Accountability should never be feared, it needs to be embraced

When implementing a business rescue, and business turnaround plan, there needs to be a certain level of accountability that goes with the plan.

At the end of the day, the company didn’t get into distress by itself did it? Certain events led the company down a specific path. These events need to be highlighted and examined so that they do not happen again.

Often, the biggest cause of distress is gross (often financial) mismanagement. This is where egos need to be put aside and accountability needs to be taken for the actions that led the company to where it is. My inspiration for this article comes after Eskom CEO, André de Ruyter sent a strongly worded letter to his Eskom colleagues criticising what he called victim mentality of acquired helplessness. He also called for a halt on tolerating mediocrity.

In his letter, De Ruyter said: we tend to blame Government, the weather, and all sorts of creative reasons rather than step up and take accountability and responsibility for our own actions. This is something we need to change as such behaviour impacts our sense of urgency.  People tend to display inertia and lack of accountability without any consequence management. 

This got me thinking about how BRPs often try to build a culture of accountability within businesses. This often faces massive resistance.

A matter of urgency
I believe that every company needs to have a culture of accountability. However, this is more vital in distressed companies because benchmarks need to be set in order to manage the effectiveness of the business rescue and business turnaround strategy.

The sole purpose of a company is to become, and then remain profitable. I believe that management’s basic task is to deliver on the budget. 

However, when you look at why companies finally have to resort to Business Rescue you will see that many of the companies (like SAA) have made losses for many years. The losses raise a red flag that something is wrong, but management (especially privately owned companies) seem to be paralysed and do not act.

When changes need to be made, you need to start at the top, you cannot change a company from the middle.  When you want to stop the decline of company performance one strategy is to replace the CEO because he/she has the necessary powers to make decisions and implement it. This will be a firm declaration that there will be consequences for poor performance. This is the foundation of any culture of accountability. 

Management problems
I believe that the management is the biggest problem when it comes to companies who are in distress.  It is because of their thinking and (mis)management and lack of corrective action that the company is in trouble. Some managers leave when things go wrong and have to be replaced.  However, it is important that the remaining managers buy-in into the new strategy and deliver thereon.

The performance bonus scheme must be aligned with the new objectives. To do so the overall key performance indicators (KPIs) must be cascaded by department and ultimately to everybody’s job descriptions to ensure that they focus on the right things and are rewarded accordingly

I believe that the systems and reporting must be set up to give the necessary information to manage the business with alarms, dashboards, and exception reports (management by exception) for shift/daily management as well as monthly reporting.  Sometimes there are no systems, or it is not suitable for the type of company. When this happens, the systems have to be replaced.

Performance measurement
The next step is for the culture of accountability to filter down throughout the organisation.

If you ask somebody to do something, but you do not follow up, they will start ignoring any requests in future because their perception is that you are not serious, and you are just wasting their time. 

There is an expression that if you measure something it will come right by itself. By focusing on the list of most important issues and expecting answers the CEO will force the next level to respond.  Because it is linked to their performance bonus scheme, they, in turn, will put pressure on their subordinates to focus on those issues and provide answers and by doing so the CEO will cascade what is important throughout the company.

Executives need to identify the key performance areas and KPIs and quantify the respective targets for each (as part of the Strategy and Business Plan) so that executives can measure and report on progress. This includes positive and negative variances. 

The role of BRPs
What role to BRPs play when it comes to building a culture of accountability?

I feel it is an important role because, as specialists in risk management, we can see where the company is currently falling short of important objectives and what needs to be put in place to make sure that these objectives are reached in the future.

Changes need to be made within management structure. This is unavoidable. There either needs to be a clean out, or new systems need to be put in place so that management knows what is expected of them and how their management will be measured in the future. We need to make sure that we lead the charge when it comes to this and that we maintain consistency when it comes to the implementation of these cultures. Accountability should never be feared, it needs to be embraced.

Hannes Brits is a Director at Kubu Business Optimization Consultants