How to Run Down Your Own Company . . . Gradually (Part 1)

Bad Hiring

“It turns out that a company can indeed look like the picture of health on the outside yet already be in decline…” – Jim Collins, How the Mighty Fall

I do not yet know anyone with the intention to run down his or her company. Normal people do not set out to destroy the company or business that they themselves started. Normally people want to see growth for a business or project or initiative that they started.

Why then do some people run their businesses down? Why then do some of us manage our businesses as though our intention is to run it down? How come many African businesses – ones which were thriving at some point – are no more?

So once upon a time it was thriving, but now it is no more or just a shadow of its former self. “It turns out that a company can indeed look like the picture of health on the outside yet already be in decline…” (Jim Collins, How the Mighty Fall). It means the decline started and continued unnoticed.

It means the decline or demise was already going on, on the inside whereas everything looked well on the outside. Several accounts seem to suggest that the Titanic eventually crashed because of a series of wrong decisions taken much earlier.

So it is safe to say that the crash that happened was inevitable. People that end up running down their business truly did not intend to. Why does it seem so difficult to see Nigerian businesses outliving their founders? Why do many Nigerian businesses have stunted growth or even decline?

An in-exhaustive list is presented here to help us all avoid running down our companies. Take this as the minority report that could help us avoid further decline.

Hiring Decisions

I have always maintained that hiring is an executive function. This is particularly so in an SME. It is one of the most important jobs of the CEO even though it resides within the Human Resources function. Hiring is the path through which people join the organisation.

The process with which a person joins an organisation determines the effectiveness or otherwise of the person. I always say that the process assures the product. Having and using a well laid out process assures us of getting a good outcome or product or staff much more than intuition or experience.

The basis for choosing someone to join your organisation also affects the effectiveness or otherwise of the person. This idea of hiring people because they are family, or from your tribe or your church/mosque or religion is dangerous to the continuity of the business.

Thinking they would be more reliable or trustworthy can blindside you and also bring a litany of woes that have been seen to stunt or destroy many organisations. Every time you don’t make effort to hire the best man or woman for the job you send a message and also trigger a chain of damaging events.

Messages such as:

“This company is for my family and no one else matters”

“Hiring top talent isn’t important”

“This company’s future is not important”

“Others are not important if they are not family or church members”

“What we are doing here is not that important, failure is an option”

If this family-staff has a leadership role, it is even much worse. People who consider themselves very bright then ‘check out’ of the company while looking for another job.

Bad Hiring is Expensive

In another article already published here I made this point;

“Bad hiring is expensive. Plain and simple . . . no need sugar-coating the situation. There are direct and indirect costs associated with poor hiring. Certainly the productivity of such a hire would be low – maybe even dismal.

The productivity of the team would also be low (in instances where the person heads the team). Team morale could dip and thus stifle performance and creativity.

From my dashboard as an organisational effectiveness strategist, I can tell you this for free: one of the differentiating skills for leaders in the 21^st century is the ability to manage people who are smarter, more skilled and with more self-motivation than you.

A team or group is only as good as the leader’s ability to generate discretionary effort from direct reports. Implication? A lot of teams/groups/divisions in our organizations have their potential stellar efforts repressed by their leaders.

This begins to give you a fair idea of the ripple effects of the poor hiring of a leader. Quality of work output would reduce for sure. Poor quality hires may result in poor customer service, which leads to revenue loss and even loss of market share (Taleo research).

In customer relationship management it is easier to maintain the customer than to regain a lost customer – the cost is just too high and it could have been avoided. An additional damage from bad hiring is erosion of brand equity.

You don’t even want to add costs for separation of the poorly hired person and eventual replacement costs. Don’t forget that when we talk about staffing or hiring, we speak of hiring junior-senior staff; administrators; managing directors; committee members or chairmen; governmental parastatal heads; project managers; pastors; vice-chancellors; ministers or commissioners; and the list goes on and on.

The more complex the role, the more control it has over people and resources, the more the damage bad hiring can cause. Caveat emptor! Hiring right then isn’t a nice-to-have but a need-to-have . . . a clear imperative” (Aruosa Osemwegie, The Return on Right Hiring).

Selection of Vendors and Suppliers

The process and basis for choosing vendors and suppliers is an indirect path to decline as well. All businesses exist within an ecosystem consisting of you, vendors/suppliers, shareholders/investors, regulators/government, and customers.

Your vendors/suppliers are critical inputs into your business such that some of them are even elevated into partners. A great vendor is expected to give quality advice, services and products; provide proactive advice and solutions for the future; save you costs without mortgaging value and be willing to provide unpopular solutions.

