Businesses Don't Fail - Leaders Do

image:mohidhaka.com
culled from:hbr.com

Why do businesses fail? If you’re willing to strip away all the excuses, explanations, rationalizations, and justifications for business failures, and be really honest in your analysis, you’ll find only one plausible reason -poor leadership. I’ve often said real leaders refuse to take the credit for success, but they will always accept responsibility for failures. Harsh? Yes; but it goes with the territory. In today’s column I’m going to toss out the politically correct story-lines and reveal the top 15 reasons that leaders fail…

In the 15 points listed below I’ll examine some of the more common reasons attributed to business failure, and I’ll likewise assess the roles and responsibilities of leadership as they pertain to said reasons being leadership failures:

    Lack of Character: It doesn’t matter what your title is, if you don’t do the right things for the right reasons you will fail. Leaders who don’t display character won’t attract it or retain it in others. Leaders who fail to demonstrate a constancy of character won’t create trust, won’t engender confidence and won’t create loyalty.
    Lack of Vision: It is the role of the CEO to clearly define and communicate the corporate vision. If there is no vision, a flawed vision, or a poorly communicated vision, the responsibility falls squarely in the lap of executive leadership. Moreover, if the vision is not in alignment with the corporate values there will also be troubled waters ahead.
    Poor Branding:  A poor brand generally means leadership has failed. Brands fall into decline for only one reason – leaders have abdicated their responsibility. They have allowed their brand equity to erode, and failed to deliver on the brand promise. Leaders who don’t steward their brand as one of the greatest corporate assets deserve the fate that awaits them.
    Lack of Execution: Everything boils down to execution, and ensuring a certainty of execution is job number one for executive leadership. Entrepreneurs or CEOs who don’t focus on deploying the necessary talent and resources to ensure that the largest risks are adequately managed, or that the biggest opportunities are exploited have a leadership team destined for failure.
    Flawed Strategy: A flawed strategy simply reveals weak leadership. While there are exceptions to every rule, companies tend to succeed by design and fail by default. Show me a company with a flawed strategy and I’ll show you an inept leader.
    Lack of Capital: I have witnessed well capitalized ventures fail miserably, and severely under-capitalized ventures eventually grow into category dominant brands. A lack of capital can provide a socially acceptable excuse for business failure, but it is not the reason businesses fail. Raising, deploying, and managing capital is ultimately the responsibility of leadership. The amount of capital required to run a business is based upon how the business is operated. Therefore if leadership operates the business without consideration for capital constraints, or irrespective of capital formation issues, then the blame should fall squarely on the shoulders of leadership. Morever, if executive leadership squanders capital through irresponsible acts, there will also be severe consequences.
    Poor Management: It is the job of leadership to recruit, mentor, deploy, and retain management talent. If the management team is not getting the job done, it’s not a management problem, it’s the fault of executive leadership. Show me a leader that blames his management team for failure to execute and I’ll show you a poor leader.
    Lack of Sales: A lack of sales is ultimately attributable to a lack of leadership. Strategy, pricing, positioning, branding, distribution, compensation, or any number of other metrics tied to sales force productivity all rest with executive leadership. A lack of revenue is not someone else’s problem, it’s a leadership problem.
    Toxic Culture:  The truth is nothing stifles productivity and creates conflict like a toxic culture. That said, a toxic culture simply cannot exist where good leadership is present and engaged. If the lunatics have gained control over the asylum be sure to fit leadership for a straight-jacket as well.
    No Innovation: Leaders create a culture of innovation or they kill it. Leaders who can’t stay in front of the market tend to get run over by it. Great leaders have a strong bias to action. They don’t rest upon past accomplishments, and are always seeking to improve through change and innovation. Those leaders who don’t openly embrace change will be doomed by their antiquated outlook.
    No Market: Good leadership pursues sound market opportunities. Pursuing the wrong market, or pursuing the right market improperly is also the fault of executive leadership. Scaling a business too fast, too slow, or worse yet, not designing a scalable business to begin with is a leadership issue. No market equals no leadership…
    Poor Professional Advice: Nobody has cornered the market on knowledge and wisdom. If leadership doesn’t seek out the best quality advice available to them, then they will likely not make the best decisions. All CEOs and entrepreneurs need top quality professional advisers. There is no excuse for C-level leaders to have blind-spots. When a leader has a “miss” or a blind-spot, he or she is simply showing the arrogance of operating within the limitations of their own thinking.
    The Inability to Attract and Retain Talent: Great leaders surround themselves with great talent. They understand that talent begets more talent. If your company doesn’t possess the talent it needs to achieve its business objectives no one is to blame but leadership.
    Competitive Awareness: A business does not need to be the category dominant player to avoid failure. That being said, it is the leadership’s responsibility to understand the competitive landscape and navigate it successfully. If a company isn’t consistantly winning, it’s not what the competition is doing, but rather poor leadership that creates the inability to compete.
    Obsolescence or Market Changes: If executive leadership is in touch with the market it will be difficult to be caught by surprise. It is the responsibility of executive leadership to make sure that the proper attention is given to innovation, business intelligence and market research to manage the risk of obsolescence and market changes.

Bottom line…businesses don’t fail – leaders do. The talent that it takes to operate at the C-suite level is matched only by the amount of responsibility that goes with the territory. If it was an easy job everyone would be a CEO or entrepreneur. Thoughts?