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Uncategorized on 18 Jun 2012

Corporate Rest and Rejuvenation

Corporate Rest and Rejuvenation

 

Most athletes know that getting enough rest after exercise is essential to high-level performance.  Rest time allows the athlete to be rejuvenated and allows tissue repair to occur. Without sufficient time to repair and rejuvenate, the body will continue to breakdown from intensive exercise. Symptoms of over working or training often occur from a lack of rest and rejuvenation time. Signs of over training and working include a feeling of general staleness,  sense of depression and hopelessness, decreased sports performance and increased risk of injury, among others. The body repairs and strengthens itself in the time between workouts, and continuous training can actually weaken the strongest athletes.

 

In a similar vein, a corporate executive without adequate rest will wear out and productivity thus impaired through industrial accidents, careless mistakes and sick leave. But many employees still over work and feel guilty when they take a day off

Rest days are critical to performance for a variety of reasons. Some are physiological and some are psychological. Rest is physically necessary so that the muscles can repair, rebuild and strengthen. For employees, building in rest days can help maintain a better balance between home, work and health.One of the most effective ways to improve mental and physical health is rest.  People also produce their best results when they are relaxed and comfortable at their workplace. 

 

The first concept of rest in the corporate context is stability.  Therein, lies an apparent paradox.  To cope with the rapid changes, the company needs to change. Yet, in the quest for growth-inducing changes, the company needs to have rest and stability.  It is the same with the human body.  A company needs some amount of organizational slack or thinking time.  Many companies focus on changes after changes except they forgot that the things that they are currently doing are just as important.   As a result these companies went through fruitless diversifications and divestments.  Finally they ended up losing focus or neglecting their core businesses because they did not protect their fortresses back home. 

 

Times of stillness during rest facilitate a shift of focus from being immersion in one’s stressful environment to a more tranquil state of mind. This will not only allow one to cope with the onslaught of stress but also enable the mind to be energized and rejuvenated while emptying the negative emotions accumulated throughout the day, week etc.  The body needs rest in order for it to re-charge and repair itself.  It needs time to relax, think and reflect back. But at the same time, the body needs to remain active in order to achieve optimal body functions and good health.  One cannot remain inactive or passive indefinitely.  Otherwise, prolonged periods of inactivity can result in the loss of mental lucidness and thereafter a steady decline in one’s body functions and health.  It is found that people who retire and do not keep active, often die shortly. 

 

This is why the manager has to master the art of preserving stability amidst change as well as spurring change during stability. Managers think that if the staff take things easy and relaxed, they are goofing off.  This is not true.  Most creative ideas and innovations come about when the person is relaxed.  When he is tense and over-crowded in his mind, he has no time to truly think.  How can then the creative juices be generated? 

 

Change can create workload and stress to the staff. If the change is well managed to bring in better processes and increased efficiency, then it is justifiable. However, if the changes come frequently and constantly with little respite, then the workload can bring stress and detriment to the individual as well as the organization. Prolonged stress can result in high employee attrition and customer service deteriorates.

 

It is therefore abhorrent to hear a manager say:  “Firing shall continue till morale improves.”  Some companies hire and fire whenever they like.  This is binge-and-purge staffing or corporate bulimia, an illness in which there is a great and uncontrollable desire to eat, usually followed by vomiting in order not to gain weight.  Such frequent changes in management and staff not only breed suspicion and disloyalty among the staff but also rip off the innovative heart and fabric of corporate cohesion.  Frequent changes through downsizing exercises have proven to be a corporate cultural disaster.  Self-interest will replace corporate interest, as loyalty and trust are lost. 

 

This is why Lewis Platt, the former Chairman and CEO of Hewlett-Packard said: “There are times when the right strategy is probably to back off on current growth in order to have the company better positioned for the future.”  Rest, you cannot afford not to.  The time to rest is when you do not have time for it.

 

This is why there is a saying: “God grant me the serenity to accept the things I cannot change, courage to change things I can, and wisdom to know the difference.”  This is why you need R&R – Rest and Rejuvenate.

