The Inept Organization: Weak Leadership as the Culprit

by James D. Roumeliotis

How often do you come across a company, either as a consumer or at a business relationship level, and realize how frustrating it is to deal with?

To understand and penetrate the corporate governing structure and “culture”, you need look no further than the upper echelon of the hierarchical tree. It is here that procedural decisions are shaped and executed. An entity’s leadership is expected to head the enterprise by governing its long-term growth and sustained wealth.
Moreover, there is a constant search for the “right” human resources. Recruited and fresh talent must resemble the leadership in tone and style. Call it the organization’s DNA. Exceptional organizations are good at these types of corporate strategies, thus strengthening performance effectively.

We notice that in certain types of B2B transactions, there can be scope for unscrupulous behavior. One or both parties are tempted by “disservice” during their business exchange. Shortsightedness might lend itself to make this underhanded approach appear “profitable” on paper. Such relationships inevitably end badly because they are not conceived with trust or respect.

Success Breeds Success

Companies that foster the right attitudes and strategies put the firm on track for success. Examining their corporate histories, you can witness a trajectory of growth. They have a tendency to dominate their markets and “win” through competent talent, innovation, and an entrepreneurial mindset within the leadership at the executive level. These choices underscore the prosperity and rapid growth of the institution. An examination of Alphabet (Google) or Facebook shows this quite nicely. They are not built like “traditional” corporations nor do they act like them.

Organizational leadership is accountable for creating value for customers, employees and its owners/investors. When Bill Gates conceived Microsoft, he put the firm on track for providing constituent audiences with what nobody else could provide. Understanding “asset” management in an expanded meaning of the term guaranteed that Microsoft would succeed under Gates stewardship.

The opposite is equally true. When top executives lack knowledge or experience for board positions, they should not be promoted to these leadership roles. Some family owned firms run afoul here and this brings up the issues of sustainability and corporate governance. Another weakness in running an organization, in my view, is pushing for short-term profitability at the expense of solid planning. For example, with large organizations, competence is not the primary value but rather connections, politics, and clever tactics. Such “benefits” can usually compensate for incompetence.

No business can continue to prosper unless it attracts fresh and eager talent. Despite the dilemmas within the financial world, top organizations consistently lure new talent with lucrative compensation packages. It is easier for a firm such as Goldman to tap the “best” because of its reputation, size and success than a small local financial player. When Goldman recruits they know where to look, whether it is Harvard or the London Business School. Prospects will already contain the seeds of the corporate culture in their past. Given the “right” conditions, new talent blossoms. Qualifications are never enough. They are a starting point reinforced by attitude and values. The selection and screening process is designed by HR to weed out inappropriate candidates.

Established software companies’ interview process include quizzing candidates with challenging technical questions. This practice not only assesses problem-solving and knowledge ability, but also explores the ability to perform under pressure, which is a key skill required for software engineers to succeed in their intense work environment.

One thing is firmly certain ─ the best-managed companies have “one” factor in common:
They are constant achievers in their respective industries. These companies exude managerial excellence. Financial performance is the result of this style of management. Consider companies such as Amazon, Apple and Cisco, among others, which thrive and ranked in 2019 by the Drucker Institute as America’s largest publicly traded companies according to Peter Drucker’s principles of effectiveness—“doing the right things well.”

Deeds Not Slogans

Companies with inept leadership usually fail in the first year or two, but even established companies can stumble badly when they outgrow the capabilities of the founding team. Research by the U.S. Bureau of Labor Statistics demonstrates that nearly 6/10 businesses shut down within the first 4 years of operation.

To be a successful entrepreneur is not an effortless task. It takes plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Not everyone will become Jeff Bezos. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges daily to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.

Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies:
• Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit.
• No Unique Selling/Value Proposition – Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage.
• Operational deficiencies – various ailments and no structure
• Absence of or very little communication among staff and management – Divisions aren’t well-coordinated and do not function as a team.
• No transparency – There is hardly any openness from management.
• Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents.
• Lack of proper execution of decisions and with new products/services.
• Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient.
• Creativity is practically non-existent – An absence of innovation and employee empowerment will hurt progress and stifle new ideas.
• No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable.
• A weak sales force along with an unattractive compensation plan.
• Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.
• Poor hiring practices – should hire for attitude and train for skills.
• Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure.
• High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity.
• Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo
• No specific and/or stable channel strategy – Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners.
• The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company.
• Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand.
• Weak financial controls – cash flow dilemmas – over leveraged/undercapitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth.
• Absence of sound marketing program(s) and/or brand strategy – A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works.
• Growing too fast and not staying on course as the company grows.
• Lack or very little employee training & development.
• Deficient in control systems – reactive rather than pro-active.
• Lack of continuous improvements or complacent.

Top executives need to be accountable to the ownership or Board of Directors – whichever applies, or at least to an outside arm’s length and neutral party such as an adviser who can also play “devil’s advocate” when necessary.

Good Organizations Matter

The way to solve an organizational problem is to confront the structural issues with a moral sense of purpose and ethics. For its clients to receive stellar service, the firm must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.

Seth Godin, a renowned marketing strategist, stated succinctly: “If you want to build a caring organization, you need to fill it with caring people and then get out of their way. When your organization punishes people for caring, don’t be surprised when people stop caring. When you free your employees to act like people (as opposed to cogs in a profit-maximizing efficient machine) then the caring can’t help but happen.”

Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. A company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.

Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.

In a nutshell: Well-run companies thrive no matter what by hiring the right people, taking good care of them, listening to customers and never ceasing to innovate and improve.

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