In my experience managing and consulting to multi nationals, businesses usually fail because managers fail. This may be because of bankruptcy, some closed still solvent but unable to make an income (profit). Some businesses fall short of their true potential and realize the success that is both possible and desirable.
So why do organisations fail? They fail because managers fail and this could be attributed to a number of basic causes depending on the nature of the enterprise.
However, one very important factor in any business is this, ‘Although the products and processes may differ, the principles of management (and strategic management) are all the sam’
Causes for failure could point to no strategic business plan, no budget/cash flow projections and monitoring, no KPI monitoring, poor market research, poor product costing, insufficient monitoring of the product/process contribution analysis, fault engineering, ineffective financial planning, no communication policy, no safety policy and no employee development program.
Failures don’t just happen, men and women make them happen or prevent them from happening. This is usually through poor judgement, lack of foresight, ignorance to financial planning and monitoring, and inappropriate people management and development skills.
One of the greatest mistakes I have found in my reviews of businesses which are looking for sustainable growth and profit is a total lack of appreciation regarding the critical success factors which go into making up the bottom line P&L including the strength of a balance sheet. Also operational costing (hourly rates) is not considered necessary to keep afloat of varying overhead costs.
Another major factor is a reluctance of the marketing and sales teams to work cohesively and share the success factors but also the project/product failures.
Failures won’t happen only if you don’t permit it to happen. But in saying this, your prevention strategy must be more than just a few brave words. It will need ongoing analysis of the reasons for past failures against close scrutiny of the present performance accompanied and supported by a living strategic business plan.
It is the people in organisations who produce successes and failures. This is why planning, organizing, integrating, motivating, and measuring are the success elements in all business endeavors.
These brief comments are the result of years as a CEO and of someone who has been both managed and mismanaged. They are also an overview of observations gleaned not only within Australia, but many overseas mission trips looking at best practice, lean operations, bench-marking, technology, and licensing. In all missions that I was fortunate to undertake, one thing was uppermost in my mind, businesses do not need to reinvent the wheel when they can learn from the very best worldwide, including Australia.
One thing that was and still is very evident to me is that taking into consideration the volumes Australia was working with there was no one anywhere in the world that was as innovative given the challenges of justifying capital expense supported by low annual volumes and fixed price costing demands.
I hope that some of these insights may encourage many managers/business executive owners to immediately commit to making a firm determination to improve their own performances including that of presenting development opportunities for all employees at all levels of the organisation.