Why do companies fail?

Every year, especially in the last couple of years, thousands of established companies either liquidate or file bankruptcy. It is remarkable that so many established businesses that were once successful, simply become irrelevant and loose everything. There can be many causes, but one fatal business management error that has been amplified by this economic crisis is inefficient labor and underpaid talent. There are many companies that manage their employees pay based on what is "fair" or "equal" as opposed to merit or value. In many companies there is a lot of waste in overpaid lower level employees and underpaid upper lever employees that actually bring in money. When times were good it was very easy to keep employees around because they had been with the company for a long time or were close to retirement, even if they did not produce value for the company. Now that revenue's are down, bloated payrolls are feeling the pressure from tight budgets and deficits. This has also caused a lot of employers to underpay or restrict pay from higher level employees that actually have the talent to get them through this tough economic climate. This has cause a surge of new companies being formed and employees changing companies.

Why do companies fail? One key reason is wasteful payroll management. Paying too much for non-producers and not enough for talent is a determining factor in the health of any company. The math simply doesn't work out. If one employee is pulling the weight of 5 non-producers, then eventually the one producer will leave or stop producing, creating a payroll of 6 employees and no revenue. Once that management style is implemented it is just a matter of time before a snowball effect occurs and the entire company crumbles. This is usually caused by poor upper management and uniformed decision makers.

What can you do? If your company is experiencing these same problems then stand up to management and show them the path of the company. If they are unresponsive it would be wise to find a new place to work before you are forced out of your job. Usually companies that mismanage employee payroll have many other issues that will also lead to failure.

What does this have to do with trade show displays? Not much, but its very important business advice in a tough economy!