 

 

 

 


 

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Uncategorized on 30 Nov 2009

Many CEOs Pursue the Four Ps – Pay, Power, Perks and Prestige Rather than Profits

Recently, there are more and more CEOs falling from grace. In the United States, forced exits accounted for 39% of CEO departures in 2002 up from 25 % in 2001, according to Booz Allen Hamilton. In 2002, Enron Chairman Ken Lay, Tyco chief Dennis Kozlowski, Qwest’s Joe Nacchio, Worldcom’s Bernie Ebbers. Year 2003 saw the departure of CEOs from Raytheon, Kmart, Spiegel, Scherling Plough, Motorola, Freddie Mac, Boeing, American, etc.

Agence France-Presse (AFP) in 13 April 2004 reported that Professor David Yermack of New York University Stern School of Business found that the average shareholder gains underperformed market benchmarks at companies where the chief flies by luxurious corporate jets. In the study, ‘Flights of Fancy: Corporate Jets, CEO Perquisites and Inferior Shareholder Returns’, Professor Yermack said: “The central result of this study is that CEO’s personal use of company aircraft is associated with severe and significant under-performance of their employers’stock. Firms’stock prices drop an average of 2 percent around the date of initial disclosure of corporate plane use.”

Some of the CEOs may not be justifiably fired as the economy turns bad through no faults of theirs’ but they were held accountable. However, the days of fat cats running corporations are over.

Uncontrolled and unnecessary costs destroy businesses. If your competitor has a limo and you do not, you are already winning. He has a leaky bucket. There are six self-made multi-billionaires. And all of them were paragons of simplicity and prudence in self-aggrandisement.

In 1991, Sam Walton founder of Wal-Mart drove an eight-year-old red Ford pickup. He always fetched his own coffee. As President of EDS, Ross Perot paid himself $70,000 a year. However, when Perot sold EDS to General Motors, the President of General Motors, Perot’s new boss, made $2.4 million salary plus a bonus. Finally, he paid Perot $2.5 billion to go away because GM executives were embarrassed by the folksy Perot, who did not demand a fat salary or swanky office or specially tuned cars. David Packard never had an enclosed office before he left Hewlett-Packard for government service. Bill Gates of Microsoft often rode coach on planes, until they finally got so big they ran their own fleet of aircraft. Warren Buffet manages Berkshire Hathaway’s billions and billions with a staff of 24. When they lunch together, it is McDonald’s. Warren still stayed in the same house that he bought thirty years ago and drew on a salary of US 100,000 per annum. Ingvar Kamprad, the founder of Ikea takes the company bus to his stores.

Indeed examples of executive abuses dominated the news during 2002. Many Enron employees were fired whilst Senior Executives used $200,000 to fund its luxury box at the formerly named Enron Field. Though founded on the innovative idea of instant photography, Polaroid’s management failed to save the company from the shift to digital cameras. Polaroid reportedly cancelled health-care benefits for the company’s retirees in the wake of its Chapter 11 filing. However, management reportedly petitioned the bankruptcy court for permission to dole out roughly $19 million in bonuses to keep key executives from leaving. Webvan is another example. It failed to compete against the traditional supermarkets with its online shopping services and home delivery. Before it ceased operations, the company reportedly agreed to pay its resigning CEO, George Shaheen, $375,000 per year for life although the Webvan’s stock price plunged 99 percent during his tenure.

Kmart in bankruptcy authorised payments of $362,000 per month in retirement benefits to some 242 of its executives. The Kmart’s creditors which K mart owed $6 billion protested to a Chicago bankruptcy judge.

L A Times writer John Balzar observed that creditors and shareholders are not the only ones enraged at the seemingly arrogant attitudes of America’s corporate giants. “Consumers are mad, and some are declaring petty war against the mighty corporation, against shenanigans, the double-dealing, the get-rich-quick schemes, the fraud, the selfserving deals.” Those investors felt that they have been robbed as they saw their retirement savings dwindled.

In America, CEOs compensation surged 1000% in three decades, making it to 500 times the pay of the average worker. Yet, they are greedy for more. Martha Stewart of the ImClone System expensed off the US 17,000 cost of a holiday to her company. Dennis Kozlowski spent US$15,000 on a ‘dog umbrella stand’ and US$6000 on shower curtain. John Rigas spent US $20,000 of Adelphia’s shareholders’ funds on a Christmas tree. The list of corporate excesses goes on and on.

