Peak SBC, LLC  



by: Cary Christian

In Parts 1 and 2 of this series, we reviewed five money problems and five strategic problems that explain how small businesses get into trouble. We're going to wrap up this series by looking at people problems.

Business organizations are inherently social organizations. There are relationships between employees and their bosses, employees and other employees, employees and customers, employees and vendors, the business and its outside consultants, and many other types of social interactions that can each cause problems of some sort. In fact, people problems may just be the most difficult type of problem to deal with.

It would be nice if we were all well-schooled in psychology and could avoid people problems by simply not hiring or associating with people that have the potential of causing problems. But that is unrealistic in many ways other than the obvious. You simply never know who might or might not be a problem individual under stress. No amount of psychological training is going to equip the small business owner to make such a determination and be 100 percent accurate.

There is also no way to know how effective an individual is going to be for an organization. A person may be nice, kind, polite, have a great educational background and a good work history, but just cannot function well in your organization. Is this the fault of the individual or the organization? How can you tell?

The stakes are high. More than a few small businesses have been ruined because the entrepreneur made poor decisions relative to the people he or she chose to associate with and how relationships with these individuals were maintained.


1. Failure to train employees properly.

Not all problems with people are related to personality. In fact, most problems that small businesses must face relate to the inability of the business to train employees for the tasks for which they are to be responsible.

There is a major difference here in the capabilities of large and small organizations. Large organizations generally have a formalized training structure in place for new hires. Small organizations generally rely on on-the-job training carried out by individuals who themselves have been poorly trained and thus are in no position to train anyone else.

Business is transacted by people. If the people who work for the business are poorly trained it will always reflect negatively on the bottom line. Always.

It is critical that new employee training be carried out by people who are both knowledgeable in the subject matter of the training and capable of training effectively. If no employees meet this criteria, then a trainer or trainers must be brought in from the outside.

Poorly trained employees create more problems than just errors in their work product. They also become a drain on morale and can create problems with other employees, customers and vendors.

2. Failure to appreciate the contributions of employees.

It is not uncommon for employees of small businesses to feel unappreciated. Larger organizations have structures in place to recognize employee achievements and are better able to reward outstanding efforts financially.

Small businesses make a number of mistakes in this area. Some examples are:

- Treating employees as though they are easily replaceable.
- Failure to provide reasonable benefits.
- Little or no recognition of outstanding accomplishments.
- Failure to respect the value of employees' time.
- Failure to ask for and respect employees' opinions.

Entrepreneurs sometimes treat employees like they are family, and this is generally a good thing. It can become a negative, however. People generally expect their families to help them out to the greatest extent possible while expecting little or nothing in return. They do it because they are family. Your employees will never BE family. They need more appreciation and recognition than family will ever need.

Employees are the life-blood of any business organization. It is critical that employees feel like they are part of the team, are respected, are well compensated, and that their efforts are truly appreciated by the owners. Small businesses who look at employment costs first when seeking to control or reduce expenses are making a mistake that can be deadly.

3. Hiring or trusting the wrong people.

I once knew a business that was doing well, employing about 15 people, making decent profits for the owners, and growing slowly every year. The owner decided he was ready to take the plunge and take the business to the next level.

He hired a man who was generally recognized as being one of the best sales organization builders in the business to open several new offices and introduce new product lines at all locations. The business quintupled in size within six months. New locations were opened in two other cities in the same state and total employees grew to in excess of 125. Everything looked good.

But . . . the owner had lost control. The new hire demanded the world and threatened to walk out if his demands were not met. They were met until one day the owner could stand it no more and told the man to get out. He did. And he took every employee he brought into the organization with him! His people collected the businesses' receivables and left it with the bills due to vendors. He opened competing businesses in each city using his former employer's own money to destroy him. And destroy him he did.

The owner of this small business actually knew that this man had done this very same thing to two other businesses before him. He hired him anyway because he thought he could control the situation.

The moral of the story? A small business needs to know who they are dealing with and refuse to let greed lead them down the path to destruction. Hiring or associating with people who are not VERIFIABLY trustworthy and honest, no matter how good the individual might be at his job, will always be mistake.

4. Creating an atmosphere of mistrust.

It is important that employees, customers, vendors and others that have relationships with a business trust the owners. I have seen situations where owners intentionally create an atmosphere of mistrust for purposes of control, but I won't address those situations because there is really nothing to say about them.

But in other cases, owners create an atmosphere of mistrust without meaning to. This can happen when an owner fails to recognize the contributions of employees and where owners fail to deliver on their promises whether they be promises made to employees, vendors or customers.

Vendors and customers will simply refuse to do business with an organization they can feel they can no longer trust. Employees will be constantly on the lookout for another job opportunity and job performance will suffer. Business results of operations suffers in direct proportion to this growth of mistrust.

Small business owners need to always be mindful of their actions and the consequences. For example, I know of one situation where the owners regularly pocket the cash from cash sales made by the business. The cash they take is properly accounted for in all ways but the employees do not necessarily know that.

Some employees think they are stealing from the business and cheating on their taxes. Some have even lodged complaints with taxing authorities, (anonymously, of course). All of this could be avoided by following simple procedures designed to eliminate the appearance of impropriety.

Bottom line? Sometimes owners tend to think of their business as an extension of their personal lives and personal checkbook and do things they would never think of doing if they were the CEO of a business they did not own. This always creates problems in some fashion. Small businesses must create procedures that build trust and operate in compliance with them.

Entrepreneurs must build the character of the organization. Businesses have a reputation just like individuals do and that reputation is key to continued success.

5. Hiring the wrong consultants.

Consultants can add a lot of value to a small business enterprise. Small businesses generally cannot afford Fortune 500 executives, so they should include in the budget funds for the best consultants available. The hourly fees may be scary, but the right consultant will be worth many times the amount of the fees charged.

Small businesses make a big mistake when they make it a practice to hire the cheapest accountants, attorneys and business advisors they can find. Consultants should be hired based on their experience level, their reputation, and what they can do for the business. The capabilities of the consultant should be matched with the project at hand. If the project is critical, the small business simply cannot afford not to hire the best.


Small businesses are the fuel that runs the engines of commerce in every country throughout the world. Opportunities abound for small businesses that can operate on par with world class organizations. Avoiding the problems discussed in this article series is a good first step toward making your own organization world class.

Copyright (c) 2002

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