You have been working here for about 3 years. Life is good. You come in as late as you like and leave late because the work is challenging and rewarding. No one is watching over your shoulder, most days you sling code until your mind goes numb. At any moment a nerf gun war can break out in the office. When Halo 3 was released, all work stopped and there was an all-nighter in the game room. Company parties are amazing, the Christmas party was at a rock-n-roll museum last year and you have an annual company awards ceremony at a hot night club.

The company has been growing at a rapid rate. The employee count has doubled in the past year and the year before that it almost tripled. There are about 20 new people joining the company each month. Extending this growth out over the next couple of years, you can’t help but think that the company will be a huge player in the market. Can we go public? Won’t we all be rich?

One fine day, you notice that there are a few new people who just aren’t fitting in. They come from larger competitors. Their idea of productivity is waving their hands in meetings talking about “enterprise scale” and “web 2.0”. Some others are clearly sub-par coders, quality is suffering. What is going on? You brush it off and continue with your daily routine.

Over time, you realize that the company has made some bad bets. It turns out that those misfit new hires where actually making two times what they were delivering in value. Those Christmas parties and award ceremonies cost in the millions of dollars. Worse yet, the company is insolvent, living off debt and investments my a lone angel investor. Wow, look how far this place has fallen. Your morale fads, this is not fun anymore. What are you going to do? You love this place and you can’t bare to start looking for another job when all you friends work here.

This is a story all to familiar to anyone who has been around the consulting industry for a number of years. All to quickly the company that you grew to love changes right underneath your feet. Who is to blame? How did this happen?

This is part of the journey and an opportunity to do some growing up. First and foremost, understand that your beloved company is a business. And businesses have to make money or they don’t exist for very long. You may have become emotionally attach to the company and assumed that you would work here in perpetuity, having fun with your friends. Reality is that unless a service business is run at a profit sooner or later it bites the dust.

The interesting part is that morale has a large influence on the trajectory that a company takes. In the beginning morale acts as a buoy, lifting the company to new heights. Good morale is contagious, each new person that enters the company is quickly infected with enthusiasm as soon as they walk in the door. You recruit your friends, everyone is cheerful and bright. Clients see this and are drawn to your energy and zest for details. Bottom line is that everyone believes in the company and you are all working towards a higher goal: your collective professional happiness.

The opposite is true in the declining phase of a company. No one wants to put in the extra effort that was once automatic. Meetings are pure hell, distrust in management is normal, projects fail, pride is lost. Bad morale is even more contagious. People love to complain and focus on the negatives.

Looking back at my career, I can say that I have been through this cycle at least 3 times. During the first 2, I had no idea what was happening. The last one I understood and tried to divorce myself from the situation by taking a clinical approach. I’ve learned that this is the cycle of life at small consulting companies. You cannot change it or expect different results with the same inputs.