Description
International Journal Of Management Perspectives
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IJMP’2009
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©2008 INTERNATIONAL BUSINESS AND TOURISM
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©2009 INTERNATIONAL BUSINESS AND TOURISM
SOCIETY PUBLISHING GROUP
INTERNATIONAL JOURNAL
OF MANAGEMENT PERSPECTIVES
CONTENTS PAGE
Indigenous Customer Relationship Management
Practices in Indian Automobile Companies:
Strategic Implications
Sajal Kabiraj, Joghee Shanmugan
Women in Leadership and Gender Equity in Alba-
nia: Case of Vlora Region
Etleva Leskaj, Klaudja Guga
Institutional features and entrepreneurship devel-
opment in Romania. A case study on
the North-East region
Andreea-Oana Iacobu??, Livia Baciu and Laura Asan-
dului
Challenges of Leadership in Corporate
Management and Turnaround
Amos Adeoye Idowu
Encouragement, Punishment, Offering New
Solutions
S. M. Abdollahi Keyvani and Mehrdad Mozafari
...1
...26
...37
...56
...74
VOLUME 1 - IJMP - ISSUE 4 / 2009
ISSN: 1307 - 1629
EDITOR
HUSEYIN ARASLI
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ABSTRACT
Challenges of Leadership in Corporate Management and
Turnaround
Amos Adeoye Idowu
Department of Public Law, Obafemi Awolowo University, Nigeria
This paper examined challenges of leadership in the process of a corporate
management and turnaround with a view to appreciating certain fundamental issues
relating to the role of a leader in a bid to salvage the fortune of an ailing company
or a business enterprise. The study adopted a combination of descriptive, analytical,
leadership, functional and systemic theory models on such matters bordering on the
existence of many ailing companies in Nigeria and world over, necessity for ensuring
their resuscitation, expected problems and workable strategies.
The study found that a frightening number of despondent companies and corporate
organisations now exist all over the world due to various socio-economic, political,
ecological and anthropological problems. This development had resulted into mass
corporate failure currently responsible for high rate of unemployment in the society
coupled with serious decline in economic contributions of private sectors to national
development. Hence, the astronomical increase in crime rate, spate of insecurity and
intolerable degree of breakdown of law and order. Recourse was made to major agro-
allied and food processing companies and business enterprises in Nigeria for a period
of nine years, April, 2000 – April, 2009. The paper concluded that effective leadership
quite capable of formulating systemic policies and implementing workable strategies
for proftable corporate management and turnaround is seriously needed in reviving
many dying companies and business enterprises so as to replace them in positions of
value toward human and material development of countries where they operate.
Keywords: challenges, leadership, corporate, management, turnaround.
* Corresponding author: Amos Adeoye Idowu
Tel:+902323881218, Fax:+902323888826
E-mail: [email protected]
IJMP is a publication of International Business and Toursim Society
www.ib-ts.org/ijmp.htm © 2009 All rights reserved.
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INTRODUCTION
Over the ages, corporate organizations had been known as the mainstream of private
sectors which have made their indelible marks in the socio-economic development of
nations where they operated. In recent time, corporate entities, through their business
endeavours and economic activities, have given employment to the people, enhanced
their standards of living and contributed immensely to the Gross National Income of
their countries. Unfortunately, many companies and corporations in the world are now
experiencing serious downward trends in their business positions due to many problems
associated with leadership style, management, structure, their modus operandi and
modus vivendi. In Nigeria for instance, (Business Times 2008), reported that over
67% of registered companies and business frms are dysfunctional thereby, seriously
requiring surgical operations from corporate turnaround experts of classic competence.
Aside national problems of socio-economic, political, executive lawlessness and
insecurity of life and property; anthropological problems of laxity, negligence,
irresponsible behaviour, wickedness, dereliction of duties and corruption often traceable
to corporate workers are known to be responsible for complete or partial collapse of
many companies. The problem has been compounded by the global economic recession
being experienced in all nations. This unfortunate situation has necessitated the renewed
efforts at focusing on corporate leadership and its responsibilities in the process of
ensuring a reliable turnaround of a jaundiced company. A corporate leader who is
required to affect a proftable turnaround is expected to have some outstanding personal
qualities and leadership skills necessary for overcoming some inevitable challenges.
Without this, a sick company may not be able to stand on its feet again.
CONCEPTUALISATION
Challenges
Within the context of this paper, the word ‘challenges’ means some major problems,
hindrances or constraints militating against effective exploitation of personal qualities,
ethical values and professional skills of a leader in the process of a corporate
management and turnaround (Osase 1999, Graig 2008). They include all possible
diffculties against necessary steps and efforts taken by a corporate turnaround expert
to change the misfortune of a company through effective management strategies with a
view to repositioning it for better performance of a proftable nature.
Leadership
The concept of leadership can be expressed as a combination of natural attributes of
person who is expected to shape collective behavioural patterns of a group in direction
capable of achieving particular goals like prudent management and turnaround of
an ailing company (Dunmoye 1991). It can also be defned as the inducement of
followers by the leader to act for certain goals that represent the wants and needs or
the aspirations and expectations of both the leader and followers (James 1978). The
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concept of leadership in the management and turnaround of a company refers to the
overall propensity of certain individuals holding themselves out as experts to lead
the people by virtue of their knowledge and competence while determine to ensure
proper management of the deplorable affairs of a failing company. However, some of
the serious leadership challenges facing business today and which are resulting into
fnancial crises include, lack of accountability and irresponsible leadership arising from
personal traits, background, education and professional skills of corporate offcials
(Stevens et al 2006).
In most cases, the overriding parameter for determining a successful leader lies in his
ability to utilize a combination of all the above named qualities and within the same
factoral circumstance to effect a workable and proftable management and turnaround
of a sick company (Warren 2007). It is however salient to point out that the concept of
leadership is not a one-way affair but also relational. It involves someone who exerts
infuence and those who are being infuenced. In other words, without responsive and
dependable followers in a company, there can be no productive leadership (Serjovalli
2006). Conversely too, without the presence of a brilliant, courageous, healthy,
dedicated, dynamic and disciplined leader, there can be no responsive and dependable
followers (Vugt 2008).
