How do badly managed companies survive?

Are you surprised by any of these three points below?

• Companies that perform well typically have good managers at all levels of the organisation;

• There is a solid link between how well managers adopt proven best practices and how well a company performs;

• Employees in better-managed companies are likely to experience a more satisfactory work-life balance.

The above are findings recently reported by the LSE in conjunction and McKinsey & Company on management practices and productivity.  The findings come from a survey of over 700 midsize manufacturing companies in the France, Germany, the UK and the US. 

Hopefully, there are not too many surprises at this stage, but what the report did show is that managers are normally more important than the industry sector in which a company operates, the regulatory environment that constrains it, or the country where it resides.  As Stuart Jones says in BusinessMatters :

"People are your most important asset" turns out to be wrong. People are not your most important asset. The right people are. 

How do so many badly managed companies survive?  The answer is due to competition - or lack of it.  In a typical situation, it is very difficult for a badly managed company to survive; it's tough enough for the well run companies.  However, if the competition is weak then the need for a well managed company becomes less.  Good examples would be small companies with particular niches, unique desired products and where geography is a factor (e.g. your shop is the only shop on the island).  This is all very well and good if you are in this group, but watch out as the competition always has a way of catching up.

Finally, you can find further information on the report from Egils Milbergs, which will be of particular interest if you are involved in a family owned business.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

Comments

[Dennis Howlett]

Ok - so how are 'we' going to value and measure this 'asset' and its worth to the business so we ensure we've insulated ourselves with the 'right assets?'

[Philip Woodgate]

There's the normal techniques of good recruitment, actively using the probation period to properly assess you've got the right person and proper training and managment structure.

Personally, I think a good way is to recruit from within. You already know you've got good people and we can give them the training and support to move up to the next level.

The less conventional method are blogs they provide a good insight into the individual.

[Dennis Howlett]

OK - so that's new hires and promotions. But what about the people already there. The problem as I see it is that as you climb the greasy pole, you end up as partner.

Once in that position, many become like university professors - tenured. That's when all your ideas about 'right people' take on a very different meaning. I'm not suggesting that's the case at GJ, but I am suggesting that's what lies behind much of the malaise I see in the profession.

So the net result is that while many firms may attract the 'right' people, it is for the wrong reason. Net result, clients lose out. Until now. Blogs give them a voice and that doesn't go away too easily - especially if they're ticked off. If that's right then the dynamics of selecting the 'right' people changes dramatically because the firm's focus has changed.

Yet the reality is that many firms did rather better last year. Being quick to jump on the compliance bandwagon. Very few people in the UK were blogging last year. It's taking off now.

[Stuart Jones]

Over the years I have noticed how weak businesses (low profits/poor cashflow/bad owners & or management) manage to cling on and survive for years and years - literally. Sadly, the very fact that they do survive even though their financial position is worsening is often seen as them being successful. This in turn can wrongly influence their competitors. All this is down to a lack of benchmarking information = the information which is needed to implement best practice. Dennis has touched on this previously and I'm not certain if I have a concluding remark to this post! One other comment I would add is that far too many business owners complain about the lack of quality staff but do nothing to improve their own inadequacies ie train themselves in new/missing skills such as dare I suggest this - financial management.

[Philip Woodgate]

Hi Dennis and Stuart. It's interesting that both of you are highlighting problems that can occur at the top of the management tree. Let's face it, you can only bury your head in the sand for so long before the competition catches up.