IN THE GAME OF LIFE, HE’S JUST A DREADFUL GOALHANGER!
ARE THE CAUSES OF BUSINESS FAILURE SIMPLE OR COMPLEX?
In an earlier article, we looked at the symptoms of business failure. Symptoms are easily seen, but they are often seen too late. The causes of decline are identifiable, can be spotted earlier and (at least sometimes!) are manageable. One might say the underlying factors are internal to the business (largely controllable) or external (less controllable) factors:
|INTERNAL CAUSES||EXTERNAL CAUSES|
|Poor Management and Governance||Changes in Market Demand|
|Inadequate Financial and Cash Control||Competition|
|Overtrading, Big Projects and Acquisitions||Commodity prices|
|Poor Financial policy||Political and Regulatory change|
|Lack of Market Effort||Technology and Redundancy|
|Organisational Confusion||Uncontrollable Global Forces|
IT’S JUST MANAGEMENT STUPID!
As a Safe Harbour Advisory Firm, we are always looking at the causes of failure, and we are examining management about the reasons the challenging business conditions.
One could also say that all the reasons for poor performance ultimately just reside in management. That it was either poor decisions, or no decisions – or watching and criticising without acting – that were the cause of all the other problems. Even if the cause of failure is something external (like a pandemic), can we say that management were poorly prepared, or did not respond properly, or didn’t have the business set up to specifically address that risk? Is the secret to a good business just good management and good luck? If that is right, it’s interesting but not helpful, as it doesn’t provide any assistance to the people analysing the problem diagnostically (like Safe Harbour Advisors and turnaround consultants!) Changing management is of assistance, but you need a plan for success, you need to know the other things. For example, was the failure due to low market share (external), or poor financial policy and lack of investment in establishing better market share (internal), or the inability of management to clearly see that issue?
So – ultimately, it’s about (a) knowing the complex web of casual factors, and how internal and external factors co-relate and (b) knowing the ability of leaders to identify and respond to those factors.
We will cover the other factors another time, but for now we begin with Management and Governance.
MANAGEMENT AND GOVERANCE FAILURE FACTORS
Some of the common casual factors are briefly set out below:
|Neglect pf Core Business||
|Lack of Management
LET’S BLAME THE MAN!
His lack of humility defies imagination
And he hangs round like a fart in a Russian space station
He does not even notice as he sells you down the river
Cause he is one of life’s takers and he’s looking for a giver
He smirks and shrugs his shoulders as he drops another clanger
In the game of life, he’s just a dreadful goal-hanger
Billy Bragg 1996
Around the water cooler, it is easy to blame management, their focus on analytics, and their personalities. But its more complex than that. It is the people inside the organisation that view the symptoms of decline, and the reactions management have. It is an early diagnosis of the causes of decline that will result in the best chance of turnaround, and we will focus on more of those in a later article.
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