Corporate
The word ‘corporate’ is something connected with a company, a business entity
or a corporation (Garner 2004, Dignam et al 2009). In Nigeria, such an entity must
be registered under the Companies and Allied Matters Act, Cap. C12, Laws of the
Federation of Nigeria, 2004 and by the Corporate Affairs Commission (CAC); thereby,
making it a legal personality. In a corporate turnaround therefore, a leader is dealing
with a company which is a juristic person. It is a company known to law and not a legal
nonentity. A company is like a human being which can sue and be sued in its corporate
name. The only difference between a registered company/corporation and a human
being is that a company has no biological life as a human being. But a company has
a long life span than a human being. The longest number of years for a human being
is between 80 and 150 (Holy Bible 1983); but a registered company has a perpetual
succession capable of being handed over from generation to generation.
Management
The dictionary meaning of the word ‘management’ is the act of running and controlling
a business or a similar organization. (Hornby 2000). It is also the act or skill of dealing
with people or situations in a successful way. In the context of this article, management
refers to conceiveable means by which a leader (corporate manager) utilizes all his skills
and profciencies to infuence his workers in both positive and dynamic ways to revamp
a falling company. The word ‘management’, in the context of various challenges facing
business today can equally be used to mean the people, both mangers and entire workers
who manage operations within a company and execute top management’s directives
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(Danon 2007).
Turnaround
The word ‘turnaround’ can be used in two grammatical connotations. First, as a
verb, to change something into a particular state or condition (Hornby 2000). An
example is the issue of changing an ailing company from its dilapidated or failing
position to a valuable and proft-making venture. Second, as a noun, depicting the
latest and successful position of a company after a thorough and rewarding processes of
a turnaround. Within the purview of this article, the phrase ‘corporate management and
turnaround’ refers to all necessary strategies put in place to revive an ailing company
thereby, changing its dilapidated position to an enviable and promising business entity.
It refers to all determinable efforts of a corporate leader or a turnaround expert to ensure
effective coordination of other company workers to make good the bad conditions of a
company.
THEORETICAL FRAMEWORK
The frst set of theories adopted in this study is called the Leadership Theory (Mckinney
1979). This theory is segmented into three main parts: (i) Personality or Traits theory.
This theory posits that a leader possesses certain inherent qualities which assist him to
positively or negatively infuence his followers or workers either to make him succeed
or fail in his company or organization. Top on the spectrum of such inherent qualities
are ethical values in every corporate leader which promote ethical decision- making and
actions through skill development, self – assessment and application exercises (Graig
2008).
The second segment of leadership theory is the interpersonal or group-infuence
theory. Writers on this theory believe that common habits, feelings, perceptions and
motives between workers and a leader also go a long way to dictate the level of success
or failure which may be recorded in a management/turnaround process. In other words,
the interpersonal theory asserts that a leader who is friendlier with his workers is likely
to succeed fast in a turnaround process than a leader who is hostile and antagonistic. A
caveat should be entered on this assertion. It is not impossible for workers in a company
to abuse the friendly relationship between them and their leader to cause havocs against
his efforts at ensuring proper management/turnaround of the company. Whereas,
workers who realize that their leader is a no nonsense-taker would always sit up to
implement his policies for attaining success in a turnaround process.
The third segment of leadership theory is called the conditional or situational theory.
This theory emphasizes that certain prevailing conditions, situations and circumstances
within which a leader and his workers are operating often infuence their personal traits
and professional skills towards formulating policies and adopting strategies needed for
effective management and corporate turnaround. Researchers on this theory assert that
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conditions, situations and circumstances are strong environmental factors capable of
shaping individual destiny and the destiny of an ailing company meant to be turned
around (Glassey 1947).
The second set of theories adopted in this article is called the Functional Theory.
The theory focuses on the functions performed by institutions, organs or units of
government, organizations or corporate entities to ensure their effective performances,
operations and survival (Waltz 1979). The most prominent variant of functionalism
concerning this topic is structural functionalism which emphasizes those components
and sub-components of an ailing company headed by its staff must work in tandem to
ensure proper management capable of bringing about a successful turnaround process.
In fact, (Dignam & Co 2009), having assessed the impact of economic globalisation
on the key corporate governance systems of UK, the US and Germany, came to the
conclusion that the issue of leadership is quite fundamental to proper workability and
meaningful convergence of insider and outsider corporate systems.
The third set of theories relied upon in this piece is the System Model Theory.
This theory conceives the phenomenon or subject matter of an ailing company and
those of its components as a system made of interrelated parts which must exist in
continuous interaction to ensure the functioning of the system (Booth 1991). Here,
an ailing company is regarded as the whole system while the turnaround leader and
other departments headed by company workers remain its component and interrelated
parts which are expected to interact continuously to guarantee proper formulation and
implementation of necessary policies aimed at resuscitating the company.
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Figure 1. Trends in the dysfunctioning agro-allied & food processing companies &
Agro-allied and food processing companies and business enterprises registered by the Cor-
porate Affairs Commission of Nigeria, 2000-2009
Dysfunctioning Agro-allied and food processing companies and Business enterprises, 2000-2009
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business enterprises registered by corporate affairs commission of Nigeria, April,
2000-April, 2009
Source: Corporate Affairs Commission of Nigeria, Research Unit
In fgure 1, the total number of agro-allied and the Corporate Affairs Commission of
Nigeria (CAC) in the frst quarter of the year 2000 was about 65,000. Out of this fgure,
36,000 (55.3%) were dysfunctioning. In 2001, the number of registered companies and
business enterprises rose to 280,250 out of which 190,101 (68%) were despondent. There
was another trend of increase in the number of companies registered in 2002 to the tune
of about 280,304 out of which about 125,500 (45%) were moribund. In 2003, 2004 and
2005, the total number of registered companies and business enterprises amounted to
270,120, 250,302 and 235,106 respectively. Of these fgures, 171,201 (63%), 210,100
(84%), 122,101 (73%) were found sleeping and unproductive respectively.
In 2006 and 2007, the number of registered agro-allied and food processing companies
and business enterprises in Nigeria rose to 255,122 and 251,103 respectively while
about 186,090 (73%) and 185,102 (74%) companies were not performing. There
was a slight increase in the number of companies registered in 2008 to the tune of
about 246.121 leaving about 167,115 (68%) of such companies dysfunctioning. The
frst quarter of the year 2009 witnessed the sum of 71,209 registered agro-allied and
food processing companies with a total number of 40,702 (57%) not functioning. In
other words, out of the total number of about 2,204637 agro-allied and food processing
companies and business enterprises registered by the Corporate Affairs Commission in
Nigeria between April, 2000 and April, 2009; about 1,434,012 (65%) of such companies
were dysfunctioning.
