Why Do Businesses Fail?
For any new entrepreneur, it’s natural to be optimistic.
Whether that person has a world-changing idea or is starting a new coffee shop, the glass has to be half full that the business will succeed. Otherwise, what is the point of starting a new company in the first place?
The Harsh Reality
Today’s infographic from InsuranceQuotes shows that this entrepreneurial enthusiasm might be misplaced.
The reality is that it’s a cruel world out there for entrepreneurs. The Bureau of Labor Statistics in the United States keeps a sobering tally of how often businesses fail, and here are the numbers from 1995-2015:
|Years in Business||Failure Rate|
Statistically speaking, there is over a 50% chance that any new business is toast in five years.
And the record for tech startups? It’s even worse, with 90% of all startups eventually failing.
Business Failure Can Be Complex
It takes the confluence of many factors to build a successful business: assembling the right team at the right time, achieving product/market fit, staying on top of the competition, and getting the necessary funding are just some of the key elements to success.
In the same vein, it is often hard to pin down just one reason for failure, since everything is so interconnected.
For example, one study by U.S. Bank shows that 82% of small businesses fail because of cash flow mismanagement. This is a fair point, since without cash flow there is no business.
However, while cash flow may end up being the final nail in the coffin for many businesses, it’s also fair to say that a lack of cash flow can be the symptom of other problems. What if the company is going after the wrong market? What if the team is dysfunctional and unmotivated? What if the company isn’t differentiated enough to compete?
With any of these situations playing out, it should be no surprise that sales aren’t coming in like expected, which would certainly tank cash flow. At the same time, a company with the right team and product should be able to make swift changes to right the ship from any chronic issues.
Some Reasons Businesses Fail
With the complexity of business failure in mind, here are some of the commonly listed reasons for why businesses fail:
- 82% experience cash flow problems
- 42% find that there is an insufficient need for their product or service
- 29% run out of cash
- 23% do not have the right team
- 19% are out-competed
Lastly, for a full list of reasons for why businesses fail, see this infographic showing 20 common reasons why startups fail.
Navigating Uncertainty: Leadership Accountability in Times of Crisis
This infographic explores five key behaviors that CEOs and executives should adopt in order to demonstrate leadership accountability in times of crisis.
In the face of adversity, leaders may struggle to manage their teams effectively.
Before the COVID-19 outbreak, over half of all professionals globally worked remotely at least 2.5 days a week. This has since increased dramatically, with 88% of organizations now insisting their employees work from home and implement social distancing.
Leaders must adapt to a more flexible workplace and create a culture of accountability so that their organization can successfully weather the COVID-19 storm.
Leadership Accountability in Uncertain Times
Today’s infographic, from bestselling author Vince Molinaro, reveals the five behaviors that leaders can adopt in order to provide thoughtful navigation through uncertainty.
>> Join Vince Molinaro’s Community of Accountable Leaders
The Impact of Leadership Accountability
As the workforce pivots to remote working arrangements, the benefits of flexible working policies are coming into sharper focus.
Research shows that these policies can lower overhead costs, reduce commuting times and increase employee satisfaction—in addition to attracting top talent. Moreover, the shift to working remotely could boost the U.S. economy by $4.5 trillion annually by 2030.
But achieving these benefits requires accountability from everyone in an organization, and in an increasingly virtual world, that can become difficult to manage.
Challenges Facing Leaders Today
Leaders are already subject to an array of challenges that they must overcome, such as:
- The pressure to differentiate: Leaders feel an unrelenting pressure to innovate and help their organizations stand out in a sea of ruthless competitors.
- Executing the strategy: Leaders must align the organization to ensure employees are clear about what needs to get done to execute priorities seamlessly.
- Leading transformational change: With so many moving parts, constant change across several aspects of a business can be difficult for leaders to manage.
- Creating enduring value: Customers, boards, and shareholders have high expectations for leaders in exchange for their loyalty.
- Building future talent: Leaders must build and nurture the next generation of leaders in addition to managing the day-to-day.
These mounting pressures can have a detrimental impact on a business leader’s performance, so it is crucial that they get the support they need now, more than ever.
