Procurement Perspectives: Specific management skills and tools for modern business

Failures of leadership, and management, can often also be explained by reference to fairly predictable causes.

It is important to provide a general overview of what may be termed the process and profile of failure, because these features highlight many of the specific managerial skills and tools necessary for effective leadership.

In Britain, more than two-thirds of all small businesses fail in the first five years of operation. According to a study conducted by the Wharton School of Business, failure may be generally attributed to inadequate research and development, including with respect to the market for products or services offered; uncontrolled costs; weak market strategies; bad timing and competitor activities.

Couple this with two years of a pandemic, supply chain shortages and an economy in question, starting a new business today from scratch is very risky.

Not to be depressing, but a very large percentage of new businesses do not even complete their first year of operation. Studies of businesses that fail during the first year indicate that more than 40 per cent of them fail due to incompetence – a lack of physical or intellectual fitness required to run the business successfully.

A further 15 per cent fail because the entrepreneur who sets up the business has little, if any, experience in the product or service offered, while approximately the same percentage fail due to lack of planning or managerial skills, that is little planning or experience of managing a company or employees before going into business.

Leaving aside those causes of failure that are merely the inverse of the good business practices that I have discussed in previous articles.

In my view, effective management requires a careful balance of the differing levels of knowledge and understanding that exists at different levels of management within the organization.

For instance, the degree of oversight expected (and required) at successive levels of management is sometimes analogized to the view at 10,000, 20,000 or 30,000 feet.

At each higher level, vision has a greater scope, but offers far less detail. High level leaders, through their influences on subordinates, ensure the organization does not lose sight of the bigger picture.

Still, it is essential for leaders at the higher levels of an organization to retain an understanding of the importance of detail. The reason is that two situations that seem superficially similar may sufficiently differ and lead to radically different results if proper attention is not paid to detail.

To give an obvious example.

In the United States, Canada, Australia and Great Britain, income taxes are levied that are based on broadly similar principles. Nevertheless, in each country there are significantly different inclusions and exclusions from taxable income, along with different rates, credits and deductions.

A person who plans his or her investment on the assumption that broad similarity translate into similarity in detail likely will be very disappointed in the final return on that investment.

I have always said businesses do not plan to fail, but they do fail to plan.

Planning takes time, it requires effort, and since the benefits of planning are often indirect, the need to plan may seem to lack any particular urgency.

In reality, in order to avoid problems, planning is essential before a business starts and remains so long as it survives.

A comprehensive business plan serves as a blueprint for the future of a business.

It identifies what is needed, including critical skills and expertise, and how and when the business expects to go about meeting the anticipated need.

To be effective, the plan must be specific and identify existing weaknesses and potential problems in sufficient detail so that they may be addressed before they become insurmountable.

The plan must also establish benchmarks to measure the performance of the business so as to determine whether satisfactory progress is being made and so as to permit emerging problems to be identified.        

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.