A combination of factors like offcial corruption, negligence, lukewormness, and
absenteeism on the part of workers in both the Companies and Corporate Affairs
Commission of Nigeria were responsible for the deteriorating conditions of all the
companies under examination. Also, issues of poverty, disobedience to law, inconsistent
policies and political instability often traceable to government and the people in Nigeria
and other African nations in particular, have been responsible for high degree of
dysfunctioning companies under review. With a population of about 230 billion people,
vast forest and agricultural resources, it is sad to observe that even out of a very few
registered agro-allied and food processing companies between April, 2000 and April,
2009; a greater percentage of them were not performing. This development could be
traceable to the unfortunate attitude of Nigerian governmental authorities over the years
which had divested their interest from agriculture and vast land resources to exploitation
of crude oil. The net result of this phenomenon had been poverty, ignorance and diseases
arising from unemployment, food insecurity and serious economic recession.
In this article, agro-allied and food processing companies and business enterprises are
said to be dysfunctioning if:
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a) unable to render annual returns to the Corporate Affairs Commission in order
to confrm whether they are still buoyant
b) unable to carry out their functions as listed in their Memoranda and Articles
of Associations
c) unable to render their economic and social obligations to the government and
people
d) unable to sustain their corporate existence thereby, sending out thousands of
their employees out of jobs
e) unable to produce, process and sell food and agricultural products to the people
thereby, failing in their duties of complementing the efforts of the government
in solving problems of food scarcity in the countries where they operate
f) unable to contribute meaningfully to the manpower and industrial development
of their nations.
The foregoing explanations were arrived at through a content analysis of information
and data obtained in the annual reports and statements of the research unit of the
Corporate Affairs Commission of Nigeria. Agro-allied and food processing companies
and business enterprises were focussed due to the signifcant role expected of them
with particular regards to the provision of food for the people in the current age of food
scarcity and global economic meltdown. Any corporate leader intending to reverse the
misfortune of an ailing company should have some outstanding personal qualities and
professional skills.
PERSONAL QUALITIES AND PROFESSIONAL SKILLS OF A LEADER
(a) Health
Health is wealth. A sound and perfect state of health without any pronounced state of
infrmity capable of rendering a corporate leader and his workers ineffective is highly
desirable for achieving a successful turnaround. It will be a calamity for a sick company
to fnd itself in the hands of sick managers or turnaround experts. As human beings,
much pressure from work and serious exertion at times, may result into one sickness
or the other. Hence, adequate health care facilities must be put in place in the company
for the workers. In most cases, the services of very hard-working, consistent,
abulent and rugged workers are needed in turning around a sick company.
(b) Character
Certain fundamental qualities that make a person to be considered good, responsible
and perfect must be found in a corporate leader. Such qualities include; humility,
honesty, openness, fairness, kindness, frmness and straightforwardness. These are
what a leader needs to effectively infuence his subordinates and assert his authority to
realize a promising turnaround (Graig 2008).
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(c) Intellectual Ability
Education is the mother of inventions and a strong weapon against illiteracy and
poverty. A corporate leader wishing to coordinate the efforts of other workers for
ensuring a successful turnaround of an ailing company must be intellectually sound,
knowledgeable and full of ideas. He must not be tossed here and there by other workers
to take a position on a particular matter due to lack of knowledge. Nevertheless, it is
always good for a leader to allow his workers to offer their inputs on a matter if only to
enrich the scope and wealth of his experience (Danon 2007).
(d) Love and Interest for the Job
A corporate leader who intends to effect a successful turnaround for an ailing
company must show suffcient love and interest for the work. He must believe and have
unshakable hope in policies being formulated for managing the company and moving
it forward. A corporate leader who is just working for the purpose of keeping his soul
and body together and ready to leave for a greener pasture at any available opportunity
cannot succeed in moving forward a sick and cripple company.
(e) Vision
A corporate leader must be able to see well and must possess the ability to think about
or plan the future with great imagination and intelligence (Hornby 2000). An ailing
company needs a lot of plans and imaginations for various steps to be taken in future
for its turnaround.
(f) Discipline
Discipline involves self control, personal restraints, respect for others and the use of
rules and punishments for controlling people (Hornby 2000). A corporate leader must
show suffcient examples of discipline which other workers must emulate. He must be
able to live above board, correct erring offcers and give commensurate punishments
for offences committed through due process and the rule of law. In order to accomplish
a promising turnaround for a sick company, a turnaround expert must always lead by
practical, inspirational and motivational examples. He must be ready at all times, to
assert his authority and pride of command.
(g) Justice and Fairness
In an organization without Justice, peace is the eventual casualty. More than anything
else, justice, equity and fairness must pervade the operations of all stakeholders of a
dying company if a successful turnaround is to be achieved. A turnaround expert must
not be hostile, he must be a listening authority who is always ready to give opportunities
to his workers to express their views on any matter affecting the interest of the company.
This can be achieved through regular departmental meetings, conferences, workshops,
seminars or sampling opinions of workers by personal contacts. Failure to give workers
opportunity to express their opinions may bring contempt and mistrust capable of
derailing a turnaround process. This is why it has been said by (Fatai Williams 1983),
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that:
‘If you drive men and women from the public arena
where debate is free, you send them to the cellar where
revolutions are borne. It is indeed better to have an uproar
than a wisper.’
However, much as it is desirable for a turnaround expert to give his workers the
opportunity to express their opinions and assert their freedom of speech about issues
affecting the interest of a company; this opportunity must not be allowed by a corporate
leader to be misused in precipitating crises in the company. A leader must be able to
assert his overall authority and arrive at a fnal or decisive position on any salient affair
of a company. In the words of (Meiklegon 1969):
‘Freedom of speech is not the guardian of unregulated
talkativeness. It does not require that every occasion,
every citizen shall take part in a public debate nor can
it ever give the assurance that everyone shall have the
opportunity to do so. What is essential therefore, is that
not everyone shall speak but that everything worth-saying
shall be said.’
(h) Fear of God
In ensuring an enduring management and turnaround for a cripple company, the
overriding quality which a leader must possess is the fear of God. The fear of God
includes, ability of a leader to run away from sins and temptations, to be sincere,
kind, dutiful and prayerful. The (Holy Bible, 1983), states that the fear of God is the
beginning of wisdom which a leader and his workers seriously need to succeed in their
turnaround efforts. The ability to fear God will also enables a leader and his team to
spend their days in prosperity and their years in pleasures as they manage the affairs of
the company (Holy Bible 1983). Effective exhibition by a leader and his workers of the
outstanding qualities enumerated above does not prevent them from coming across the
following problems or challenges in the process of Management and turnaround of a
cripple company.
