The obvious indicators, such as declining sales or lack of profitability, often become apparent at a late stage. Prior to this, there are qualitative signs that signal a crisis. Ultimately, it is a combination of unresolved quantitative and qualitative factors that, when viewed holistically, reveal the need for action. 

Top management must be able to identify and interpret these signals and their interactions early on and act promptly to avert or effectively manage a crisis. Unfortunately, as our survey of 200 CxOs from manufacturing companies indicates, structural adjustments are often initiated too late, with 71 percent of respondents agreeing. 

So, how does a crisis develop within a company, and what are the signs indicating undesirable developments and the need for transformation? 

Unbalanced governance structures within a company are a very early warning sign. Often, incomplete or unclear lines of authority, or missing or vacant committees, impede decision-making processes. Important decisions are delayed or made under false assumptions, leading to an incomplete or unfounded corporate vision and strategy. If top management overlooks or ignores important trends and disruptive developments, and thereby misses growth opportunities, it becomes detrimental to the business. Failure to adapt to new technologies or trends, unsuccessful acquisitions, or poor investments can lead the company into peril. Clearly defined decision-making bodies are essential to achieve a radical realignment of strategy in such cases. 

Employees are the backbone of every company, and their satisfaction and motivation are crucial for success. Increasing staff turnover, declining productivity, and a lack of identification with the corporate culture are clear and early signs of an internal crisis. These signals should not be taken lightly, as they often point to deeper structural problems, such as poor communication, lack of development opportunities, or resistance to necessary change. Companies that fail to engage employees in the change process risk losing valuable talent, including high performers, and jeopardizing overall productivity. 

The lack of decision-making capability, misguiding strategy, and crisis-ridden corporate culture often manifest in operational processes, leading to inefficiencies. Underutilized production capacity, costly operations, quality issues, or delays in the supply chain are clear indicators. If companies do not improve their efficiency by investing in automation, for example, the situation can become critical. Operating costs rise, and competitiveness is threatened. The same applies if there is a general lack of investment in innovative technologies. 

Inefficient processes in sales and production often jeopardize customer relationships, directly impacting revenue and market position. Declining customer loyalty, the migration of regular customers, or an increase in complaints are indicators that a company is at risk of losing its competitive edge. Special attention must be paid to the complexity of the customer and product portfolio: Is it still manageable? If companies fail to incessantly evolve and adapt their portfolios to new market demands, customer trust can be irretrievably lost, and more innovative competitors can gain market share. 

At the end of the chain, the obvious effects are reflected in key financial figures. Declining profitability, increasing losses, or persistent liquidity problems are clear indicators that the trend is moving in the wrong direction and that a series of unresolved issues have already preceded it. Depending on the severity of the crisis, rapid and consistent cost-cutting and liquidity measures are required. However, sales-promoting measures should also be taken to prepare for future growth. In the medium to long term, it will not be possible to overcome the financial crisis if the underlying causes in governance and strategy, culture, and operational processes are not addressed. 

Those who respond early to signs of structural problems, consistently address the root causes, focus on future opportunities, have the best chance of emerging stronger from a transformation or restructuring, thus laying the foundation for sustainable growth and value creation. In-depth and relentless analysis, as well as targeted, effective, and proven measures that address the underlying causes of the crisis and not just the superficial symptoms, are crucial to success. An external perspective adds significant value. Experienced experts can create comprehensive transparency and design initial measures in just a few weeks. Three-quarters of the 200 independently surveyed CxOs of large manufacturing companies state that they see great advantages in an external analysis of profitability and future viability.