By Fareeha Qayoom
ver the years, I have seen many starts-up’s, mid-level corporations and big white Titanic(s) slowly sink without a trace.
Failing organizations have one thing in common without fail, they lack ethics – (in other words, when it’s a question of ‘money vs. doing the right thing’, they always pick the money!). They also practice a lot of deceit across the board. (No, this is not a lecture on business ethics! I am just sharing my observations with you!)
Any organization that encourages the culture of ‘dishonesty, lies, power-play(s), cover-up(s), witch hunt(s) and blame-game(s)’ as opposed to ‘fair-play, honesty and respect for rules, openness and transparency’ is bound to fail in the long run. One rule for management and another rule for line staff will not work – it’s bound to create low morale and de-motivated staff which in the long run means a failing or a failed organization.
Since the company culture is set by the senior management, the cloning is complete by process of ‘assimilation’ and ‘elimination’ – all mid-level and line-staff will mimic the senior management – staff that doesn’t want to assimilate will eventually leave or get picked-on one by one and made to leave – I call it the “Lord of the Flies” – syndrome. So it’s very important that you pick the right senior management (if you happen to be the CEO).
The above is true for all organizations. However, when it comes to start-ups, there are many more factors involved on top of this basic one… Here they are.
No business plan
Many small scale start-up’s start without a business plan. The CEO might have a basic idea in his (or her) head but if you don’t commit it to paper, you are planning to fail. For successful implementation, planning is crucial – you have to write down all phases of your plan even if you don’t plan to implement some aspects of it immediately. Some business ideas would and should die a natural death (on paper) because even if a single ingredient is missing or there is no plan B, you will eventually fail anyway. Why go through the hassle of spending all that money and time on it before throwing in the towel?
Lack of a mission statement
Some CEO’s never get around to defining their business or indeed the bottom line – it’s very important that all your staff understands what it is you are trying to achieve in their day to day to operations – what is driving your business? – Is it profits at any cost? – Innovation? -Product Development? – Service? – Customers? – Quality? If you send out conflicting signals, you will not achieve anything at the end of the day. A mission statement needs to be simple, translatable, measureable and achievable. It also needs to be open-ended and evolve with your business and changing market conditions.
Consistency and flexibility are two important ingredients of a successful mission statement. I mean don’t be like Sony – they were still producing the obsolete technology like a cassette based walk-man in year 2010! (No, I am not kidding. According to Wikipedia, “Sony still continues to make cassette-based Walkman devices in China for the US and other overseas markets; however they were discontinued in Japan only on October 23, 2010.”!)…evolve with times but remain consistent.
Lack of proper funding
Finance is another key ingredient in any business plan. If you fail to acquire the proper funding to start your business, don’t. Good management costs money. You can’t be tightfisted with your human resources. If you can’t hire professionals, you are indeed planning to fail. You might as well chuck it in now.
Also structure your business by identifying key divisions – for example, you can merge product development and production if you have limited budget but you can’t eliminate one division at the expense of another. You would also require advertising and promotion budget and a marketing and sales staff, not to mention, a distribution plan. Even if one aspect of your business is not accounted for in your org. structure and business plan, you are again setting yourself up for failure. You can cut costs by hiring fewer professionals with a wider range of skills to head your key departments but failing to account for even a single ingredient will cost you big in the long run. Bottom line, financial planning, a clear organizational structure with skilled staff to man key areas and a clear mission statement with corresponding objectives for each department are the three most important items that stand between you and failure.
Lack of emotional intelligence on the part of CEO or team leader
Some CEOs and senior managers actively promote ‘dirty’ politics by playing favorites, holding gossip/bitching fests with key staff, reacting to manipulative maneuvering by clever employees who might be working to promote their interests at the expense of your company interests. As a CEO, be emotionally intelligent – period. Don’t be easily led. Check out all the facts. Make up your own mind. I find, not reacting to all the negative emotions out there is the most intelligent thing to do, especially if someone is persistently carrying tales about your star performer in an effort to discredit or disparage their contribution to your bottom line.
Keep your emotions in check, be fair and transparent at all times. Do not promote the policy of “Do as I say, not as I do.” Remember, actions speak louder than words. There should be no contradiction between your words and actions. Only then will you achieve your corporate objectives as a CEO. Treat all your staff fairly. Don’t discriminate. Create performance measures that are objective and measurable and do not rely on subjective value judgments.
Beware of sycophants, lazy but clever staff, or hangers-on courtier types who actually do little or nothing but take credit for other people’s work. They will eventually sink your boat.
Accept only the assets and fire the liabilities immediately; or eventually you will end up paying for them yourself.
