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51 Fatal Business Errors


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51 Fatal Business Errors

  1. 2. The 51 Fatal Business Errors And How to Avoid Them AUTHOR: Jim Muehlhausen, CPA, JD PUBLISHER: Maxum Communications, Inc. DATE OF PUBLICATION: 2003-2008 392 pages
  2. 3. <ul><li>The 51 Fatal Business Errors focuses on lessons learned by business owners and CEOs from their successes and failures, and is intended as a practical guide to shape one’s own business. </li></ul><ul><li>It offers incisive, readily applicable real-life experience gleaned from what the author, Jim Muehlhausen, calls ‘the world’s most expensive business school’: The School of Hard Knocks. </li></ul><ul><li>To this end, the book determines the 51 most crucial errors a company can face and discusses how to overcome them. </li></ul>THE BIG IDEA
  3. 4. WHY YOU NEED THIS BOOK <ul><li>This book is designed to be used as a reference each time a new issue in one’s business venture arises. </li></ul><ul><li>In that vein, it discusses the 51 most crucial business errors to be overcome, fleshes concepts out with real-life examples, and provides action steps towards determining the most effective solutions to these errors. </li></ul><ul><li>Unlike many business books which refuse to stray too far from simply discussing business theories, the book does so to empowers the reader not just to read and be informed, but to act upon what he/she has read – </li></ul><ul><li>in short, to translate learning into action. </li></ul><ul><li>For the sake of brevity and ease of understanding, only a few of the most important and significant errors as identified by the author are taken up at length in this summary. </li></ul>
  4. 5. USING THE GYM MEMBERSHIP <ul><li>Business success cannot be learned in school. It does not come with any MBA certificate. </li></ul><ul><li>It is best discovered by enrolling yourself in the School of Hard Knocks - where practical knowledge is taught through tough lessons. </li></ul><ul><li>Most business books are like gym memberships. They get all exciting at the start, but end up without seeing any action. Most business books discuss a lot of information and theories, but cannot be proven useful when the time comes to put what has been learned into practice. </li></ul><ul><li>Done right, a business book should energize you and leave you with tangible action items to make your business better. </li></ul><ul><li>Here are some specific tools needed to get your business in shape and 'toned'. </li></ul>
  5. 6. ENTER AT YOUR OWN RISK If your heart is really set on coming up with meaningful action for your business to move to the next level, then you must have courage and unlimited understanding for accepting mistakes you may have made along the way, changes you can adapt, and fresh goals that you can set. Points and observations raised in this book are neither for the fainthearted nor those who are already satisfied with their business’ standing. Instead, this is for those few entrepreneurs who are eager to make and see things happen. In fact, you may find yourself disagreeing on some parts, so here are two important warnings:
  6. 7. ENTER AT YOUR OWN RISK Warning # 1: What is discussed here might get in your face a bit, as you’ll be dealing with tough questions to answer for the benefit of turning your business into something GREAT. Treat it as an act of compassion which aims to prevent you from being the common CEO who may well have talent and capability but might fall short of his or her true potential. Warning # 2: Do not be offended each time the phrase “small business” is used. The SBA defines the small business as less than fifty million dollars in sales and fewer than five hundred employees. Any small business would be happy to attain those goals. Remember, it is very much essential to be open to points that will make you REALLY think and eventually act.
  7. 8. ‘ WHAT’S GOOD FOR G.E.’ ISN’T ALWAYS GOOD FOR G.E. Most business materials are written for and/or about large businesses like General Electric; such coverage and analysis of business issues becomes conventional wisdom. But then closely-held businesses cannot follow the same wisdom. Most of the time, business people forget the difference between past, present, and future. They tend to follow conventional business wisdom, forgetting that some of what they learn might not be applicable during the present. Trends shift, industries evolve, and even people change. You must be willing to challenge conventional wisdom to find the one fit for your own business.
