you tell if your job is a dead-end job?

How can you tell when the company is really in trouble, and it’s time to quit?

It is risky to stay in a company after its “expiration date.” When the company is going down, you don’t want it to take your career with it.

Your career trajectory is significantly impacted by where you choose to work. It determines the quality of projects, leadership, your direct manager, and coworkers. It also affects your personal and professional growth.

Work on great things with great people, and it will be great for your career.

On the other hand, if you stay too long in a troubled company that doesn’t seem to be recovering, you’ll stagnate, and your professional brand gets damaged. People wonder why you’re still there.

I’ve experienced both situations a few times. It turned me into a better observer of the early warning signs of a failing company.

However, one of these signs is better than all the rest; the “canary.”

Early in my career, it took a few jobs before I started identifying my canary. It was several more years before I learned to trust the message the canary was sending.

You may not be familiar with the concept of a canary. It dates back to the early 1900s when miners would take canaries down into the mines with them as an early warning system for carbon monoxide and other airborne poisons. If the birds became sick or died, they knew that something was wrong, and it was time to exit the mine.

At work, people come and go. It’s healthy, and it happens. There are so many reasons that someone might choose to move on.

Sometimes there is nothing wrong with the company at all. Sometimes there is nothing wrong with their job. They found a better opportunity, or a personal issue was impacting their decision, or they just wanted to make a change.

But, sometimes, the company is in trouble and about to collapse. Or — even worse — it will just slowly choke your career into an agonizingly slow death.


Pick a good canary

I’m sure your company has many smart, talented people. But, that doesn’t mean their departure would necessarily be a leading indicator of troubled times.

Just because they are leaving the company, it doesn’t necessarily mean bad things for you or your organization.

What makes someone a good canary?

  • They’ve been with the company long enough to know the difference between minor downturns, temporary setbacks, and a much more severe problem.

  • They are connected well enough in the company to get the information required to separate truth from rumor.

  • They are senior enough to be in the critical meetings where they hear company-level decisions, or they somehow have access to that information via an inside connection.

  • They are trustworthy and have good judgment.

  • Finally, they are close enough to you and your organization that something spooking them should spook you too.

This person may be in your organization, but not always. I’ve usually worked in Design and Product organizations. But, some of my best canaries have been well-connected, smart people in Engineering.

Other vital organizations can be a great place to look too. HR and PR, for example, are often the first ones informed of massive changes that are coming because they need to be prepared for the event.


Stay close to your canary

There will be early signs that something is going on within the company. Stay close enough to your canary that you’ll notice when their behavior or disposition suddenly changes.

  • Why are they suddenly involved in numerous closed-door meetings?

  • Are they usually friendly, but they’re now acting distant?

  • Are they usually very serious or even grumpy, but now they suddenly seem happy and carefree? Yes, believe it or not, this can be concerning.

I worked with one executive who was grumpy and confrontational 90% of the time. One week I noticed that he suddenly had a smile on his face and acted pleasant in all of our meetings. Things that typically would have made him upset no longer seemed to faze him.

A week later, he announced that he was leaving the company. He was suddenly happy because he knew he was leaving all of the issues and chaos behind. He no longer cared enough to get upset (i.e., “No longer my problem”).

It is best if your canary is someone you know and have a chance to interact with regularly. You can try to keep an eye on them from afar, but it’s much harder.


Trust your canary

It’s easy to dismiss the signs. It’s tempting to be complacent. Or, you may feel loyal and want to ride it out.

But, you’re more likely to ride it down, not out.

If you know the person well, set up a time for a private conversation to ask where she is going and why she’s leaving. I think it’s best to have this conversation away from work.

Take her out for coffee or lunch. She’ll be more comfortable sharing information with you if coworkers aren’t walking by and interrupting you every few minutes.

At one company, I scheduled time to talk with a critical canary who was leaving, even though I wasn’t a close friend of hers. She didn’t reveal anything beyond the PR-sanctioned story, but it didn’t hurt to ask and try to learn more.

