Management: Human Failings

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Why do businesses go broke? Taking an annual pulse count of U.S. business, Dun & Bradstreet last week blamed the great majority of business failures on incompetent or inexperienced management. Of 15,782 failures in 1962, 91.3% were due directly to management fumbles that caused poor sales, a poor competitive position, crushing overhead or inventory problems. The highest industrial failure rates were among the makers of furniture, electrical machinery, shoes and transportation equipment; on the retail level, the failure list was headed by children's and ladies' wear stores, sporting-goods shops and furniture stores.

Some ominous new trends popped up in the survey. Though some 1,300 fewer businesses failed last year than in 1961, the companies that failed were generally bigger and the overall loss greater ($1.2 billion v. 1961's $1 billion). In 1962, 134 failing companies had liabilities of more than $1,000,000 each compared with 96 the year before. As usual, more than half of all failures occurred among companies five years old or less, but the number of companies that collapsed after ten years rose to 22% of the total. The apparent reason: logy reflexes in the face of stiffened competition.