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Diagnosing your business wounds

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Today’s guest post is written by Ben Sherwood, author of “The Survivors Club: The Secrets and Science that Could Save Your Life.”

In emergency rooms across America, there’s a simple formula for predicting who will live and who will die in a trauma case. It’s known as Ps and pronounced P sub S. It means the probability of survival. The equation is intimidating:

Ps = 1 / (1 + e-b)

The bottom line: In an accident, experts say, your probability of survival is based on three factors: your age; your vital signs; and the extent of your injuries.

In business, you could write a similar equation for the probability of a company’s survival in this recession. The chances are a function of the company’s age, its vital signs, and the extent of the trauma inflicted by the economic collapse.

In the ER, doctors say, it’s also critical to know the difference between treating a knife wound, a bullet wound, and blunt body trauma caused by a head-on collision. While all three can be fatal, a stab in the heart can be repaired with one big stitch and a bullet is more complicated but can still be sewn up. Blunt trauma is the worst, because there’s no one fixable thing. It’s a whole body of hurt.

Again, these rules directly apply to the business world. Telecom companies had to repair their knife wound and reevaluate their business strategy to combat the growing use of the Internet and wireless-based phone plans. One or two good decisions, like stitches, can sew up the problem.

Some financial institutions, like Goldman Sachs, suffered serious gunshot wounds. But now, the company appears to have been saved and is even exploring returning government bailout money.

And then there are companies like AIG or GM and Chrysler, which for very different reasons slammed full force into a wall. Their businesses face acute crisis and their odds of full recovery are long, but still possible with the highest levels of care and support from all available resources, including the government.

In the ER, an accurate diagnosis and a highly competent team are critical elements in survival. Every day, the same holds true for businesses across America. The companies with the best chances of survival have leaders who realistically diagnose their challenges and deploy the best people and resources to respond.

As a manager, how are you responding to the injuries this economy is inflicting on your organization?

Image credit, iStock