Why do companies fail? Corruption, incompetence and lack of care

We have heard about a ZBC boss who rewards himself with a monthly salary of $40,000 while his employees go for months without pay. We have also heard about a PSMAS boss who earns $250,000 per month. Who hasn’t heard about the Cottco boss who reportedly splashed out $800,000 of the company’s money on bribes for police, magistrates, prosecutors, politicians, you name it, in what he calls “oiling the system”.

Cuthbert Dube
Cuthbert Dube

We have also heard about Capital Bank’s chairman, who irregularly instructed management to employ his long-time colleague and former student, while his wife was awarded the tender to supply uniforms to the bank’s female staff.

All this information is already in the public domain and there are other corporate leaders, not yet brought to light, who are probably doing much worse.

These increasing reports of corporate leaders conducting malpractice give an insight into what really is pulling our country backwards.

Cecil Madondo of Tudor House Consultancy, which managed 25 of the 149 companies that filed for liquidation in 2012, is on record saying that the liquidations were caused by “gross mismanagement and lack of effective corporate governance”, among other factors.

One wonders if there are any controls to stop corporate leaders from abusing and manipulating companies’ resources. If those controls are there, then how come all these unfortunate incidences are taking place?

While the corporate sector blames its challenges on factors like liquidity, high utility costs, a poor business environment and a myriad of other challenges, it appears as if corporate leaders themselves are responsible for their business failures.

We need a paradigm shift in corporate leadership in Zimbabwe. We need corporate leadership that is sensitive to the need to contribute to economic growth. Many companies that are making losses could actually be making dynamic profits, if they had strong leaders at their helm.

Metalsa, an American automotive company, is a good example of what bad and good leadership can do to a corporate organisation. Before a change of leadership, Metalsa had a questionable future, with only one plant and a rejection rate of 10 per cent for its products. It was making $23m in domestic sales, with no exports and with a staff of 1,000 employees.

With new leaders at the helm, Metalsa started to have worldwide recognition and the number of plants increased to six. It also realised $140m in sales, with 40 per cent coming from exports. Rejection rate fell to 0.1 per cent and productivity increased by 200 per cent. The company won numerous awards for quality.

From the above, we see that good leadership results in growth, profitability and success of companies. Good corporate leaders are recognised by their courage and clarity in focusing on values and principles, as well as their competence, knowledge and their strength of character. They should be able to inspire a shared vision and enable others to act.

Zimbabwe also needs corporate leaders who pay attention to the welfare of their employees, not those who abuse company resources while employees go hungry. Employees are the most important resource of a company and should be treated as befits that importance.

‘Metalsa had a questionable future, with only one plant and a rejection rate of 10 per cent for its products. With new leaders at the helm, productivity and sales rocketed and the company won awards for quality.’

“People want to be treated as people.” Those are the words of Patricia Carrigan, who transformed one branch of General Motors (GM) that she was leading. In just two years, Carrigan’s branch managed to be the first GM plant to attain a quality standard on first audit. Grievances also fell to zero, with discipline incidents declining by 82 per cent and no protested disciplinary actions. Absenteeism declined from 25 per cent to nine per cent, with sickness and accident costs cut by 67 per cent.

It is high time for Zimbabwe’s corporate leaders to be whipped into line. Companies should first address their leadership problems before blaming failure on things like sanctions and other trivial excuses.

Post published in: Opinions & Analysis
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