Small Business Failure
Bad Management Decisions
Written by Nidhi Ann Raj for Gaebler Ventures
Decisions maybe bad or good depending on how well they help to achieve your goal. But there are some things to keep in mind and to avoid while making a sound decision.
As your one-man army expands, you will have a team of people called the 'management committee' or the 'board' that takes care of all strategic decisions made by the company.
However, as the number of heads involved in a decision making increases, there are chances that the decision may go wrong and may not help to achieve the desired goal. Most bad decisions stem from insufficient experience and/ or judgement of the management team. Critical decisions, regarding various facets of the company, if not made wisely, can lead to the downfall of the firm.
Here are some decisions that you may want to avoid, especially during the initial years of your company.
- Hiring too much:- As you expand, you may feel the need of a huge workforce and thus enter into a hiring spree. However, you may not actually need all the people you end up hiring. Hence, even as you expand, try to utilise your available resources fully. Then take note of the amount of work that needs extra hands and hire the bare minimum number to get the work done on time, without overloading any employee.
There is no point in hiring people without having enough work to keep them busy. Work or not, remember that you have to pay them their salary. This not only puts you at a financial loss, but also breeds frustration among those who are underutilized.
- An equally grave mistake is firing employees at the first hint of a downslide or recession. Before doing so, recalculate the costs involved in hiring, training and retaining them. These 'dry' periods will pass over time and then it becomes difficult to hire people with the same skill set, experience and loyalty as your current employees. Instead think of innovative ways to reduce their hikes and perks, without affecting them severely, till your business rebounds.
- Companies tend to seek the help of consultants for every small problem they feel they may not be able to make a sound decision to. At times, they may be wise, but mostly they end up paying huge chunks of money for decisions or actions they could have taken on their own.
- Decisions revolving HR policies should be made with utmost care. One of the friends recently told me how the management had decided to introduce forced/ relative ranking into the appraisal system where employees were evaluated against each other. This brought dirty politics into play, which in the long term affected the employees'' productivity at large. In this case, the management could instead evaluate employees based on a set of standards or goals.
Other company policies, too, should not be made so complicated that employees find it suffocating to work. Make policies that are understandable, practical and effective when put in use. However, this does not mean that policies and practices should never change. Do not believe what worked before will work again. Change is mandatory when needed. The management should meet at regular intervals to review core areas of development and best practices to remain competent.
- Another hasty decision a company makes is to merge, acquire, diversify or sell off. Although this is a vast topic in itself, it is important to understand that you should not jump into this game unless your company's finances are in need for it for further growth. Pricing decisions should also be made carefully and after much research. Decisions to overprice or under price your product, especially during its initial launch can pay heavily.
Over and above, decisions are to left to the discretion of the management. Yet, it is advisable to take feedback from employees to better understand the impact of the decision made.
Nidhi Ann Raj is a gifted writer who is currently pursuing post-graduate studies at George Brown College in Toronto Canada, where she is specializing in Marketing and Finance.
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