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4 Traits Needed by Business Managers to Keep them in the Black

April 16, 2015

 

 

As an Insolvency practitioner, I deal with many businesses which are suffering considerable financial stress and hardship. These can be caused by a range of factors, both internal and external to the organisation.  However, in most cases, poor management is the key factor which will eventually cause a business to stumble.

 

Why is good management important?

If economic conditions are good, and customers keep coming in the door, then a business may get by with a poor manager at the helm.  This, however, will only work for a limited time in the right economic conditions. If the conditions change and the flow of customers slows down, then there will be trouble.

 

If there a change in external conditions, for example a slow down in the industry, then a good manager may make all the difference.  A good manager will know where the business should be heading, how to get it there and how to react to changes which will impact on the business.

 

Key Traits of a Good Manager

 

In my experience of running my own firm and reviewing the health of many other firms, I believe that there are four traits that are vital to any manager, regardless of the industry they are operating in. They are:

 

1.  Vision

2.  Leadership

3.  Realist

4.  A good head for business

 

I will talk about each of these elements in turn.

 

Vision

 

Vision is having a picture of where you want the business to be in 1, 5, 10, even 20 years time. Without vision, a company will just aimlessly drift.  It is the equivalent of steering a ship without knowing the destination.  It may be adventurous, but at the end of the day, you will probably have only travelled in circles or even worse, steered unwittingly onto rocks, resulting in shipwreck.

 

Vision is required whether you are a small retail outlet or a large manufacturer operating on a global level.  If a manager knows where the business should be in the future, then they will be able to develop appropriate systems, employ the right staff and make all the right business decisions to help them get there intact.

 

Leadership

 

Leadership is the second aspect which is vital for success.  A manager needs to know how to lead the business toward towards the goal using all the available resources.  Using our sailing example again, once the destination is known, a good captain needs to be able to use all of the tools at their disposal so that the boat safely reaches its destination.  This is not just about manning the helm but also about making full use of the prevailing breezes and full use of crew. For a business manager the tools available include staff, money, opportunities, company assets, systems etc.  A good manager will know how to lead so that all of these tools are used efficiently and effectively.

 

Another key area in good leadership is leading your staff.  This means effectively communicating your vision for the business to your staff so that they come to share the same vision.  This can be difficult because staff members are all different but successful managers ensure their vision is shared, and get the best from their staff as a result.

 

Realistic

 

Vision and leadership are only effective if they are realistic.  For example, a small retail outlet may be setting their vision unrealistically high if they expect to corner the Australian retail tile market in six months. The goal needs to be high but also achievable otherwise it will only lead to low staff morale and stress for the manager.  A good manager also has to be able to see situations objectively and know when things are working and when they are not.  If something is not working well, then a good manager will need to be able to adapt to what is required. 

 

A Good Head for Business

 

Finally, a good head for business is vital.  Many people go into business because they have grown up in an industry and decide that they now want to work for themselves.  Knowing the industry you are operating in will only get a manager so far.  An effective manager must also have a financial understanding of the business.  This sounds basic but I have assisted many businesses that were run by people who were excellent at what they did, but had no idea if they were making or losing money while they did it.

 

Does the following sound Familiar?

 

I was recently involved with a company that operated a retail outlet in Melbourne.  It was not unusual for a small retail company in that the owner of the business was involved in all aspects of the business from balancing the books through to customer service and sales.

 

In this instance, the owner was excellent at selling the product but had limited knowledge or interest in the financial books of the company.  This only became a problem when the industry quietened but the business could not survive.  This is a classic case of a manager having the industry knowledge but not the general business knowledge. Happily, we were able to negotiate the sale of the business to someone who did have the general business knowledge and who employed the previous manager to sell the product which he did very well.  The business not only survived but both the new and old owners are doing what they do best!

 

How do you find out if you are a good manager?  Talk to your accountant and look at the business performance over the years that you have been managing.  External factors may well impact which are beyond your control, but look honestly at the situation. Talk to your employees and talk to other managers in the industry and see what they do.  It might be that your accountant or a specialist could suggest ways to improve your management, or changes to get your company back on course.

 

Bruce Mulvaney is a Fellow Chartered Accountant and Turnaround and Insolvency Practitioner operating from Melbourne's eastern suburbs. He is a past State Chairman and National Board Member of the Institute of Chartered Accountants in Australia.

 

He is freely available for speaking engagements for business groups and industry associations.

 

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