  8. 9. ‘ WHAT’S GOOD FOR G.E.’ ISN’T ALWAYS GOOD FOR G.E. <ul><li>The discussion of some of the commonly committed Fatal Errors is meant to jumpstart your ability to challenge convention and push you to think outside the box. </li></ul><ul><li>Fatal Error: Hiring Your Competitors’ Rejects </li></ul><ul><li>Let’s take the case of Tom, who is having an awful time hiring quality customer service personnel. He can only offer an average amount of pay for his business to remain profitable. Eventually, he realized that out of desperation to hire experienced people, he could end up hiring his competitors' rejects. </li></ul><ul><li>Instead, he decides to focus on looking for people who may not have experience but instead possess skills that can be honed by training and various skills tests. </li></ul>
  9. 10. ‘ WHAT’S GOOD FOR G.E.’ ISN’T ALWAYS GOOD FOR G.E. It’s an incorrect assumption to think that your competitors have simply let some of their best people leave. Doesn’t it make more sense that these people were let go because of poor performance? It’s wiser to decide to hire ‘inexperienced’ people with high aptitude rather than ‘experienced’ ones. Train them according to your standards and make this a solid basis for your hiring decision. Leave your gut instincts behind, as they are never entirely accurate, and don’t be deceived by the ‘movie star’ look of the employee on paper. Personality profiling can also help you weed out people who would have a difficult time being effective in some positions while testing provides you with hard data upon which you can base your hiring decision.
  10. 11. ‘ WHAT’S GOOD FOR G.E.’ ISN’T ALWAYS GOOD FOR G.E. Fatal Error: Revolving Door Policies Alan was very proud of his ability to know every bit of information there is to know about his thirty employees - their hobbies, kids' and spouses' names, and personal histories, for starters. His policy worked well for some time, but his people began to take advantage of it. They became so comfortable with him that they entered his office anytime they wanted; they could plop down in a chair and voice out various complaints. Even when Alan had an important presentation to do, his employees kept on interrupting him and he could not get a minute to himself. His presentation was adversely affected by the constant interruptions of his open door.
  11. 12. ‘ WHAT’S GOOD FOR G.E.’ ISN’T ALWAYS GOOD FOR G.E. Allowing a ‘very open’ direct line to the people on top of your management heap could lead to the creation of an environment where gossip and unnecessary demands proliferate and take time and resources away from actual business. It may be better to set regular meetings where everyone can have the opportunity to voice out their opinions, requests, and essential feedback that could be of help to the company. A closed-door setup with regular meetings might work best to sustain the structure of the business without burning the bridges of communication.
  12. 13. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) Do you remember the Mad Hatter in the famous story Alice in Wonderland? He was so busy running around that he could not even remember what he was late for whenever he'd run around saying, 'I'm late, I'm late for a VERY important date.' Most entrepreneurs run their businesses like the Mad Hatter. They work IN their businesses but totally forget to get themselves involved in the meaningful activities that will drive long-term value. Some of the italicized errors below provide some insight into how you can begin to improve your performance and effectiveness as CEO of your company.
  13. 14. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) Fatal Error: Refusing to Delegate Cindy was an extremely hard worker and she hadn't slowed down from the time that she started her own business. But 24 hours a day wasn't enough for Cindy to manage everything. She was directly involved in her business; few workers were anywhere near as good as she. When she got into an accident, she was confined in the hospital for three weeks and was forced to delegate. Surprisingly, and quite fortunately for the company, all the workers performed well in her absence. Some CEOs say their people are not good enough to assign important tasks to, when they actually mean that they are unwilling to a take chance on them.
