Stories of business failure and mistakes often are swept under the rug. Colleagues and bosses generally don’t like to tell one another about their missteps, and when business leaders give interviews or write books, they focus much more on their victories than their failures.

That’s a shame. The lessons learned from business bungles have tremendous value to all kinds of managers—particularly in difficult economies such as this one, when the risk for failure is greatest. My coauthor and I spent seven years interviewing nearly 1,000 managers across 21 industries to identify the most common and costly business mistakes—mistakes with the potential to ruin careers and companies but also to teach us important lessons.

Lessons we can learn from the worst mistakes…

  1. Don’t try to be all things to all customers. Managers tend to say yes when customers offer them business—even if the job isn’t in line with the company’s chosen direction. As Jeff Hoffman, a founder of, puts it, “It’s hard to say no to money.”

    But companies that lack the discipline to say no can lose their focus.

    Example: L.A. Gear was a very successful maker of women’s designer athletic footwear in the 1980s. In the 1990s, the company jumped at the chance to make men’s performance athletic footwear, then to get its products into Wal-Mart. Both of those opportunities were at odds with L.A. Gear’s up-market, fashion-oriented direction and diluted its brand. The company filed for bankruptcy by decade’s end.

    There are several steps you need to take to gain focus…

    Define your business or department based on the needs it serves and value it provides, then say no to opportunities that don’t fit.

    Relentlessly pursue business opportunities that do fit. The more opportunities you see, the less likely you will be to jump at bad-fit opportunities just because they happen to present themselves.

    If an important client asks you to do something outside your chosen direction, you don’t have to do it to keep the customer satisfied—you could partner with a company that specializes in the service.

  2. Don’t “think outside the box” on strategic direction. While think-outside-the-box brainstorming sessions are fine for marketing or design decisions, they can be disastrous when it comes to charting the direction of a business or department. Focus and discipline could be replaced with creativity for creativity’s sake. The end result often is dabbling—doing a little business here, a little there without any true direction.

    Example: Allstate Insurance noticed that it was sending large numbers of out-of-state business travelers—Allstate employees and employees of companies that were working with Allstate—to hotels near the company’s Illinois headquarters. Their outside-the-box idea was to open an Allstate hotel to serve those travelers. The hotel was booked to capacity but still failed because Allstate knew nothing about running hotels.

    What to do: Before pursuing any outside-the-box strategic direction, stop and consider whether the idea has synergy with your existing business.

  3. Don’t be a bully or allow bullying. According to a survey by, 27% of employees believe that they have been bullied in the workplace, usually by a boss. This workplace bullying can lead to lower morale, lower productivity and increased absenteeism and turnover.

    Bully bosses usually don’t consider themselves bullies, and most don’t do anything as overt as yelling at employees. Instead they use sarcasm, ridicule, unfair workloads or threats of unemployment to intimidate.

    What to do: Encourage feedback from people who work or previously worked for you about whether you bully employees. If you are repeatedly told that you do, accept that you are viewed this way even if you don’t consider yourself a bully—the line between being tough but fair and being a bully can be difficult to determine. Make an effort to alter the specific behaviors that others see as bullying. Also, ask whether anyone who works under you is a bully, and make it clear to these people that their bullying behavior needs to change.

  4. Don’t encourage false workplace harmony. Some bosses believe that it’s important for everyone in the company or department to be like a family, with themselves at the head.

    In reality, it’s rare for everyone in a large group to get along. Requiring them to do so can create a toxic atmosphere where people gripe about one another behind closed doors because they can’t air differences in the open. Emphasizing workplace harmony also can stifle creative debate and cause frustration—employees who receive only positive feedback might feel cheated when they don’t receive promotions and/or their ideas are not implemented. Besides, employees who never receive criticism might never improve.

    Example: A Portland law firm gave only positive performance reviews to its support staff, even though this staff didn’t work very hard—the firm’s managing partner wanted his company to be a big happy family. The firm’s best associates became frustrated with the resulting lack of help from the support staff and left.

    What to do: Encourage debate and open communication, not consensus. Strive to be respected by employees, not liked. Don’t hide bad news from employees—in the long run, it will make them feel lied to, not protected.

  5. Don’t hoard power. Rise far enough in the corporate hierarchy, and eventually it’s no longer feasible to handle every detail and decision yourself—you’ll have to delegate. Fail to do this, and your department or company will grind to a halt as everyone waits for your decisions…you’ll be so distracted by endless details that you won’t pay sufficient attention to the big picture…and your employees won’t develop their own skills and confidence.

    Example: Jill Barad was a great product manager at toy company Mattel because of her attention to detail. But that strength became a weakness when she was named CEO and insisted on personally overseeing every detail about virtually every product Mattel produced. She was forced to resign after just three years.

    What to do: If you have trouble handing off responsibility to employees, try viewing yourself as less of a boss and more of a coach. Coaches rarely set foot on the field. Instead they take pride in formulating a smart game plan and preparing their players as well as they can.

  6. Don’t be self-absorbed. It’s easy to become self-centered when you’re running a company or large department. Some leaders start to think that they can do no wrong. Others revel a bit too much in being the center of attention or fail to share credit for successes. In fact, our interviews suggest that this is the single most common misstep bosses make.

    What to do: Find a “truth teller” within your company whose opinion you respect. Give this person your permission to tell you what you need to hear—for example, when one of your decisions needs to be rethought or when the image you’re projecting is not as positive as you believe.

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