OPERATIONAL CHALLENGES AND STRATEGIES
(a) Deplorable Company Position
One of the frst and glaring challenges or problems of leadership in a corporate
turnaround is the deplorable state of affairs in the company. The company must have
been in serious debt or in a state of infrastructural decay like lifts not working, vehicles
grounded coupled with a regime of disloyal, non-challant and unproductive staff. This
is obviously a discouraging state of affairs in a company. A good leader who is a
competent turnaround expert fnding himself in this situation must be able to exhibit
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a combined qualities of courage, tenacity, vision, hardwork and quick reasoning to
generate immediate results.
(b) Lack of Capital
Absence of funds in an ailing company to carry out corporate functions like payment
of salaries and maintenance of infrastructure may be a serious challenge. This is where
a turnaround expert must demonstrate his intellectual and business skills by formulating
certain strategies for overcoming perceived challenges. Management and turnaround
strategies in this regard may include diversifcation of the company’s operation,
investments and business endeavours. Loans may also be taken provided interests are
not unbearable and that sound policies are in place for quick repayment.
(c) Staff Indiscipline
Operational challenge in the nature of staff indiscipline is often a feature of an ailing
company. Many at times, workers have been found to engage in acts of corruption,
frolicking, laziness, negligence, disloyalty, wickedness and absenteeism. In order to
overcome this challenge, a leader must be disciplined, an embodiment of good example
and be ready to curtail excesses of his workers through appropriate punishments within
the framework of due process and rule of law.
(d) Mismanagement
One of the factors often responsible for the downfall of a company is gross
mismanagement in the hands of workers. Acts of mismanagement include, corruption,
favoritism, putting round pegs in square holes, disrespect for constituted authorities
and disregard for company rules and regulations (Stephens & Co 2006). Some ways
of curtailing unlawful mismanagement acts of workers include, the establishment of
appropriate structure and hierarchical regimes for the company, making sure people
know what to do and they are doing it, giving appropriate punishments to defaulters and
appropriate rewards to hardwork and effciency.
(e) Internal and External Competitors
Unfair and wicked competitions from cognate business companies within and outside
the nation capable of weakening or drastically reducing the operational endeavours
of the company are serious challenges of leadership in a corporate management and
turnaround. These features of competitions against a distressed company will require
the use of intellectual, academic, technical and professional skills of a leader and his
workers to tackle the activities of unfriendly competitors. To achieve this, different
surprises and innovations can be introduced in product-brandling and operations.
Workers must also be ready to keep their secrets secret and maintain effective espirit de
corps among themselves.
(f) Change
One of the biggest challenges of leadership in a corporate management is change.
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The only thing that is permanent in human affairs is change. A turnaround expert must
be ready to change his policies and strategies to meet exigencies and circumstances of
time. The abilities of other companies around to effect changes in their operations and
products may not be easy to be physically curtailed. Hence, a leader and his team must
learn how to respond quickly to certain changes noticeable in the operations of their
corporate competitors. One of the strategies for accomplishing this is to always train
and retrain company workers so as to make them professionally and physically ready
for any emergency in their schemes of operations.
(g) Hostile Authority
On grounds of political considerations, jealousy and executive lawlessness; certain
authorities of government or community where a company is operating may decide to
intervene unlawfully in its affairs or even decide to acquire it illegally. This amounts to
a serious challenge notwithstanding the corporate and operational state of that company.
If this happens, a corporate leader must be courageous enough and use all legal and
constitutional means to defend his right and that of the company. An example of this was
demonstrated by Authorities of NICON and Nigeria – Re. v. A.G. of the Federation of
Nigeria and Minister of Finance & Ors., In this case, Barrister Jimoh Ibrahim instituted
certain court actions against some federal authorities for unlawful intervention and take-
over of NICON and Nigeria-Re which eventually led to the handing-over of the two
companies back to him. Another example was the courageous and dynamic efforts of
Bill Gate against the oppressive antitrust laws of the United States of America over his
Microsoft monopoly.
(h) Insecurity of Life and Property
On several occasions, there may be incidents of serious threats to life and property or
apparent break down of law and order in a place where an ailing company is operating.
This is a disturbing feature of many African nations including Nigeria. This can be
a challenge to all efforts of a corporate leader and his team to formulate appropriate
policies or even implement policies already put in place for ensuring any successful
management and turnaround. The issue of national security must not be left to
governmental authorities and agencies. Appropriate security strategies include, the
ability of the company workers and other citizens to maintain public discipline, obey
the law, volunteer useful and credible information on crime to the Police and other law
enforcement agents.
(i) Political Instability
In most developing nations, political instability is usually the basis of the following
governments’ inconsistent policies capable of negatively affecting the operations
of all companies whether buoyant or distressed: fnancial policies on banks’ interest
rates, import duties on raw materials, increase in fuel price and salaries of workers
etc. In all these situations, a worthy corporate leader and a turnaround expert must
think fast and fashion out appropriate strategies capable of coping with such exigencies.
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Strategies of such nature may include, increase in salaries, reduction of staff strength,
relocation of certain facilities, development of new products etc. In his consideration of
multinational corporate leadership, (Andy Knight 2009), was of the strong view that its
political and ethical manifestations in developing and multilingual societies have been
posing serious challenges to socio- economic contributions of many companies and
other corporate organisations toward the overall development of their host countries.
This is quite relevant to the current situation in the Niger Delta of Nigeria where there
are protracted agitations against environmental degradation due to the oil exploration
activities of Multinational and Corporate Bodies. The revenue allocation from the
Federal Government for the development of the region over the years had not been
effectively utilised due to incidents of mass corruption cum political and ethical effect
of the multinational corporate leadership.
(j) Environmental Problems
Environmental Problems in the nature of natural disasters like food, hurricane,
erosion and desert encroachment have been experienced in Nigeria. Few of these
disasters have also worked against effective operations of many companies especially
those in agricultural sector. It is also possible for the operations of a company to
cause environmental problems like the operational activities of the oil multinational
companies in the Niger Delta causing pollution, gas faring and soil degradation (Idowu,
1999). While it is desirable for corporate individuals to respect the environmental
impact assessment policies and laws of the Federal Government in their operations,
there is no way by which human beings can avoid the infuence of the environment over
their personal and corporate endeavours. Hence, (Glassey 1947) once asserted that:
‘It is an axiom of social science that however strongly
individualistic a particular personality may be, however
unique his contribution to life, he is inevitably infuenced
by groups of factors known under the general name of
environment. Environment and heredity are considered the
two great forces shaping individual destiny.’
