From the ASX top 200 to SMEs: the 7 most frequent failures by Australian organisations

By David Smith. Published at Jun 13, 2019, in Features

David Smith, Principal Advisor in Business Improvement at SAI Global, highlights the most frequent audit failures for Australian businesses.

Australia still has a long way to go to producing the highest quality services and products. Problems associated with quality usually come from organisations failing to set realistic objectives; and not effectively marrying their processes, systems and employee talent cohesively within their organisations to meet those objectives.

SAI Global’s top 7 businesses failures, as revealed by its audits:

  1. Lack of effective strategic planning. Any business audit should seek proof of a business strategy, and proof that the strategy is being reviewed and followed, that the business understands its strengths and weaknesses, and its market and competition. Audit failures here are more common among small-to-medium businesses. We find smaller businesses more commonly have less of a focus on strategy and direction. They are too busy running their business and don’t have the resources to look at the bigger picture. As such, they have less of an understanding of the competitive environment, are less able to compete, and often struggle to identify opportunities and grow.
  2. Mid-level and junior employees are in the dark about the business’s objectives. Has senior management cascaded measurable objectives – and the necessary resources – to relevant functions in the organisation? Surprisingly, this is among the most common audit failures. This leads to the ‘silo’ effect, where internal teams are working independently of each other. Businesses that fail this aspect of their audit commonly struggle to meet their objectives.
  3. Important functions of the business are not monitored. Quality management audits look for evidence that the organisation is monitoring performance at each appropriate level. For instance, a company might want to improve the efficiency of its customer-facing staff but is unlikely to achieve this if they don’t implement a scheduling system they can measure. Our assessments of organisations have found that monitoring processes have not always been developed or followed. Again, this makes it a significantly more challenging for businesses to meet their goals.
  4. Short-sighted leadership. Leadership is an area in which successful small-to-medium businesses often shine. In large organisations, I have often seen a section head focus on their own area, not the organisation as a whole. This can lead to the ‘silo’ effect and hence inefficiency. This problem can be identified by assessing the linkage of processes between sections and the flow of information and work.
  5. Conflicting systems, processes and objectives. Internal systems and objectives within individual departments may clash with the organisational systems and objectives. For instance, an organisation’s call centre may have an efficiency targets that requires its operators to limit their call times with each customer. This could mean that all of the information required from the customer to provide a quality service is not obtained and this can hinder the achievement of the quality service objectives set by the organisation.
  6. Employees don’t receive support to develop competence. Qualifications and competence of employees in various roles counts. When we interview employees, most tell us they were put into a role with very little mentoring and support. As a result, they have difficulty in fulfilling the requirements of their role, particularly early on.
  7. Failing to identify and solve problems. Senior management often fall prey to using profit and loss statements as the only way to monitor the health of the company and make strategic decisions. Basing decisions on financials without a focus on the quality of the organisation’s products and services happens a lot – and is not an effective means of identifying problems. In the case where organisations do identify a problem, a significant proportion of audits show that managers don’t have the capabilities available to solve them. When the ‘silo’ effect is occurring, problems are sometimes hidden in that department and this can have a negative effect on the whole organisation.

SAI Global is a trusted global leader in risk management solutions through its standards, assurance and training offerings across more than 130 countries. David Smith, Principal Advisor in Business Improvement at SAI Global, carries out training and certification for organisations seeking to meet the ISO 9001 Standard for quality management systems.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Thanks for subscribing!

X