General errors and mistakes that commited by Business Companies

Companies have worked hard at restructuring themselves in response to the dramatic changes that have occurred in the economy and in their marketplaces in recent years. Here are a few thoughts concerning some of the serious errors companies have committed in their efforts to change:

Mistake 1: Laying Off Only Lower-Level Support Staff

Personnel decisions are made by senior and middle management— who, of course, are not going to choose themselves for outplacement. As a result, the company ends up with many ‘‘chiefs’’ but not enough ‘‘Indians.’’ Six-figure executives spend their time typing, photocopying, and faxing when they should be meeting with customers and planning strategies.

Executives should prioritize entire programs, products, and markets according to profitability and opportunity. Maintaining or even increasing the number of support staff and expanding their responsibilities makes more time available to executives to develop the business. Leave the more routine tasks to those who are best trained (and appropriately paid) to perform them.

Mistake 2: Seeing the Future as an Extension of the Past.

During times of marketplace turmoil and uncertainty, some companies seek out those programs, strategies, and attitudes that worked well in the past. This provides a level of organizational comfort and eases the tensions associated with change.

However, sticking to what has always worked well may, in fact, be perpetuating approaches that are no longer valid as a result of new market conditions.

There should be no sacred cows when the company under Selected achieves. Reexamine and reprioritize all of the company’s operations and activities.

Mistake 3: Not Recycling Past Ideas That Merit Current Consideration

Whether an idea is profitable or not depends on both the timing of its implementation and the management support it receives. Something that did not work seven years ago may have considerable merit now.

The market may currently need some products and services that it did not need in the past. List, explore, and give consideration to all ideas. With input from everyone concerned, make a list of all possible courses of action. Some resurrected fundamentals or past failures may in fact save the day.

Mistake 4: Reducing Price Rather Than Adding Value

Giving the customer a price discount may result in a sale. It can also encourage the customer either to expect further discounts in the future or to ask, ‘‘If you can afford to reduce the price now, does that mean that you were gouging me in the past?’’ Your objective is to create a loyal market, not merely to make a sale. Pressures to reduce the price are lessened when you add value to the sale. Value-added features could include:

• Faster delivery
• Higher quality
• Educating customers on product applications
• User conferences
• Focus groups for product improvement
• Improved customer service

These activities enhance your competitive position. Getting a new customer is very difficult. Keeping an existing customer happy is a great challenge. Getting back a customer that you have already lost is almost impossible.

Mistake 5: Ignoring the 80 Percent/20 Percent Rule

You need to realize that 20 percent of your customers account for 80 percent of your revenue, and 20 percent of your products result in 80 percent of your shipments. Less positively, 20 percent of your employees account for 80 percent of your absenteeism, and 20 percent of your customers are responsible for 80 percent of your overdue accounts receivable.

Companies confuse activity with productivity and productivity with effectiveness. They try to be all things to all people. Every order receives fanatical attention from exhausted, overworked people who hope and believe that if they can just work harder, things will improve. Focus your energies on the activities that are most important. The least important 80 percent of all corporate activity results in only 20 percent of the achievement. Do not dilute the effort and compromise the performance of the most important tasks by expending too much energy on that least important 80 percent. Intelligent corporate prioritizing and time management ensures that the most important work gets done.

Achievement = Productivity = Effectiveness = Profitability

Mistake 6: Holding On to Sacred Cows

The entire business should be evaluated periodically, perhaps at budget time. Is each of the product lines and markets still providing its expected contribution? Is any product line or market consuming an inordinate share of corporate resources, beyond what is justified by present and expected future performance? What other, more profitable ventures can be implemented with underproductive resources? Should we really be in this business?