When someone starts a business around the block and fails, no one but close relatives and friends will find out. The case is entirely different with big businesses. Once a business attains a particular height and becomes popular, the slightest issue it goes through may make headlines. There are several businesses which have been successfully built from a humble beginning but crumbled along the way. You too may be looking forward to growing your business into a giant company some day or perhaps it is also making waves and you are wondering what steps you need to take to keep things moving forward. There are several reasons for business failure and in the following paragraphs, we are going to examine those causes, looking at where fallen companies missed it and how you can avoid making the same mistakes.
There are many giant companies and businesses which have been in existence for decades. Some of them are actually thriving and leading in their different sectors. The difference between failed businesses and thriving ones are not necessarily complicated. There are some important aspects you have to watch out for. Once you understand the reasons for business failure, you can easily avoid the traps.
In every company and cooperate setting, the importance of Human resource cannot be undermined. Inadequate understanding of the importance of workers is one of the main reasons why businesses fail. People are the most important asset any business has, especially the staff or workers of the business. Whether the business prospers or fails is largely dependent on them. some businesses actually start out with an outstanding staff management scheme. However, a lot of these companies and specifically their human resource departments become sidetracked or distracted by success and no longer give their staff the quality of care they use to. This is a common reason why companies fail.
When a business is established, it is normal to find an enthusiastic staff. A group of workers who are willing to go the extra mile to see that company goals are achieved. Somewhere along the line, some of them begin to lose that enthusiasm and drive, but top management hardly bothers to find out what is really happening. The loss of enthusiasm is usually received with stern reprimands and even threats aimed at making workers do better. However, managers and sector leaders sometimes fail to realize that the root cause of the problem is not naughtiness.
It is important to revisit the way your staff are treated and ensure that they receive better. That their pay and other privileges are upgraded. It is sad to say, but some businesses grow to another level and one cannot even tell that there is a difference by looking at their workers. If your business grows bigger and becomes more prosperous but your staff do not get higher pay and better working conditions, get prepared to have things go on the decline pretty soon.
Inadequate Customer Care
This sign of failing businesses is much like the one just mentioned. Customer care is becoming even increasingly more important than people think. Thus poor customer care is one primary reason why companies fail. It is a common saying that in business, the customer is King. This does not only apply when your business is still small and you are trying to get and keep as many customers as possible. No matter how large the market-share and customer base you have gained is, you must always remember the value of a single customer. One customer has the power to influence a host of others to join in on using your product or services just like a single customer can discourage a chain of others.
Failed businesses have this one thing as a cause of their downfall. Neglect of quality customer care when they get to a certain height of success. It is like a disease that eats through the entire company or business framework. Customers of large businesses meet many different staff of the company in different ways and places. From the guy at the gate to the person sitting in the big office at the top floor, the attitude towards every single customer and potential customer has to be the best. When top management loses sight of the value and importance of having more customers and keeping already committed ones, their attitude towards customers will communicate the value they have for them to the entire staff of the company. One famous reason why companies fail is the loss of sight for the value of customers as they reach certain heights of success.
Constantly remind your staff about how important customers are to the business by the way you talk about them and the value you place on them. As your business grows to higher heights revisit this particular aspect of the business from time to time and ensure that you are on track. Though many people do not regard poor customer care as a reason why businesses fail, it is actually more serious than they realize.
Loopholes in Management
In order for a business to achieve great success and maintain progress, there must be am outstanding team of managers. When companies grow big, managing different sectors becomes increasingly challenging. However, no loopholes can be tolerated if the business must maintain the heights already attained and keep making progress. Management loopholes are a sign of failed businesses and another reason why businesses fail.
Managerial roles and responsibilities have to be clearly spelt out and respected. Sometimes large businesses with several roles have many duties and responsibilities which are not clearly spelt out. What is everybody’s duty is often nobody’s responsibility. Such loopholes make it difficult for workers to take responsibility and for top managers to hold someone responsible for unfinished tasks. It is vital for every business to have a managerial system that can be held responsible and accountable for whatever goes on within the business. Failing businesses always have one form of management lapse or the other.
