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Leadership mistakes made by small business owners

Published: 29 March 2007 by CA

I am "CA" Atreya (PMP, MBA), the author of this blog. I help businesses in Atlantic Canada achieve their BHAG successfully. You may subscribe to this blog using a feed reader (RSS). Note: We have moved the blog to a new domain to better reflect this blog's objectives.

Having worked with a number of small business leaders, I have noticed that they all commit some common mistakes. Here is my list of the top five mistakes they make:

1. Attitude towards employees: Some leaders do not value employees at all. Employees are not treated with respect and their work not valued at all. Small business owner syndrome is one of the main reasons why such organizations hit a wall. This is one of the most deadliest mistakes I have seen entrepreneurs make. High employee churn is expensive: cost of hiring, opportunity losses, loss of productivity all costs the small business when they cannot afford this.

2. Haphazard hiring process: Small businesses have scarce resources. Hence, employees need to be multi-skilled. They should have a “Let me do what-ever I can to make this work” approach. Hiring an employee with no experience in small business is a mistake. Employees who have worked in large organizations have a silo mentality and are usually not the right fit and cannot adapt to the small business culture. Entrepreneurs do not spend enough time upfront during the recruitment process and evaluate potential employees. At best the recruitment process is haphazard and often times lacks strategy. Rigorous background checks are essential and so is “integrity” screening.

3. No feedback, monitoring and evaluation: Conflict avoidance leaders are not helping themselves by holding back constructive feedback. I recommend providing feedback as conversations during day-to-day activities when it is fresh in the mind rather than wait for a formal performance review. It also gives the leader and the employee an opportunity to evaluate and measure performance continuously. I came across this article on how a hiring decision can go bad.

4. Not communicating the organization’s vision and mission: I have never seen any small business leader say this without being prompted for one. Merely hanging this on the wall is not enough. Employees need to understand where the organization is going; what its goals and objectives are. If they do not know where the organization is going, they will be unable to help you reach organizational goals.

5. No marketing: Once a CEO told me after about a year I joined a small business “I was not in favor of appointing a marketing person. I did not think we needed a marketing person.” I cannot, for the life of me, figure out why would an organization not have a marketing strategy or a plan. It is as natural as breathing. There shouldn’t be any debate on that subject. Some CEOs do not see the relation between sales and marketing. For some reason, CEOs view marketing as an expense instead of an investment. (It does go down in accounting as an expense – but we are not talking accounts here). Sales will get you the orders but marketing will retain them. Marketing is a strategic tool through which brand is established and sales pipeline populated, among other things. Failure to actively pursue marketing activities hampers your organization’s ability to compete.

6. Survival mode: Did I say five mistakes above? I could not resist to sneak this one in. I once worked with a small business CEO who often quoted this. And he used this as an excuse for his lack of business focus. In an attempt to get more sales, he would discount the order so much that the sale was no longer profitable. The worse was to reduce delivery time. This put a lot of strain on existing projects and developers churned out code that went directly to customers without comprehensive testing. Is it any surprise that the business continued in the “survival mode” for a prolonged period? If your business is in survival mode for any considerable length of time (six months to a year as a thumb rule) you may want to look for an alternative career.

I’d love to hear from you what you think are the top five leadership mistakes that entrepreneurs commit.

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10 Comments »

  • Irakli Nadareishvili said:

    Wonderful, very thoughtful analysis. Could not agree more. Thanks for putting it together.

    # 1 April 2007 at 11:34 pm
  • CA said:

    Thanks for dropping by Irakli. All the best with your blog.

    # 2 April 2007 at 1:57 am
  • Startup Spark said:

    [...]Top 10 Surefire Ways To Come Up With A Million Dollar Idea. It’s an entertaining look at coming up with great ideas, with some worthwhile links out to other sites. I particularly like reasons #3, #6 and #10. CA provides 6 leadership mistakes made by small business owners. These ring very true, and I’ve seen them many times over. All 6 reasons are bang on. The last one, which CA sneaks in at the end, is particularly interesting because it’s about survival mode, something I[...]

    # 4 April 2007 at 4:11 pm
  • Show Me the Money said:

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    # 9 April 2007 at 8:02 pm
  • Stephen Calhoun said:

    You forgot the number one small business owner’s mistake, even if it is often the context to #1.

    Thinking that because you’re the owner/boss, BY DEFINITION, you are the: smartest, most knowing, (’all knowing,’) and most exemplary person in your business.

    It is not for nothing that persons who would otherwise be working for someone else often start their own businesses because they don’t want to be under somebody else’s thumb. Alas, these same people can have crushing thumbs.

    Perhaps the hardest truism for many entrepreneurial types to adhere to is the one that states: ‘hire people smarter than you are and unleash them.’ One of the classic business failure syndromes follows from the owner becoming seduced by their own powers while capable people are literally prevented from solving garden-variety business problems.

    I’ve observed and worked for numerous businesses that evaluated everything and everyone except for the boss and leadership. In total consider this the ‘emperor with no clothes’ syndrome and consider how common it is among business owners who don’t like being second fiddle to anybody, even those with proven capabilities, smarts, and dedication.

    # 11 April 2007 at 3:38 pm
  • Charan Atreya said:

    Stephen, your observations are perfectly valid. Thank you for highlighting them.

    I myself have been at the receiving of statements like “I pay your salary”. Another statement I have heard is, “I get two votes and each of you get half”. In the last two years that I have been in Canada, I know of at least one great product that will fail miserably due to this attitude from small business owners.

    # 11 April 2007 at 7:02 pm
  • JTreiber said:

    Thanks for these great insight guys. Definitely helpful as we try to launch our new venture.

    # 13 April 2007 at 11:27 am
  • Charan Atreya said:

    I am glad the article and subsequent conversations have been useful, Jonathan. All the best in your venture.

    # 14 April 2007 at 12:08 am
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    # 17 April 2007 at 10:53 am
  • MabelandHarry said:

    [...]Leadership mistakes made by small business owners posted at IQI Strategic Management, Inc., saying, “Having worked with a number of small businesses, I find a common theme among the many mistakes they make - most of them people related. Here is my most important list.”[...]

    # 27 April 2007 at 7:18 pm

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