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Why Maximum Businesses Fail due to Mismanagement!

A true measure of the value of any business leader and manager is undoubtedly performance! American motivational speaker Brian Tracy

Why Maximum Businesses Fail due to Mismanagement!

Tuesday May 21, 2019,

6 min Read

Bloomberg estimates that 8 in 10 entrepreneurs starting a business fail within the first 1.5 years. That means, nearly 80% of most businesses don’t make it past the second year. What can be learned from business failures? A lot, if we look closely. Primarily, businesses fail due to mismanagement, and the inability to scale. So, what are the features of a failed business? Let’s decode what it takes for businesses to lose out and miss the opportunities for growth.

#1 Weak Middle-Level Management

Poor management stems from the lack of ability to listen, and instead, just hear what you want. Weak middle-level managers may even resort to micro-managing, working in the absence of standard or systems or communicating poorly. Most middle managers grappling with a multi-generational workforce are facing ever-changing, complex work environments. Incompetence has no place in the modern marketplace. Given that middle managers have a crucial role to play in implementing and executing the organizational strategies and fostering cultural change, weak managers can destroy your business.

Lack of strong middle management culminates in high turnover, low levels of employee engagement, or lack of succession down the line. Weak middle management leads to poor leaders, ineffective change management and lack of strategic vision. An organization which fails to strengthen its middle management cannot hope to succeed. Middle-level manager play an important role in identifying and quantifying key drivers, developing, measuring, and reporting key metrics, budgets, and presenting effective business cases.

Middle managers are vital for making critical workplace decisions.

 Middle managers who lack confidence does not promote a reliable image. Second-guessing decisions, failure to act and not adhering to directional commitment on part of middle managers can have huge implications for your business. Lack of industry insights, failure to adapt and inability to innovate are some of the biggest flaws of middle managers who are ineffective. This can dent your business in multiple ways.


#2 SOPs that are not defined

Would you hire a chauffeur who is untrained and does not know basic traffic signal rules? Or a tailor who simply did not draft the patterns before cutting the material and stitching a dress?

Certainly not!

Yet, many companies and businesses are plagued by lack of SOPs or standard operating procedures. This results that range in inefficiency and lost profit or even injury and death.

SOPs are the hallmark of smart businesses, for these procedures ensure consistency in the way tasks and processes are performed. Undefined SOPs can reduce chances of seamless functioning and organized operations. Additionally, poorly written SOPs cannot provide direction to employees or ensure consistency and quality control.

Poorly defined SOPs lead to guessing games and falling levels of productivity. SOPs can save crucial time, money and effort by ensuring employees know what their duties and responsibilities are. 

SOPs that are poorly conceptualized and ineffectively worded can do their fair share of damage for your business. Not defining SOPs for your business operations can be equally detrimental. Holding employees accountable for tasks and processes that lack documentation will backfire on the management. 

Without SOPs, job performance is no longer judged on objective criteria. Without effective SOPs, managers can end up mislabeling employee success or performance.

SOPs further create a safe work environment and emphasize peer accountability and coaching. Well composed SOPs delineate the HOW as well as the WHY of procedures, justifying the need for following processes and systems and paving the way for business success.

#3 No Audits

Another reason businesses fail has to do with lack of audits. Business audits offer a unique management tool which verifies if products, processes, and services of businesses meet the standards of customers, employees and the industry. Quality and compliance audits offer avenues for effective risk management. Highlighting operational and financial risks, audits ensure corrective actions can be immediately taken.

Businesses need to create value for customers. An audit remains an invaluable means of ensuring this. Products, services, processes, and standards of businesses need to focus on exceeding expectations every time. This increases customer confidence and builds sales. Audits also serve to clear the field for business expansion.

Using quality certifications in marketing pitches promote trust in a business and serve as a key to business success. Evidence of compliance and quality auditing assists companies in leveraging a good reputation. It also offers businesses a competitive edge on the basis of effective reputation management. Quality auditing effective benchmarking and limitless business growth.

#4 KRAs / KPIs not defined

KRAs/Key Responsibilities Areas and KPIs/Key Performance Indicators must be well defined for businesses to grow. When businesses fail due to mismanagement, this is primarily on account of poor expectation mapping. Lack of task management systems can be adverse for business growth. KPIs and KRAs offer value as they inform strategic decision making and align with your strategies.

 KRAs ensure employees perform better and teams take ownership of key responsibilities and duties delegated to them. KPIs are exceptional early warning signals which track team performance and make it easier to identify the leaders in a team. Combining KPIs and KRAs helps in tracking and achieving goals faster; one cannot impact business without the other.

Businesses fail due to misaligned goals and objectives when KPIs and KRAs are not tracked. Developing KPIs by measuring what competitors track won't work.

For your business to succeed, it needs KPIs and KRAs unique to your industry and mission or vision. Strategic KPIs need to be identified to inform and direct decision making, rather than building a sea of irrelevant information that just loses out on the big picture. Measuring success evolves over time, but establishing relevant metrics is crucial to measuring the performance of a company. The focus should always be on helping your team to win. 

#5 No Reviews & Training

A more competitive workforce results in greater productivity and better business bottom lines. Reviews and training help to develop employee skills and strengths, accelerate engagement and promote employee retention.

Training is a powerful medium for addressing potential skills or knowledge deficits. Reviews can create a cycle of feedback and KOR/knowledge of results. An ineffective organization misses out on both! Training and reviews address strategic needs. Without effective employee development, business growth is impossible.

Final Thoughts

An organization's capacity to learn, and translate learning into action fast, is at the core of an unbeatable competitive advantage. To succeed and secure a winning edge, you need to measure success and standardize procedures, processes, and operations. The purpose of business is to make a reasonable return by making products and services that people need and value. For businesses that fail, this remains an unattainable goal. To create, articulate, implement and drive the vision for growth requires effective management and procedures. For businesses seeking growth, SOPs are mission-critical to avert mismanagement of resources and reach new heights of success.