I was asked in a recent interview what five mistakes I had seen ruin companies the most. I want to share my answer with you in hopes that it will help you lead well.

Here they are.

  1. Unwise Hiring – I’ve long been stunned by how casually some firms hire. This is usually for two reasons. First, they hire in crisis mode. Typically, someone left unexpectedly and so there’s a rush to find a replacement. This means the usual due diligence is overlooked. Second, they hire sentimentally. The dock manager has a son who just got out of prison or the boss’s secretary has asked to stretch her wings and try a new role. Again, the usual due diligence is overlooked. We should remember that it is relatively inexpensive to hire but it is costly to hire badly and have to fire. Hire slowly and cautiously, as free of sentiment as possible. It will serve you well.
  2. Clumsy Firing – Most firms create unnecessary bloodshed when they let someone go. I’ve seen situations in which everybody in the firm knew that a given worker had to go but it was still so mishandled by the “higher ups” that it caused the firm to lose ground for years. The wise steps to follow are simple. Maintain a clear record of the low performance or misdeeds that lead to the need for an employee to leave. Make sure this employee knows of the concerns about him or her well in advance and has a chance to address them. When the time comes to let the person go, explain well, move quickly, be generous in severance, articulate the need for the move to the rest of the firm, and show compassion for all involved. Then heal and move on. A skillful firing should gain ground for the firm in every way.
  3. Murky Goals – Surveys have shown that most workers believe they are expected to show up and do decent work. This is fine, but these beliefs alone won’t produce an exceptional firm and motivated workers. People want to feel part of a grand purpose. They want to team. They want to achieve. They want to be rewarded for their sacrifices. They want to celebrate victories together. So, a leader must set goals that stretch the firm but that are achievable. He must talk about values that everyone can share and be proud of. She must inspire workers with visions of what can be done and what it will mean for each of them. When goals are achieved, the workers should be rewarded handsomely and celebrated. You can have a firm of “clock punchers” or you can have a firm of champions. Leaders determine the difference.
  4. Uninspiring Leaders – I can state this one briefly. There are the kind of leaders everyone wants to follow. They care. They embody noble values. They inspire by how they live and what they say. They are wise. They build a firm that benefits everyone and makes life better. Then there are the duds. We all know who they are. I don’t even need to describe them. They are the opposite of the inspiring leader. Avoid them like the plague. Do everything possible not to be one.
  5. Overreach – You and your firm are made for specific purposes. If vanity and foolishness prevail, the best cookie company in the world can venture into real estate or tech or publishing and create unparalleled disaster. Global business history is filled with examples of such folly. Do what you do, do it very well, and guard the boundaries of your purpose. Success will come of it.