Since 2002, I have carefully compared my experiences as an entrepreneur, with my time in paid employment. Especially with regard to the most frequent cause of failure, amongst senior managers and CEOs of small/medium businesses I interacted with on both sides.
I was shocked to discover that INEPTITUDE – on the part of these top decision makers – was the major cause of failure!
That is, a total lack of skill in the very endeavour they are responsible for managing to profitability or productivity.
If you find it difficult to understand how a CEO can be inept in the manner I have described above, be assured that you are not alone in feeling this way!
I struggled with myself for years to BELIEVE what my eyes saw and ears heard as I worked closely with some (NOT ALL) of these people.
Believe me when I say some mothers – sorry, I mean "companies" – do ‘ave them!
What would you say about the decision making competence of a CEO, who pays well over N250, 000 over a 6 month period, to a software developer, but fails to ensure himself or ANY of his staff can competently make use of the application delivered (And that’s despite extensive efforts by the developer to provide on site, hands on training)?
The above (true story) is just one example of how a CEO can be inept.
Now, if you owned shares in such a company, would you feel confident that your investment would be well managed to yield beneficial returns?
I know I would not – and I am certain most others would feel the same way.
Now, this lack of skill or ineptitude is rarely an accident. Instead it is often the result of a lack of discipline – particularly mental discipline. To be honest, I personally consider it to be evidence of mental indolence or laziness on the part of the "guilty" CEO.
Some companies (especially startup or small/medium) fail to succeed in spite of having talented and competent hands reporting to the CEO, in addition to ready access to financing. One possible reason for this failure could be the problem of "CEO Ineptitude".
But What Are The Signs Of "CEO Ineptitude"?
Below I list nine (9) signs and symptoms a CEO will exhibit that will suggest s/he is inept.
1. Does not (or no longer wants to) know or keep track of operational details that affect the company’s ability to meet its business success goals. The result is that when trends turn bad, s/he rarely notices until it’s too late. The company suffers as a result.
2. Is not (and is NOT keen to become) proficient in using technology s/he pays for (such as a laptop/PC, monthly Internet access etc) to boost his/her ability to make better business decisions.
3. Will not admit it, but is terrified of thinking and/or making "tough" decisions by him or herself. For instance s/he will do almost anything to get even a visiting friend or consultant to help him decide when an unrepentant staff guilty of being repeatedly absent from work should be penalized by way of salary deduction. The business suffers for this, because other staff copy the unpunished staff PLUS diligent staff get frustrated and conclude there is no point sticking to the rules.
4. Always balks at going out and getting personally involved in making sales visits towards generating sales/marketing leads. Instead s/he spends money hiring more sales and marketing personnel than necessary, who then get pushed out to do this unwanted chore – at a higher cost to the company. The worst part however is that the RESULTS they get often never justify the wages "overhead" their presence in the company attracts. Again, the company suffers (this is especially true for a startup or small/medium enterprise)..
5. Hires and pays professional service providers or consultants to develop systems and solutions meant to help the company succeed better, BUT fails to take ownership – and USE – the delivered product, often times to the bafflement of even those s/he paid to provide it (at least those with integrity)!
6. Always pays him or herself lavishly even when the company is still struggling to generate cash flow to meet its business needs.
"The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of of a warm personal gesture by the individual to himself" –John Kenneth Galbraith (Annals of an Abiding Liberal)
7. Often allows products or services to be sold to customers on credit without putting in place mechanisms for vigorous redemption of receivables. As a result the company suffers from a growing overload of "debts" owed it by customers, even as production or output is stifled by poor cash availability to finance inventory and other routine expenses. Sometimes, this forces the company into taking overdraft from banks at less than friendly interest rates. Once again, the company suffers.
8. Does not READ (articles, books, magazines) to get new ideas that s/he can apply towards developing better ways of managing the business to productivity and profitability.
9. Pays beggarly wages. Believes in hiring for as little as possible, while trying to get as much as possible out of the same hired hands they UNDER-PAY. Does not believe in employee motivation.
The result is that the staff always feel under appreciated and are constantly on the lookout for what they can get and run off with.
Evidence: a high staff turnover rate, which in turn prevents the company from fully entrenching any initiatives introduced by management. So, the company suffers – AGAIN!
"I don’t want any yes-men around me. I want everybody to tell me the truth even if it costs them their jobs" – Samuel Goldwyn
Final Words: If you know any company whose CEO or key decision maker suffers from the above aspects of ineptitude, I strongly suggest you avoid investing in it.
Except of course you can do something to "correct" the observed inadequacies.
Why do I say this?
Well, the fact is that you can be sure such is unlikely to display any evidence of steady progress over time.
This will be mainly because of the erratic decision making output arising from inept CEO activity like those earlier enumerated. The company will therefore be more prone to negative influences of the market place and industry it operates in.
No real life/physical business entity can operate 100% successfully on autopilot.
And that’s why human beings are put in charge to actively THINK and ACT based on daily developments to steer it in the direction of greatest returns on investment.
All of these are of course my experience-based ideas. But you may not agree with them – and you have every right not to.
That will however not mean I am wrong, or that they are inaccurate.
My suggestion: THINK carefully before you reject what you’ve read above!
PS: This article is based on excerpts from a write up originally published by Tayo K. Solagbade in his Self-Development Digest Newsletter on Monday 3rd August 2009, via www.spontaneousdevelopment.com