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Tuesday , August 20 2019

Mechanism of collapsing co (7)

“Perseverance is not a long race; it is many short races one after the other,” Scottish politician Walter Elliot (1888 — 1958).

ONE of the challenges that the management faced was the Real Estate Department. This department was dispersed into several disorganized managements and companies where more than four companies performed the same activity and role, and they were independently managed.

The most astonishing issue, as I mentioned in the previous article, is that the management of these companies are subject to personal temperaments which disregard the welfare of the corporation. Each company used to deal with financial returns as they pleased without referring them to the higher management — the parent corporation.

However, the core problem which facilitated the collapse of these companies was that the financial returns, or rather, the generated income was handled and invested internally. Only a small portion — compared to the size of returns — of these returns were referred to the higher management.

The excuse given by these companies was that they invested returns in specialized investment companies, meaning they disregarded the investment sector of the higher management of this group.

The first step to remedy this haphazard management style was to oblige the companies operating under the parent corporation to deposit all the income generated by real estate to the headquarters, where the income will be dealt with as per the mechanism for handling the corporation’s overall income.

Nonetheless, the higher management discovered that most of the investments done by the independently operating subsidiaries were not registered under the corporation’s name. Instead, the investments were registered under individual names and these individuals were somehow related to several officials.

It was in the interest of the parent corporation to ensure that it regains all of the investments done under its name, so it will not incur more losses.

Therefore, amicable settlements were initiated by those who used the group’s income to invest privately. Through this process, sacrifices were made in order to regain most of the investments in the best interest of the parent corporation in its bid to rescue itself from total collapse.

After putting back most of the generated income under the control of the parent company, which happened through several liquidations of investments; the higher management decided to amend the leadership structure of its subsidiaries — a similar step taken in other sectors of the corporation.

The amendments facilitated dissolution of sub-management boards and employed executive directors of each company, limiting their mandate to executive role only.

This move was not aimed at limiting the entrepreneurship and creativity of directors, but at the current stage, the rescue plan could not accommodate multiple channels of decisions. Once the financial situation of the company is stabilized, the directors will bit by bit regain their full executive role in their respective companies. Every entity will then have independent bearing and end goals.


By Yousef Awadh Al-Azmi




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