While doing some research for a presentation on company failure I came across an thoughtful article by Steve Tobak, published in January of 2013. Tobak observed (not particularly surprisingly) that when asked, 10 CEOs would give 10 different answers as to why companies fail. The challenges, they lament, was the need to create innovative products, invent breakthrough technologies, the need for world dominating marketing and the ability to manage complex supply chains while navigating the mercurial issues of highly competitive global markets. But while they are significant issues are they the real reason for failure? Or, are they in fact a simple and convenient “fall guy” obscuring the underlying true cause of failure which conveniently goes unchallenged.
A companies life-cycle is determined by people,its leaders, and its birth and growth, its success or failure, is subject to their competence. The root cause of a companies failure is not because of a non-competitive product, a difficult supply chain or a competitive market but is driven by the decision or more appropriately by the series of decisions that created the uncompetitive product, assembled the complex supply chain or targeted a highly competitive or otherwise inappropriate market. In other words the root cause of failure generally rests with its people, specifically its leadership. A reality that in many cases goes unrecognized until it is too late.
This was eloquently articulated by Tobak in his article when he pointed out that when facing failure, rarely do CEO’s or their executive management look into the mirror and say “That’s why we failed”.
Quoting Tobak “At the core of every company in trouble is usually a management team that is not as competent as it needs to be , is more complacent than it should be, and is more dysfunctional than it can get away with”.
Some of the warning signs of trouble are a management team that;
- think they have all the answers
- are pushing a grandiose vision
- believe in the status quo
- breathe their own fumes
- surround themselves with yes-men
- are afraid to lose what they have