Poor strategic management leads to business failure

Recent ASIC research found that almost 75 per cent of 2012-13 failures were caused by poor strategic management.

The challenging economic environment often is blamed for small business failures, but recent Australian Securities & Investments Commission research found about 75 per cent of 2012-13 failures were because of poor strategic management and inadequate controls.

In business, leadership is a critical element in producing results.

Control systems provide management with data needed to make important decisions. But typical methods to control performance often are heavy-handed. Effective accountability meth­ods have much more power.

Accountability is different from control. Control is about management enforcing compli­ance from employees. Accountability is a two-way commitment based on a positive relationship between managers and teams, where each supports the other in achieving mutually beneficial goals. Accountability is often confused with responsibility. Responsibility implies a need to complete a task or project.

Accountability is more relationship focused and involves a commitment between people to achieve a specific outcome. It involves two-way communication about progress and performance.

A healthy, accountable environment is where individuals, teams and organisations help each other to execute their responsibilities, co-operatively improve standards and methods, inspire participants to share their results and willingly accept joint and individual liability for achieving them.

To create an environment that enhances accountability, managers need to provide inspirational leadership. Employees who are supporting managers with positive change will be more engaged and more open to being accountable for results. Trust between management and employees is enhanced by this process.

It is difficult to create an environment for positive accountability where there are hidden agendas, poor leadership, favouritism, a lack of clarity of direction, lack of resources, a lack of follow-through or consequences, and the misuse or manipulation of people or data.

A successful leader will focus on building a culture of achievement and accountability around the vision, which requires an openness regarding performance and results. Achieving goals should be celebrated to enhance team spirit and motivation.

Accountability exists on five levels.

Personal accountability is the commitment to take responsibility for your own results and those you can influence.

Individual accountability refers to the relationship individuals have with bosses and workmates.

Team accountability is shared by people who co-operate to achieve common goals.

Organisational accountability is similar to team accountability but at a higher level, where there may be teams of teams.

And stakeholder accountability involves people detached from the organisation who share accountability for setting expectations or providing resources to the organisation and then holding it accountable for reporting results.

The strength of an accountability system is how much each person is inspired by their relationship with their leader.

Typical management control focuses on performance and productivity without sufficient reference to the vision and mission.

Accountability is all about the vision and mission, and measuring performance and results is understood in relation to shared goals and commitments. This ensures all people are on the same page and are working together.

Greg Roworth is the author of Run Your Business on Autopilot: How to Leverage Your Business for Maximum Profit in Minimum Time.