Many articles, text books, journals and blog posts have been written on how to manage a business in order to succeed, but not much as far as am aware has been written on how not to run a business.
This in my opinion is a fundamental reason why many businesses fail despite the plethora of resources that promises to teach people how to be successful in managing their businesses. Well, this blog post will tell you exactly how not to run a business.
In practice, I have worked for companies that does really well and for those that have no clue whatsoever on what they are doing.
Overtrading which can come in different form is essentially when a company is dabbling into too many things thereby placing unnecessary strain on resources.
Threatening your staff with retrenchment and salary slash
Experience and history has shown that trying to instil fear in the mind of your staff does not make them more productive. Rather, it makes them to start looking for a way out thereby making them have divided attention.
Nobody will be particularly motivated if your boss called you after one month of employment and says that he has been told to retrench some staff or cut salaries.
Ignoring the fundamentals like having accounting system installed
Accounting is the lifeblood of every business and should not be treated with levity. There is no point in business owners spending billions if they have no way of accounting for the monies. I once worked for a company that invested billions in the business but did not deem it fit to invest little in acquiring accounting software and server- I need not say that I resigned from the company after few months.
Cooking your books
Evil begets evil. Hindsight has shown that 99% of businesses that are badly run falsify their accounting records. This creative accounting that is common with businesses that are not run well is most times down to the fact that these kinds of businesses vests too much power on a single person that can easily control the accountant of the business. They also do everything possible to ill-equip the accountant and other finance professionals working for them. Fraudulent accounting can only give the owners of the business false impression that they are doing well.
Doing same thing and expecting different result
A wise man once defined insanity as doing same thing and expects different results. You don’t expect a contractor that you have used in the past, who failed to deliver all the deliverables of the project to deliver on a new project.
Paying too much salary to few and too little to majority
One of my lecturers at the University of Glasgow once told us that most companies that struggle financially usually look for solutions at the wrong places.
Why look for ways to save cost while you can easily do so by simply reviewing your current salary structure. It is common in badly run businesses to pay 2 or 3 people more than you pay 50 people.
Easily assigning blames
Finger pointing when things go wrong has never been and will never be a substitute to constructive feedback after corrective measure has been taken. The only thing that finger pointing does is that it makes people become defensive and not productive. Everyone in the team will only work to the extent that blames are shifted to the next person and not necessarily contribute to customer experience.
Expecting magic from your staff without giving them the tools needed for work
One thing about performance management and motivation is that people would simply give up when the impossible is being asked of them. You cannot ask an individual to drain an ocean and give him or her table spoon.
As strange as this may sound, many businesses do this thinking that they are being frugal with resources of the company but the truth is that the business is taking one step forward and three or more steps backward.
Not living the spirit of corporate governance
One thing is to have pen put to paper all in the name of having rules and guidelines to help the business and another thing is to implement its contents. Businesses cannot thrive in deceit and propaganda.
A major reason why businesses fail is when there is significant defect in management style and settings.
I have worked in an organization where people where employed to occupy a position but where relegated to the background thereby permitting an individual to have pseudo power in all aspects of the business- i.e doing everything in the business. This is a recipe for failure.
One of the hallmarks of companies that are destined to fail or underachieve is the presence of any form of discrimination. Discriminating against people on grounds of age, sex, religious, even the position they occupy is a work place CRIME that has helped send many businesses that would have been successful to their early grave.
I have witnessed a situation where two people occupying similar position are being paid differently. Also, the one with bigger salary has an official car with a driver and the other does not have.
I do not need to tell you what happened to the motivation of the other staff.
Spending on non-value added activities while ignoring value added activities
More lean businesses encourage Top management of companies to streamline their activities by implementing a form of lean strategy. This among other things entails doing aware with activities that does not add value to the customers’ experience.
It is only in businesses that are badly run that you will see some staff members using high class cars as official cars- without company’s logo on it. While basic tools that allow the workers be productive like constant electricity are not provided.
Awarding contracts in-discriminatory
Show me a company that awards contracts indiscriminately and I will show you a business that will fail soon.
Dampening staff moral through toxic words
Talk is cheap they say but not when you are on the receiving end of toxic words. Nothing kills a business more than having unmotivated staff working for you. You cannot successfully run your business by reducing your colleagues to nothing with the words that come out of your mouth.
Telling lies during interview just to hire the best
Staff morale will immediately drop to the ground when they notice that all they were told at the interview about the company and working conditions are lies. This will make employees that are worth what they say they are worth to start looking for a way out.
Imagine being employed as an accountant in 2016 and is not provided with computer and accounting software for example. There is no need telling lies during interview just to entice the best and lose them within few months. It will be a win situation if you tell prospective employees about the challenges of your business and they still choose to join you.
Increasing working hours without adequate consultation with staff
One thing that I still have not managed to get my ‘Big’ head around is how some employers would go into a 40hr contract with a staff only for them to then try modifying it without the courtesy of dialoguing with the people involved.
In this blog post on how not to run a business, I have briefly made a case that in my opinion many businesses fail because too many attention has been given to research into how to properly run a business but not much has been done to draw attention to those things that should not be done if you want to succeed in business. Accounting researchers should please take note.
In as much as the points and issues discussed in this article are based on my real life experience working as finance/accounting professional, I have tried not to establish any relationship or any link to businesses that I have worked for.
The aim of this article is to provide educational and learning material as always and not to castigate any business that I have either worked for or consulted for in the past.