Poor Planning Can Lead to a Failed Business

Published May 23, 2014 by Mayrbear's Lair

POOR_PLANNING

Another significant reason why businesses fail is because of poor planning. However, upon closer examination, we will discover that businesses do not fail because of poor planning alone, failure also tends to occur because the plans were not executed to their fullest potential. Carroll and Mui (2008) revealed, for instance, that corporate America has spent hundreds of billions of dollars producing epic business failures. In fact, many executives in top management positions cringe at the word failure. As a result they rarely learn from failed outcomes and in most cases, focus the blame elsewhere (Carroll & Mui, 2008).

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Take for example the mortgage and loan crisis of 2008 that repeated earlier financial crises. This is a strong indicator that business institutions continue to repeat the same or similar errors. The statistics are quite sobering in fact because they reveal that since 1981, 423 US companies with assets of more than $500 million filed for bankruptcy. In addition, their combined assets at the time totaled more than – are you ready for this – $1.5 trillion! Their combined annual revenue was almost $830 billion; and in fact, some of these corporations filed bankruptcy multiple times! This tells us that companies are not even learning from other companies’ mistakes.

Burnout

So what is the reason for all these burnouts? Carroll and Mui’s research suggests that it is not poor planning, but rather the poor execution of those strategic plans. For instance, in a battlefield, most leaders reveal that a battle plan rarely survives first contact. This is because they can only engage in so much planning before just moving forward. Executives could stand to learn from this fact. Planning and execution are significant, but what is equally if not more important, is creating a plan with good strategic actions that will produce effective results.

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Take for example the famous incident that occurred at the Charge of the Light Brigade, the British Cavalry so named because they were optimized for fast mobility. The English troops were led by Lord Cardigan against Russian soldiers in October of 1854 during the Battle of Balaclava. According to reports, faulty intelligence affected the orders given to the cavalry that contributed to the disastrous decision to charge the Russians who were equipped with a considerable amount of artillery in the Crimean War. The British executed their strategy as planned, however, because the strategic move was based on false data, their campaign was ineffective. Once the charge was set in motion, there was no way to avoid the disaster they encountered and as Alfred Lord Tennyson wrote in his famous poem, the soldiers walked into the valley of death.

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In other words, their failure did not result from poor planning, it resulted because of incorrect information that was used to devise the plans. This is how inaccurate information can result in disastrous outcomes. In fact, in a business context, Carroll and Mui further postulate that 46% of company failures can be avoided if leaders are more aware of the pitfalls they may face. Other failures can also be avoided if companies are able to detect the warning signs. In short, the best strategy to avoid failures that result from poor planning is to understand that poor planning can result from a lack of accurate data in the construction and execution of the strategic planning process. In truth, there are many factors that can contribute to a business failing to achieve their desired outcomes. The key lies in a firm’s abilities to not only acknowledge their mistakes, but take responsibility and accountability for them as well as use the failure as an opportunity to learn so they can avoid repeating the same patterns thereafter.

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Well that wraps up our analysis on the various components that contribute to business failures. In the meantime, for anyone interested, this Memorial holiday weekend only, we are kicking off an exciting promotional campaign with amazon.com where you can pick up several of my published eBooklets on organizational management for free! If you or anyone you know can use some help taking their business to the next level, click on the title links for the booklet of your choosing. Today’s specials are: (a) Breaching the Communication Gap which provides insights and information on the value of effective communication and the tools needed to develop more successful communication skills; and (b) The Mission of Corporate Strategic Behavior which will disclose to you valuable information on the significance and purpose of developing effective organizational management plans! Get your copy today!

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Have a fun Memorial Day weekend everyone  and keep organized!

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“Get into the habit of asking yourself if what you are doing can be handled by someone else.” — Anonymous

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References:

Carroll, P., & Mui, C. (2008). Billion dollar lessons. New York, NY: Penguin Group.

2 comments on “Poor Planning Can Lead to a Failed Business

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