Unaccountability is a great managerial deficiency and another one of the many reasons for business failure and should not be tolerated. Top managers of various departments in a business should be able to give account of everything that goes on in their departments. That also implies that in case there is some failure or the other, someone should be able to explain exactly what went wrong and bring those responsible to face disciplinary sanctions.
Loss of vision or pursuit of purpose
So many challenges pop up when a company or business gets to certain heights. Pressure from competitors, meeting up with changes in customer trends and demands are issues which have the potential of causing a business or company to lose touch with its original vision and purpose statement. For example, the purpose of setting up a fast food processing business may have been to increase availability of readily made food items and help people deal with the trouble of finding something decent to eat in the midst of a busy day’s schedule.
However, one of the reasons for business failure may have been the fact that top managers and entrepreneur of the business loosed sight of this purpose along the way and became distracted by other things. Failed businesses are usually those that lose touch with the reason why it started. It is difficult to consider why companies fail without facing this point.
One reason why a business may be distracted is due to competition. Sometimes competitors could make things so difficult for the business that instead of focusing on getting better, the business resolves to picking a “fight”. Competitors should challenge your methods and encourage you perform better. However, better performance can never mean going out of your ways and purpose to fight back. The company we just mentioned for example could decide to get engaged in producing or supplying other products which may be related to their original idea but was never part of the plan and does not serve the business’ purpose. Consequently, the business will get into a line of production which may not solve any problem for the community or their customers. As a result, it will only be losing money instead of making profit.
The purpose of every record breaking business is always geared at solving a problem. That is what gives it worth and market value. The easier it can make life for people, the more willing they will be to pay for its products and services. On the other hand, if the business loses sight of why it was started in the first place and begins chasing shadows, it will not be long before they lose customers and sales and eventually be pushed out of the market.
Loss of Uniqueness
Loss of a business’ purpose and vision is followed by loss of its uniqueness. And if a business is not unique, it cannot help it but be lost in the cloud of market obscurity. Even two businesses offering the same services are unique. They may be serving the same purpose but they cannot both use the same methods and strategies. Their differences make them unique and none of them should stoop so low as to lose their uniqueness for the sake of competitors. There is no need to mimic your competitor unless you do not understand or have loosed sight of how important your business is and why you started it in the first place. One fault you will find with failing businesses is the loss of uniqueness.
The presence of fierce and innovative competitors
With some companies or businesses, competition is usually so strong that some entrepreneurs just can’t catch up with the pace if they are not innovative. When you have competing companies that seem to always be ahead of you in innovations and meeting the needs of customers in new, more interesting ways, you brand will always be lagging behind. Customers like what is trending, fashionable. You only know how strong you have grown when you begin to face competition.
The trap some big businesses fell into and which sent them out of business was the mindset that what worked for the past five years will work for the next five. Change is constant. Some things may be slow to change but they definitely will. Do not make the mistake of holding on to methods you used in the past simply because they have worked so well. We are living in the technological age and things change faster now more than ever. Businesses that feel comfortable doing things the way they have always done them will find themselves being pushed out the market sooner or later. Nothing requires changes to be made than competition.
Make it a routine to examine changes in taste and fashion so that your business can meet up with the challenges that come. Every business has to be proactive instead of reactive. Be the first in your industry to introduce the next trend, to incorporate technological advancements into your production and distribution process. Start an online shop, introduce better services, do what the others are not doing and you will get the results they are not getting. The goal is to keep the lead. If other businesses are following your methods, it’s a good sign that you are leading them.
This calls for research
Business research is not negotiable for any business that must thrive. One of the reasons for business failure and why companies fail is the fact that some businesses never do any form of market research before making new moves. As a result, business opportunities that should have been exploited are not even discovered. Some big businesses actually start out with market research strategies but at some point, they stop putting in so much into their market researchprograms.
