Is Your Management Team Fit For Purpose? 09/06/2010

Nowadays, in our increasingly global economy, the success or failure of a business can be the inevitable consequence of economic issues such as interest rates, exchange rates or government regulations over which management has no control.

For some in the business community, the danger signs arising from the credit crunch were plain to see, albeit  company leaders may have been somewhat confused by the almost unprecedented low levels of interest rates; base rate remains  at only 1%.

Many young management teams have only ever known good times and the current climate will leave many entrepreneurs facing unfamiliar territory. They will have to wrestle with a host of new business issues if they are to successfully batten down the hatches and chart a path for their business to successfully ride out this economic storm.

What is certain is that there will be casualties. Those who survive will be the management teams who identify the danger signs early enough. Directors of any business should be actively looking for the first signs of trouble and, in most cases, the key to the solution lies with them.

There is, however, a conundrum in that for some businesses the problem is its management. And one of the most difficult things to identify, or perhaps have to admit to, is inadequate or bad management. Contrary to popular belief, very few failed businesses are the result of fraud or dishonesty;  almost all business failures can be attributed to inept management.

This manifests itself in a variety of ways; lack of control over costs and profit margins, poor service delivery resulting in unhappy customers, and a lack of information reaching management.  In my experience, certain types of poor management seem to crop up more frequently than others.

One of these is the dominant personality who tends to surround himself or herself with 'yes-men.'   As a general rule, consistently sound and rational decisions are the result of several minds working together rather than one working in isolation. But this type of individual doesn’t tend to listen to those around him with the result that bad business decisions are made.. He dictates rather than leads.  Some businesses can appear to be very successful under such a management style but this is generally when economic conditions are favourable. When difficult times come along such businesses can all too frequently become casualties.

Some businesses adopt ,more of a team approach to managing a business but that alone is no guarantee for avoiding pitfalls. The most effective teams are those embracing a range of skills but equally importantly,  the members  must be able to work together. Irrespective of whether your are in a business environment or a sporting environment, the teams who are going to be most successful will not be made up exclusively of goal scorers or defenders, technical or marketing specialists - but a mix of both.

It is essential that any combination includes someone who can produce meaningful accounting information so you know how your business is performing in reality. For smaller businesses this in itself is a challenge but that is where working closely with your professional advisers can provide that extra resource and make that critical difference.

The long term future of any business depends on the continuity of capable management and a challenge for the management team is to ensure that there are appropriate plans for succession in place. It may come as a surprise to some but having the same surname as the founder or owner is not generally a sufficiently good reason to decide on the next generation of management!

Whether or not you are running a family business, succession planning is key.  This is something that is often overlooked in businesses that are run by the type of dominant personality I discussed earlier – because that type of individual has a fundamental problem in devolving authority to those around him thus giving rise to a management vacuum.

Managers need to be courageous and self critical enough to assess whether they really do have the broad range of skills necessary to spot the symptoms of pending problems sufficiently early.  If they can then do they have the skills to develop an appropriate plan of action to give their organisation the best prospect of surviving today’s economic challenges and avoid becoming a statistic on the list of casualties that the current economic crisis has already precipitated?