Missing necessary communication skills
This is the single most important skill you need to implement your goals successfully. If you don’t know how to communicate, take a class but learn.
I have seen many CEOs and senior managers at the top who are poor communicators. No wonder they fail at achieving their objectives and create a lot of frustration and bad feeling in their middle management and line staff.
Missing a complete skills-set
You can’t substitute A for B. If you don’t have the necessary skills to perform a certain task – sub-contract, delegate, or hire. Manage the problem quickly– acquire it for your company. Don’t make do with poor substitutes. If budget is a problem, hire a part-time consultant or contractor or give the task to your vendor or get in training. I remember I met this venture capitalist a few years ago. We started talking. He told me many stories about his experiences – one story sticks in my mind, he shot down a particular venture, refusing to fund it because all the key managers were engineers – they had made no provision for administration, sales or marketing staff in their business plan!
Shoddy HR practices and recruitment
Many CEOs double as the chief HR officer as well, thinking they actually don’t need a separate HR department. You are only as good as your human resources. Systems, machines and SOPs are all good in their place; however, there is no substitute for human resources. Be very discerning when you hire. Take extra care. Especially, when you hire your senior management; remember, the show, The Apprentice? Trump would go through weeks of testing before he would hire his apprentice. Your people make or break your organization. The least you can do is design HR recruitment systems that only let the best people in and keep the worst out.
Politics, Nepotism and cronyism
Yes, start ups suffer from this disease too. In fact, I worked for this one start-up recently that actually was in the process of failing within three months of its establishment because one of the key senior managers was a very self-important man who was more worried about his important position and lack of protocol that was accorded to him by other senior managers (namely me!) than actually doing some of his work. (I was making him look bad apparently by doing my job!).
My boss (COO) instead of resolving the situation was protecting the wrong guy while his boss (owner of the business and major shareholder who incidentally had worked with me before in another project and therefore, knew my work and had full confidence in my abilities) was trying to light a rocket under him (COO) to hurry him along because his financier was getting jittery with all the delays in product development.
I left as quickly as I could – clearly, this was a no win situation, (not that, I was aware of all the undercurrents at the time!) I was simply in no mood to get into a turf war with him (the senior manager and my boss the COO who was protecting him), especially as I was working at supersonic speed while he was crawling along at snail’s pace and blaming me for his lack of velocity!
Funnily enough, his staff actively hated him and was undermining all his efforts, (I know because I could see their resentment!) plus, I really think he didn’t know his job and couldn’t program worth a damn which was the real problem.
The company closed down one month after I left (though they kept the website going with a couple of entry level programmers). The financier pulled out because he didn’t see any results even after eight months of pouring in large amounts of cash. The website was supposed to go live in two months! It needed to be dynamic and user friendly. It was none of those things even after eight months of major effort by the programmers and two major identity changes in content. By the way, did I tell you? The self-important key manager was some kind of a relative or a family friend of the owner apparently! I never did find out for sure if there was any truth to this rumor but there you have it, his staff had another reason for hating him and it had nothing to do with his insufferable company manners! (No wonder he sank the owner’s boat).
Wrong priorities – putting the customer last
Some CEOs don’t understand what drives their business. They might be more interested in getting certain numbers for their production every month or they might be more interested in selling their product at a certain price; while their customers might be looking for a particular product innovation at that particular moment in time. Putting your customers needs first actually will make you more flexible, help you evolve, grow and move with the times and will keep you in business for years to come. Companies that stop listening to their customers become has-beens very quickly and eventually die.
Playing it safe
Some CEOs create vast bureaucracies, complicated SOPs and tons of layers between them and their line staff. They also ban risk taking, entrepreneurship and innovation and instead create a chain of command and reams of manuals with the sole intention of maintaining the status quo. Such companies fail too in the long run.
Whatever you are selling, what keeps you in business is innovation in your field. Playing safe just creates mediocrity and same old, same old. Research and development, trend forecasting and keeping your ears to the ground and fingers on your customers pulse is actually not unproductive expenditure as some senior managers think – (R&D is the first division that gets slashed in times of recession) – it’s actually a necessary expense. As a CEO spend money on research and development. Information is power. Acquire it. ■
The 18 Mistakes That Kill Startups
In the Q & A period after a recent talk, someone asked what made startups fail. After standing there gaping for a few seconds I realized this was kind of a trick question. It’s equivalent to asking how to make a startup succeed—if you avoid every cause of failure, you succeed—and that’s too big a question to answer on the fly.
