Why Poor Management Leads To Start-Up Failure

Since the late 80’s studies show that poor management and people’s problems are the number one cause of start-up failures. Be it the tension between employees, entrepreneurs, management, VCs, or founders, poor management at the senior level can easily spell doom for any start-up. The truth is founders are inseparable from their company and their motivations and attitude become the organization’s culture. Venture Capitalists put the highest importance on founders when picking investments.

Most start-ups usually open with the founders and one or two employees. The business is manageable and the focus is primarily on making sales. However, as the company scales, which can happen quickly in some cases, activities become overwhelming and stress builds. If the start-up does not practice proper management, daily pressures can result in shaky systems, reactive decisions, and poor choices.

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Start-Up Failure #1 – The Effects Of Poor Management On Staff Members

The phrase ”people do not quit their jobs, but bad managers” has never been more accurate in this day and age. Poor leadership and management can make the workplace intolerable, regardless of the size of an organization.

Health and lifestyle expert Janine Castle runs a detox centre, and says that all members have to be on the same page. “If you picture a 12-wheeler truck with one flat tyre, it’s going to cause problems. It’s the same for a business. One bad egg can cause everything else to collapse, so it’s important for the owner to take charge from the front and ensure that their management skills are up to scratch.”

In bigger companies, department managers can be transferred or paid off. But what if the problem is one of the founders of a start-up? The reality is that it could be the beginning of a failing business. When people with a brilliant idea decide to launch a business, their skills are rarely considered.

Start-Up Failure #2 – What Makes A Bad Leader?

Most individuals responsible for poor management are usually not aware they lack proper training and skills. Since they are running a company with gut instinct, they are unable to see their mistakes. For staff members, working with such an individual can range from dealing with a demanding boss to working for an oblivious loose cannon.

Mental expert Luke Mollica notes that bad leaders are easy to spot, but also the hardest to convince. “A bad leader sticks out like a sore thumb. But if you try to tell them or guide them that certain decisions are harmful to a business, they can’t handle it. Good leaders look at everything from a holistic point of view and want to absorb as many opinions as they can to make the right decision.”

Start-up founders tend to believe they are putting the company’s interests first, but fail to notice that staff members are their most valuable asset. Without motivated, happy, and highly engaged staff, a start-up is as good as doomed. That being said, here are some characteristics of a bad leader:

Start-Up Failure #3 – They Won’t Let Go Of Control

Too many founders fall for this trap. When they launched the start-up, they oversaw each and every aspect. However, as the business starts to scale up and become more established, they need more staff members. All is good until they attempt to control every element of the business. They have invested so much in the company and so, letting go feels like they’re eliminating a part of themselves. Trusting others is difficult and often want to approve every decision and check every process.

In addition to stalling progress, all innovation is stamped, as employees always have to wait for the founder to have their say. Staff members are forced to stop contributing and instead wait for the nod. As the business growth stalls, employees are likely to search for better opportunities.

Start-Up failure reasons

Start-Up Failure #4 – Poor Listening Skills

Most business founders tend to view the start-up as an extension of themselves, and therefore, they know better. They do not listen to staff members in matters relating to stock levels, product quality, customer feedback, etc. Instead, they take input personally and always defend their actions.

Michael Yousef, who leads All Image Architects, notes that it’s vital to listen to all perspectives available. “I think it’s ludicrous that people ignore opinions as soon as they hear them. Sure, they may not agree with it, but it’s important to hear it out because it gives you a different way of thinking and viewing a situation. That’s why business owners need to be receptive to all types of feedback and views on things.”

Despite being presented with vital information from qualified employees, they adopt the ‘who are you to question me’ attitude. Without a change in such, a business is more likely to fail.

These are some of the traits of poor leaders and can easily spell doom for a start-up.

How do you plan on avoiding doom for your start-up with leadership failures? Get in touch with the Strategy And Execution Advisors team and find out how to ensure your business is set up for any occasion.

To Scale Up your business! Take our Scaling Up/Four Decisions Needs Assessment to discover how your business measures against other Scaled Up companies. We’ll contact you.

Ted Bonel – Strategy & Execution Advisors

Need assistance to help your team achieve your objectives to grow your business? Contact me at tedb@strategyandexecution.com.au to schedule a free 30-minute discovery meeting.

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