When a vendor is chosen for parochial/sentimental reasons, the probability of getting, consistently, any of the above begins to dwindle. Sometimes to the extent of becoming a threat to your company’s ability to serve own customers and eventually a source of decline and demise.

When you keep selecting your family as vendors, you send the signal that “it is about family and not the interest of the business”. You create a “we” against “them”. Staff start to get the idea that vendors and suppliers, since they are family, are actually just ‘chopping’ company money. Unholy thoughts begin to creep into their minds.

Firing Decisions

An African proverb says, “Twenty friends cannot play together for twenty years”. Sure people will have to leave our organisations. Whatever is the reason, we must be professional about it so that it doesn’t send a wrong signal to those still in the organisation and a wrong signal to the employment market.

The former could lead to: lowered morale amongst existing staff, disengagement, loss of discretionary effort, counterproductive behaviour, more wastes and losses, and even fraud. The latter could make it difficult for you to hire great talent into your company ever again.

When you have disengaged, disgruntled, hurting staff and merged with the challenge of getting good people to join you then decline and business demise has begun . . . albeit imperceptibly. The other day I was trying to market an indigenous company to a human resource colleague because the company was looking to hire a Head of Human Resources.

And she said to me that she didn’t want to work in a one-man organisation. I did try to convince her that though it was a one-man founded business yet it wasn’t run as a one-man business and that they were well-funded, and also have a great brand. It was an unsuccessful attempt.

This big SME went ahead and hired someone else – whom I happened to know as well. This new Head of HR was sacked alongside four other team leaders on the same day after spending about six months. It got me thinking.

What if my friend had taken up that job and left her other job, wouldn’t I have been blamed for it? Bad firing and resignation practices also dents a graver damage to the community of MSMEs.

This is why it is difficult to get people to believe in a founder’s vision because a lot of people have experiences of bad firing. I must confess that I also once asked a lady to leave our company in a manner that wasn’t praiseworthy. But I immediately setup reconciliation and remedial steps to undo my initial actions and I think we are still friends today.

Resignation Practices

When people elect to leave be careful not to turn them into enemies. It is better to have a culture where they leave as friends. If not friends at least have a professional process in place. Something tells me some people would still not heed this refrain.

Making staff resignations adversarial is dangerous to the business’ health and can open up the company to counterproductive behaviour and fraud. Read my lips: Eventually employees always win. You may get away with it for this particular employee but what about the ones after?

What about the word that begins to percolate around town, which begins to affect your ability to attract other good people or you even attract people who are already wired to undercut you from Day One? What about the court cases that could begin to pile?

Kid yourself not, people have begun to sue employers and many of those cases aren’t on the news. But let me walk you through something that you may not have thought about. “Who is the first to know when someone wants to resign?” The employee or the company?

Answer: The employee and other employees. “Who is the last to know?” The company. Hence if you set belligerent tendencies in motion, having done it to one staff, the word goes round and then it’s a matter of time before people change their resignation tactics.

They would resign at the time when you least expect; in a manner you least expect, so that you cannot hurt them by those things some people do. They know you would seize the car immediately they tell you, so they would bash the car or put some sand in the fuel tank or engine.

They would leave the reconciliations they were working on undone. They would go away with codes to servers. They would leave whilst being your representative in a high-powered project. They know you would collect the laptop immediately they tell you, so they would save their files and leave the laptop empty (virtually empty, so that the next person you hire has to start from scratch).

They would make deals that would undercut you with customers. Or they would make it easy for customers to walk away with merchandise. God forbid you need them in the near future to testify in court on your behalf against another company.

Decision Rights

Where do decision rights rest? If you are the one who makes all the decisions then watch it. The bigger your team is the more dispersed decision rights should be.

Heavy duty decline and extinction is on not when you make most of the company decisions but when you have done it to the extent that staff (including senior staff) now wait for you before they make any move. Employee Initiative Paralysis has set in. God forbid there is a fire. For they may turn to you and ask what they should do!

Organisations are simply a composite of decisions made. All sorts of decisions are being made daily such as who to hire, which vendor to select, which proposal to pursue, which strategy to pursue, who to let go, which opportunities to harness, what to walk away from, etc.

In some cases you may still be the one who approves but this you can do based on the employee’s findings and recommendation. The bigger the organisation and the more you have people bearing titles such as ‘Manager’, ‘Senior manager’ or even ‘General Manager’ the more you should have approving authority dispersed around the company.

Ownership mind-set grows in an environment where there is more empowerment and devolution of powers. Don’t agree something else with your managers and then go do another thing without notifying them. If you undercut them, they will undercut you as well. And remember what the Warri man said about “Who do last…?”