If you want to make consistent progress, register growth and avoid falling out of business, you have to ensure that there is adequate market research conducted before you take the next level. Don’t make the mistake of assumptions. Let the findings made by researchers be the foundation upon which you make decisions for the business. Sometimes investment opportunities which seemed wonderful are only disappointments waiting to happen. However, these are things which could be discovered and sorted out before money, time and other resources are put into any business deal or venture.
The success or failure of any corporation, whether government, or private, profit or non-profit making largely depends on the quality of leadership available. The quality of decision making determines the quality of performance that can be done and failures with regards to leadership is one of the many reasons why businesses fail. And even when members of a department contribute ideas that have to be implemented, the final decision of whether or not they will be implemented rest on the shoulders of the leader.
There are so many aspects of leadership that have to be taken note of. And this is especially important for large business because department and main leaders have more work to do and more people to deal with. Let’s examine some areas where big business leaders fail and how you can avoid their pitfalls.
Dealing with Workers
Like Dale Carnegie remarks in his classic How to Win Friends and Influence People, there are two ways to get things done through people. The first is to force or oblige the person involved to do it and the second is to make them want to do it. Of course the second is the nobler way of dealing with employers and workers. Though it is more difficult to keep in touch, leaders of big businesses have to see to it that workers do not get to a point where they lose passion and interest in what they do. If that happens, they will simply be going through the motions and productivity will definitely suffer.
Leaders in large businesses must therefore ensure that those who work under them are always enthusiastic and passionate about their jobs.
When they find that a particular worker or workers in a department are no longer as productive as they use to be, it is the place of leaders to figure out what is going on and get things going again. Resolving to always fire unproductive workers is not the best way to solve the issue. Any company or business that makes it a habit to let go of workers without understanding their challenges may have to keep losing workers and that will prove detrimental for the business in the long run.
Taking the lead
Leaders in any field or department have to ensure that they are actually leading. Many large businesses have actually crumbled because they appointed departmental leaders who could not stay ahead of those they were leading. One consequence of such a situation is that smart workers will not feel challenged to be more productive. Actually some of them could even leave to be employed in another department or a different business.
Leaders ought to challenge those they are leading to do better, to perform better. They do this by constantly seeking to be ahead of their subordinates in every aspect. They have to be more knowledgeable and show strength of character and attitude towards work. One reason why businesses fail is owing to the fact that at a certain level, mangers and leaders loosed that passionate spirit to stay ahead and sometimes they begin to depend on those under them for ideas and plans for the next level. Workers will definitely know when they are being challenged or if their leaders and managers are just being lazy.
Keeping Relationships Positive
Failing businesses leave one thing in their wake; a disgruntled set of people who are out of touch with the company or business they are called to serve. Check all failed businesses and you will see that for one reason or the other, the leader failed to maintain a healthy relationship with workers. Whether departmental or overall leadership, the case is usually the same for failed businesses. It is one of the most important aspects or causes of business failure entrepreneurs and owners of thriving businesses have to learn from and be cautious of.
It is vital that workers and even clients and customers see a need to show up and remain faithful to your company beyond their need for whatever products or services you may be offering. Learn to keep them coming for something worth more. For friendship and acquaintance sake. In the same light every big company must learn to keep their workers coming to work every day with fresh enthusiasm and commitment that springs from the glowing relationship you and other company leaders have established with them. There is no messing around with this principle.
Thus, no matter how large the company grows, leaders must learn to keep in touch and build personal relationships with each and every worker and customer. Let them know how valuable they are to you. let them feel it and you can be sure they will be loyal to the company for life. Sometimes it could take losing a particular worker for a company to lose its place in the market.
Some workers are that important. Though you may have few of such people working for your business it is wise to treat each worker as though they were indispensable. On the other hand, those who are truly indispensable are usually not motivated by money. Usually they are motivated by commitment to a course and relationship with people at their place of work keeping such people around is technical but important. Learn to treat them with honor and not only will they never feel the need to leave, but they will always commit their best to see that the business prospers.
Even if you are faced with a crises in business and you have to keep it from becoming like one of the failing businesses around you, you can trust that studying the above reasons for business failure and working hard to eliminate the root causes will put you over obstacles and keep you on the track of success.