CASE STUDIES
At this juncture, it may be ideal to examine some foreign and domestic companies
which needed the intervention of some corporate turnaround experts having experienced
serious downward trends in their operations and outputs.
(1) GEC British Electrical Company to Marconi Plc (Stuart 2006)
The British Electrical Company fell into trouble through mismanagement to the debt
profle of about 4 billion pound. The new managers and turnaround experts actually
embarked on two years restructuring processes which encompassed fundamental
management, operational and fnancial changes such as a Board clear-out, disposals of
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over 20 businesses, reducing headcount by over 50%, delisting and relisting of stock
market and change of name to Marconi Plc. These strategies enabled the management
team to ensure the long-term viability of the stricken telecom suppliers in the United
Kingdom.
(2) Price Waterhouse Coopers (PWC)
PWC was a family-owned company which specialized in the production of carbonated
drinks in the United Kingdom (Stuart 2006). The company ran into serious problems
to the extent that it needed about 4 Million Pound to recuperate. Through leadership
skills and quality of independent thinking, discreet judgement, ability to identify talents
in workers and give rewards to hardwork; David Jones and his team were able to assert
their full control of the company for two years and pay off its creditors to the tune of
about 44 Million Pound.
(3) NICON Insurance Plc and Nigeria – Re
NICON Insurance is a notable insurance company established in Nigeria since 1969
by the National Insurance Decree No. 22 now National Insurance Corporation of
Nigeria Act, Cap. 263, laws of the Federation of Nigeria, 1990. Its major goal is to
protect the properties of the Federal Government on land, on water and in the air by
way of Insurance. The Company had established itself as the most leading insurance
Company in Nigeria and in the continent of Africa. The Nigeria-Re Insurance is another
formidable Insurance Company which had been leading in the business of re-insuring
gigantic life, property and transport services especially in aviation, rail and maritime
industries. Due to mismanagement, corruption and misplaced priorities in the running
of the affairs of the two companies by various authorities and individuals, the regime
of President Olusegun Obasanjo decided to privatize them for better effciency and
services.
Having been sold to Barrister Jimoh Ibrahim in 2005 through the provisions of
the Public Enterprises (Privatisation and Commercialisation Act, Cap B.38) Laws of
the Federation of Nigeria 2004; practical efforts were made to change the fortunes
of the companies by cutting down management costs, reduction of wastes, prunning
unwieldy staff strength, provision of modern equipment, improving staff welfare and
computerized services.
Due to lack of suffcient communication, undue attention to political sentiments by
authorities of some regulatory bodies such as the National Insurance Commission and
Ministry of Finance, the new investment authorities of NICON and Nigeria-Re were
alleged to have neglected some regulations in the management of the companies since
2005. Hence, the regulatory authorities decided to intervene in the management of
the companies on November 14, 2007 by deploying fully armed mobile Policemen to
Abuja Headquarters of the two companies and announced the sacking of their Boards
of Directors (Punch 2007). The Core-Investor, Barrister Jimoh Ibrahim proceeded to
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a Federal High Court in Abuja and obtained three independent injunctions restraining
the Federal Government Regulatory Agencies form any act capable of interfering with
the interest of the owner and ordering them to surrender the companies to him (Punch
2007).
The companies were formally handed over to Barrister Jimoh Ibrahim sometime in
May, 2008 through an instrument of a Judicial settlement out of court (Nation 2008).
Entrenched in the terms of settlement are certain important steps to be taken by the
Core-Investor to move the two companies forward. The key-step was the injection of
N25 billion ($0.173 billion) into the two companies to meet certain requirements of
recapitalization (Vanguard 2008).
Since the two companies have been surrendered to the Core-Investor, the following
major steps have been taken to ensure proper turnaround of the companies to allow
them take their pride of place in insurance industries:
(a) Injection of N25 billion ($0.173 billion) to satisfy the requirement of recapitalization.
(b) Major restructuring of the two companies in terms organization, staff and functions.
(c) Addition of competent, intelligent and notable insurance experts to the Board of
Directors of the two companies.
(d) Sponsoring public advertisements in electronic and print media to educate
members of the public on recent development about the activities of the companies.
(e) Diversifying business endeavours of the company from insurance to hotels,
aviation, oil and gas, carpentry, property and other related industries like publishing of
newspapers.
(f) Improving the scientifc and computer skills of workers in the performance of the
businesses of the two companies.
(g) Ensuring prompt and full payment of all clients’ legitimate claims.
(h) Expanding the operations of the companies within and outside the shores of
Nigeria.
(i) Ensuring effective and enduring strategies capable of enhancing the integrity of
the two companies as their offcial currency.
CONCLUSION
In the course of this study, certain issues bordering on various processes of ensuring
proper management and turnaround of distressed companies were observed. First,
different factors which account for the downfall or partial collapse of many companies
cannot be completely removed from the corporate jurisprudence and business activities
of stakeholders within the economy. These factors emerge as challenges from time to
time and being partially or wholly overcome through trial and errors in the course of
operational techniques.
A. A. Idowu
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Second, incidents of collapse of companies have thrown many persons out of jobs,
caused reduction in the availability of corporate goods in circulation, discouraged both
local and foreign investors and slashed the fnancial inputs of companies to the Gross
Domestic Income of many nations.
Third, the two indices of personal qualities and operational skills traceable to a leader
in the course of a corporate turnaround must be properly harmonised through effective
cooperation between the leader and his workers in order to achieve a successful
turnaround of a distressed company.
Fourth, the present socio-economic, cultural and political circumstances in many
countries, especially Nigeria, are not very conducive for business endeavours and
entrepreneurial activities. Added to this problem is insecurity of life and property in
different countries including Nigeria, especially the Niger Delta where the activities
of militants are now a source of concern for the government and the people (Thisday
2008).
RECOMMENDATIONS
1. A distressed company to be turned around must have identifable structure and
operational systems clearly recognized by law.
2. All the stakeholders of an ailing company must always ensure effective running and
management to prevent further collapse and dilapidation.
3. A corporate leader and a turnaround expert must be a person of impeccable character,
wit and candour capable of being relied upon by his workers and whose involvement is
sure of yielding a proftable turnaround.
4. Workers in a distressed company must be ready to learn from past mistakes and take
challenges with enthusiasm so that their leader will be encouraged to put in his very best
in pursuing policies capable of yielding good results.
5. In ensuring a successful turnaround, all relevant laws, procedures and regulations
governing the operation of a distressed company must be strictly followed. In the
case of Nigeria, defective provisions of he Companies and Allied Matters Act, 2004
which are not effective in compelling owners of registered companies to ensure proper
management of their companies should be amended.
