Finding better ways of rescuing failing companies is a matter of much debate thanks to impetus from the current government.
Lots of heat and light is also being generated around the topic of start-ups. Surely it’s surprising then, that we hear nothing about why established enterprises go bust in the first place.
I am firmly of the view that too many businesses find themselves at the top of the slippery slope and too many managers fail to realise they are skidding fast towards the point of no return.
I am a licensed insolvency practitioner, incoming president of R3 (the body representing professionals who help underperforming businesses) and a corporate recovery partner at KPMG. So, you may think, I protest too much. However, I firmly believe I would not be as busy if business managers were more effective and less blinkered.
R3’s recently published survey of corporate failure and rescue in Britain indicated that poor management was the principal cause of corporate failure.
My experience leads me to believe that at least four out of every five preventable insolvencies can be laid at management’s door.
I accept there are many hopeless cases every year where managers cannot be blamed. I also accept that survival of the fittest means some will not succeed.
I certainly don’t believe only people with something akin to a ‘chartered director’ qualification should be allowed to start-up in business. Entrepreneurship should be an option for all. Failed entrepreneurs should be entitled to try again.
I am of the view that more rescues will succeed if managers recognise they are often part of the problem. In the course of dealing with the crises I hear banks condemned, the economy blamed. The fault lies with the bloke next door who won’t pay. It is rare to hear a manager say ‘we should have seen this coming’.
The R3 survey also showed, in three-quarters of cases, things have gone too far to effect a rescue by the time we get involved. I, of course, would say the solution at least partly lies in getting managers to take advice as soon as they realise they have a problem. You might say a little more foresight would mean they would not need our help at all.
A couple of years ago R3 published a guide to avoiding failure. The Ostrich’s Guide to Business Recovery. Some 36,000 people asked for copies. But, it seems the problem has not been solved – there are still far too many people out there with their heads in the sand.