Why Businesses Fail

This is the second part in a series, Employee Engagement 101, by guest author Burl Haigwood, a Business Performance Consultant with Evolve Performance Group. Check out the first part on employee engagement vs. disengagement, and the final part on employee engagement programs!

Employee Engagement 101: Why Businesses Fail

Another important piece of the puzzle is for SMBs is to understand why businesses fail. Employee and client engagement are proven business strategies that create a competitive edge in the marketplace. The Ritz Carlton, Nordstrom, Northrop Grumman, Starbucks are all in commodity businesses (e.g., hotel rooms, coffee, clothes, contractor), just like many SMBs. What sets them apart is their investment in human capital and high levels of employee engagement. Most SMBs don’t have the time money or business expertise to invest in capital improvements or process improvements, so they need to focus on their employees and their clients. In most cases human capital investments can be the fastest return on investment for their business.

Why Do SMBs Fail?

According to the “Why SMBs Fail” data I have found in my research (see to the right), failures or lack of performance can mainly be attributed to business owners failing to engage their employees and/or their clients. A lack of working knowledge of how to use employee and client engagement to drive revenue.

In many cases, the existing conditions of location, sales/marketing budgets, product/service, capital, credit, market conditions, regulations and death & taxes can’t easily be corrected. However, properly managing human capital and clients can have an immediate and long-term impact on daily operations of SMBs.

Why Do SMBs Fail? SMBs Need Management Training to Sustain Growth and Increase Their Survivability Rate.

  • According to the U.S. Small Business Administration, 8 of 10 small business start-ups are no longer in existence after five years due to lack of management knowledge and skills.
  • According to Forbes contributor, Eric T. Wagner, the number one reason eight out of ten businesses fail is that they are not really in touch with customers through deep dialogue.
    • “Your customer holds the key to your success deep in their pain, behavior, dreams, values and the jobs they are trying to accomplish.”
  • In his book, Small Business Management, Michael Ames cites lack of experience as his number one reason for business failure.
  • According to Shark Tank’s Robert Herjavec in his book, You Don’t Have to be a Shark: Creating Your Own Success, the third biggest reason why businesses fail is lack of management experience. Note: 8 out of the 11 reasons for failed business cited in this article can be addressed with employee and client engagement business strategies.

My Findings

My experience and research has uncovered some common ground.

  • Employee engagement can be accurately measured and improved.
  • Employee engagement improvements can be quantified into a ROI that saves money, makes money, or reduces the cost of lost opportunities.
  • Employee and client engagement surveys and programs are well-known and accepted business strategies.
  • Improving employee and client engagement takes a combination of survey data, leadership, company-wide communication, and manager/employee education.
  • Improving employee engagement is not accomplished with a single widget or activity.
  • The employee engagement program must be easy-to-understand and implement and save you more time than not taking action

What is often missing in the engagement research journey is “how do I do get it and where do I start?

Evolve Performance Group has reverse engineered what employees need to become engaged and the process what it takes to create a culture of hope, trust, compassion and stability. In the next part of this series, I am going to walk you through that process so that you may improve employee engagement for your business!

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