6. Government should provide a more conducive environment for security of life and
property for business investors to operate. In the case of Nigeria, governments at all
levels should go back to agriculture with a view to attaining the goals of food security
and industrial development.
7. A corporate leader and his team must not leave GOD aside in their equations. Without
God, nothing is possible (Holy Bible 1983).
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REFERENCES
Andy, Musciulu et al (2009) The Ashgate Research Companion to political Leadership,
London: Ashgate Publishers.
Business Times (Lagos), 22 May, 2008, 19.
Booth, K. (1991). New Thinking About Strategy and Internaitonal Security. Washington:
Harper Collins Publishers.
Danon . M (2007) “ Leadership Challenges Facing Business Today” The Leadership
Trust Conference, UK, www.leadership.org.uk
Dignam . A, et al (2009) The Globalisation of Corporate Governance, London: Ashgate
Publishers.
Dunmoye, A (1991). National Aspirations, Journal of National Association of Political
Sciences, Ahmadu Bello University, Zaria, Nigeria, 9(1), 60.
Fatai, W. (1983) quoted in The Sketch (Nigerian Newspapers). Ibadan: African
Newspapers Publishers.
Garner, B.A. (2004) Black’s Law Dictionary. New York: Thomson Press.
Glassey, N. (1947) Groundwork of Criticisms. London: Oxford University Press.
Graig. E. J (2008) Meeting the Ethical Challenges of Leadership, London: Sage
Publishers.
Holy Bible (1983). Authorised King James Version. New York: Thomas Nelson Press;
Proverbs Chapter one verse seven, Job chapter 36 verse 11; Mark Chapter 10 verse 27.
Hornby, A.S. (2000). Oxford Advanced Learner’s Dictionary of English Language.
London: Oxford University Press.
Idowu, A. (1999). Human Rights, Environmental Degradation and Oil Multinational
companies in Nigeria: The Ogoniland Episode, Netherlands Quarterly of Human Rights
17(2) 165.
James, M.D. (1978). Leadership. New York: Harper Row Publishers.
Mckinney, B. (1979). Public Administration: Balancing Power and Accountability.
Illinois: Moore Publishers.
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Meiklegon, L. (1969), ‘Freedom of Speech’ in Government by the People (1969), Burns,
J. & Peltason, J (eds). New York: Prentice Hall Press.
Osase, E.B. (1988). Strategic Management in Nigeria. Lagos: MD Press.
Serjiovall. T. J (2006), Rethinking Leadership : A Collection of Articles, UK: Corwin
Press.
Stephens Davis, Lukomnik and Watson (2006), Private Sector Opinion, Issue 13
Towards an Accountable Capitalism, Harvard University: Harvard Business School
Press.
Stuart, S. (2006). Leading Corporate Turnaround. Chichester: John Wiley and Sons
Press.
ThisDay (Nigeria) Lagos: Leaders and Company Press, 28 June, 2008; www.
thisdayonline.com
The Nation (Nigeria) Lagos: Vintage Press, 8 May, 2008;http://www.thenationonlineng.
com
The Punch (Nigeria), Lagos: Punch Publishers Nov. 15 & 26, 2007 and 26 May, 2008;
www.punchontheweb.com
Vanguard (Nigeria) Lagos: Vanguard Media Press, 17 April, 2008; Vanguardngr.com
Vugt. V (2008) “ Leadership, Followership, and Evolution : Some Lessons from the
Past” American Psychologist Vol. 63 (3).
Warren. B (2007) “ Challenges of Leadership in Modern World: Introduction to Special
Issues” America Psychologist Vol. 62 (1).
Waltz, K. (1979). Theory of International Politics. New York: McGraw Hill Publishers.
Submitted: 19 June 2009
Revised version submitted: 11 August 2009
Accepted: 13 August 2009
Double-blind refereed anonymously
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Author(s) Information:
Amos Adeoye Idowu is a Senior Lecturer and Acting Head, Department of Public Law,
Obafemi Awolowo University, Ile-Ife, Osun State. Nigeria. He had Ph.D in Law with
particular emphasis on Constitutional Jurisprudence and Human Rights. He has been
teaching students and supervising theses at both graduate and undergraduate levels in
various courses within the purview of Public and International Laws since 1992. He has
also attended local and international conferences in which he delivered academic papers
already published in some domestic and international journals.
A. A. Idowu
doc_467008625.pdf
International Journal Of Management Perspectives
WWW.IB-TS.ORG WWW.IB-TS.ORG
IJMP’2009
WWW.IB-TS.ORG
©2008 INTERNATIONAL BUSINESS AND TOURISM
SOCIETY PUBLISHING GROUP
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©2009 INTERNATIONAL BUSINESS AND TOURISM
SOCIETY PUBLISHING GROUP
INTERNATIONAL JOURNAL
OF MANAGEMENT PERSPECTIVES
CONTENTS PAGE
Indigenous Customer Relationship Management
Practices in Indian Automobile Companies:
Strategic Implications
Sajal Kabiraj, Joghee Shanmugan
Women in Leadership and Gender Equity in Alba-
nia: Case of Vlora Region
Etleva Leskaj, Klaudja Guga
Institutional features and entrepreneurship devel-
opment in Romania. A case study on
the North-East region
Andreea-Oana Iacobu??, Livia Baciu and Laura Asan-
dului
Challenges of Leadership in Corporate
Management and Turnaround
Amos Adeoye Idowu
Encouragement, Punishment, Offering New
Solutions
S. M. Abdollahi Keyvani and Mehrdad Mozafari
...1
...26
...37
...56
...74
VOLUME 1 - IJMP - ISSUE 4 / 2009
ISSN: 1307 - 1629
EDITOR
HUSEYIN ARASLI
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ISSN: 1307-1629, 2009, 4 (1)
ABSTRACT
Challenges of Leadership in Corporate Management and
Turnaround
Amos Adeoye Idowu
Department of Public Law, Obafemi Awolowo University, Nigeria
This paper examined challenges of leadership in the process of a corporate
management and turnaround with a view to appreciating certain fundamental issues
relating to the role of a leader in a bid to salvage the fortune of an ailing company
or a business enterprise. The study adopted a combination of descriptive, analytical,
leadership, functional and systemic theory models on such matters bordering on the
existence of many ailing companies in Nigeria and world over, necessity for ensuring
their resuscitation, expected problems and workable strategies.
