FOUNDERS: BIGGEST REASON FOR DOWNFALL OF STARTUPS
Let’s have a quick overview of the structure:
How does Bad Management Affect the startup?
What makes a Bad Founder?
Poor Communication Skills
Being a Boss, not a Leader
Not giving Credits to Employees
‘Startup’ is probably the most discussed phenomenon in the 21st-century business world.
What started as a mere ‘risky experiment’ business style in the 1990s has been the most preferred form of business given its low investment requirements and excellent earning potential.
But all isn't rosy in the startup ecosystem. Did you know how many startup businesses fail? This information will give you an idea of what percentage of startups are successful:
9 out of 10 startups don’t make it.
20% of startups fall apart after a year.
30% of startups close within two years.
50% of startups shut their doors within five years.
70% of startups dissolve within ten years.
Quite disheartening, right? Well, most startups are bound to fail, given they lack the strong fundamentals of a traditional business and are, more often than not, a risky affair.
Although there are various causes, managerial ineptitude remains the main issue. Statistics from the end of 2019 indicated that poor management and inexperienced leadership were to blame for 82% of companies failing.
Most startups start with a very small team, but as the firm grows, things go wrong, and stress levels rise. Daily demands may quickly result in poor judgments, unstable processes, and reactionary decisions without well-developed management abilities.
How does Bad Management Affect the startup?
“People don’t quit their job; they quit bad managers,” a phrase not unknown in the corporate world. Poor leadership can quash the spirit of the startup and can lead to a lack of motivation for the employees.
When people start a new business, they often miss out on one crucial thing- Human Resource Management. Creative ideas and initiatives often fall flat without the appropriate skills to manage people.
While in big organizations, managers of departments can be laid off or transferred when poor leadership is affecting the operations, what can be done when the problem lies with the founder itself?
A creative/entrepreneurial mind is not synonymous with a managerial mindset.
What makes a Bad Founder/Manager?
POOR COMMUNICATION SKILLS
Often founders are not able to effectively communicate their vision to the employees, which results in drastic discrepancies between desired results and actual results.
The inability of the founder to take feedback from employees regarding customer feedback, product, quality, etc., leads to poor judgment.
If founders are not able to distinguish between their personality and the business, they can get pretty defensive over criticism and might overlook real problems.
BEING A BOSS, NOT A LEADER
A startup ecosystem differs from a traditional corporate structure since there are no clear boundaries and people often interact with all team members.
Therefore to lead a closely held team, one requires the competence of a leader and not of a boss.
A founder needs to share his vision with his team and work collectively.
One way communication never works in startup culture is it leads to motivation kill and to fuel a startup, one needs enthusiasm and creativity of the highest level.
Leading by an example>>>dictating an example.
The founder of an organization may bring in his relatives and friends as consultants or advisers to help him make decisions.
Personal relationships might spill over to business relationships, and flaws and shortcomings might be overlooked.
The more the employee resembles the founder's characteristics or preferences, the more favor they will receive. They are given better pay and promoted over those more talented and deserving, and their opinions are given more weight.
Consequently, employees grow disengaged and depart when they understand they are in a dead-end scenario.
Favoritism kills natural talent.
NOT GIVING CREDITS TO EMPLOYEE
Entrepreneurs assume that paying employees a wage is adequate compensation for their efforts.
It is not unusual for bosses to adopt a severe management style that keeps staff on the clock and constantly monitored. A founder may have all the qualities of being a successful entrepreneur, but if he lacks people management skills, the chances of his startup making it big are next to nothing.
A founder may have all the qualities of being a successful entrepreneur, but if he lacks people management skills, the chances of the startup making it big are next to nothing.
You may have all the patents in the world, but the most precious asset remains - the people.