SMALL BUSINESSES GET INTO TROUBLE - PART 3
by: Cary Christian
In Parts 1 and 2 of this series, we reviewed five money problems and five
strategic problems that explain how small businesses get into trouble. We're
going to wrap up this series by looking at people problems.
Business organizations are inherently social organizations. There are
relationships between employees and their bosses, employees and other
employees, employees and customers, employees and vendors, the business and
its outside consultants, and many other types of social interactions that
can each cause problems of some sort. In fact, people problems may just be
the most difficult type of problem to deal with.
It would be nice if we were all well-schooled in psychology and could avoid
people problems by simply not hiring or associating with people that have
the potential of causing problems. But that is unrealistic in many ways
other than the obvious. You simply never know who might or might not be a
problem individual under stress. No amount of psychological training is
going to equip the small business owner to make such a determination and be
100 percent accurate.
There is also no way to know how effective an individual is going to be for
an organization. A person may be nice, kind, polite, have a great
educational background and a good work history, but just cannot function
well in your organization. Is this the fault of the individual or the
organization? How can you tell?
The stakes are high. More than a few small businesses have been ruined
because the entrepreneur made poor decisions relative to the people he or
she chose to associate with and how relationships with these individuals
1. Failure to train employees properly.
Not all problems with people are related to personality. In fact, most
problems that small businesses must face relate to the inability of the
business to train employees for the tasks for which they are to be
There is a major difference here in the capabilities of large and small
organizations. Large organizations generally have a formalized training
structure in place for new hires. Small organizations generally rely on
on-the-job training carried out by individuals who themselves have been
poorly trained and thus are in no position to train anyone else.
Business is transacted by people. If the people who work for the business
are poorly trained it will always reflect negatively on the bottom line.
It is critical that new employee training be carried out by people who are
both knowledgeable in the subject matter of the training and capable of
training effectively. If no employees meet this criteria, then a trainer or
trainers must be brought in from the outside.
Poorly trained employees create more problems than just errors in their work
product. They also become a drain on morale and can create problems with
other employees, customers and vendors.
2. Failure to appreciate the contributions of employees.
It is not uncommon for employees of small businesses to feel unappreciated.
Larger organizations have structures in place to recognize employee
achievements and are better able to reward outstanding efforts financially.
Small businesses make a number of mistakes in this area. Some examples are:
- Treating employees as though they are easily replaceable.
- Failure to provide reasonable benefits.
- Little or no recognition of outstanding accomplishments.
- Failure to respect the value of employees' time.
- Failure to ask for and respect employees' opinions.
Entrepreneurs sometimes treat employees like they are family, and this is
generally a good thing. It can become a negative, however. People generally
expect their families to help them out to the greatest extent possible while
expecting little or nothing in return. They do it because they are family.
Your employees will never BE family. They need more appreciation and
recognition than family will ever need.
Employees are the life-blood of any business organization. It is critical
that employees feel like they are part of the team, are respected, are well
compensated, and that their efforts are truly appreciated by the owners.
Small businesses who look at employment costs first when seeking to control
or reduce expenses are making a mistake that can be deadly.
3. Hiring or trusting the wrong people.
I once knew a business that was doing well, employing about 15 people,
making decent profits for the owners, and growing slowly every year. The
owner decided he was ready to take the plunge and take the business to the
He hired a man who was generally recognized as being one of the best sales
organization builders in the business to open several new offices and
introduce new product lines at all locations. The business quintupled in
size within six months. New locations were opened in two other cities in the
same state and total employees grew to in excess of 125. Everything looked
But . . . the owner had lost control. The new hire demanded the world and
threatened to walk out if his demands were not met. They were met until one
day the owner could stand it no more and told the man to get out. He did.
And he took every employee he brought into the organization with him! His
people collected the businesses' receivables and left it with the bills due
to vendors. He opened competing businesses in each city using his former
employer's own money to destroy him. And destroy him he did.
The owner of this small business actually knew that this man had done this
very same thing to two other businesses before him. He hired him anyway
because he thought he could control the situation.
The moral of the story? A small business needs to know who they are dealing
with and refuse to let greed lead them down the path to destruction. Hiring
or associating with people who are not VERIFIABLY trustworthy and honest, no
matter how good the individual might be at his job, will always be mistake.
4. Creating an atmosphere of mistrust.
It is important that employees, customers, vendors and others that have
relationships with a business trust the owners. I have seen situations where
owners intentionally create an atmosphere of mistrust for purposes of
control, but I won't address those situations because there is really
nothing to say about them.
But in other cases, owners create an atmosphere of mistrust without meaning
to. This can happen when an owner fails to recognize the contributions of
employees and where owners fail to deliver on their promises whether they be
promises made to employees, vendors or customers.
Vendors and customers will simply refuse to do business with an organization
they can feel they can no longer trust. Employees will be constantly on the
lookout for another job opportunity and job performance will suffer.
Business results of operations suffers in direct proportion to this growth
Small business owners need to always be mindful of their actions and the
consequences. For example, I know of one situation where the owners
regularly pocket the cash from cash sales made by the business. The cash
they take is properly accounted for in all ways but the employees do not
necessarily know that.
Some employees think they are stealing from the business and cheating on
their taxes. Some have even lodged complaints with taxing authorities,
(anonymously, of course). All of this could be avoided by following simple
procedures designed to eliminate the appearance of impropriety.
Bottom line? Sometimes owners tend to think of their business as an
extension of their personal lives and personal checkbook and do things they
would never think of doing if they were the CEO of a business they did not
own. This always creates problems in some fashion. Small businesses must
create procedures that build trust and operate in compliance with them.
Entrepreneurs must build the character of the organization. Businesses have
a reputation just like individuals do and that reputation is key to
5. Hiring the wrong consultants.
Consultants can add a lot of value to a small business enterprise. Small
businesses generally cannot afford Fortune 500 executives, so they should
include in the budget funds for the best consultants available. The hourly
fees may be scary, but the right consultant will be worth many times the
amount of the fees charged.
Small businesses make a big mistake when they make it a practice to hire the
cheapest accountants, attorneys and business advisors they can find.
Consultants should be hired based on their experience level, their
reputation, and what they can do for the business. The capabilities of the
consultant should be matched with the project at hand. If the project is
critical, the small business simply cannot afford not to hire the best.
Small businesses are the fuel that runs the engines of commerce in every
country throughout the world. Opportunities abound for small businesses that
can operate on par with world class organizations. Avoiding the problems
discussed in this article series is a good first step toward making your own
organization world class.
Copyright (c) 2002