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Business failure - Ministry of Development conference

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Organised by the Ministry of Development, the conference focused on business culture in Poland in the context of the government's New Opportunity Policy (PNS) programme. This is a development programme that comprehensively addresses the issue of business management in a crisis situation and issues related to the liquidation of enterprises.

The main goals of the PNS are: preventing crisis situations in enterprises by launching early warning systems, limiting the risk of liquidation of enterprises through extrajudicial and judicial forms of repair and restructuring, efficient liquidation of enterprises and support for resuming business activity – the so-called new start. It is worth writing about it in more detail soon, and today I'd like focus on one part of the meeting.

The final panel discussion of the conference, entitled 'Failure and fall in business - how to survive, learn lessons and move on', was an opportunity to talk about approaches to mistakes, failures and how to recover from them. It was attended by a group of business practitioners - entrepreneurs, advisors or business coaches. Thanks to an invitation from the organisers, who found me to host the FuckUp Nights meetings, I had the opportunity to lead this discussion.

During the bulk of the discussion, we talked about failure in the context of entrepreneurs. We did not make a distinction between a startup and 'simply' running a smaller or larger company - both topics are very similar and were treated simply as 'entrepreneurship'. To a slightly lesser extent, but just as interestingly, the discussion was about the attitudes and role of managers towards mistakes and failures in the organisations or teams they lead.

One of the observations that emerged from earlier sessions at the conference, and which was also clearly described during this panel, was that closing down a business is as much an aspect of entrepreneurship as opening one. Closing the company may not necessarily be a failure. It may be a way to avoid it. Because failure can have many faces. For some it will be losing money, for others not achieving their goals (partially or completely). For someone else it will be losing health or contacts with loved ones as a result of excessive dedication to business.

What kind of 'failures' can entrepreneurs or managers not afford? Various mistakes can be made - some of them may be forgivable or understandable, but an abuse of trust is extremely difficult to make up for. And in tough times, an entrepreneur with a poor reputation will not be able to cope. So trust and reputation are qualities that you cannot afford to lose in business. Especially if they are associated with our name, with our brand.

One of the questions asked by the panel concerned the differences in the approach to mistakes and failures between Polish companies and foreign. The thesis was put forward that in large companies, depending on the organizational culture, these approaches may be different. Mr. Robert Loranc rightly noticed that at the moment this approach has become uniform. Employees of large corporations often come from different countries, they come from various other companies. The conviction that has been prevalent for several years, passed on during corporate training, that the "right to make mistakes" is something normal in modern organizations, also has its influence. Without it, there is no creativity or innovative products. Of course, everything has its limits and it is worth being aware that failure is not the same. We will be treated differently if we try to do something new and we fail or if we neglect some area once. And completely differently if our attitude or behavior leads to losses, repeats the same mistakes or acts against the law.

Short, to the point and very interesting was the answer to the question: "Who is responsible for the failures of teams or employees". It was: the boss. And it did not provoke any discussion. It is the boss who is responsible for what happens in the team, how prepared the employees are to perform their tasks, what skills they have, what attitudes they display. He or she is the one who should react early on to irregularities, fill in the gaps, take care of the necessary resources. He or she should also react to inappropriate behaviour and, if it is repeated, even dismiss the person in question. So that the team or the company does not fail as a whole because of one or a few misbehaving individuals. That is his role.

Interviewees also pointed out that entrepreneurial failure is often not only their personal challenge, but also a problem for employees. To a certain extent, entrepreneurs also affect the people they give their jobs to with their decisions. A bad business move, neglecting payment liquidity can mean, for example, a lack of funds for salaries. Another panellist noted that an entrepreneur must first of all take care of his or her own basic needs and only then take care of the needs of others. A bit like training aeroplane passengers - in the event of an accident, a parent must first put on an oxygen mask for himself and only then for his child. If they don't, they may, for example, lose consciousness and not be able to help others. The analogy is interesting and I am curious to hear your views on it.

During the conversation on supporting entrepreneurs in "recovering from failures", Mr. Maciej Roch Pietrzak pointed out that often the owners companies are waiting too long with the launch of restructuring programs. And it is not about debt collection or employee layoffs, but about transforming the business from its current, problematic state to a healthier, more profitable one the chance to continue the company's operations. Sometimes, sufficient help is to enable the acquisition of relatively small financial resources, allowing for maintaining liquidity. Or to take advantage of the possibility of deferring ZUS payments. In some situations, small things, but done at the right time, when there is no need to "save" the company, are completely sufficient to prevent bankruptcy and maintain its operation. Such possibilities already exist to some extent, and there will be more and more of them thanks to the aforementioned New Chance Policy and the amended "Restructuring Law".

During the discussion, it was also stated that "company restructuring" is treated as a kind of stigma - a burden the company in the eyes partners or banks. The solution to this problem can be trust and reputation, which entrepreneurs must take care of in advance. It also helps support provided by organizations experienced in restructuring. It is worth noting that, just like "not every train goes to PKP", not every lawyer knows restructuring well enough to help carry out such a process effectively. That is why it is worth using the help of professionals.

An interesting theme emerged at the end of the meeting, as a result of a question from the floor. One of the listeners noted that numerous institutions supporting start-ups prepare entrepreneurs in organisational, administrative, accounting and legal terms, or help them raise funds for their activities. None of these institutions, however, prepare them for... the end of their business.

In the context of the well-known statistics that in In Poland, 8 out of 10 companies fails in the first two years of its activity, this is a very practical observation. For me, there was only one conclusion - the packages of assistance for beginning entrepreneurs should necessarily include a "first aid kit" (named after Mr. Maciej Roch Pietrzak), containing information on when and to whom to turn for support in the event of observing symptoms of difficulties in the company's activity. This will prevent the company from failing, or in the worst case, to close it down in such a way as to minimize the potential losses and problems of owners or shareholders related to it.

I regret that the meeting could not have lasted longer. The information presented above is only part of the very large amount of knowledge and opinions that the panellists shared with the audience. Knowledge that is all the more valuable because it comes from practical experience and my own observations. I have described those points that were particularly memorable to me - hence a certain selectivity of topics. I hope to participate in future similar events and equally engaging discussions.

The event, which took place on December 9, 2015, was organized by the Department of Innovation and Industry in the Ministry of Development. The following persons took part in the panel discussion: Marta Zięba-Szklarska (founder and CEO, Świat Kadr), Edward Połaski (President, Foundation for Small and Medium-Sized Enterprises), Robert Jasiński (entrepreneur and business advisor), Robert Loranc (President of the Management Board, CEO, LORANC & PARTNERS Sp. z oo), Marcin Osman (founder and owner of OSM Consult Sp. z oo) and Maciej Roch Pietrzak (President of the Management Board, PMR Restrukturyzacje SA). For their support in organizing the panel Thank you Ms. Agata Wancio, Chief Specialist from the Department of Innovation and Industry of the Ministry of Economy.

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