David Smith, Principal Advisor in Business Improvement at SAI Global knows a thing or two about why businesses fail. Having carried out 100s of audits and training and certification for organisations of all sizes, Smith believes many Australian businesses lack processes and planning, which leads them to failure.
“Problems associated with quality usually come from organisations failing to set realistic objectives; and not effectively marrying their processes, systems and employee talent cohesively within their organisations to meet those objectives,” says Smith.
Here are David’s top 7 businesses failures and how you can avoid falling prey.
- Lack of effective strategic planning.
Audits by SAI Global seek proof of a business strategy, and proof that the strategy is being reviewed and followed, that the business understands its strengths and weaknesses, and its market and competition. David says audit failures here are more common among small-to-medium businesses.
“We find smaller businesses more commonly have less of a focus on strategy and direction. They are too busy running their business and don’t have the resources to look at the bigger picture. As such, they have less of an understanding of the competitive environment, are less able to compete, and often struggle to identify opportunities and grow.”
- Mid-level and junior employees are in the dark about the business’s objectives.
Has senior management provided staff with measurable objectives – and the necessary resources? Surprisingly, this is among the most common audit failures, David says. “This leads to the ‘silo’ effect, where internal teams are working independently of each other. Businesses that fail this aspect of their audit commonly struggle to meet their objectives.”
- Important functions of the business are not monitored.
Is the business monitoring performance at each appropriate level. David says, “For instance, a company might want to improve the efficiency of its customer-facing staff but is unlikely to achieve this if they don’t implement a scheduling system they can measure. Our assessments of organisations have found that monitoring processes have not always been developed or followed. Again, this makes it a significantly more challenging for businesses to meet their goals.”
- Short-sighted leadership.
Leadership is an area in which successful small-to-medium businesses often shine. David says, “In large organisations, I have often seen a section head focus on their own area, not the organisation as a whole. This can lead to the ‘silo’ effect and hence inefficiency.” Auditors often identify this problem by assessing the linkage of processes between sections and the flow of information and work.
- Conflicting systems, processes and objectives.
We frequently identify internal systems and objectives within individual departments that clash with the organisational systems and objectives. For instance, an organisation’s call centre may have an efficiency targets that requires its operators to limit their call times with each customer. This could mean that all of the information required from the customer to provide a quality service is not obtained and this can hinder the achievement of the quality service objectives set by the organisation.
- Employees don’t receive support to develop competence.
When was the last time you audietd the qualifications and competence of employees in various roles? David says, “When we interview employees, most tell us they were put into a role with very little mentoring and support. As a result, they have difficulty in fulfilling the requirements of their role, particularly early on.”
- Failing to identify and solve problems.
Senior management often fall prey to using profit and loss statements as the only way to monitor the health of the company and make strategic decisions. “Basing decisions on financials without a focus on the quality of the organisation’s products and services happens a lot – and is not an effective means of identifying problems,” David says. In the case where organisations do identify a problem, a significant proportion of audits show that managers don’t have the capabilities available to solve them. When the ‘silo’ effect is occurring, problems are sometimes hidden in that department and this can have a negative effect on the whole organisation.