  14. 15. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) As the CEO, you may be the best at doing almost any task. But you can’t do everything ; you’ll run out of time and everyone, yourself included, will suffer as a result. The solution: manage outputs, not inputs. Learn to delegate jobs to your staff! There is a great saying: “It does not matter how well you do a task that you should not be doing.” Also, keep a time log of your day. Find some of the simplest tasks you do and delegate them to free your hands for the more complex ones. Some of the factors to consider when delegating are:
  15. 16. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) <ul><li>Factors to consider when delegating: </li></ul><ul><li>The difficulty of the task (the lower the level of difficulty, the more likely you should delegate it) </li></ul><ul><li>The length of time to complete the task (the longer time the task takes, the more likely you should delegate it) </li></ul><ul><li>How often the task arises (the more often the task arises, the more likely you should delegate it) </li></ul><ul><li>How difficult it would be to train someone else to do the task (the easier it is to train someone, the more likely you should delegate it) </li></ul>
  16. 17. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) <ul><li>More factors to consider when delegating: </li></ul><ul><li>What the impact on your customers would be if the task is done wrong (the higher impact, the less likely you should delegate it) </li></ul><ul><li>How much you like the task (you are allowed to enjoy your day, so if you like the task, keep it) </li></ul>
  17. 18. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) Fatal Error: Leave Me Alone Rudy had his own service firm for many years. Over that time, he had rescued a friend from a failing business and made him his 'right-hand man.' Eventually, Rudy made his friend an equal partner in the business. One day, Rudy left to take a vacation. When Rudy returned, he learned that his friend had raided the computer files and talked all his customers into migrating to his friend's new firm. But with the support of his CEO group, Rudy was able to overcome his emotional storm and his friend’s betrayal. The traumatic event challenged Rudy to take his business to the next level. Today, his business is in significantly better standing than before.
  18. 19. IS IT TIME TO FIRE YOUR C.E.O.? (YES, I’M TALKING ABOUT YOU) It is not a shameful thing to ask for help from someone else. Being a CEO should not stop you from finding someone whom you can confide in, complain to, and consult with. Everybody needs help once in a while. You should know how to handle the qualities of ego, stubbornness, and pride in balance - when to use them in being highly entrepreneurial and when to discard them when they are not serving you. Find yourself a group of business owners who can give you support and advice.
  19. 20. BEST AND WORST PRACTICES Learning about some of the best practices that work for other businesses and adapting them to fit your own firm can help you avoid some tough situations. The key is to keep an open mind and read them with positive expectation. Fatal Error: Turning Racehorses into Plow Horses Ed was running a logistics company and had put a person in a job who was not performing at the level expected. Ed realized that his company was paying too high a cost just to keep this person in his position. So he decided to hire someone new and kindly asked the person to step down.
  20. 21. BEST AND WORST PRACTICES But the talk didn't go well and the person resigned in the end. It wasn't what Ed wanted. He liked the person and he knew he could be of big help in other ways. The situation worsened when the following week, another person in the division resigned, feeling he had been overlooked for the new job and that he had been quietly waiting for the opportunity to advance until he was denied the opportunity to do so. Ed lost two great people and he was left to adjust until he could find replacements for the two who left and until the new person could learn the process. Be aware of detecting frustration in your people. This would mean that they are no longer enjoying or feeling satisfaction from their work. Don’t let your most talented and most driven people go down the drain.
  21. 22. BEST AND WORST PRACTICES <ul><li>Here are some points on how you can prevent your people from getting frustrated : </li></ul><ul><li>Use tools to ensure you know the needs, motivations, and talents of your players. </li></ul><ul><li>Communicate with your employees often , and ask them what they want. </li></ul><ul><li>Watch for people who are becoming rebels because this is a shift in their actions that is a key indicator of dissatisfaction. </li></ul><ul><li>Know what skills and personality traits are critical to a position before moving someone into the job. </li></ul>
  22. 23. BEST AND WORST PRACTICES <ul><li>Fatal Error: Ignoring Your Best Performers </li></ul><ul><li>Yolanda was an excellent problem solver. One key to her business success was her number one employee Rachel, who also happened to be her right hand person. Rachel had been given raises and was making an excellent wage. </li></ul><ul><li>However, Yolanda was so busy growing the business that she forgot to praise Rachel's heroics. After some time, Rachel quit when she had found a position for less money but which included more skill growth and responsibility. </li></ul>
