YEARS ago, a company was facing insolvency and the initial diagnosis indicated it was due to weak commercial activities or weak market- as specialists prefer to say. In my humble opinion, this justification is not valid at the heart of valid accounting, budgets, plans and work plan. Any external factor cannot be considered except for reasons that are beyond the control of the company’s administration or due to clear shortcomings.
Actually, outcome of investigation showed that weak market had nothing to do with the problem. Rather, the issue was related to administrative policy that resulted in the financial loss of the company. The first cause of failure was illogical appointment of several senior officials and creation of positions that were not initially included in the administrative structure of the organization. Some senior officials were appointed while the company had no need for them. They were appointed based on complements.
Secondly, construction of a new headquarters at a cost exceeding the capacity of the company exhausted a large part of its resources. Furthermore, there were no regular follow-up of the activities of the contractor, which opened the door wide to corruption and huge withdrawals from the company’s bank deposit to cover the expenses many times. Here, we need to ask if there was an integrated budget for construction, furnishing, operation and maintenance of the new headquarters or not.
It was noticed that social responsibility item of the company’s budget was misused. The work of one company overlapped another under the same administration, leading to mixed transactions and other dealings with suppliers and clients, while the manager was later discovered to be incompetent in the running of the company. He was handling assets and fate of the company like a private estate. He was distributing gifts left and right (in the social responsibility aspect) while members of the board had their eyes blinded and hands were tied! It was useless to remove the administrative board, so the crime was committed against the company, because no new administration could fix what was destroyed over the years except by miracle or after long years.
The company thereby became flaccid, hopeless and unable to make the right move towards development. Demands from creditors were steady and members of the board were moving freely! Reform should start with punishment for those who bastardized the company through legal procedures. The next thing is to lay down the first rescue plan, which is the initial and quick reorganization. This should include the reduction of expenditure, merging positions, and deleting useless departments and positions. The concentration should be on the main activity of the company and the situation re-positioned back to normal, at least morally and administratively.
The next thing is the second rescue plan, which is 90 percent dependent on success of the first plan. This plan will restore the structure and specify shape of the new management of the company. From there, the company will start its activities afresh. It will be based on basic factors such as strict appointment into positions with prerogatives of its occupier, while defining the works of a particular department, its substance and limit, including reasonable annual budget that can take care of all aspects.
“You can preach a better sermon with your life than with your lips” Oliver Goldsmith).
By Yusuf Awad Al-Azmi