The Top 10 Reasons Startups Fail
Research by the U.S. Bureau of Labor Statistics shows that nearly six in ten businesses shut down within the first four years of operation. While not as calamitous as the 90% failure rate often repeated as fact, the BLS statistics are sobering for anyone tempted to invest their time and personal savings into launching a small business. To avoid becoming a statistic yourself, I have put together the top reasons so many new businesses fail.
Why Startups Fail
Reason 1: Market Problems
A major reason why companies fail, is that they run into the problem of their being little or no market for the product that they have built. Here are some common symptoms:
* There is not a compelling enough value proposition, or compelling event, to cause the buyer to actually commit to purchasing. Good sales reps will tell you that to get an order in today’s tough conditions, you have to find buyers that have their “hair on fire”, or are “in extreme pain”. You also hear people talking about whether a product is a Vitamin (nice to have), or an Aspirin (must have).
* The market timing is wrong. You could be ahead of your market by a few years, and they are not ready for your particular solution at this stage. For example when EqualLogic first launched their product, iSCSI was still very early, and it needed the arrival of VMWare which required a storage area network to do VMotion to really kick their market into gear. Fortunately they had the funding to last through the early years.
* The market size of people that have pain, and have funds is simply not large enough
An entrepreneur recently asked me why startups fail. Startups fail because they run out of money. You’re probably thinking, “Tell me something I don’t already know!” Read on and you’ll see that statement is deceptive in its simplicity
This post is based both on my experience as an investor and as entrepreneur (when I’ve boot-strapped and venture-funded).
They spend too much on sales and marketing before they’re ready. Many venture companies move to a high burn rate too quickly and it’s hard to go back. Sometimes even a frugal entrepreneur winds up spending too much either because he doesn’t manage the money or is tempted by having money in the bank. This often happens when a startup raises too much money too early.
5 Tips to deal with Office Politics
Charu | Jun 23 2006
Here are 5 tips for the office, which can be a help for you in dealing with the taxing situation and finding your way out of the mess.
1. Think before you act (or speak)
2. Nurture the stakeholders
3. Keep enemies close
4. Imitate the successful
5. Play the game
Dealing with Office Politics
Navigating the minefield
“There’s too much wrangling and maneuvering going on – I just hate this office politicking”. “Joe, well he’s a smart political mover – knows exactly how to get what he wants and how to get on.” Whether you hate it, admire it, practice it or avoid it, office politics is a fact of life in any organization. And, like it or not, it’s something that you need to understand and master to be sure of your own success.
Top 10 reasons why start-ups fail
By Kukil Bora, SiliconIndia
Tuesday, 01 March 2011, 16:40 Hrs
Bangalore: Have you ever wondered what makes entrepreneurs a rare breed? It’s because very few start-ups actually triumph in their endeavor. According to a research done by the U.S. Bureau of Labor Statistics, nearly six in ten businesses shut down within the first four years of operation. This is surely abstemious for anyone tempted to invest their time and personal savings into launching a new business. So what are the factors that turn out to be the obstacles in keeping a new business afloat in the perilous waters of the entrepreneurial sea? Mentioning below are the top ten reasons that, if not avoided, can sink a start-up.
Very true analysis/observation, I totally agree with the facts you have mentioned but one question, why its happening around? As I see 8 out of 10 ratio of such failing practices. How do you stop this, I mean someone must be there to ask them to do it properly or please don’t do it!
haha lovvvved ittt!!! we want more honest articles like these!
Why You Need to Stay in the Rat Race — A Wake-up Call for Lazy CEOs
Published: Friday, 3 Jun 2011 | 10:44 AM ET
By Todd G. Buchholz author of, “RUSH: Why You Need and Love the Rat Race”
We all think we will be happy when we finally have some downtime – when we can get away, disconnect, shut down.
You may even daydream about withdrawing from the rat race full-time. What you don’t know is that all that peace and quiet will ruin your state of mind.
The same is true in the workplace.
CEOs who try to lift self-esteem by stomping on internal competition will drive their company right to bankruptcy court.
How the Big Idea Will Get You Fired
Too often, companies act upon “revolutionary” ideas not worth fighting for. McDonald’s Arch Deluxe, anyone?
By G. Michael Maddock and Raphael Louis Vitón
“Wouldn’t it be cool if …”
And with that phrase comes a chance to lose tens of millions of dollars—and maybe your job.
We don’t want you to be afraid of what we call the “idea monkey” (someone who tends to come up with tantalizing, imaginative ideas) in your organization and his big thoughts. Far from it. Helping companies come up with the Next Big Thing is how we make our living. Idea monkeys with their big ideas play a critical part in the process.