Emergic: Rajesh Jain's Blog

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Why Do Most Companies Fail?

March 12th, 2006 · No Comments

Paul Allen answers:

My guess is that most companies fail primarily because they dont have the right team of people. The CEO might not be right, or the CEO hasnt chosen the right people in the right positions, because most CEOs dont know the talent level required at each position and the teamwork needed to build a successful company.

This is especially true of young CEOs, who havent been around the block, who havent seen great talent in action, in all the roles necessary to build a successful company.

The more I think about what CEOs do, the more I seem to think a comparison to a basketball coach is appropriate. To have a successful company, most businesses need key people in several categories including research & development, manufacturing, IT, finance, marketing, sales, and HR. Many CEOs may have personally succeeded in one of these areas. For example, most Inc 500 CEOs say they are personally strong in sales and marketing. I think the number was 80% last time I saw a survey.

But CEOs of struggling companies most likely have strong employees in areas where they know what talent is, but mediocre employees in all the other areas that theyve never coached before.

If a CEO has never worked for a company with a great finance person, how can they be expected to hire someone that is great? Same with every position in the company.

Tags: Entrepreneurship

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