Most folks like to invest by finding the best run-companies first, and then figuring out a good price to start buying shares.

It’s a great strategy.

But I find it’s helpful to invert that thinking.

Find the worst-run businesses you can think of. Figure out what they’re doing wrong. And invest in their competitors instead (or go short).

Having worked for a variety of companies, big and small, as well as investing all over the map (literally), there are a number of common threads that make the difference between a successful, growing company, and an unsuccessful, failing company.

But let’s get one thing out of the way first: A failing company may not mean a bankrupt company. Even a poorly-run company can limp along for years. If competition is weak, unorganized, or doing something so completely different to achieve success, a company that’s had prior success can simply ramp down over a number of years close to what it ran up. Failure need not be defined in purely financial terms.

But what makes a failure of a company? A few traits stand out in particular.

First, a high rate of employee turnover. A good or great company will tend to hire and retain top talent. A failing company will fall behind the industry in that regard, and good folks will leave on their own volition. Mediocre folks may find new opportunities, or decide the investment in finding a higher-paying job isn’t worth what they’re doing now. Poor employees tend to get shown the door at both successful and unsuccessful companies like.

Secondly, a poorly-run company tends to have more losers in management. And poor management often marks the difference between success and failure. Poor management can be marked in different ways. Missing out on a profitable opportunity is one type of failure. Being so focused on your personal place in the company that you prevent the company from succeeding is a bigger type of failure.

That’s a common trait in a company where failure can always be shifted downwards. Harry Truman famously had a sign on his desk in the White House that said “The buck stops here.” But when management at a company can blame their incompetence further down the org chart, the same failed policies will stay in place.

This problem gets magnified the higher up the org chart you go. At the C-Suite level, keeping favorite employees may mean retaining the worst possible employees.

Over my years of observing failed companies, I’ve seen management materially mislead potential investors, require employees to defend themselves in court, promoted irresponsible and clearly erratic employees, have deliberately botched customer, vendor, and contractor relations for personal reasons, among others.

No doubt you have similar, if not worse, stories!

The truth always comes out, though. And it’s an important lesson to keep perspective. If you’re a manager at your business, don’t just think about what you know. Approach things from an outsider. What are you missing? What’s staring you right in the face? A change in focus will help.

A competent company, however, tends to avoid C-Suite overreach, flatten the org chart as much as possible, and empower their employees to find the best ways to achieve results. When this is successfully done, management serves as a sanity check on some of the zanier ideas that employees may come up with.

Finally, leadership in any organization starts at the top. In the smaller companies I’ve worked at, I’ve loved the chance to work for some great CEOs, often directly. Some created a company from scratch. Some were independently wealthy but had a great idea and the passion to see it play out in a company.

But, likewise, a poor CEO is one who finds themselves “too busy” or “without the bandwidth” to address simple employee concerns. A poor CEO fails to communicate with his/her own employees about the vision for the company, and how to achieve that vision.

A CEO who pivots from a profitable idea to one that only profits the CEO’s ego and not the bottom line creates a company doomed to fail.

One of my favorite forms of a failed CEO is the kind that can tell you all sorts of demographics about their customers. That kind of knowledge is important, but if a CEO is telling you this with disdain, it’s clear they don’t care about their customers. Eventually, the customers will figure it out and take their business elsewhere.

And woe betide a company CEO that can’t even make the time to come into the office and keep regular office hours! These CEOs may have had success in the past to get to the point where they feel they can take some time off, but they’ll also ruin their business without really trying, or without even knowing it.

The best CEOs I’ve worked with have always followed a “first in and last out” policy every day. They own the business that way in every sense of the word. And most recognize that their employees have a life outside the office, and respect that work/life balance accordingly. It’s amazing, but rare, how simple respect can have a multiplier effect on office morale.

When you look at these factors, it’s clear that the easiest way to ruin a business is to have a failed culture. That comes in all shapes and forms, but a mentality of “this has always been the way we do things” to a proposed paradigm shift is quite possibly the most deadly.

Remember, capitalism is all about creative destruction. New products and ideas replace old ones all the time!

A company hopelessly tied to old ways of doing business will find this notion a hefty chain that can’t be easily overcome. And the old ways of doing things is a policy that inevitably finds its source high up the corporate food chain.

Add in having the wrong people in place, and it’s only a matter of time, albeit a prolonged period, where failure becomes inevitable.

That’s why investing isn’t just about the numbers behind a company’s earnings. Who runs a company, and how they run it matters too. A great company tends to have great folks minding the store. That’s also why the old adage “People don’t quit a bad job, they quit a bad boss” has more profound investment implications than at first glance.

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.