I also valued her perspective and career advice. Regardless of what you learn, it’s always good to strengthen that connection when a talented person is leaving the company.


Does it ever make sense to stay?

Let’s say that you know that your canary is leaving the company. You discover that the reason he is going is something that may very well impact you and your organization.

It was undoubtedly going to be harmful to him, so it could potentially be detrimental for you too.

Here are a few real-world examples of canaries fleeing a bad situation:

  • The company is facing a big lawsuit that is about to go public in the media. It will damage the corporate brand, and it will likely negatively affect the professional brand of many of the people working there. It will primarily impact the senior leadership team. For example, key executives and board members started leaving Theranos long before the company fully imploded. The employees were left in the dark.

  • The company is going to file for bankruptcy. For example, multiple PG&E executives announced their “retirement” weeks before the company announced that it would file for Chapter 11 bankruptcy. What a fantastic coincidence!

  • The company is going through an acquisition, merger, or partnership. This can sometimes be an excellent thing. But, in this case, for one reason or another, it is a bad thing. So, the canaries are leaving before it ruins their careers. For example, Whole Foods experienced a host of executives and senior managers exiting the company during the Amazon acquisition in 2018.

You have a decision to make when a company is in turmoil:

  • Do you make your plans to leave and seek greener pastures for your career?

  • Or, do you stay, try to ride out the situation, and find a way to survive and thrive in the midst of it all?

Sometimes chaos and uncertainty do present an opportunity for you and your career. A massive reorganization may position you under a great new leader who nurtures your career.

Or, a departure leaves a hole in the management chain, and you could step up to take on that leadership role.

In the midst of chaos, there is also opportunity
- Sun Tzu

Chaos may present a chance for you to grow more quickly in your career than usually would have occurred. You may have to take on responsibilities that stretch you far beyond what you were doing before.

You’ll have to learn, adapt, and quickly develop new skills. But, it will accelerate your career more than you ever expected. It will pave the way for an even more significant move later.

All of this change creates a wild ride, but it is also likely to end in a train wreck eventually.

Sometimes companies ride through turbulent times with considerable adjustments in strategy, organizations, and leadership, but they emerge victorious on the other side. Sometimes they implode spectacularly.

The former was my experience at Apple. When Steve returned to the company during the NeXT acquisition, it was a crazy time. Projects were getting canceled left and right, people were fired every week, and everything was utterly shaken up.

However, in the end, it was a massive turnaround for the business. The value of the company (and the stock) exploded over the next 20+ years.

On the flip side, I had a very different experience at Yahoo. The chaos was incredibly stressful as we changed CEOs, senior leadership, and strategies over and over again during my time there. But, I will admit that it boosted my career beyond what would have occurred at a more stable company.

I had an unexpected opportunity to step up and take on a role that I will admit I wasn’t quite ready for yet. It forced me to accelerate my learning and growth as a leader. It forced me to overcome my fear of public speaking.

It fundamentally changed the trajectory of my career path forever. I wouldn’t be where I am today if I hadn’t been through that trial by fire.

But, Yahoo eventually kept sliding down and down. In 2008, the company rejected Microsoft’s offer to acquire it for more than $45 billion.

Then, in 2017, Verizon finally acquired Yahoo for $4.48 billion. Ouch. I’m glad that I left the company in 2010.


You’ll have a decision to make

In the end, I finally recognized when it was time to jump off that wild ride at Yahoo. I had been keeping a close eye on my canary. When he decided it was his time to leave the company and explained where he was going and why I knew it was time for me to exit as well.

He’s a smarter and more politically-savvy player than I’ll ever be. I trusted his judgment.

One day, the decision will be yours to make as well.

  • Should you leave when your canary makes his or her exit?

  • Is it a sign that there is no more runway for you at the company, and staying won’t be good for your career?

  • Or, is there a way for you to seize an opportunity in the middle of that chaos?

  • Can you step up and accelerate your career while there is still a chance?

You’ll be able to gather the information you need to make smart decisions if you’ve built a strong network of great mentors and advisors. You have been building a powerful professional network, haven’t you?


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