The study found that a frightening number of despondent companies and corporate
organisations now exist all over the world due to various socio-economic, political,
ecological and anthropological problems. This development had resulted into mass
corporate failure currently responsible for high rate of unemployment in the society
coupled with serious decline in economic contributions of private sectors to national
development. Hence, the astronomical increase in crime rate, spate of insecurity and
intolerable degree of breakdown of law and order. Recourse was made to major agro-
allied and food processing companies and business enterprises in Nigeria for a period
of nine years, April, 2000 – April, 2009. The paper concluded that effective leadership
quite capable of formulating systemic policies and implementing workable strategies
for proftable corporate management and turnaround is seriously needed in reviving
many dying companies and business enterprises so as to replace them in positions of
value toward human and material development of countries where they operate.
Keywords: challenges, leadership, corporate, management, turnaround.
* Corresponding author: Amos Adeoye Idowu
Tel:+902323881218, Fax:+902323888826
E-mail: [email protected]
IJMP is a publication of International Business and Toursim Society
www.ib-ts.org/ijmp.htm © 2009 All rights reserved.
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INTRODUCTION
Over the ages, corporate organizations had been known as the mainstream of private
sectors which have made their indelible marks in the socio-economic development of
nations where they operated. In recent time, corporate entities, through their business
endeavours and economic activities, have given employment to the people, enhanced
their standards of living and contributed immensely to the Gross National Income of
their countries. Unfortunately, many companies and corporations in the world are now
experiencing serious downward trends in their business positions due to many problems
associated with leadership style, management, structure, their modus operandi and
modus vivendi. In Nigeria for instance, (Business Times 2008), reported that over
67% of registered companies and business frms are dysfunctional thereby, seriously
requiring surgical operations from corporate turnaround experts of classic competence.
Aside national problems of socio-economic, political, executive lawlessness and
insecurity of life and property; anthropological problems of laxity, negligence,
irresponsible behaviour, wickedness, dereliction of duties and corruption often traceable
to corporate workers are known to be responsible for complete or partial collapse of
many companies. The problem has been compounded by the global economic recession
being experienced in all nations. This unfortunate situation has necessitated the renewed
efforts at focusing on corporate leadership and its responsibilities in the process of
ensuring a reliable turnaround of a jaundiced company. A corporate leader who is
required to affect a proftable turnaround is expected to have some outstanding personal
qualities and leadership skills necessary for overcoming some inevitable challenges.
Without this, a sick company may not be able to stand on its feet again.
CONCEPTUALISATION
Challenges
Within the context of this paper, the word ‘challenges’ means some major problems,
hindrances or constraints militating against effective exploitation of personal qualities,
ethical values and professional skills of a leader in the process of a corporate
management and turnaround (Osase 1999, Graig 2008). They include all possible
diffculties against necessary steps and efforts taken by a corporate turnaround expert
to change the misfortune of a company through effective management strategies with a
view to repositioning it for better performance of a proftable nature.
Leadership
The concept of leadership can be expressed as a combination of natural attributes of
person who is expected to shape collective behavioural patterns of a group in direction
capable of achieving particular goals like prudent management and turnaround of
an ailing company (Dunmoye 1991). It can also be defned as the inducement of
followers by the leader to act for certain goals that represent the wants and needs or
the aspirations and expectations of both the leader and followers (James 1978). The
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concept of leadership in the management and turnaround of a company refers to the
overall propensity of certain individuals holding themselves out as experts to lead
the people by virtue of their knowledge and competence while determine to ensure
proper management of the deplorable affairs of a failing company. However, some of
the serious leadership challenges facing business today and which are resulting into
fnancial crises include, lack of accountability and irresponsible leadership arising from
personal traits, background, education and professional skills of corporate offcials
(Stevens et al 2006).
In most cases, the overriding parameter for determining a successful leader lies in his
ability to utilize a combination of all the above named qualities and within the same
factoral circumstance to effect a workable and proftable management and turnaround
of a sick company (Warren 2007). It is however salient to point out that the concept of
leadership is not a one-way affair but also relational. It involves someone who exerts
infuence and those who are being infuenced. In other words, without responsive and
dependable followers in a company, there can be no productive leadership (Serjovalli
2006). Conversely too, without the presence of a brilliant, courageous, healthy,
dedicated, dynamic and disciplined leader, there can be no responsive and dependable
followers (Vugt 2008).
Corporate
The word ‘corporate’ is something connected with a company, a business entity
or a corporation (Garner 2004, Dignam et al 2009). In Nigeria, such an entity must
be registered under the Companies and Allied Matters Act, Cap. C12, Laws of the
Federation of Nigeria, 2004 and by the Corporate Affairs Commission (CAC); thereby,
making it a legal personality. In a corporate turnaround therefore, a leader is dealing
with a company which is a juristic person. It is a company known to law and not a legal
nonentity. A company is like a human being which can sue and be sued in its corporate
name. The only difference between a registered company/corporation and a human
being is that a company has no biological life as a human being. But a company has
a long life span than a human being. The longest number of years for a human being
is between 80 and 150 (Holy Bible 1983); but a registered company has a perpetual
succession capable of being handed over from generation to generation.
Management
The dictionary meaning of the word ‘management’ is the act of running and controlling
a business or a similar organization. (Hornby 2000). It is also the act or skill of dealing
with people or situations in a successful way. In the context of this article, management
refers to conceiveable means by which a leader (corporate manager) utilizes all his skills
and profciencies to infuence his workers in both positive and dynamic ways to revamp
a falling company. The word ‘management’, in the context of various challenges facing
business today can equally be used to mean the people, both mangers and entire workers
who manage operations within a company and execute top management’s directives
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(Danon 2007).
Turnaround
The word ‘turnaround’ can be used in two grammatical connotations. First, as a
verb, to change something into a particular state or condition (Hornby 2000). An
example is the issue of changing an ailing company from its dilapidated or failing
position to a valuable and proft-making venture. Second, as a noun, depicting the
latest and successful position of a company after a thorough and rewarding processes of
a turnaround. Within the purview of this article, the phrase ‘corporate management and
turnaround’ refers to all necessary strategies put in place to revive an ailing company
thereby, changing its dilapidated position to an enviable and promising business entity.
It refers to all determinable efforts of a corporate leader or a turnaround expert to ensure
effective coordination of other company workers to make good the bad conditions of a
company.
THEORETICAL FRAMEWORK
The frst set of theories adopted in this study is called the Leadership Theory (Mckinney
1979). This theory is segmented into three main parts: (i) Personality or Traits theory.
