The Biggest Cause Of Business Failure

What is the biggest ongoing cause of business failure in North America, today? If someone asked you, what would you say?

Based on our experience, most people would answer that it was the result of one or more of these 3 factors – not enough opportunity, not enough resources or not enough talent.

However, it is none of these.

The biggest ongoing cause of business failure in North America is management’s inability to effectively deal with identified non-performance.

Here’s what this means.

In most business failures, a forensic audit would show that somebody had been doing something in their job that they didn’t have permission to do (non-performance) and NOBODY DID ANYTHING ABOUT IT. And, the cumulative effect of this action or non-action eventually leads to the failure.

Here’s the critical thing to understand. Rarely, if ever, do people ‘not’ do their jobs, either consciously or intentionally. Nobody wakes up in the morning and says ‘today I’m going to do a bad job.’

Yet we’ve all seen big examples of cumulative non-performance in the news. It happens slowly – mostly when people did something they weren’t supposed to do – and nothing was said about it.

For example, the trader who lost $6 billion they weren’t supposed to trade (but the local manager didn’t stop them the first time they lost $10,000 doing the same thing). Or, at companies like Enron where the accountants began rigging the books and those who noticed said nothing, perhaps hoping it was just an anomaly, which eventually lead to a huge failure.

Enron is another example of  the devastating effects of cumulative non-peformance.

But, those are big, obvious examples. How does this apply to ordinary businesses?

Let’s start with a definition of non-performance. It means doing anything in your job you don’t have permission to do OR not doing something you are supposed to do. Either or both. And, it’s mostly unintentional.

Here’s how non-performance happens…

The first time that someone doesn’t do what they are supposed to do OR does something they are not supposed to do and no one says anything, that person concludes that their behavior is OK.

In other words, it was OK to not perform. The next time no one says anything, the person concludes that it’s OK again. It only takes about 2 weeks for this daily behavior to become a habit.

Now, here’s the problem. Every time something becomes habit, it moves to the unconscious and we don’t notice that we’re doing it. But we are doing it.

This eventually leads to the bar in your organization being lowered so that the norm slowly becomes the lowest level of mediocrity that people are prepared to tolerate.

That’s tough stuff if you’re trying to create a culture of excellence.

How does this happen? Most managers want to create a culture of excellence. Where does it go wrong? Here’s a common example.

You’ve asked Leonard to do something (big or small) by a specific time. And Leonard doesn’t do it the way you wanted it done. For example, he might be late (non-performance). He does it wrong (non-performance). Someone else does it for him (non-performance). He puts it off and does something else because he doesn’t like doing what you asked him to do (non-performance). You get the drift.

But, at this stage, Leonard still doesn’t know he’s doing anything wrong because nothing’s been said to  him.

And, even though you’ve noticed it, you might say to yourself, ‘Leonard might be having a bad day, I’ll talk to him about it tomorrow’ But when tomorrow comes, you say ‘It’s Friday. I’ll talk to him on Monday’.

Or, you say, ‘It’s OK. Since Leonard didn’t do it, I’ll get Mary to do it’ or ‘I know I should get to this but I have all this filing to do and I would rather do it than tell Leonard he’s not performing because he gets all defensive and confrontational anytime I critique him’.

Why does this happen? Why doesn’t a manager deal with non-performance?

The cause is anchored in our common reticence to be the bearer of ‘bad’ news. So, we avoid any interactions that might cause this discomfort, not realizing that when we do nothing, we make the non-performance OK.

What happens as a result?

Leonard thinks it was OK not to do something the way you wanted it done, including not doing it at all. This generates another damaging consequence.

Those around Leonard notice that there was no downside for him, so they start to change the parameters around their own job. So, just when you think everything took care of itself and that it won’t happen again, the bar just got lowered.

Just to be clear. Most of the time, Leonard doesn’t know he’s not performing. It isn’t his fault. He might not have been trained properly or he might not have been given enough time to do the job.

The manager owns this, not Leonard, because the non-performance was not identified and effectively dealt with.

If you are a manager, here’s what you can do about this: when you notice non-performance, deal with it immediately or, if this isn’t possible, you must deal with it inside 24 hours.

Exploring the deeper causes of why this happens, in greater detail, is the subject of another blog.

We hope this has helped you understand why we say…

The biggest ongoing cause of business failure in North America is management’s inability to effectively deal with identified non-performance.