Red Flags In Sports Are Penalties .... In Business Red Flags Build Value !

by Rand Manasse

In football, when the referee throws a flag it tells everyone that a penalty has been committed.


Play stops and everyone pays attention to see what has happened.


Penalties are used to keep players within a framework of rules to make things fair. When a penalty is committed, yards are marked off on the field. The team that committed the penalty has to pay the price and the opposing team benefits.


With rules, skill and execution become the determining factors in success.


Flags can also benefit business.


According to Jim Collins, author of Good To Great, great businesses have a flag system to keep everyone in check.


These systems are designed to make sure everyone in the business remains focused. It’s an early warning system to make sure no large mistakes occur.


In addition to the referee flags, coaches have red challenge flags. This mechanism gives coaches the ability to challenge calls on the field made by the referees. The challenge system allows coaches to keep the referees within the framework of the rules.


Business works the same way.


In football, the referees use penalty flags to keep players within the framework of the game. Coaches use red flags to challenge certain calls on the field.


In business, the system is known as the Red Flag Mechanism. If you use the red flag mechanism you can build in value and grow your business.


The red flags in business are made to keep everyone within the framework of success. When everyone in the business has the opportunity to raise a red flag others will be more apt to stay the course.


A red flag mechanism allows self-monitoring to occur so you do not have to micromanage people or processes, which opens up opportunity.


There are two main red flag mechanisms in business that you can implement right now. These mechanisms will allow you and your employees to stay within the successful framework on your way to greatness.


Employee Reporting


Once you have the right people on board at your business and in the right roles it’s time to let them go to work. You allow them to achieve the goals established by the executive team.


However, in order to give employees freedom it’s important to have a red flag mechanism for employee reporting. The mechanism gives all employees the ability to report to management when they feel something needs to be said.


Employees can bring up things other employees are doing that falls outside of the framework or things management is doing outside of the framework.


An example given by Jim Collins was from his classroom. For an entire semester he was giving lectures and allowed each student to have a red flag. During the semester the students would have the opportunity to raise their red flags at any point if they felt the lecture was not beneficial.


The students could use their flags only once, but the mechanism allowed Collins to keep his course on track instead of having to wait until the end of the year to receive feedback from the traditional professor surveys.


Customer Feedback


Second, it’s important to have red flag mechanisms in place to get feedback from customers.


Again, Jim Collins gives an example from a great company in his research. The company would send out invoices each month to customers. On the invoices the company would ask the customers to pay the full invoice only if they were completely satisfied with what they had received.


If the customers were not satisfied they could pay whatever they felt was appropriate. This red flag mechanism allowed the company to realize if there were any issues before the customer would decide to simply stop doing business with the company.


It is a classic example of a canary in the coalmine.




Football uses a flag system to keep the game on track. Referees use flags to make sure everyone is following the rules and staying inside the framework of the game. Coaches use red challenge flags to make sure all calls on the field are correct and accurate.


Businesses can add value and grow with red flag mechanisms as well.


Implement the employee and customer red flag mechanisms in your business. You’ll be empowering your employees to succeed within your framework while also providing management with the feedback necessary to succeed. Also, by giving your customers the opportunity to provide feedback you can learn about any issues before it’s too late.


Some might see flags as a negative part of football and business. A red flag mechanism, however, is one of the best tools in business. It lets you, the business leader, know that there is improvement that can be made on your way to becoming a great company.


As always, please leave me a comment and let me know what you think. If you need help in building value into your business, please contact me at 914.741.5200 or


To your success!



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