  23. 24. BEST AND WORST PRACTICES <ul><li>If you’re thinking of saving money by cutting down on giving raises to your good employees, remember that if they decide to leave you, you’d have to spend much more to recruit new ones that are at least as good </li></ul><ul><li>as them. </li></ul><ul><li>There are many simple and easy ways to reward your employees – an unexpected day off, tickets to the movies, a surprise vacation package, and so on and so forth. </li></ul>
  24. 25. MULE-KICKS <ul><li>You have three basic methods to choose from to run your business: </li></ul><ul><li>Create a great business model plan, create customers, and so on and so forth – do it the best way you can. Run your businesses as you would run yourself. </li></ul><ul><li>The second method to run a business is to squeeze the square peg (the environmental variables) into the round hole (you). </li></ul><ul><li>The third and best option is to ACT as a CEO . Being a highly effective CEO involves moving outside your comfort zone. </li></ul>
  25. 26. MULE-KICKS <ul><li>The following errors are two where a good mule-kick is needed to wake people up and get them moving: </li></ul><ul><li>Fatal Error: YABUT </li></ul><ul><li>Joe had spent almost six months completing his marketing plan. Not surprisingly, his sales force was not as successful as they were expected to be. </li></ul><ul><li>They offered a host of complaints: they needed better marketing, the price of the goods was too high, they needed to add XYZ feature, and so on and so forth. </li></ul><ul><li>The YABUTting of the sales force was the problem. Joe recognized this and planned to put a team of non-YABUTters in place for better performance. </li></ul>
  26. 27. MULE-KICKS <ul><li>YABUT = yeah but… Cultivate a performance culture by not tolerating YABUTs from your people or even yourself. </li></ul><ul><li>It is better to say NO than accepting a project and letting it all fail. In this way, you’ll be able to set and enforce standards with your employees. </li></ul><ul><li>Here’s a step-by-step solution: </li></ul><ul><li>Recognize if you are “YABUTting.” Then if you see that you are allowing your people to YABUT, you have half of the problem solved. </li></ul><ul><li>Eliminate items from your list. You can’t promise your people you will do something and then not do it. </li></ul><ul><li>Realize that it’s all right to say NO! Saying that you are not going to tackle a project is much better than allowing it to fail or to stall out. </li></ul><ul><li>If you’re being a leader of the YABUTS, simply stop doing it . You will be ready to model, and to enforce, your standards with your employees. </li></ul>
  27. 28. MULE-KICKS Fatal Error: A Pinch of This, A Pinch of That Ryce and her landscape company always seemed to be so occupied with the day-to-day details of the business that they tended to forget about taking the time to understand the future direction of the business. It’s the nature of the industry to change as time passes ; for instance, consumer preferences shift and industries consolidate. Handling such changes poorly can cause any business harm , not to mention the continuous failure of some to take the big picture into consideration and plan accordingly. Make sure that each of your daily activities is a part of a bigger plan that produces bigger accomplishments. If you fail to plan, you are planning to fail.
  28. 29. NOW WHAT? <ul><li>Here is a step-by-step action plan to improving your management and your business: </li></ul><ul><li>Phase One: Work on Building Your New CEO </li></ul><ul><li>Get rid of the emotional baggage. </li></ul><ul><li>Eliminate your low-impact activities and learn how to delegate. </li></ul><ul><li>Delegate the function, not the task. </li></ul><ul><li>You must be confident that you can make yourself more valuable than the cost of buying your time back. </li></ul><ul><li>Phase Two: Learn How to Act </li></ul><ul><li>Like it or not, management is acting . You are not the real you at work; you are playing a role as the manager of your business. </li></ul><ul><li>Why not play the role of the BEST ever manager of your business? </li></ul>
  29. 30. NOW WHAT? <ul><li>Phase Three: Hire Better </li></ul><ul><li>Find out what your current key employees’ aptitudes are and find a test. Then use this test to screen new hires. Forget the resumes. Make your own test if needed. </li></ul><ul><li>Phase Four: Train Better </li></ul><ul><li>Break the training into tiny steps, eliminating as much variety as possible. Variety kills training. </li></ul><ul><li>Phase Five: Create Systems </li></ul><ul><li>Be willing to “put your stake in the ground.” That is, pick a specific, objective solution DESPITE its imperfections and STICK WITH IT. Recognize that not all solutions will be perfect. </li></ul><ul><li>Phase Six: Enjoy </li></ul><ul><li>Remember, it is your business’ function to serve YOU , not the other way around. You are supposed to enjoy it! </li></ul>
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