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