How Poor Business Management Led To The Failure Of A Group Of Companies

 

The following is how poor business management led to failure of a group of companies.

  • The Group.
  • Business Structures.
  • Management Style.
  • Personnel Management.
  • Financial Management.
  • Marketing Management.
  • Bank accounts
  • Final Effects
  • Your take away

This article is the story of how Mr. XZY had a group of businesses.

The Mr. XZY has the uncommon wisdom of being able to identify viable businesses.

The Group

Mr. XZY had business interests in the following industries:

  • Aviation,
  • Transportation,
  • Manufacturing,
  • Brewery,
  • Education,
  • Estate development and

Business structures

All his companies were duly registered with Corporate Affairs Commission as private limited liability companies.

Under the law private limited liability companies can have a minimum of two directors.

The companies have all the features of sole proprietorship:

  • XZY provided all the startup capitals of the businesses
  • So he and one of his sons were the directors
  • He was the majority shareholder

Management Style

The business management style of Mr. ZXY featured in much the same way across all the companies.

For example:

  • He made all business decisions alone
  • No one was allowed to contribute ideas to make the company move forward.
  • Suggestions, observations, criticisms or comments were not allowed
  • Anyone who attempted to say something was sacked without pay.
  • And so in all matters his decisions were final

Poor Business Management: Personnel

Mr. ZXY never cared for welfare of his employees. For example, he never:

  • Encouraged, recognized or rewarded deserving employees with promotions or pay raises.
  • Paid his employees what they were worth.
  • Owed employees several months of unpaid salaries.
  • Towards the end of each month, he would travel outside the country; just to delay payment of salaries.

The following were the consequences of his bad personnel management style.

  • Unhappy.
  • Employees were not no longer secure on their jobs
  • There were no job satisfaction
  • Productivity dropped
  • Good employees left

Poor Business Management: Finances

Mr. ZXY’s approach to financial management was a far cry from what it should be. For example:

  • He would just walk into any of the companies and collect cash from the cashier.
  • Never did he sign for any monies he collected from his companies.
  • Sales revenue were never paid to the bank
  • He had access to funds at any time of the day
  • Was fast in getting credit lines from banks
  • But extremely slow in paying back.

Poor Business management: Marketing

His poor management also affected the marketing activities of his companies.

He believed that money spent on advertisements were money wasted.

Consequently, his companies began to experience low sales turnover:

  • Suppliers were no longer willing to allow them credit sales
  • Sales and profits began to drop
  • Customers began to drift away
  • Customer service became poorer by the day

Poor Business Management: Bank Accounts

Mr. XZY took bank loans from virtually all the banks. He was fast in securing bank credit but slow in paying back.

Consequently, the banks became apprehensive. They stopped giving him new credit lines.

Existing loans grew larger because of interest charges. In other words, the balances in all the bank accounts were calculated on compounded interest basis.

Shortly after, the banks came calling for their money.

Poor Business Management: Accounting Records

To Mr. ZXY the idea of keeping accounting books was not necessary.

For example:

  • Bank reconciliation statements were never prepared
  • preparing annual financial statements for his businesses were not necessary
  • He never paid personal income taxes because he relied on his connections.
  • In the same vein, none of his companies paid company taxes.

As the companies were not making profits, so company taxes were out of the question.

Poor Business Management: Final Effects

The businesses of chief XYZ began to fail one after the other due to his poor management styles.

Mr. ZXY was good in incorporating new basis but was poor in managing them.

Consequently, old companies were folding up as fast new ones were incorporated.

Many more companies were in the process of going down.

Your Take Away

The take away from this story is that you should:

  • Tap into the intellects of your employees because you never can tell who of them might have useful ideas that could move your business forward.
  • Hold regular meetings with your employees
  • Listen to the contributions of your employees
  • Pay your employees what they are worth
  • Do not delay their salaries
  • Encourage, motivate and reward good employees
  • Give your trusted senior staff free hands to put their knowledge and skills to work for you.
  • Learn to delegate responsibilities and authority to your senior employees.

Related: How To Manage Small Business Finances Efficiently

 

Samuel Ijenhi

CEO of Ijenhi Business Solutions

samuelijenhi@gmail.com

 

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