Mismanagement in Industry

As an English proverb goes, he who makes no mistakes makes nothing. But errors in management may cost companies a lot of money, and very many people may suffer. Sometimes it is too late to correct errors.

First of all, it is essential to find out if any mistakes have been made in running a company. Executives should analyse their work and clearly understand positive and negative effects of their activity. If it is possible to correct a mistake, it must be done without delay.

But it is safer to avoid mismanagement than to correct mistakes. Prevention is better than cure. That's why experts in management classify and explain typical managerial errors in different sectors of economy.

T. M. Rohan, a respected authority on management, believes that there are some causes of mismanagement in American industrial companies.

In industry managers sometimes make mistakes. One of the most critical issues for managers is whether they are able or unwilling to learn from their mistakes. It's important to understand what commonly causes errors in management and not to repeat them in future. What mistakes are avoidable?

Some managers become victims of poor market research. Others misjudge their potential buyers. According to some American experts in executive recruitment, a glaring mistake many managers make is surrounding themselves with yes men. They hire those who take orders – or they let them go. And then they ruin their companies. Sometimes other mistakes result in losses for companies.

Egos. Some executives just have colossal egos and can never admit their mistakes. With regard to such people, their companies' directors should investigate and make changes before it's too late.

One company in the electronic business was building components for other builders to use and put their names on. Management there never thought the Japanese or Koreans could build better quality at a lower price, even though some people within their own company pointed out it was already starting to happen.

They decided to start making the rest of the components of the finished product themselves and thus jump into the consumer-goods field – even though their own customers warned them they were getting parts from Asia.

It was very difficult to this sales-oriented company to jump into manufacturing. The company lost much money because of poor management.

Favoritism. Another source of management mistakes is putting too much emphasis on how certain people fit into the culture of a company. No attention is paid even to their mistakes. Other people are made the scapegoats for any mistake.

Outsiders' advice. There are also errors made by listening (or not listening) to outsiders. Their opinions should be analyzed and discussed. Some experts' advice should be ignored. On the other hand, there are many "outsiders", from whom management can learn valuable lessons. Very often suppliers' suggestions help to improve customer service.

Bad business. Sometimes companies can't do business well. They produce low quality products. Or they don't investigate the real cost of the product at the market. Or they can't work with customers.

Here are some examples.

Some suppliers sold more than they could and didn't make promised delivery dates. They never told the customer, because they didn't want to lose the order. This resulted in losses for both companies.

One company tried to sell $100.000 machines to an industry whose major capital investment was $600 machines. It wasn't successful, though the product was technologically new. This mistake was caused by misjudging the market.

At another company they used to coddle their customers too much. Typically, if a customer told them he made a small mistake on a design and wanted it changed, they would do it without charge. But they found some of these changes were costing them $10.000 and three weeks delay in delivery. So they started charging customers, as most others in their business already did. The results were good.

In the current period of recession, most companies have found themselves in a hopeless or critical situation. Many firms have gone bankrupt and had to stop their business activities. Others have reduced the rate of production and suffered great losses. A great many of people have become unemployed.

Experts single out a number of specific errors in management during the downturn. On the one hand, the crisis has revealed and visualized the drawbacks characteristic of any period of economic development: poor assessment of market tendencies, mistakes in estimation of demand and supply, errors in production management and quality control, shortcomings in work organization, staff management, and customer service.

On the other hand, the crisis has caused some strategic errors in business management. In the present uncertain times, many CEOs are not able to adapt to the existing conditions and change their strategy. Some of them are not ready to save and cut expenditures. For others it is difficult to fire workers. Sometimes CEOs are not able to assess the situation soberly: they either exaggerate the menace to the company or overestimate the difficulties and raise a panic.

There are firms economizing on research and development investments. Most experts claim that it is a great strategic error which can cause loss of market share and lagging behind competitors.

During the downturn company leaders must be wise to act according to crisis scenarios and take effective steps to survive.

Exercise 10. Find in the text the equivalents of these words and word combinations.

Положительное и отрицательное воздействие их деятельности, безотлагательно, исправлять ошибки, обычно, объясняют типичные ошибки в управлении, не готовы учиться на ошибках, плохое исследование рынка, недооценивают потенциальных покупателей, губят свои компании, приводят к потерям, огромное самомнение, не могут признать свои ошибки, остальные детали готовой продукции, неожиданно переключиться на производство, продать машины стоимость 100 тысяч долларов, задержка поставки товаров на три недели, в нынешний период рецессии, обанкротились, оценка спроса и предложения, управление персоналом, стратегические ошибки в управлении коммерческим предприятием.

 

Exercise 11. Answer the following questions in pairs.

1. What are the most common mistakes in business?

2. What should executives do to avoid mismanagement?

3. Why must company directors get rid of managers having colossal egos?

4. What is favouritism in management?

5. What is the proper attitude to outsiders' advice?

6. The golden mean is good in treating customers. Do you agree? Prove it.

7. What managerial errors has the current recession caused?

 

Exercise 12. Read the information about production management and the manager's lines of activity in companies. What are the 5M's? What responsibilities mustn't be neglected in manufacturing industries?