CEOs who live ‘fat cat’ lifestyles using corporate funds should be slaughtered and skinned.

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Uncategorized on 05 May 2008

If you are sick, see a corporate doctor

In the movie, ‘Ghost Buster’, the theme song starts off, “If there is something strange in the neighbourhood, who do you call: Ghost buster”. Similarly, a sick company needs to call on the Corporate Turnaround Expert if you find something awfully unwell in your company.

Sick companies have waited, hoping that their nightmare would be over soon. But things often get worse before they get better.

It is normal that when a person falls sick, the first thing you do is to see a doctor. But why allow this situation to explode into a financial crisis? The company needs to go into intensive care, otherwise, it will go under and the owners will become a bankrupt or lawsuits could be filed against them.

What has just described happens to thousand of companies every day in Asia. Many of us just do not seek help early enough for our corporate woes due to unfounded fears and reasons – what if the bank learns about it and pulls the credit facilities? What if the employees learn about the poor state of health and jump ship? With the face-saving culture in Asia, what if my friends, customers and business associates learn that I am not doing well, would they reject me? Why should I call on the Corporate Turnaround Expert in Asia?

When you need a heart by-pass, you naturally call in a cardiologist rather than any general practitioner. When you have tax problems, you call in a tax consultant and not any accountant. Yet, many troubled companies make the fatal mistake of not approaching the right professional for help. Many continue to use their own internal management who are already like a deer caught in the floodlights, petrified and totally clueless on how to move forward.

Many of us would not use self-medication if we were seriously sick. Yet, we make this mistake when managing our troubled businesses. Most of the time, a troubled company cannot be fixed solely from the within. The management may harbour too much prejudices, vested interests and baggage. If the medicine is too bitter, the management may not have the guts to swallow it. The company needs somebody from the outside who is able to say “no” firmly when necessary. If the internal management is the cause of the problems, then the use of the internal management is like using leeches to cure leukemia.

Managers from successful companies will not cut it as they have not had to work with low-morale employees, creditors screaming for payments and diminishing market share as clients switch to competitors.

The sick company needs to hire a Corporate Turnaround Expert with many years of turnaround experience grounded with proven turnaround techniques. As an outsider, the corporate turnaround expert brings unfair advantages to the turnaround process. The Corporate Turnaround Expert has no emotional baggage tied to a new dream or historically interesting but economically irrelevant service. Nor is the Corporate Turnaround Expert beholden to the present management. He or she can ask dump questions without looking dump. One or two dump questions will turn out to be brilliant ones.

Contrary to expectation, employees will accord the Corporate Turnaround Expert the co-operation. These employees understand that the Corporate Turnaround Expert represents their last chance and that he or she did not create the problems. They will be open to the Corporate Turnaround Expert as they know that he or she is there to help the company succeed. With the right demeanour and without any rudeness, the employees will guide the Corporate Turnaround immediately towards the major problems.

Care has to be taken in the selection of a company doctor or turnaround specialist or Corporate Turnaround Expert in Asia. There are many professionals in Asia who profess to be turnaround specialists but are actually only financial people who are preoccupied with cost-cutting measures.is important.

Certainly such skills are important but it is only part of the answer. The specialist also needs to have gone through adversity and has track record of successfully turning around troubled companies. Why spend another sleepless night worrying what to do next? Similar to taking care of your physical health, early diagnosis and proper treatment are keys to your corporate recovery. Sick companies just cannot afford another day to procrastinate.

When you are afflicted by cancer, immediately see an oncologist and do not rely on your family doctor. There is a cure for your corporate cancer if proper treatment is administered early enough. The selection of the right turnaround specialist to help the company quickly is crucial.Ifit is done too late, even the turnaround specialist may not be able to help you.

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Uncategorized on 25 Feb 2007

Recovery and Strengthening – Long Term Programs to Sustaining Good Financial Health

Many companies came out of crisis and yet got back into trouble again. Why is it that these companies which have managed to ride out of the ‘intensive care unit’ fall back into trouble again? We also see such problems with patients in that they are cured of “heart disease” and “lung ailments” and subsequently went back to the old bad habits of stressful living and smoking. These companies and individuals did not continue to nurse themselves to good health through long term recovery and strengthening programs of their bodies and spirit.

