Business failure - Ministry of Development conference

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 objectives of the PNS are to prevent business crises by setting up early warning systems, to reduce the risk of business closures through non-judicial and judicial forms of recovery and restructuring, to carry out business closures efficiently and to support business restarts - the so-called 'fresh start'. It is worth writing more about it soon, and today I would like to 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 observation that had already emerged from earlier meetings at the conference, and which was also clearly described on the panel discussed, was that closing businesses is as much an aspect of entrepreneurship as opening them. Closing a business may not necessarily be a failure. It can be a way of avoiding it. Because failure can have different faces. For some it will be the loss of money, for others the failure to achieve their goals (partially or completely). For others, it may be the loss of health or contacts with loved ones as a result of excessive dedication to the 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 of the panel concerned the differences in approaches to mistakes and failures between Polish and foreign companies. It was hypothesised that in large companies, depending on the organisational culture, these approaches may be different. Mr Robert Loranc rightly pointed out that this approach has now become uniform. Employees of large corporations often come from different countries, coming from a variety of other companies. Also influential is the belief, which has been prevalent for some years now and is passed on in corporate training courses, that the 'right to make mistakes' is something normal in modern organisations. Without it, there is no creativity or innovative products. Of course, everything has its limits and it is worth being aware that failure does not equal failure. We will be treated differently if we try to do something new and fail or if we neglect an area once. It is completely different if our attitude or behaviour leads to losses, if we repeat the same mistakes or act illegally.

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 a discussion on supporting entrepreneurs in 'recovering from failures', Mr Maciej Roch Pietrzak pointed out that often business owners wait too long before launching restructuring programmes. And it is not about debt collection or laying off employees, but about transforming the business from its current, problematic state to a healthier one that gives the company a chance to continue operating. Sometimes, allowing relatively small funds to be raised to maintain liquidity is sufficient help. Or to take advantage of the possibility of deferring Social Security payments. In some situations, small things, but done at the right time, when there is not yet a need to "rescue" the company, are completely sufficient to prevent collapse and sustain the company's operation. Such possibilities already partly exist, and there will be more and more of them thanks to the already mentioned New Opportunity Policy and the amended "Restructuring Law".

In the discussion, it was also stated that 'company restructuring' is treated as a kind of stigma - burdening the company in the eyes of partners or banks. This can be rescued by the trust and reputation that entrepreneurs need to take care of beforehand. Support provided by organisations experienced in carrying out restructuring also helps. At the same time, it is worth noting that, just like 'not every train to the PKP', for example, not every lawyer knows restructuring well enough to help carry out such a process effectively. For this reason, it is worth taking advantage of 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 statistic that in Poland 8 out of 10 companies fail in their first two years of operation, this is a very practical observation. For me, there was only one conclusion - it is essential to include a "first aid kit" (name after Mr Maciej Rock Pietrzak) in the support packages for start-up entrepreneurs, containing information on when and to whom to turn for support if symptoms of difficulties in the company's operations are observed. This will make it possible to prevent the company from collapsing or, in the worst-case scenario, to close it down in such a way as to minimise any associated losses and problems for the owners or shareholders.

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 9 December 2015, was organised by the Department of Innovation and Industry at the Ministry of Development. The described panel discussion was attended by Ms Marta Zięba-Szklarska (founder and CEO, Świat Kadr), Mr Edward Połaski (President, Small and Medium Enterprises Foundation), Mr Robert Jasiński (entrepreneur and business advisor), Mr Robert Loranc (President of the Board, CEO, LORANC & PARTNERS Sp. z o.o.), Mr Marcin Osman (founder and owner of OSM Consult Sp. z o.o.) and Mr Maciej Roch Pietrzak (President of the Board, PMR Restrukturyzacje S.A.). For support in organising the panel, I would like to thank Ms Agata Wancio, Chief Specialist, Department of Innovation and Industry, Ministry of Economy.