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7 Costly Management Mistakes and How You Can Avoid Them

7 Costly Management Mistakes and How You Can Avoid Them

NOT ALONE: Good managers know when to let go.

ASK THE PROS: Good managers know when to get help from experts.

WORK IT: Keeping money in an interest-free account is inexcusable.

As you know, life as a restaurant owner means dealing with a full measure of challenging decisions, any one of which can have a negative impact on your operation. Even if you have a trusted and experienced support person or group, the weight of the final decision rests squarely on your shoulders.

The good news is that you don't always have to be a trailblazer. Even problems that appear to be unique to your restaurant have likely been dealt with successfully by thousands of your predecessors. Of course, many others have suffered the consequences simply because they took the wrong turn at a fork in the management road.

Here are seven ways for you to avoid some of the most common mistakes made by those who have traveled that road before you:

1. Trying to do it all yourself

A failure to understand the importance and the necessity of delegating is one of the most common mistakes that hinders growth in small businesses, according to the experts interviewed for this story.

"Just because you can complete a task, doesn't mean you should," says management consultant Andrea Michalek. "Anything that is not a core competency of your business should be outsourced. Without hiring any additional employees, it's now possible to get the outside help you need at prices you can afford."

"Some business owners go broke saving money," says consultant Wally Adamchik. "Rather than outsource their web design and maintenance, for example, they do it themselves, because they can. Of course, this takes them away from high-impact work like marketing. They are saving money doing their own web thing but they are losing money in the long run by doing it."

If you find yourself neglecting some of the basic responsibilities of restaurant operation such as marketing and customer relations, it's probably time for you to put more trust in other people. Given a chance, many will surprise you with positive results.

2. Failing to understand the true meaning of marketing
Many restaurateurs are so busy dealing with day-to-day operations that they never get around to putting together a business-building marketing program. That's a serious mistake. Marketing is a basic building block in the construction of a successful restaurant. Yet, many owners shy away from all but the most obvious ways to promote their businesses. For some, their entire marketing program consists of an expensive ad in the Yellow Pages.

While advertising is an essential part of marketing, it is only that—a part. An effective marketing program requires much more than advertising. Marketing embraces all facets of your operation. To be an effective marketer, you must nurture and promote your business image, sell yourself as well as your business and concentrate on making a visit to your restaurant the best choice for your prospects. There is no other way. Competitive prices alone won't do it. A high degree of culinary skills alone won't do it.

Marketing is a complex fabric woven of many threads. Every serious restaurant owner should spend a reasonable part of his/her time learning what goes into the makeup of a complete marketing program.

Too many small business owners stammer when asked, "So what do you do?" says Michalek. "Referrals and word-of-mouth marketing are two cost-effective methods to grow any business. If you cannot succinctly express what you do and whom you serve, you're shutting the door on your best source of new customers."

3. Failing to avoid the pitfalls in hiring friends or family
Many food businesses owe their success, at least in part, to an employee who is either a relative or friend of the owner. When such a relationship works, it can work very well. Still, when it doesn't work out, it can be disastrous.

"You should use extreme care in bringing a friend or relative into your business," says author and career consultant Katharine Hansen. "If the relationship doesn't work out, terminating it can be a serious problem."

Hansen tells of one business owner who hired her own sister. "Now she'd like to sell the business to go back to college teaching, but finds herself responsible for her sister's employment. This is but one example of the kinds of unexpected traps that lie in wait for business owners who hire friends or family."

For a more detailed look at the advantages and disadvantages of hiring friends and family, log on to

4. Failing to take action on unsatisfactory employees

"Not firing a problem worker is one of the worst operating mistakes you can make," says James Walsh, author of Rightful Termination: Defensive Strategies for Hiring and Firing in the Lawsuit-Happy 90's (Merritt Publishing, 1997). "It keeps the problem worker around to create more trouble, making a bad situation worse. That's not fair to you or to your other employees."

A single problem employee in a restaurant with two or three dozen employees can represent a serious threat to productivity and profits; in a much smaller operation, it can be deadly.

In short, once you identify a disruptive or unproductive employee, it's best to face up to the unpleasant task of terminating the relationship. Postponing it can only lead to a more serious problem later on.

5. Failing to follow the principles of profitable cash management

Profitable management of cash flow calls for never allowing any of your money to lie idle. The worst place to deposit your daily receipts is in a low-interest/no-interest checking account.

Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. From that point on, deposit your daily receipts into the money market account where they will immediately start drawing interest.

Never deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks written.

Worst money sin of all: leaving checks or cash lying around in a desk drawer until you can get to the bank. Using every cent of your money to make money is the smart way to bolster business profits.

6. Failing to ask for outside help

"A good place to locate potential members of a peer group," says. Robinson, "is one of your local service clubs such as Rotary, Kiwanis or Lion's Club."

7. Failing to develop good hiring skills

Among the suggestions Robinson offers are these:

  • Prepare interview questions in advance. Take notes so that you won't forget what the candidates said. I guarantee that you will either forget what the first interviewee said or mix his/her responses with subsequent interviewees if you don't take notes. Ask each candidate the same questions so that you can compare answers and more accurately compare the candidates.
  • It's your first date; don't go too far too fast. Don't make a hiring decision based on your first interview. Take your time. Compare candidates.
  • Make the candidates feel comfortable; they reveal more if they aren't on guard. If you make the interview feel like an interrogation you'll know how they respond to questioning under pressure, but it's unlikely they'll tell you much revealing information about themselves because they will be on the defensive.
  • You must sell the candidates on the job and you, but don't talk more than 20 percent of the time. Let the candidates do most of the talking.
  • Ask open-ended questions. Avoid questions that can be answered with a simple yes or no.

There is, of course, much more to skillful hiring techniques. Author Walsh advises starting with what hiring experts call structured questions. "Ask them of every candidate and base your comparisons on their answers." He suggests using a standardized worksheet to do this, checking off each applicant's strengths against the job skills required for the position.

Of course, these seven missteps aren't the only management errors that can negatively affect your restaurant, but steering clear of them can go a long way toward optimizing your bottom line.

William Lynott

is a former management consultant and corporate executive who writes on business and financial topics. You can reach him at [email protected].

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