Once a company has come out of the ‘intensive care’ stage, it is of paramount importance that it can continue to nurse itself to health. The pace of recovery and rehabilitation can vary from patients to patients, even though they maybe afflicted by the same disease. Similar to the recovery after a surgery, a physiotherapist will start you on an exercise and rehabilitation regime such as assisting you to walk with crutches. As you recuperate in the hospital, the physiotherapist and occupational therapist will teach you the proper way to walk, eat, bath, sit and dress. They will also advise on your diet and exercise programmes when you are discharged from hospital.

The company needs to give itself time for healing and recovery. Then it needs to review and reflect on some of the hard issues relating to sales and marketing, customers and market positioning. Oftentimes, these basic issues are taken for granted and can get the company into trouble. The recovery period is also a good time for the company to recharge and reenergize itself through re-visiting its ethical values, inspirational and renewal process.

After full recovery, the battle to stay in good health is not over yet. The company needs to continue to strengthen and have foresight to transform and innovate. It must also continue to build up its cash reserves.

Some doctors believe that the immune system can defend the body against cancer and germs. The immunity is the defence system to combat diseases. During this phase, the strengthening of the immune system is key to boosting health.

The immune system for the company is the corporate culture. A dysfunctional corporate culture is one which is arrogant and full of ego. Also, the company needs to strengthen its immune system through healthy mindsets and vision. In medical science of psychosomatic, it is believed that the mental health can affect the physical health, similarly the mindset of the company can hurt the financial health. Oftentimes, in a sick company, the enemy is within.

An organisation that has regained corporate wellness needs to implement a sustained programme to remain in the pink of health. The company needs to strengthen its heart through exercising, good diet and vitamin supplements. As these are long -term measures, their benefits are normally not visible immediately.

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Uncategorized on 05 Feb 2007

Do Not Depend Solely on the Doctor in the House to do the Surgery

Many business leaders are good at starting a business or maintaining one that has already been well established. However, they are not good at fixing a seriously sick business. Avoid bankruptcy by hiring the turnaround experts.

They often do not have the experience, skills, temperament or willingness to do a proper turnaround. Sometimes, the business leader himself is the hindrance and obstacle to the entire turnaround process because of past encumbrances and prejudices. An outsider is quite often required to execute the turnaround.

Most of the time, a troubled company cannot be fixed solely from the within. The management may harbour too much prejudices, vested interests and baggage. If the medicine is too bitter, management may not have the guts to swallow it. The company needs somebody from the outside who is able to say “no” firmly when necessary. If the internal management is the cause of the internal woes, then the use of internal management for the turnaround is like using leeches to cure leukaemia. The condition of the patient will not improve and may deteriorate as time passes by.

An outsider brings some unfair advantages to the turnaround game. You have no emotional baggage tied to a new dream or a historically interesting but economically irrelevant service. Nor are you beholden to the big bosses. You can ask dump questions without looking dumb. One or two of those dumb questions will turn out to be brilliant ones.

Contrary to expectations, you will find you are accorded loyalty from employees. Other executives have to work hard to earn this devotion. These employees understand that you represent their last chance, and that you did not create the problem. They knew that the business was wobbling off course before the board or owners understood it. With the right demeanour and without rudeness, the employees will guide you immediately toward the major problems. Few will hold back if you listen hard. They know that if you really quiz them and they will lose their jobs anyway, it is less painful for them, since both of you have tried to salvage the situation.

Turnaround specialists coming from your specific industry are usually quite good. Their names are familiar in the industry and you can check on the reputation of these specialists. They also probably already know something about your company.

These specialists can make objective decisions that the ailing company’s management cannot. Some take on full-time positions within the company as the Chief Executive. Others may be engaged as consultants with full authority and access to the company’s accounts. They are there to cover the wound, conduct surgery or resuscitation. Once the job is done, they move on as these guys may not be the types suited to running a healthy company. Majority of executives are not suited for a turnaround as this unique situation demands extraordinary leadership. When these turnaround specialists take over the helm of the management, they swiftly proceed do the things that the Chief Executive ought to be doing before the company gets into trouble – restructuring.

