Finkelstein in work “Why smart executives fail: And what you can learn from their mistakes” reveals that the success of a company depends to a large extent on executives, what decisions they make, how they operate in an ever-changing business environment, and how they respond to the emerging problems and difficulties that any modern business faces. Even smart and seemingly successful executives can fail for a variety of reasons. Learning from others’ experiences and mistakes as well as understanding their reasons, might help to avoid them or identify and solve problems that can lead to the collapse of a successful business even before they happen.
All companies that were successful at first and then failed have some common features. The majority of initially successful businesses fail at four critical business stages: launching new initiatives, dealing with innovation and change, handling mergers and acquisitions, and coping with new competitive challenges (Finkelstein, 2004). However, many companies go through these stages successfully. This happens due to proper management and competent decisions of executives. Rapid business failures in these stages are triggered by four damaging practices that present themselves long before the business falls, unbeknownst to everyone. They include incorrect executive thinking that affects the organization’s perspective of reality, delusional attitudes that maintain this false reality, faults in communication mechanisms meant to process potentially urgent information, and company executives’ refusal to modify their course (Finkelstein, 2004). All these mistakes are related to the decisions of the owners and directors, and to build a successful business, they must be understood and avoided.
Incorrect executive thinking that affects the organization’s perspective of reality is one of the most critical issues that can destroy a company. Having owners as managers could be disastrous for the business, as happened with Samsung Motors, which was owned and operated by Lee, and no one could stop his misguided decisions (Finkelstein, 2004). Internal company factors such as al factors organizational structure, culture, leadership, and technology are all linked to a company’s flexibility and innovativeness (Bashir & Verma, 2019). The construction of such a stable internal structure allows the creation of a system that makes it impossible to distort the perception of reality by executives and their absolute power in the company. When the organizational system meets the needs of the company, the feasibility of making key decisions is analyzed at several stages, which makes it possible to evaluate whether it meets the interests of the entire organization and not just the ambitions of management. A balanced structure and internal culture are effective means of countering company pride which leads to the problem of distortion of reality (Durrah et al., 2019). When employees are motivated to tell the truth to management, it helps prevent a potentially dangerous decision for the company.
One more critical issue is how managers view their firms’ reality and react to it. Many major corporate blunders are the result of both inactivity and incorrect executive action (Finkelstein, 2004). A company’s ability to adapt to the changing world around it is one of the most important aspects of its success. One of the first major mistakes made by business owners and executives in an article by Finkelstein (2004) is that they deliberately chose not to react to change even when they knew it was coming. When a wrong decision has already been made, and the company is moving in that direction at a particular stage, it becomes evident that the decision was wrong. Effective business process management is vital to successful management in such cases (Badakhshan et al., 2020). Timely response to the processes taking place, analysis, measurement, and optimization in such cases can save the company even when a mistake has already been made.
It is necessary to analyze and understand the causes and consequences of managers’ mistakes in order to build a successful business and achieve company development. However, at the moment when managers or business owners make such decisions, which later lead to the collapse of the company, they are most often sure of the correctness of these decisions. Therefore, building such a system in the company, which will allow for minimizing such mistakes, is the key to successful operations.
References
Badakhshan, P., Conboy, K., Grisold, T., & vom Brocke, J. (2020). Agile business process management: A systematic literature review and an integrated framework. Business Process Management Journal, 26(6), 1505-1523. Web.
Bashir, M., & Verma, R. (2019). Internal factors & consequences of business model innovation. Management Decision, 57(1), 262-290. Web.
Durrah, O., Chaudhary, M., & Gharib, M. (2019). Organizational cynicism and its impact on organizational pride in industrial organizations. International journal of environmental research and public health, 16(7), 1203. Web.
Finkelstein, S. (2004). Why smart executives fail: And what you can learn from their mistakes. Penguin.