Often, businesses can be so focused on negotiating perceived threats in the greater business environment that they fail to identify factors within the company which could threaten its success. The internal business environment comprises of factors within the company which impact the success and approach of operations. Unlike the external environment, the company has control over these factors. Managing the strengths and eliminating weakness of internal operations is the key to business success.
The role of company leadership is an essential internal factor. Your leadership style and management style impact organizational culture. Take a look at these common internal business risks and think about how you think your business fares with regards to these.
Remember not every business faces the same risks so the list below is not complete.
Politics and Mismanagement – Internal company politics, particularly in family businesses, can be debilitating; causing management and staff alike to focus, not on the market and the job at hand, but on what’s happening internally.
Poor financial management and reporting along with poor cash flow planning are one of the biggest threats to a business. Overstocking or understocking can mean money tied up or lost sales. Technology, such as computer network failures and problems associated with using outdated equipment
Staff management – Are employees motivated, hard-working and talented. Unmotivated staff, especially those dealing with customers, can destroy a business quickly. Health and safety, such as accidents and fire.
Equipment maintenance – Downtime on production equipment, delivery vehicles, even computers and printers can result in disruption and losses. Install a culture of preventative maintenance.
Security, such as theft, fraud, loss of intellectual property, extortion and online security and fraud. In most companies staff steal more than customers. Ensure systems are in place to secure all assets (cash and stock usually being the biggest) and all loop-holes are closed to potential thieves. Secure the stock receiving and dispatch areas and an owner or trusted manager should check all stock in and out.
Current processes like employee programs, software systems, and department hierarchies
Companies must also consider softer elements like company culture and image, the role of key staff, operational efficiency and potential. Your business needs innovation in order to keep up with competitors. A lack of innovation can pose a serious risk to a growing business. No innovation will cause a company to remain boring. The company will become dull, stagnant and irrelevant.
Mastering some of the forces that impact your business is more challenging than handling others. The extent to which you can control them differs. You can change how internal and external factors affect your firm. You cannot make the economy grow.
The greatest thing about internal factors is that you have control over most of them. Changing internal factors often involves some indirect costs. Many of the factors are a result of the way you run your business. Plan for these potential threats in advance before it is too late.
Peter Drucker said - "Asking ‘What is right for the enterprise does not guarantee that the right decisions will be made. Even the most brilliant executive is human and thus prone to mistakes and prejudices. But failure to ask the question virtually guarantees the wrong decision."