When you are afflicted by cancer, see an oncologist and do not rely on your family doctor.

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Uncategorized on 05 Feb 2007

Recovery and Strengthening – Long Term Programs to Sustaining Good Financial Health

Many companies came out of crisis and yet got back into trouble again. Why is it that these companies which have managed to ride out of the ‘intensive care unit’ fall back into trouble again? We also see such problems with patients in that they are cured of “heart disease” and “lung ailments” and subsequently went back to the old bad habits of stressful living and smoking. These companies and individuals did not continue to nurse themselves to good health through long term recovery and strengthening programs of their bodies and spirit.

Once a company has come out of the ‘intensive care’ stage, it is of paramount importance that it can continue to nurse itself to health. The pace of recovery and rehabilitation can vary from patients to patients, even though they maybe afflicted by the same disease. Similar to the recovery after a surgery, a physiotherapist will start you on an exercise and rehabilitation regime such as assisting you to walk with crutches. As you recuperate in the hospital, the physiotherapist and occupational therapist will teach you the proper way to walk, eat, bath, sit and dress. They will also advise on your diet and exercise programmes when you are discharged from hospital.

The company needs to give itself time for healing and recovery. Then it needs to review and reflect on some of the hard issues relating to sales and marketing, customers and market positioning. Oftentimes, these basic issues are taken for granted and can get the company into trouble. The recovery period is also a good time for the company to recharge and reenergize itself through re-visiting its ethical values, inspirational and renewal process.

After full recovery, the battle to stay in good health is not over yet. The company needs to continue to strengthen and have foresight to transform and innovate. It must also continue to build up its cash reserves.

Some doctors believe that the immune system can defend the body against cancer and germs. The immunity is the defence system to combat diseases. During this phase, the strengthening of the immune system is key to boosting health.

The immune system for the company is the corporate culture. A dysfunctional corporate culture is one which is arrogant and full of ego. Also, the company needs to strengthen its immune system through healthy mindsets and vision. In medical science of psychosomatic, it is believed that the mental health can affect the physical health, similarly the mindset of the company can hurt the financial health. Oftentimes, in a sick company, the enemy is within.

An organisation that has regained corporate wellness needs to implement a sustained programme to remain in the pink of health. The company needs to strengthen its heart through exercising, good diet and vitamin supplements. As these are long -term measures, their benefits are normally not visible immediately.

Post to Twitter Tweet This Post Post to Delicious Delicious Post to Facebook Facebook Post to MySpace MySpace

Uncategorized on 05 Feb 2007

Do Not Depend Solely on the Doctor in the House to do the Surgery

Many business leaders are good at starting a business or maintaining one that has already been well established. However, they are not good at fixing a seriously sick business. Avoid bankruptcy by hiring the turnaround experts.

They often do not have the experience, skills, temperament or willingness to do a proper turnaround. Sometimes, the business leader himself is the hindrance and obstacle to the entire turnaround process because of past encumbrances and prejudices. An outsider is quite often required to execute the turnaround.

Most of the time, a troubled company cannot be fixed solely from the within. The management may harbour too much prejudices, vested interests and baggage. If the medicine is too bitter, management may not have the guts to swallow it. The company needs somebody from the outside who is able to say “no” firmly when necessary. If the internal management is the cause of the internal woes, then the use of internal management for the turnaround is like using leeches to cure leukaemia. The condition of the patient will not improve and may deteriorate as time passes by.

An outsider brings some unfair advantages to the turnaround game. You have no emotional baggage tied to a new dream or a historically interesting but economically irrelevant service. Nor are you beholden to the big bosses. You can ask dump questions without looking dumb. One or two of those dumb questions will turn out to be brilliant ones.

Contrary to expectations, you will find you are accorded loyalty from employees. Other executives have to work hard to earn this devotion. These employees understand that you represent their last chance, and that you did not create the problem. They knew that the business was wobbling off course before the board or owners understood it. With the right demeanour and without rudeness, the employees will guide you immediately toward the major problems. Few will hold back if you listen hard. They know that if you really quiz them and they will lose their jobs anyway, it is less painful for them, since both of you have tried to salvage the situation.

Turnaround specialists coming from your specific industry are usually quite good. Their names are familiar in the industry and you can check on the reputation of these specialists. They also probably already know something about your company.

