| There are many important imperatives and factors | | | | CEO. Weak board of directors and |
| which are not quantified or measurable | | | | the financial controllers are also a possible cause. Yet, |
| by the traditional accounting system.Human capital is | | | | the current accounting system in |
| perhaps the single most critical success factor for | | | | place does not measure the quality of these key |
| companies. But its | | | | management staff and board members. |
| importance cannot be captured or measured by the | | | | Other causes of failures include poor quality staff and |
| financial numbers. One can anticipate | | | | dysfunctional corporate culture that |
| the failure of companies by observing the high | | | | are ill equipped to handle changes in the marketplace. |
| defections within their middle and senior | | | | The damage caused by such |
| management ranks. The exodus of these key | | | | factors is often only manifested just prior to the |
| managers is the precursor to a much more | | | | financial numbers displaying the red |
| severe problem, which can impact the continuity of | | | | flags.Financial statements can give some amount of |
| execution and administration of the | | | | indication and warning signs. But they should not be |
| company.Another intangible factor of the financial | | | | solely depended upon to gauge the health of the |
| health is the morale of the staff. Although | | | | company. There are many corporate and accounting |
| good morale of the staff does not always equate to | | | | scandals to testify that financial statements are |
| good productivity, poor morale | | | | insufficient.The profitability barometer of a vulnerable |
| certainly spells trouble for the company. A reduction in | | | | company usually takes the form of negative or |
| the staff morale will result in | | | | declining profitability. It may have been slipping for |
| reduction of the flow of constructive ideas and | | | | several years, consistently below |
| effective operation of the company. In | | | | the industry's average and compares unfavourably |
| turn, poor morale can cause the exodus of good staff | | | | with the competitors. However, the |
| and eventually a decline in the | | | | declining trend is sometimes confused with many |
| profitability and market share of the company.Low | | | | other factors such as poor economic |
| morale is another intangible factor that cannot be | | | | conditions, shocks in the marketplace etc. An |
| measured using financial terms. | | | | experienced manager needs to be able to |
| High morale does not necessarily yield high | | | | identify the problems long before the financial |
| productivity. Low morale is the definite | | | | numbers turn red. Mike Teng (DBA, MBA, BEng, |
| formula for low productivity. The problem with low | | | | FIMechE, FIEE, CEng, PEng, FCMI, FCIM, SMCS) is the |
| morale is that the flow of ideas is | | | | author of the best-selling business book "Corporate |
| reduced, there is exodus of good staff and | | | | Turnaround: Nursing a sick company back to health", in |
| operations efficiency are affected in the | | | | 2002. In 2006, he authored another book entitled, |
| process.Unfortunately, the traditional accounting | | | | "Corporate Wellness: 101 Principles in Turnaround and |
| statements also do not measure the brand equity. | | | | Transformation." Dr Teng is widely recognized as a |
| Brand equity is actually the amount of good will | | | | turnaround CEO in Asia by the news media. He has |
| resident in the brand. It is the added | | | | 27 years of experience in corporate responsibilities in |
| value endowed upon the product or service as a | | | | the Asia Pacific region. Of these, he held Chief |
| result of past investments and marketing | | | | Executive Officer's positions for 17 years in |
| of the brand. It is also an asset that the company | | | | multi-national, local and publicly listed companies. He led |
| must ensure that its value does not | | | | in the successful turnaround of several troubled |
| depreciate. Unfortunately, the brand equity is not | | | | companies. He is currently the Managing Director of a |
| captured in the balance sheet because | | | | business advisory firm, Corporate Turnaround Centre |
| of its arbitrary nature.Another significant root cause of | | | | Pte Ltd, which assists companies on a fast track to |
| corporate failures is the quality of the CEO. Most | | | | financial performance. |
| turnaround situations arise because of incompetent | | | | |