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By the Time the Financial Numbers Show Red, the Company is Already Bleeding

There are many important imperatives and
factors which are not quantified orturnaround situations arise because of
measurableincompetent CEO. Weak board of directors
by the traditional accountingand
system.Human capital is perhaps thethe financial controllers are also a
single most critical success factor forpossible cause. Yet, the current
companies. But itsaccounting system in
importance cannot be captured orplace does not measure the quality of
measured by the financial numbers. Onethese key management staff and board
can anticipatemembers.
the failure of companies by observingOther causes of failures include poor
the high defections within their middlequality staff and dysfunctional
and seniorcorporate culture that
management ranks. The exodus of theseare ill equipped to handle changes in
key managers is the precursor to a muchthe marketplace. The damage caused by
moresuch
severe problem, which can impact thefactors is often only manifested just
continuity of execution andprior to the financial numbers
administration of thedisplaying the red
company.Another intangible factor offlags.Financial statements can give
the financial health is the morale ofsome amount of indication and warning
the staff. Althoughsigns. But they should not be solely
good morale of the staff does notdepended upon to gauge the health of the
always equate to good productivity, poorcompany. There are many corporate and
moraleaccounting scandals to testify that
certainly spells trouble for thefinancial statements are
company. A reduction in the staff moraleinsufficient.The profitability barometer
will result inof a vulnerable company usually takes
reduction of the flow of constructivethe form of negative or
ideas and effective operation of thedeclining profitability. It may have
company. Inbeen slipping for several years,
turn, poor morale can cause the exodusconsistently below
of good staff and eventually a declinethe industry's average and compares
in theunfavourably with the competitors.
profitability and market share of theHowever, the
company.Low morale is another intangibledeclining trend is sometimes confused
factor that cannot be measured usingwith many other factors such as poor
financial terms.economic
High morale does not necessarily yieldconditions, shocks in the marketplace
high productivity. Low morale is theetc. An experienced manager needs to be
definiteable to
formula for low productivity. Theidentify the problems long before the
problem with low morale is that the flowfinancial numbers turn red. Mike Teng
of ideas is(DBA, MBA, BEng, FIMechE, FIEE, CEng,
reduced, there is exodus of good staffPEng, FCMI, FCIM, SMCS) is the author of
and operations efficiency are affectedthe best-selling business book
in the"Corporate Turnaround: Nursing a sick
process.Unfortunately, the traditionalcompany back to health", in 2002. In
accounting statements also do not2006, he authored another book entitled,
measure the brand equity."Corporate Wellness: 101 Principles in
Brand equity is actually the amount ofTurnaround and Transformation." Dr Teng
good will resident in the brand. It isis widely recognized as a turnaround CEO
the addedin Asia by the news media. He has 27
value endowed upon the product oryears of experience in corporate
service as a result of past investmentsresponsibilities in the Asia Pacific
and marketingregion. Of these, he held Chief
of the brand. It is also an asset thatExecutive Officer's positions for 17
the company must ensure that its valueyears in multi-national, local and
does notpublicly listed companies. He led in the
depreciate. Unfortunately, the brandsuccessful turnaround of several
equity is not captured in the balancetroubled companies. He is currently the
sheet becauseManaging Director of a business advisory
of its arbitrary nature.Anotherfirm, Corporate Turnaround Centre Pte
significant root cause of corporateLtd, which assists companies on a fast
failures is the quality of the CEO. Mosttrack to financial performance.



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