6 Signs a Company Is Badly Managed

​Business managers are constantly asked to assess if employees are performing to expectations. If employees are not, managers must take steps to remedy the situation.

But what happens if lousy management is to blame for underperformance?

"Management flaws can have a big impact on a company," said Josh Rovner, author of Unbreak the System: Diagnosing and Curing the Ten Critical Flaws in Your Company (Lioncrest Publishing, 2020). "These flaws [can be] the root causes of poor financial performance, low employee engagement and morale, irate or frustrated customers, goals not being accomplished, deadlines being missed and high turnover."

Recognizing—and Rooting Out—Bad Management Practices

There are obvious signs that a company is on the wrong management track, such as declining sales and revenue, the loss of major customers and, with public companies, a falling stock price. Yet some red flags go unnoticed. Whether the warning signs are apparent or not, directly and aggressively addressing them is the way out of company mismanagement.

"This is a journey that takes patience, time and potentially a little investment of money," Rovner said. "But it's worth it."

That journey should start by checking for these six signs of leadership mismanagement:

1. Employees are fleeing.

One big sign of company mismanagement is low retention.

"Employees will occasionally quit even a well-managed company, but if a company has difficulty keeping a full staff and is constantly hiring, that's a sign there's a problem," said Matt Erhard, managing partner at Summit Search Group, a professional recruitment firm in Winnipeg, Manitoba, Canada. "High employee turnover puts a massive drain on your internal resources. First, there's the monetary cost of searching for, hiring and training new employees. Inexperienced staff is also less efficient and more likely to make mistakes, so your overall productivity drops if you're constantly needing to fill holes in the team roster."

2. Employees work on redundant projects, projects are delayed and deadlines are missed.

"[Project redundancy and delays] stem from the same underlying issue: poor organizational communications," Erhard said. "Whoever is coordinating the teams and departments isn't checking to make sure they're not duplicating each other's efforts and isn't making sure all aspects of projects are being completed."

Poor organizational communication can be as damaging to your bottom line as low retention. "Redundant work wastes time and resources that could be better put to other uses, and if you miss deadlines or constantly delay projects, your profit figures will invariably suffer," Erhard added.

3. The management team is in denial.

When managers pretend a business is doing fine when it's not, that's a problem.

It's "important to ensure issues are addressed and solved rather than playing Pollyanna and ignoring the realities of business trends," said Lori Scherwin, founder of New York City-based Strategize That, a career management advisory firm that works with corporate executives. She was also a manager at Goldman Sachs and the Boston Consulting Group.

"This has a huge impact on a public company if a management team is ignoring major issues presented by investors and continues to underperform. Not only will near-term company financials suffer, but an unrealistic management team can cause long-term damage to reputation and trust," she added.

4. New ideas are dismissed.

"When employees' ideas and suggestions are ignored, it could be signs of a complacent and unsupportive team," Scherwin said. "This could lead to stagnation in growth potential, especially if management is saying, 'This is the way we've always done it.' Any company, organization or manager that defaults to the past as gospel will get hurt in the long run. You'll miss key changes in trends and lose out on new opportunities."

Instead, promote project innovation and new ideas. "Set up a team focused on this initiative," Scherwin said. "Encourage open dialogue across the organization, and reward staff for new ideas." A company that does not do this could lose talented people who feel their value isn't appreciated.

5. Managers focus on the negative.

One classic error leaders make when under pressure is to focus on the 10 percent of work that didn't get done.

"For example, the team member who stayed up until one in the morning working and then wakes up to an e-mail commenting on what didn't get done," said Katherine King, CEO of Invisible Culture, a business leadership coaching firm in New York City. "When the first message somebody receives is 'Why didn't you do it the way I think you should've done it?' that can be incredibly demotivating and counterproductive.

"It may be unintentional, but when managers only comment on what a team is doing wrong, a company has a leadership problem. It's one of the biggest complaints I hear from team members on a regular basis."

6. A company doesn't have its own metrics.

When a company doesn't run its own metrics, or it chases vanity metrics (data such as social media likes or website page views), that's a clear red flag.

"For example, a company wants to be seen as No. 1 in its industry according to some external assessment, rather than using [clear] metrics to see where it really stands," said Toby Beresford, author of Infinite Gamification (Bot Kiln Publishing, 2020), which covers metrics management and the pitfalls of not using good data.

Beresford recommends that companies find the data they need to gain a true measure of success.

"First, management must analyze the metrics the company is chasing and identify which ones are important," he said. "Then, the company needs to design a score card that measures its own success along with a comparison against the competition. This score card should be shared across the company and should only focus on the metrics that actually matter."

Scores should also be tracked against business priorities, he added. "That provides a big benefit. Everyone in the company knows exactly what to focus on to get better."

Brian O'Connell is a freelance writer based in Bucks County, Pa. A former Wall Street trader, he is the author of the books CNBC Creating Wealth and The Career Survival Guide.