Why Maximum Businesses Fail Due to Mismanagement

In this press communiqué, retail and eCommerce consulting brand - Your Retail Coach (YRC) points out 5 reasons why businesses fail. Reasons startups fail are no different except that the nuances are slightly different. As business consultants ( https://www.yourretailcoach.in/business-process-management-bpm-consulting/ ) for a long time, YRC maintains that whether it is the failure of any existing business or the discussion is on failed startups, the main headings of reasons for business failure remain more or less the same.

The perspectives shared here are meant for business owners who find themselves asking 'why my business is failing' and seek to make a turnaround in their ventures by revisiting their strategies and organising their systems. The takeaways are useful for aspiring entrepreneurs.

The CEO Factor

Although it is the managing director who is responsible for the operational affairs of a company at the macro level, the vision and strategies are put forward by the CEO accompanied by inputs from the board of directors. And there are plenty of examples to show what happens when the wrong person is chaired as the CEO. It is not about the skills and expertise of the incumbent but it is a case of misfit. The CEO drives a company. The decisions of a CEO backed by a board of directors decide the fate of a company going into the future. The decision could be pulling out of a market or making entry into a new one, launching a new product line or getting rid of an existing one, and so on. Even though the directors may favour or go against a decision, it is the options put on the table by a CEO that often defines the scope of choice for directors. Now what vision is put forward by a CEO depends on what kind of insights and understanding they carry considering the line of business. For example, a CEO from a pharmaceutical company may not be the best fit for a fashion eCommerce company. But the same person might be highly suitable to manage the online sales channel of a pharma company.

Weaker Mid-Level Management

The mid-level management comprises the heads of various departments or divisions. It also depends on the organisational design of a company. For example, a company may have departmentation based on geographic locations instead of functional departmentation. Whatever the form of departmentation, every such department is steered by a head. This departmental head is responsible for the overall functioning of that department. At this level of management, the policies, strategies, and decisions of the top-level management find executional relevance. For instance, if there is a decision to reduce staff strength, the HR head cannot do it alone. All the departmental heads along with the managing director sit together and craft a series of sub-strategies and a roadmap to accomplish the decision that percolates from the top-level management. But if the middle-level management is not strong, the decisions coming from the top never fulfil their true purpose at the bottom level. This can be envisioned on a small scale by considering a creative team. If the marketing manager asks for a particular design for a new promotional campaign and the manager (middle level) does possess good communication and leadership skills, the executives who would actually design the campaigns will never accomplish what the marketing manager originally wanted.

Financial Mismanagement, No Audits

Financial mismanagement is a crucial reason for business failures. It is one of the most common causes why businesses do not survive. A lack of understanding of financial management followed by poor financial planning has led to the downfall of innumerable businesses including giants. So, how can businesses prevent financial mismanagement? The answer is here.

Financial management covers four key areas of action: planning, budgeting, decision-making, and controlling. Planning entails estimating capital and operating expenditure requirements, assessment of inflow and outgo of funds, procurement of funds and repayment, fund allocation, sales and revenue projections, P/L estimations, ROI and breakeven analysis, etc. Budgeting involves allocating the funds to different expenditure heads across a given period of time. Planning and budgeting help companies keep their financial and commercial decisions on predetermined trajectories. Decision-making takes place at multiple levels. For example, if funds for CSR are allocated in the budget, the concerned authority approves the release of funds when the set conditions are met. Controlling involves monitoring actual performance against plans and budgets and initiating or taking corrective measures as and when necessary. Audits are also a part of controlling.

Financial mismanagement can take place at any of the above stages. For instance, faulty audit planning would never reveal discrepancies taking place within a company. Such discrepancies and anomalies can cause grievous damage to the reputation of a company.

Operations Mismanagement, Undefined SOPs, Lack of Training

Operations management ( https://www.yourretailcoach.in/business-model-development/ ) can be a term wide open for interpretations but here it means how a business manages its routine processes and operations. Operations mismanagement can take place in any department, in any process, or even in a small activity. For example, customer reviews and feedback are vital for eCommerce brands. Without a planned system in place, there is no way to get those reviews and feedback. The consequence of this is remaining in the dark about the quality of experiences delivered to customers. This quality could be about products, last-mile delivery, website/app UX, returns and refunds, etc. The required system can be created by adding the relevant features to the website/app and via notifications to customers. Building such a system must be a part of operations planning because mismanagement in operations stems from poor operations planning. A company that builds such a system will get valuable customer reviews and feedback and a company that does not will not. SOPs, process automation, and IT play a vital role in building and enforcing a strong operations framework. And it is not just in CRM but in every other area of operation. Equally important is providing SOP training to employees and documented allocation of duties and responsibilities.

Toxic Workplaces

Often undermined, toxicity in workplaces destroys companies from within. Toxicity is not just office politics and groupisms. A much more dangerous form of toxicity is the lack of interference from senior leaders to confront and address minor forms of toxicity. Even many senior leaders would not interfere because it is not a part of their 'job'. Senior leaders must take serious note of ill practices and any form of toxicity taking place at the bottom level that is harming the work culture. Every employee including the CEO must have a sense of ownership. And if it is not there, at least there should be a consistent effort to make sure that one's surroundings are clean and free from office politics.

YourRetailCoach
Pune, India-411016
Phone: +91-9860-426-700
Email: consult@mindamend.net
Empowering Retail & E-commerce businesses worldwide.

YRC is a Management Consulting Firm with its presence across India & Dubai.
We help our clients build robust management systems which shall help to reduce their involvement in daily operations. We act as "Growth Partners" to our clients and help our clients grow in an organised manner. We have served more than 100 brands till date and are associated with 85% of them.

Get advise for Retail Business Consulting : https://www.yourretailcoach.in/contact/

This release was published on openPR.