10+ dumb business decisions that can take a company down

Hubris, big egos, poor foresight, and lack of humanity kill great companies — small and large — every year. We can learn from their misguided decisions, but we need to do it before more of our businesses fail and more of our country’s leadership is lost forever.

The following list of mistakes represents some of the dumbest thinking by companies across all industries. Read about them and learn from their failures.

Note: This information is also available as a PDF download.

#1: “Let’s cut back on customer service levels to save money”

“Due to unusually high levels of calls, we are experiencing long delays before we can answer your call.” What kind of crap is that? What they really mean is, “Because we don’t want to spend as much money on customer service as we should, we’ll put you in a queue for as long as you can stand it before hanging up.” I recently spent 45 minutes in a Verizon queue that never ended. On the other hand, T-Mobile answered my call in under 20 seconds. Guess who has my business and my loyalty now? This is particularly dumb because the cost to acquire a new customer easily offset the costs of having a few more operators.

#2: “Human beings can be replaced with machines to answer our phones”

Today, it’s a treat when we call a business and get an actual employee on the phone. Very few voicemail systems are as smart as they are supposed to be, and these poor tech systems cause untold losses in sales, customer loyalty, and goodwill. I am seeing a lot of real-world evidence that the cost of having a receptionist is easily offset by the improved customer satisfaction generated. My advice: Break away from the crowd and show your customers that you care about how they feel.

#3: “We have to pay our employees less because payroll is the single biggest expense line we have”

Many companies pay as little as they can get away with in a misguided quest for better expense management. Most of these organizations experience high employee turnover and then must spend more money hiring and training newbies. In addition, this approach has hard-to-quantify opportunity costs because companies often lose profits and customers as a result of providing bad service and care while they are understaffed or using poorly trained personnel. Circuit City’s decision to “manage” expenses this way is a big reason it’s going bankrupt while other retailers are surviving.

#4: “We’ve been very successful, so let’s grow the company more quickly”

Expanding too fast, aka the Starbucks phenomenon, can take a great concept and push it so far that it’s boring and common. The result may be stores that all look the same, staffed with lazy employees, making the business ripe for competition. Soon, every neighborhood has a couple of coffee shops, and every fast food place offers good coffee for less money. We’ve seen this occur time and again in many industries, but it’s not limited to retail or other businesses serving the public. Many analysts suggest that the downturn of once-great companies, like Boeing, Gateway, Atari, and Westinghouse, was caused by growing too quickly for their own good.

#5: “We’ll get better results if we hire a superstar manager to run this place”

These types are usually more about promoting themselves as a brand than looking after the company — and as a result, the company’s results tank. Check out what happened to these companies when they had superstars at the helm: Carley Fiorina at HP, Ed Zander (who is still at Motorola but under a lot of pressure), and Robert Nardelli of Home Depot (now CEO of Chrysler). All of these companies paid a premium for superstars who then oversaw very poor results.

#6: “Our company is so cool we will always have a large pool of talent available”

History is littered with once cool companies that took their ability to attract good talent for granted and now can’t regain that cache. For example, The GAP, Yahoo, and General Motors were all considered to be “the” place to work at one time or another. Then too late, they realized that all the great talent was going elsewhere. Their results show what can happen when we take ourselves too seriously. In today’s economy and in a worldwide marketplace, coolness is pretty fleeting, and the job opportunities for the best employees have become especially broad.

#7: “There’s no place for family in the workplace”

Not having a sound maternity, paternity, or day care policy affects an organization’s long-term success. Today’s workforce wants to work with companies that respect their desires for family; they will leave to find it. As more countries find that they may soon be unable to provide citizens with healthcare and pensions, this is a bigger deal than ever. Most young women work, and more young men have been raised by women who instilled in them the importance of family. Companies like SAS provide a great example to others who want to attract and retain the best talent in the market. And this doesn’t reduce the company’s profits or ROI.

#8: “Let’s be honest: Women are always going to want to have babies, so it’s dangerous to promote them too far up the ladder”

WPP, the world’s largest ad agency, fired its company head for this philosophy just two years ago, so don’t think it doesn’t still exist. And if you don’t know it yet, I’m happy to tell you: Women are tired of this attitude. It’s part of the reason that most business startups are being led by women in North America.

#9: “We are an equal opportunity employer — it just looks like we’re not”

Having a management team or a boardroom full of men who all look the same might make all of them feel smart and comfortable, but it reduces new idea flow for better decisions. I am amazed that fewer than 6% of America’s largest companies have female CEO’s, and the number of companies headed by men who aren’t white is insignificant. Research on this is clear: Companies with better diversity plans have better shareholder ROI and profit margins than their counterparts. And by the way, it’s more human to treat all of us equally.

#10: “We promoted Charley because he got great results in his last job”

Presuming that someone who is good in one role will be just as good in a broader role can be the kiss of death for the employee and the organization. This can take the form of promoting people beyond their level of competency or broadening scope beyond their capacity. For example, just because someone is a great engineer doesn’t mean he or she has the right skills to manage a department of engineers. Likewise, just because someone was tough enough to win business from a competitor doesn’t mean he or she has what it takes to manage a group or team. These are different skillsets.

#11: “When things get rough, it’s smart to take our time to make prudent business decisions”

Actually, it’s usually better never than late. The decline of Ford has showed that reacting to market shifts and changes too late makes it next to impossible to regain lost ground. Caught in a difficult economy, with smart competitors, Ford tried to “save its way to success” by cutting expenses and reducing the volume sales of less profitable cars and sales outlets. Then, it chased high-end customers with lackluster premium brands, like Lincoln and Jaguar, while neglecting for too long its core customers’ attraction to smart and good-looking cars, like the Camry and Civic. As a result, it will never again be America’s #2 car company, and it’s likely that it may simply become an interesting niche player in the global economy.

John McKee is the author of Career Wisdom and 21 Ways Women in Management Shoot Themselves in the Foot and is one of America’s leading executive coaches. His Web site, BusinessSuccessCoach.net, is an online destination for professionals, from small and large business owners to entry-level managers to senior-level executives - and everyone in between. He writes a weekly blog called Success Coach in the TechRepublic IT Leadership section.