Management Factors Leading to Business Failure

At yesterday's sixth annual "Buying Trouble Conference" that was hosted by the Atlanta office of law firm McKenna Long & Aldridge LLP, one of the sessions was entitled, "Legal and Business Issues That Drive Restructurings and Bankruptcies." During that segment, David Miller, Managing Director of Macquarie's Restructuring and Special Situations Group, discussed the following management factors leading to business failure:

1. The CEO/President is an autocrat (Can drive away independent views on the business; can prevent constructive debate)
2. Lack of leadership (When management is weak, employees are unsure who is really in charge)
3. Lack of board experience and depth (Typical of many boards where membership is limited to people with experience in specific functional areas, such as sales or production; often discounts the value of other skills)
4. Unwilling to seek external advice (Skill deficiencies at the management level are likely to be magnified within the lower levels of the organization)
5. Failure to change the management structure/culture or to manage change (Particularly relevant to businesses that have grown significantly and retained original management)
6. Failure to plan for succession (Management needs to identify a likely successor, for example a key employee, family member, or outside party; running a business in the interest of long-term success and viability is the best way to ultimately benefit the successor)
7. Shareholder/board disputes (Owners and managers do not necessarily have similar incentives; nothing is more destructive than a civil war)
8. Failure/inability to focus on profit (Constant margin, cost and future prospect diligence are required; often ineffective information systems hinder management's ability to focus on business line cost drivers)
9. Chaos syndrome (When management actually thrives on or is only able to manage in chaos)
10. Goldfish syndrome (Failing to understand exactly where you are and where you are going)
11. Ostrich syndrome (Failing to face-up to known problems with either operations or the business solution)