When we analyze failures of Companies, a factor that comes up time and again is the lack of importance given to human resources by the top management. In fact, we can see that the management of these companies does not respect their main asset ie: the employees of the Company. They feel that if the salary is paid, the employees are supposed to toil for them. But what they do not realize is that they are not machines, they are humans and need to be treated with more care. Salary forms the main factor for only less than 50% of the workforce. For the balance 50% or more it is other factors like good working atmosphere, organization culture, job security, job satisfaction, employee engagement, good and caring management, etc. in short something above monetary terms – the joy of going to work from home in the morning comes only with best Human Resource Management.

Most often the management of companies gives more thrust to Sales / Marketing / Finance and least on their list will be Human Resources. JRD Tata was once asked by the media as to what keeps their Company growing, how is it they move on to several diversifications successfully into specialized / niche areas, and his answer was “ we make people and people make airplanes”.

Under the above basic principle, companies even if they face turbulences, eventually come out victorious – a major example is an airline company in the US which almost went under, it is the employees of the Company who stood with the management and even worked without salary and helped their Company come out of red and the airline is now running successfully.

CASE STUDY

This principle is applicable more so in the service sector as human resources are their ONLY asset. The example of failure I am going to give is also of one Company in the service sector. New management took over a company and while taking over they failed to do proper due diligence on the finance /  statutory matters etc. But besides this, what reflects is the story of their downfall as they failed to place necessary importance on the human resource of the Company. The new management did not have the relevant industry experience, hence had to rely on the employees of the old management to run the business smoothly. But the new management gave more importance to their newly recruited own loyal staff (who had no idea about the industry) and did not take care of the old staff who were actually very strong in domain knowledge. The staff members from the old management had no access to the top management and hence their grievances were not heard. Nor could they service their valuable clients as they had no support from the Company.

Fearing that they would lose their clients forever and also eventually their job, the old staff left as a team one fine morning, and while leaving they took the clientele and data with them to form a company of their own.  This came as a big shock and the so-called loyal staff failed to see this coming, as they were more interested in pleasing the management than protecting the interests of the company in long run. 

To tide over this loss the new company recruited new staff and again committed the mistake of taking people who had no idea about the core business. Predictably enough they soon lost all business and with several fines, penalty and lack of revenue they had to close shop. The company is not in existence now and the management incurred huge loss and liability.

Lessons:-

1. Top management should conceive the importance of human resources and see that they give their employees meaningful engagement with adequate compensations.
2. Identify key productive people and protect their interests so that they serve the Company with better productivity.
3.  Conduct periodic meetings with all layers of hierarchy with complete transparency.
4. As line managers, If the right person is not put in the right slot the lack of skills in the domain will lead to unnecessary insecurity and ego clashes. 
5. Skill-based and behavioral training to be given to employees.
6. Exit interviews – conduct exit interviews when people leave and take the points mentioned seriously and corrective actions to be carried out. There is a general saying that people do not leave companies, they leave because of their managers. So if any such genuine grievances come up against managers, take immediate actions before more people leave.
7. Have a good grievance handling mechanism in place and handle the grievances in a time-bound manner before they become serious.

The investors / top management should have been more careful in appointing suitable first-line managers and also identify the key performers and retain them.