These specialists can make objective decisions that the ailing company’s management cannot. Some take on full-time positions within the company as the Chief Executive. Others may be engaged as consultants with full authority and access to the company’s accounts. They are there to cover the wound, conduct surgery or resuscitation. Once the job is done, they move on as these guys may not be the types suited to running a healthy company. Majority of executives are not suited for a turnaround as this unique situation demands extraordinary leadership. When these turnaround specialists take over the helm of the management, they swiftly proceed do the things that the Chief Executive ought to be doing before the company gets into trouble – restructuring.

When you are afflicted by cancer, see an oncologist and do not rely on your family doctor.

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Uncategorized on 25 Jan 2007

Companies Should Go For Regular Health Checks

Many companies have annual medical examinations and health screening for their employees but are negligent when it comes to their own corporate check-ups. Poor management and financial information systems typically get blamed for management’s inability to ’see it coming’. This is because the checks were done too late. Similar to handling of diseases and illness, early diagnosis and detection can mean the difference between life and death. Medical science has proven that even terminal diseases such as cancer can be cured if detected early. This is why doctors encourage their patients to go for regular check-ups. Regular checkups are critical to facilitating early detection and helps to remedy ailments.

Likewise for companies, if the problems are discovered early enough, help can be rendered. Otherwise, the danger of late detection may mean that help can come too late and the sick company will have a lesser chance of recovery. Thus companies need to know their current health status and should go for regular health checks.

Companies should know their current fitness level as part of the regular health check. The fitness level assesses the state of health of the global, local economic and political arena, the industry specific issues and dynamics as well as the issues relating to the company. The trouble is that companies do not know their state of fitness and often adopt a ‘firefighting’ approach whenever the companies are in trouble. Early diagnosis is always better than a post-mortem.

On the economic front, the check should evaluate some of the leading economic indicators such as GDP growth, consumer confidence and stock market growth. Political stability is also critical as political chaos can severely upset economic and business confidence.

On the industry front, the check should include reviewing the business trends, consumer spending, the competition as well as the product life cycle.

At the company level, the check should reveal a full picture of the company’s profit and loss, balance sheet as well as cash flow positions. The use of financial ratios as key performance indicators will help to identify current and potential troubles. Control procedures should be reviewed to ensure that the company does not undertake too much risks and financial burdens.

It is useful for companies to hire turnaround experts to review the company’s operational, financial and sales/marketing matters. This is a business audit. Unlike the annual external audit which focuses on the financial checks and balances. The business audits will check on the overall corporate health including studying into the viability of the business model. Turnaround experts are better positioned to do this job as they have undertaken corporate turnaround assignments and therefore understand what make a company tick. An external accounting auditor will not cut it as he or she will not have the business acumen to understand the overall health.

Through these fitness checks, the company can then determine whether the impending problem is financial in nature, which may be a case of over-gearing and cash flow problem. Operational and control issues may be involved too, such as frauds, financial scandals, etc. These checks can prepare the top management for some exigencies such as a change of political regime, government or terrorist attacks, etc.

When the checks revealed any areas of weaknesses, the company needs to prescribe the appropriate treatment. The company may need to employ some form of financial reengineering to resuscitate the company. If necessary, enlist the assistance of turnaround specialists. Therefore knowing the state of one’s health is inadequate, one needs to take appropriate actions to remedy the situation.

Have you done your health check lately and got your temperature checked?

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Uncategorized on 25 Jan 2007

The Key To Successful Turnaround Is Early Intervention

Most diseases including cancer and heart problems are easier to cure if detected early. Similarly, most sick companies can be turned around if the problems are discovered early. Sick companies need to be placed urgently into the intensive care units as the normal treatment regime is ineffective.

Unfortunately, owing to denial, ego or pure ignorance, many sick companies do not seek help till it is very late. Troubled businesses usually try to conceal their problems from others for obvious reasons – the creditors may stop their loans, suppliers may stop supplies, employees may jump ship etc. However, like sick people, sick company need to seek urgent help. They need to engage specialists to facilitate the restructuring programmes and to face the new harsh realities before it is too late.

