Question

How can the following cause Management failure? Cite a situation that fits each factor. (If possible related to health sector)

1. Failing to establish good internal communication and cooperation

2. Emphasis on short term financial performance

3. Neglecting operations strategy

4. Inability to implement effective risk management

5. Poor governance

Answer 1

1. Failing to establish good internal communication and cooperation

Communication and collaboration are critical to day-to-day operations considering multiple stakeholders are involved in the same. Firms, of late are employing wide range of collaboration tools to ensure the employees communicate effectively and easily.

Failing to establish good internal communication will result in delays in the projects or dependent activities leading to scope creep, increased cost of resources etc. Also, incorrect or ineffective communication will impact the quality of the product or service negatively leading to client/customer dissatisfaction.

2. Emphasis on short term financial performance

For any company to sustain, it is important to focus on long term financial performance compared to short term.

For example, if a company offers huge discounts to increase immediate sales in the next quarter or so, they might sell huge volumes and reap revenues for the quarter but they can't sustain with the discounts in longer run as they can't sustain the costs resulting in decline in profits. Hence, the firm should emphasis on how to improve the quality of the product or service while maintaining reasonable prices to ensure long-term financial performance.

3. Neglecting operations strategy

Operations strategy is a strategy at an operational or departmental level which should be in line with the business strategy of the firm.

If the firm neglects operations strategy, there will be no clear direction to the personnel on their KPIs and target performance resulting in lack of synchronization among operations, finance, marketing etc. resulting in conflicting view points and eventually hitting financial performance.

4. Inability to implement effective risk management

Risk management involves identification and mitigation of risks in business through both proactive and reactive measures. Considering a firm's business is impacted by various internal and external factors, it is imperative to implement an effective risk management strategy failing which the firm's business will result in chaos if a major issue or risk arises. Lack of risk management will lead to huge costs and loss of revenues.

For example, if a firm is into banking and doesn't have any regulations on the amount of loans and lack of checks on the individuals who will be provided loans, it will end up accumulating huge amount of Non-performing Assets(NPAs) due to its inability to collect the amount back from the individual or group resulting in financial loss.

5. Poor governance

Governance is critical to a firm's operations as it provides the required strategic direction and contains the resources to the rules and regulations to ensure discipline in the day-to-day operations of a business.

Poor Governance will result in lack of credibility from senior management leading to the employees not adhering to discipline in work resulting in financial loss.