As the old saying goes, success has many fathers, and failure is but an orphan.

I'm concerned that today, many directors lenders, and investors are being led by management to believe that poor performance is just a result of the slow economy. Our firm increasingly is being asked to assess whether an organization's poor performance is truly caused by the bad economy or whether it's the result of ... poor performance.

In similar situations, a former mentor of mine who grew up on a farm used to say, "We need to separate the buckwheat from the bull$#!+."It seems the bad economy is getting blamed for everything that goes wrong. Corporate conversations are going something like this Why are sales falling?" asks the board. "It's the economy! our whole industry is down replies management. "Why are profits in the tank?" ask investors. "It's the economy; our whole industry is down," reply the board and management. "Why are you in default on your loan?" asks the bank. "It's the economy; our whole industry is down," reply the board and management.

It's easy to see how this happens. There's something about human beings that makes us not want to hear bad news, a phenomenon I call "denoidance", the combination of denial and avoidance. So directors, lenders, and investors get into the denoidance mode and believe the bull that management's shoveling on them. Now I don't want to put all the blame on management; they may not be spreading the bull consciously. In most cases, management is just doing what's natural ... trying to survive.

The scary part about denoidance is Its impact. Ourfrrm tracks the performance of all public companies in the Upper Midwest, monitoring more than 30 financial and operational indicators of an organization's corporate health. When a company fails in 30 percent or more of these indicators, it's a red flag for us to approach the company or its professional advisers to discuss whether they want our assistance in identifying the root causes
their problems, the issues affecting their performance.

Lately, guess what answer we hear most often? You got it: "It's the economy; our whole industry is down."

Well, get a life. The slow economy can be blamed for a few troubles, but when a company is failing over one-third of these indicators, an answer like that is not denial and avoidance, it's just plain ignorance!

Some would say that this level of denoidance is causing a pent-up bubble of potential corporate failures. For instance, lenders are buried with forebearance agreements and restatements of loans. In many cases, we've seen four or five restatements; we've even seen a loan on its eighth restatement! The banking and bankruptcy attorneys who represent creditors are up to their derrieres with these forebearance agreements and restatements.

Investors, on the other hand, keep pouring more capital into their troubled portfolio companies, still hoping for some kind of divine intervention to help them achieve those 40-plus percent internal rates of returns they had planned to realize. But to do that, they have to keep feeding the sick animal. At some point, shouldn't someone ask whether they are sim­ply throwing good money after bad?

And as for boards, unfortunately too many directors aren't engaged enough in the business or the industry of the company they serve. They're not able to ask intelligent, tough questions and get the answers they need.

Thank goodness, some savvy boards of directors, investors, and management teams aren't just accepting the "slow economy" excuse, but are digging in to figure out what's really happening. Smart leaders know their company's business, their industry and market segments, and their value creators and value eroders.

If a company wants to separate buckwheat from bull$#!+, it needs to get to the bottom of whether its poor performance is the result of internal, systemic factors or external factors. Common internal factors that can be a source of poor performance include:

• Operating without a solid business plan, or without a contingency plan to adjust to a slow economy;
• Reacting late or poorly to a changing market;
• Running the business without sufficient controls;
• Growing too fast;
• Diversifying too much or too quickly;
• Managing without delegating or the right experience; or
• Relying on internal growth to finance new projects, or being undercapitalized.

If an organization is experiencing one or more of these problems, it may be able to restore its corporate health and return to profitability, because these internal factors can be brought under control and fixed. However, an aggressive renewal plan should be implemented immediately. Admitting that poor performance is not entirely the result of the slow economy, but that internal problems do in fact exist, is the first step toward recovery.

Otherwise, think about what's going to happen when the economy recovers. If you're masking internal issues with the "slow economy" excuse, you had better be prepared for the upturn. When everyone else's business is tak­ing off, you'll be left in the dust, hanging on to your little propeller beanie, with no excuses left with which to face the music. If you've been telling your directors, lenders, and investors that sales are down 20 percent because of the slow economy, when the economy rebounds you'd better increase sales by more than 20 percent, otherwise you're really just back where you started! Get the picture?

Now I want to make it clear that I accept the fact that a slow economy can have an impact on performance - no question about it. A slowdown in business spending and falling consumer confidence can truly be a hindrance to business, along with other external factors, among them:

• A small niche market that can't support a growth;
• An industry downturn;
• Competitors who are better positioned and better funded;
• A consolidating market that is pushing down prices and profit margins;
• Changing demographics in the market; or
• New social, governmental, or technologi­cal issues.

However, if the primary reasons for poor performance truly are external factors beyond the company's control, then company leaders need to ask themselves tough questions about the viability of their businesses. They have to figure out how they are going to respond to these factors and if they can overcome the obstacles. For example, what are their contingency plans for adjusting the business to survive until the economy rebounds - or what are their plans for adjusting to the predicted rebound, for that matter? If the trouble is too deep to overcome, leaders will need to seriously evaluate their strategic options, including a merger, sale, alliance or even liquidation.

With the current slow economy, many business leaders are starting the new year believing they will have another bad year. Unfortunately, perception becomes reality. Rather than just accepting the slow-economy premise, how about addressing the internal problems that you have control over, and set­ting out with the expectation that you'll have a decent year? What's wrong with that?!