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Seven costly management mistakes

May 1st, 2010 / By: / Management

Getting back to the business basics.

In the best of times, life as a manufacturer means dealing with a full measure of challenging decisions, any one of which can have a negative impact on your operations. In today’s unpredictable business climate, even tiny management errors hold the potential for serious damage to your bottom line.

Seven costly and common management mistakes can affect your daily operations in a very basic way. Here’s some advice from the experts on how to keep those pernicious practices out of your management style.

1. Trying to do it all yourself

You’ve heard it many times—if you want something done right, do it yourself. That’s a classic philosophy with an undeniable grain of poetic and practical truth. When it comes to running a business, however, too many owners suffer from a costly overdose of do-it-yourself-itis. Failing to understand the importance of delegating is one of the most common mistakes that can hinder growth in small businesses.

“Just because you can complete a task, doesn’t mean you should,” says management consultant Andrea Michalek. “Anything that is not a core competency of your business should be outsourced. Without hiring any additional employees, you can now get the outside help you need at prices you can afford.”

If you find yourself neglecting some basic responsibilities of your business—such as marketing and customer relations—it’s probably time for you to put more trust in other people. Given a chance, your employees can surprise you with positive results.

2. Failing to understand the true meaning of marketing

Many manufacturers are so busy dealing with day-to-day operations that they never get around to putting together a business-building marketing program. That is a serious mistake. Marketing is a basic building block in the construction of any manufacturing business; yet many owners shy away from all but the most obvious ways to promote their businesses.

Advertising is an essential part of marketing, but it is only that—one part. An effective marketing program requires much more than advertising; it embraces all facets of your operation. To be an effective marketer, you must nurture your business image, sell yourself as well as your business, and concentrate on making every customer a satisfied customer. Competitive prices alone won’t do it. High quality products alone won’t do it.

Marketing is a complex fabric woven from a lot of techniques, tactics and processes. Every business manager should spend a reasonable part of her or his time learning what goes into the makeup of a complete marketing program.

Too many small business owners stammer when asked, “So what do you do?” says Michalek. “Referrals and word-of-mouth marketing are two cost-effective methods to grow any business. If you cannot succinctly express what you do and whom you serve, you’re shutting the door on your best source of new customers.”

3. Failing to recognize the pitfalls in hiring friends or family

Many small businesses owe their success, at least in part, to an employee who is either a relative or a friend. When such a relationship works, it can work very well; when it doesn’t work, it can be disastrous.

“You should use extreme care in bringing a friend or relative into your business,” says author and career consultant Katharine Hansen. “If the relationship doesn’t work out, terminating it can be a serious problem.”

Hansen tells of one business owner who hired her own sister. “Now she’d like to sell the business to go back to college teaching, but finds herself responsible for her sister’s employment. This is just one example of the kinds of unexpected traps that lie in wait for business owners who hire friends or family.”

4. Failing to take action on unsatisfactory employees

Discharging an unproductive or disruptive employee is the sort of unpleasant task that most managers dread, and not without reason. However, failing to take action when necessary can be a costly mistake.

“Not firing a problem worker is one of the worst operating mistakes you can make,” says James Walsh, writing in “Rightful Termination: Defensive Strategies for Hiring and Firing in the Lawsuit-Happy 90’s” (Merritt Publishing, 1997). “It keeps the problem worker around to create more trouble, making a bad situation worse. That’s not fair to you or to your other employees.”

“Failing to terminate a problem employee can result in added stress on other employees who may have to take on more work, and dissension among those who can’t understand why the employee is being kept,” says management consultant Linda Hanson, president of LLH Enterprises. “All of this, in turn, can negatively affect the treatment of customers.” 

In short, once you identify a disruptive or unproductive employee, it’s best to face up to the unpleasant task of terminating the relationship. Postponing it can only lead to more serious problems later on. As long as you follow all recommended (and required) processes and maintain documentation on the steps you’ve taken to improve the employee’s performance, firing an unproductive employee should not present legal entanglements.

5. Failing to manage revenue

Making the sale is only the first part of a profitable business transaction. How you manage the revenue generated by your sales will determine how much of that money finds its way to your bottom line. Profitable management of cash flow calls for never allowing any of your money to lie idle. The worst place to deposit daily receipts is in a low- or no-interest checking account.

Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. From that point on, deposit your daily receipts into the money market account where they will immediately start drawing interest. Never deposit receipts into your checking account. Keep a minimum balance in the checking account and transfer cash by phone or computer as needed to cover checks written.

6. Failing to ask for outside help

“By their very nature, entrepreneurs are independent thinkers,” says management consultant Carl Robinson, Ph.D. “That’s why they are often reluctant to reach out to others for help in areas where their own experience may be lacking. I feel that any small business owner will benefit from forming a peer group made up of owners of noncompeting local businesses. This is an excellent way for a business owner to benefit from a no-cost advisory board. In a successful peer group, everyone helps everyone else through the exchange of experience and ideas.

“A good place to locate potential members of a peer group is one of your local service clubs such as a Rotary, Kiwanis, or Lions Club.”

7. Failing to develop good hiring skills

“One of the most common mistakes small business owners make is hiring poorly,” says Robinson. “Most small business owners have never received any training in the selection and assessment of people. As a result, they tend to fall victim to every ‘interview bias error’ known. If you make a single poor hiring decision, especially if you have fewer than ten employees, you can be derailed big time.”

Robinson offers these suggestions:

  • Prepare interview questions in advance. Take notes so that you won’t forget what the candidates said. I guarantee that you will either forget what the first interviewee said or mix his or her responses with subsequent interviewees if you don’t take notes. Ask each candidate the same questions so you can compare answers.
  • Don’t go too far too fast. Don’t make a hiring decision based on your first interview. Take your time. Compare candidates.
  • Make the candidates feel comfortable—they reveal more if they aren’t on guard. If you make interviewees feel like they are being interrogated, you’ll learn how they respond to questioning under pressure, but it’s unlikely they’ll tell you anything revealing about themselves
  • You must sell the candidates on the job and your company (and you), but don’t talk more than 20 percent of the time. Let the candidates do most of the talking.
  • Ask open-ended questions. Avoid questions that can be answered with a simple yes or no. If you present situations that might occur in your business in a typical day, for example, and ask candidates to talk through them, you’ll get a much more meaningful response.

These aren’t the only management errors that can affect your business negatively, but they are among the most common, and the easiest to avoid. Post the list somewhere easily visible in your office, and check it once a month just to make sure you’re not falling back into old habits.

William J. Lynott is a business writer based in Abington, Pa.

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