Much like human health, more businesses are also destroyed by neglect than any other causes. This is why regular health check is vital to prevent any unexpected health problems, detect them early so that appropriate remedies can be administered. The traditional accounting methods such as balance sheets and profit and loss statements only capture the measurable financial aspects of the company at a certain point in time. Furthermore, the real financial health of the company can be masked by deliberate accounting irregularities as in cases at Enron and Worldcom. By the time the sickness is visibly evident in the company’s accounts, it may already be too late to take corrective action to reverse the situation. Oftentimes, when the accounts show red, the company is extremely sick or suffering from haemorrhage. There are many other non-quantifiable financial factors that may impinge upon the health of the company. These may include high staff attrition, low morale or an incompetent CEO.Usually, there are ample warning signs or symptoms of impending trouble. However, these warning signals are often ignored or suppressed; hence the onset of a crisis comes as a surprise.

Early detection of business problems is vital to sustaining a company’s growth, manage the crisis effectively and to contain the economic distress. Business problems rarely occur suddenly. Most problems develop over a long period of time due to a series of financial, legal, operational and strategic errors or miscalculations that went largely ignored or undetected by management. Some obvious examples that a company is heading down the wrong course include persistent operating losses, high key staff attrition, loss of morale and market share.

It is important to pre-empt any problems from arising by looking out for warning signals. Therefore, a proverb that says: “The superior doctor prevents sickness. The mediocre doctor attends to impending sickness. The inferior doctor treats the actual sickness.”

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Uncategorized on 25 Jan 2007

Companies Should Go For Regular Health Checks

Many companies have annual medical examinations and health screening for their employees but are negligent when it comes to their own corporate check-ups. Poor management and financial information systems typically get blamed for management’s inability to ’see it coming’. This is because the checks were done too late. Similar to handling of diseases and illness, early diagnosis and detection can mean the difference between life and death. Medical science has proven that even terminal diseases such as cancer can be cured if detected early. This is why doctors encourage their patients to go for regular check-ups. Regular checkups are critical to facilitating early detection and helps to remedy ailments.

Likewise for companies, if the problems are discovered early enough, help can be rendered. Otherwise, the danger of late detection may mean that help can come too late and the sick company will have a lesser chance of recovery. Thus companies need to know their current health status and should go for regular health checks.

Companies should know their current fitness level as part of the regular health check. The fitness level assesses the state of health of the global, local economic and political arena, the industry specific issues and dynamics as well as the issues relating to the company. The trouble is that companies do not know their state of fitness and often adopt a ‘firefighting’ approach whenever the companies are in trouble. Early diagnosis is always better than a post-mortem.

On the economic front, the check should evaluate some of the leading economic indicators such as GDP growth, consumer confidence and stock market growth. Political stability is also critical as political chaos can severely upset economic and business confidence.

On the industry front, the check should include reviewing the business trends, consumer spending, the competition as well as the product life cycle.

At the company level, the check should reveal a full picture of the company’s profit and loss, balance sheet as well as cash flow positions. The use of financial ratios as key performance indicators will help to identify current and potential troubles. Control procedures should be reviewed to ensure that the company does not undertake too much risks and financial burdens.

It is useful for companies to hire turnaround experts to review the company’s operational, financial and sales/marketing matters. This is a business audit. Unlike the annual external audit which focuses on the financial checks and balances. The business audits will check on the overall corporate health including studying into the viability of the business model. Turnaround experts are better positioned to do this job as they have undertaken corporate turnaround assignments and therefore understand what make a company tick. An external accounting auditor will not cut it as he or she will not have the business acumen to understand the overall health.

Through these fitness checks, the company can then determine whether the impending problem is financial in nature, which may be a case of over-gearing and cash flow problem. Operational and control issues may be involved too, such as frauds, financial scandals, etc. These checks can prepare the top management for some exigencies such as a change of political regime, government or terrorist attacks, etc.

When the checks revealed any areas of weaknesses, the company needs to prescribe the appropriate treatment. The company may need to employ some form of financial reengineering to resuscitate the company. If necessary, enlist the assistance of turnaround specialists. Therefore knowing the state of one’s health is inadequate, one needs to take appropriate actions to remedy the situation.

Have you done your health check lately and got your temperature checked?

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