The Characteristics of Accountable Leaders
Truly accountable leadership is the only way an organization can weather uncertainty in a world that has been upended. Research reveals that among the strongest performing companies, accountable leaders consistently demonstrate five behaviors that set them apart from others.
- Hold others accountable for high standards of performance
Good leaders make mutual expectations clear by consistently reinforcing what is important, and what employees should prioritize in their roles.
- Tackle tough issues and make difficult decisions
Technology is hugely beneficial, but it should never replace the human element. Picking up the phone or having a Skype call is more immediate and personal, especially when it comes to problem solving and making tough decisions.
- Communicate the strategy across the organization
Leaders must ensure that employees have complete clarity in terms of the company’s vision to do their jobs effectively. Creating a set of well-defined goals can help people stay engaged and decrease their stress levels.
- Express optimism about the company and its future
Many employees can feel isolated and disconnected in the virtual world, so leaders must provide support, positive energy, and a sense of hope for the future.
- Display clarity about external trends in the business environment
Finally, it is critical to help employees make sense of the current situation right now. Leaders must provide honest and transparent communication in a way that manages fear, stress, and anxiety. This encourages employees’s determination to help the organization succeed.
Leading The Future
As we embrace the unknown, it is clear that leadership accountability will become more important than ever.
In fact, it has become a crucial element for future-proofing organizations in times of crisis or drastic change. Perhaps more importantly, it is necessary for encouraging teams to emerge more connected and resilient than ever before.
How Leadership Accountability Drives Company Performance
What impact does leadership accountability have on the performance of an organization? As it turns out, a lot.
Leadership plays a big role in determining the success of an organization.
Effective and accountable leadership can help propel a company forward. On the flip side, a failure to live up to the expectations of leadership can have cascading and lingering effects across an entire organization.
Bridging the Leadership Accountability Gap
Today’s infographic, from bestselling author Vince Molinaro, is a revealing look at the impact that leadership accountability can have on an organization.
Pre-order Vince Molinaro’s new book, Accountable Leaders
The Value of Leadership Accountability
The majority of people within organizations understand the value of leadership accountability – yet, in practice, many leaders fail to deliver on that promise.
A global survey of over 2,000 HR leaders and senior executives revealed that a mere 27% believed they had a strong leadership culture. Two-thirds of those surveyed believed that leadership accountability is a critical issue within their organization, while only one-third are satisfied with the degree of leadership accountability demonstrated at in their workplace.
What impact does this leadership accountability gap have on the performance of a company? As it turns out, a lot.
The Critical Link Between Accountability and Performance
Once survey responses were organized into three distinct categories – low performers, average performers, and industry leaders – interesting trends began to emerge.
Companies in the “industry leaders” category were far more likely to have a culture of leadership accountability. In fact, industry leaders were twice as likely to have clearly established expectations for their leadership team than respondents in the average or lower performing categories. These high performing companies were also far more likely to:
- Have formal succession programs to help identify high-potential leaders
- Have practices in place to foster more diverse leadership teams
- Implement development programs to effectively build the capacity of leaders
Industry leading companies had leadership teams that ranked higher in a number of key areas. Leaders at high performing companies were far more likely to:
- Understand customer needs and desires
- Understand external trends affecting the business
- Demonstrate a high level of emotional maturity
- Demonstrate passion for executing on the company’s vision
In many of these areas, the gap between industry leaders and the other categories is significant, which presents a compelling case for embracing leadership accountability as a core value.
Building a Strong Leadership Culture: Questions to Ask
The first step to building a culture of leadership accountability is self reflection. Here are questions leaders can ask to help assess how their organization is doing:
- Is leadership accountability a critical priority in your organization?
- Has your organization set clear leadership expectations for leaders?
- Do you believe your leaders at all levels, are fully committed to their leadership roles?
- Have you built a strong and aligned leadership culture across your organization?
- Does your organization have the courage to identify and address mediocre leadership at an individual and team level?
Answering “no” to any of the questions above means there’s an opportunity to develop a more accountable and effective leadership team.
Only three things happen naturally in organizations. Friction, confusion and underperformance. Everything else requires leadership.
– Peter Drucker
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