Bad management decisions and the recession

Feb 19 2009 by Robert Heller Print This Article

During this, the second-worst of all modern economic disasters, if a company announces lay-offs and closures, much of the blame is automatically attached to the downturn. However, a measure of blame should also be attached to management itself.

As is usually the case in mismanagement, human nature is at the root of the problem. The urge to make a lot more money is incredibly strong and quite common Ė and difficult to satisfy. Once the incorrect decision to invest is made, by either an investor or a manager, there are other human shortcomings to overcome Ė namely, delay and denial.

It's never easy for anyone to admit they have taken and executed extremely bad decisions. If the prize is sufficiently large, managers will fool themselves into thinking the fault doesn't exist. Convenient scapegoats are always close to hand Ė with finance directors usually the first in line.

However, it's the responsibility of the manager to ensure that the financial side of the operation is fit for purpose.

You should monitor expected cash inflows and outflows. Weekly or monthly rolling cash reports should be produced. Cash should be centralised or pooled across units.

You can't be certain of making sense of financial fundamentals without these simple checks; they both avoid traps and provide opportunities for profit.

Managers have to ask themselves some difficult questions. How and why were bad management decisions taken? Why were defects and defective attitudes ignored in the past? What can be done to guarantee that correct management policies are pursued, regardless of the economic climate?

Habits and values must be altered so the whole company has the aim of eliminating waste and maximising all efficiencies at all times. Even excellent housekeeping won't provide a bright future unless crisis management involves every manager going beyond his or her daily duty.

Writing for Business Week, Emily Thornton wisely observes that: "In times of turmoil, opportunities abound. But taking advantage of them will require fast reflexes, an aggressive attitude, and serious changes to the status quo."

However, she offers the example of John Opel when CEO of IBM for 'aggressively' rolling out the first PC during the1981 recession. In fact, the PC was notoriously under-budgeted, and IBM had a deluge of orders it couldn't deal with. Supplying the vital aggression was a dedicated team of managers and engineers seconded to the project, and given barely over a year to hit the PC market.

There's a vital clue in that story. The history of management is full of examples where teams, spawned by the parent organisation and led by charismatic independents, were set free to apply their own ideas on products and services, creating success in the process.

Management has been moving in this direction for a long time. The time to liberate the power within is now.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".