Thursday, October 29, 2015

Most Common Leadership Failures in Startups

Recently, Mr. Mohandas Pai, CEO of Manipal Learning and former CFO of Infosys made a statement that most startups in India will fail. (see: Only 10% of startups will be very successful)

While it is a general truth that 90 percent of startups will fail. Founders often attribute business failure to a range of issues that range from a lack of capital, poor marketing, ineffective product development or the inability to meet demand.

But the real cause for failure is likely to be Leadership.

Leadership, or lack of leadership is a BIG problem startups face. Its not just leadership at the top level, but also at all levels of the company. Leadership issues in the organization eventually boils up slowly leading to implosion of the business.

Here is the list of five most common leadership mistakes:

1. Expecting too much, too soon.

A typical startup is always in a hurry. Projects are not properly planned and demands are constantly changing and adding immense pressure on teams to deliver. This adds undue stress on the team and the team delivers an incomplete or defective products. Expecting too much too soon just doesn't work.

Solution: Leaders must take time to get a clear understanding on expectations and must not be afraid to say "No" when it is not possible to meet new demands.

2. Not providing adequate resources

It is typical of startups to demand something from nothing.

All organizations need: resources, time, and clear requirements. Often times in a startup resources are in critical shortage, this implies spreading the workforce too thin. This will work only in short term - but it also impacts quality of work. Adding unnecessary pressure to an already frenetic work pace does not result in great products.

3. Failure to speak the business language

Startup is not about a product or a service. It is a business that runs on money or cash. The language of business is money. Most technocrats who start companies are not comfortable  in communicating in real numbers of money. Often they end up using "soft terms" instead of hard numbers - which over a period of time leads to poor decisions and eventual failure.

4. Leaders hire & reward conformism.

"We are a great team, we think alike & we work alike." This seems to be a common motto in most startups. Often times, startups are usually all men, in the same age group, with a very similar background and experience. Group thinking often prevails, and that often leads to failure. Anyone who fails to confirm to the leader's thoughts are thrown out.

The reality is that great minds do not always think alike and if one could work effectively with people who have different point of view, and their value is judge on the merit in very important. When you are hiring or promoting someone - first think 5Ws and H questions and then make the decision.

Who is being promoted?
Why is this person being promoted?
What are we promoting, the person or the skill?
When is the opportune time to promote this person?
What will be the obstacles to his or her success?
How can we help him or her? 

5. They don't communicate bad news

Communication is at the heart of getting results. Good news or bad must be communicated. Bad news in particular must be communicated with great care & clarity.

Down playing bad news or sugaring up failures in town hall meetings is a very common mistake. As a result the team does not know how to adjust to the actual reality and that in turn leads to poor decisions.

Leadership at start ups have to be very open when communicating internally with all employees, and that clarity which comes from effective communication helps everyone to take better decisions.