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