Down the tubes? Blame the boss

By VICKI JAYNE

The primary cause of most business failures is leadership failure, says Denis Orme - and he's had plenty of opportunity to spot it.

Practitioner rather than theorist, Orme has provided hands-on management consulting to more than 200 organisations in New Zealand and overseas. They range from Fortune 500 biggies in the United States to small-scale manufacturers and Government departments.

He has discovered that very few founder because of circumstances outside their control.

Whether they've run out of cash, ideas or market share, he says, the errors all come back to one common denominator.

"Failures are typically failures of leadership - whether it lies in not doing proper planning, not recognising business trends, or in not building the strongest work team."

How and where that failure is affecting business fortunes is not so hard to spot, he says. You just need to walk into a business with eyes and ears open.

"If you listen to people, you can get a feeling for the morale and the tension that does or doesn't exist.

"In three or four days, you have a pretty good perception of what the leadership style is, what the leadership issues are and whether the person concerned is coachable."

It's an important point, the last one. Those with too much ego invested in the status quo or in not admitting blunders may prove hard to work around - especially if they are owner/managers.

An ability to shelve ego, preconceptions or traditional operating practice is all part of adopting the fresh perspective, says Orme in his book Lessons From Leadership Failure - the Greenfields Approach (1st Books Library, $49.95).

As its name suggests, the idea is to look at how you might do things differently if you were to start your business over again tomorrow.

"You have to step back, be objective, go outside the business and ask how its world has changed in terms of competitors, or technology, manufacturing processes, client demand, whatever.

"If the world has changed, you need to change the business to match.

"I don't favour change for change's sake, but business environments evolve and you have to go with them."

Seeing everything with fresh eyes not only sharpens focus but helps remove some self-imposed constraints to development.

It's an approach Orme - who was the Herald's Y2K project manager - is now applying to Bartercard New Zealand as its new chief executive.

The company is unusual in that it is a strictly business-to-business operation - functioning as a trading exchange or third-party bank for barter transactions among its 5000 members.

Part of a worldwide network with 30,000 members, the local operation involves 120 people in nine branches and monthly trading volumes of around $15 million.

Orme is one of an influx of Kiwis returning home - in his case, from Houston - with useful overseas business experience.

What he has learned is that business problems are very similar whatever the size or scale of the company - and are often surprisingly basic.

Lack of attention to detail is a biggie.

"Take cashflow planning," says Orme. "It is staggering how few businesses run a month-by-month cashflow plan so they can make mid-course direction changes as sales slow or margins change."

Having the forward thinking to know where your cashflow will be in 18 months, and then monitoring monthly progress toward that goal, is an absolute must for new companies.

"Unless you're optimistic, you'd never start a business, so there is a tendency to be positive on sales predictions and conservative on costs.

"But optimism alone won't get you there. You can run out of cash before getting to the revenue stream you've projected."

Problems with detail show up in projects that have clear outlines but hollow centres.

Timing will be missed or costs escalate because not all necessary steps were included; some missed steps can be as basic as not checking market demand before launching a new product.

Failure to implement is also common, says Orme. There's no point in having an annual marketing plan without regularly reviewing progress against it, or a grand strategy that hasn't been properly communicated, let alone actioned.

It all seems fairly commonsense stuff.

But, says Orme, common sense is not so common in business. Which helps explain why there are 45,000 bankruptcies every year in the US, and why out of every 10 businesses, up to five will fail.

"Business is not so complex. There are only a few key success drivers, and they include having the strongest team and the leadership to build it."

So how is he putting that into practice at Bartercard?

A good starting point is a clearly articulated and widely communicated vision, says Orme.

"This is where we are going, these are the 11 steps we need to take to get there and, by the way, I'll be making a monthly check on where we are in relation to that plan.

"Everyone needs to know what is the game plan, what we are trying to accomplish, where they fit into that and where their own career paths are headed."

People won't stay with a company for a pay cheque. They need to be challenged and encouraged.

The fact that he has already unearthed buried talent at Bartercard is obviously a real source of delight.

"Growing businesses successfully is my absolute passion," he says.

"And the good thing is that you can grow people in the process. It's just fun."

* vjayne@iconz.co.nz