orglearn.org

A quote from credit reporting agency, “the reasons businesses fail don’t change much” and ‘we used to ask why the businesses failed, but we discontinued the surveys because the reasons were very stable’. They went on to say, “ninety percent of failures are the result of bad management and the other big reason is failure to respond to change”.

As managers (or for that matter effective staff members) it is a wise career move (our responsibility) to make up for our personal inadequacies from a work point of view. We can do this by seeking professional advice in the specialist areas that are critical to our department’s, division’s or company’s success. Some questions we should be asking of ourselves:

Do we currently invest astutely in developing the areas outside our technical area of expertise?

When looking for training, public relations, advertising, marketing, financial or accounting advice is it just a tender process where we choose the cheapest, or is it a… ‘they are the best in their field’, decision?

Are any of these other areas of expertise sometimes ‘in company service departments’, used as a dumping ground for inadequate individuals so we can avoid the hard decision of sending inadequate staff on their way?

If we seek advice do we then learn from the advice we are given or do we ignore it because we don’t like to change?

A real example:

A now non-existent finance company I once worked for sent a senior technical expert to conduct a study overseas on trends in his field. He came back told the company what they had to do, which included the setting up of an ‘out of the hierarchy’, non standard business department. Someone was going to lose control of a major business area and have his traditional power base eroded. So the answer was no…! The ‘expert’ left and went to a very small competitor who within 6 months was making nice profits from the new business opportunities developed, probably in excess of those of our entire operation. How dumb is that! The same finance company commissioned an in depth study of their business practices by a world-renowned leader in their field (at the behest of a major shareholder I believe) and then refused to implement the recommendations. The reason for the failure to adopt the new ways of doing things was that it was going to cost too much and again (probably more importantly) dismantle some traditional power bases. Two years later when the company was still struggling the consultants where back to do the expensive survey/study again… too late the 40% major shareholder became the 90% shareholding parent and intervened with its own rules, suddenly they just a department of ‘the bank’.

DON’T ASK QUESTIONS IF YOU DON’T INTEND TO LISTEN TO ANSWERS AND… NEVER STOP QUESTIONING!

So what are the issues we must think about to avoid being myopic and locked in the past and what are the causes of financial trouble directly attributable to inept management?

1. Lack of foresight or disinterest in the future (other than how to get the next promotion)

2. Inept or even zero monitoring of the market and incorrect use of the gathered information.

3. Allowing dangerous or incorrect debt levels in relation to our operation.

4. Failure to address financial issues including constantly asking if our debt to equity ratio is reasonable or how adequate is our return on funds invested, or are we using short term borrowings to fund long term projects (and all that other boring stuff)?

5. What about technology, are we being bypassed or are we leveraging on the new technologies available?

6. How are our key relationships… key clients, financiers, suppliers and distributors? Are we, to use an old example, Ford and do we use Firestone tyres on any of our products? I wonder if ford and firestone (little “f” s intended) have ISO certification.

7. Quality Quality Quality is a must and I don’t mean certifications, I mean a management and staff attitude that really puts quality as a priority. I once watched as a file was quickly constructed a day before a quality audit (to serve as a good example), the audit was passed and the few hundred other files where never touched. Now is that quality or Bullshit Baffling the Brainless (big “B” s intended) and pardon my language.

Also we need to consider (if the surveys on failure are correct)…

8. Whether we expanding too slowly, or too quickly?

9. Linked to that are we so diversified that we’ve walked away from our core competencies, and or are we even aware of what our core competencies are?

10. We need to ensure we are not too dependant on one customer (or supplier), the finance company I mentioned lent an amount approximately equivalent to its paid up capital to three major borrowers in one industry, all of whom went bankrupt… oops!

11. We should also constantly check to see if we are overstaffed (the American Government and the Australian Public Service perhaps?).

12. We constantly need to check that our control systems are adequate, does our accounting, manufacturing, sales activity system give us the answers we need on a day to day basis?

13. What is the profit per employee, what is the ratio of sales staff to administration, how big is the personnel department and do we have a bureaucratic purchasing department?

14. Finally the team… is there dissension among the management team (or is it a team at all?) or has the team and our business reached the “level of its own incompetence”?

15. The big issue of course is to decide if there is a lack of leadership by the senior executives, or worse the chief executive. One small example of a leadership failing: Do we have a problem if all the middle management attends major training programmes because it is compulsory however the senior management doesn’t come because it’s optional? If training (and the change process) doesn’t start at the top the participants are likely to say things like “that’s OK in theory, ‘but’ that’s not how the boss acts back at the office” and a disconnect between what is needed and what actually happens occurs.

PHEW… no wonder effective managers are busy!

Cash flow and sales… next post!

Refs:

10 reasons why businesses fail, Home Office / Jeff Wuorio http://www.bcentral.com/articles/wuorio/150.asp
Flusche, Van Beveren, Kilgore, http://www.fvbkcpa.com/articles/E-toolbox_Articles/Why_Small_Businesses_Fail.htm

http://www.tuta.hut.fi/studies/Courses_and_schedules/Isib/TU-91.167/Old_seminar_papers/Ojala_Juha_final.pdf

Time to question where you are? Resume Blank | Resume Form | Resume Examples | Resume Sample | Cover Letter Fill in the free online blank resume form (positive statement examples), a handy self-analysis to evaluate the commercial realities of what you have to offer current or potential employers.