This theory posits that a leader possesses certain inherent qualities which assist him to
positively or negatively infuence his followers or workers either to make him succeed
or fail in his company or organization. Top on the spectrum of such inherent qualities
are ethical values in every corporate leader which promote ethical decision- making and
actions through skill development, self – assessment and application exercises (Graig
2008).
The second segment of leadership theory is the interpersonal or group-infuence
theory. Writers on this theory believe that common habits, feelings, perceptions and
motives between workers and a leader also go a long way to dictate the level of success
or failure which may be recorded in a management/turnaround process. In other words,
the interpersonal theory asserts that a leader who is friendlier with his workers is likely
to succeed fast in a turnaround process than a leader who is hostile and antagonistic. A
caveat should be entered on this assertion. It is not impossible for workers in a company
to abuse the friendly relationship between them and their leader to cause havocs against
his efforts at ensuring proper management/turnaround of the company. Whereas,
workers who realize that their leader is a no nonsense-taker would always sit up to
implement his policies for attaining success in a turnaround process.
The third segment of leadership theory is called the conditional or situational theory.
This theory emphasizes that certain prevailing conditions, situations and circumstances
within which a leader and his workers are operating often infuence their personal traits
and professional skills towards formulating policies and adopting strategies needed for
effective management and corporate turnaround. Researchers on this theory assert that
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conditions, situations and circumstances are strong environmental factors capable of
shaping individual destiny and the destiny of an ailing company meant to be turned
around (Glassey 1947).
The second set of theories adopted in this article is called the Functional Theory.
The theory focuses on the functions performed by institutions, organs or units of
government, organizations or corporate entities to ensure their effective performances,
operations and survival (Waltz 1979). The most prominent variant of functionalism
concerning this topic is structural functionalism which emphasizes those components
and sub-components of an ailing company headed by its staff must work in tandem to
ensure proper management capable of bringing about a successful turnaround process.
In fact, (Dignam & Co 2009), having assessed the impact of economic globalisation
on the key corporate governance systems of UK, the US and Germany, came to the
conclusion that the issue of leadership is quite fundamental to proper workability and
meaningful convergence of insider and outsider corporate systems.
The third set of theories relied upon in this piece is the System Model Theory.
This theory conceives the phenomenon or subject matter of an ailing company and
those of its components as a system made of interrelated parts which must exist in
continuous interaction to ensure the functioning of the system (Booth 1991). Here,
an ailing company is regarded as the whole system while the turnaround leader and
other departments headed by company workers remain its component and interrelated
parts which are expected to interact continuously to guarantee proper formulation and
implementation of necessary policies aimed at resuscitating the company.
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Figure 1. Trends in the dysfunctioning agro-allied & food processing companies &
Agro-allied and food processing companies and business enterprises registered by the Cor-
porate Affairs Commission of Nigeria, 2000-2009
Dysfunctioning Agro-allied and food processing companies and Business enterprises, 2000-2009
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business enterprises registered by corporate affairs commission of Nigeria, April,
2000-April, 2009
Source: Corporate Affairs Commission of Nigeria, Research Unit
In fgure 1, the total number of agro-allied and the Corporate Affairs Commission of
Nigeria (CAC) in the frst quarter of the year 2000 was about 65,000. Out of this fgure,
36,000 (55.3%) were dysfunctioning. In 2001, the number of registered companies and
business enterprises rose to 280,250 out of which 190,101 (68%) were despondent. There
was another trend of increase in the number of companies registered in 2002 to the tune
of about 280,304 out of which about 125,500 (45%) were moribund. In 2003, 2004 and
2005, the total number of registered companies and business enterprises amounted to
270,120, 250,302 and 235,106 respectively. Of these fgures, 171,201 (63%), 210,100
(84%), 122,101 (73%) were found sleeping and unproductive respectively.
In 2006 and 2007, the number of registered agro-allied and food processing companies
and business enterprises in Nigeria rose to 255,122 and 251,103 respectively while
about 186,090 (73%) and 185,102 (74%) companies were not performing. There
was a slight increase in the number of companies registered in 2008 to the tune of
about 246.121 leaving about 167,115 (68%) of such companies dysfunctioning. The
frst quarter of the year 2009 witnessed the sum of 71,209 registered agro-allied and
food processing companies with a total number of 40,702 (57%) not functioning. In
other words, out of the total number of about 2,204637 agro-allied and food processing
companies and business enterprises registered by the Corporate Affairs Commission in
Nigeria between April, 2000 and April, 2009; about 1,434,012 (65%) of such companies
were dysfunctioning.
A combination of factors like offcial corruption, negligence, lukewormness, and
absenteeism on the part of workers in both the Companies and Corporate Affairs
Commission of Nigeria were responsible for the deteriorating conditions of all the
companies under examination. Also, issues of poverty, disobedience to law, inconsistent
policies and political instability often traceable to government and the people in Nigeria
and other African nations in particular, have been responsible for high degree of
dysfunctioning companies under review. With a population of about 230 billion people,
vast forest and agricultural resources, it is sad to observe that even out of a very few
registered agro-allied and food processing companies between April, 2000 and April,
2009; a greater percentage of them were not performing. This development could be
traceable to the unfortunate attitude of Nigerian governmental authorities over the years
which had divested their interest from agriculture and vast land resources to exploitation
of crude oil. The net result of this phenomenon had been poverty, ignorance and diseases
arising from unemployment, food insecurity and serious economic recession.
In this article, agro-allied and food processing companies and business enterprises are
said to be dysfunctioning if:
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a) unable to render annual returns to the Corporate Affairs Commission in order
to confrm whether they are still buoyant
b) unable to carry out their functions as listed in their Memoranda and Articles
of Associations
c) unable to render their economic and social obligations to the government and
people
d) unable to sustain their corporate existence thereby, sending out thousands of
their employees out of jobs
e) unable to produce, process and sell food and agricultural products to the people
thereby, failing in their duties of complementing the efforts of the government
in solving problems of food scarcity in the countries where they operate
f) unable to contribute meaningfully to the manpower and industrial development
of their nations.
The foregoing explanations were arrived at through a content analysis of information
and data obtained in the annual reports and statements of the research unit of the
Corporate Affairs Commission of Nigeria. Agro-allied and food processing companies
and business enterprises were focussed due to the signifcant role expected of them
with particular regards to the provision of food for the people in the current age of food
scarcity and global economic meltdown. Any corporate leader intending to reverse the
misfortune of an ailing company should have some outstanding personal qualities and
professional skills.
PERSONAL QUALITIES AND PROFESSIONAL SKILLS OF A LEADER
(a) Health
Health is wealth. A sound and perfect state of health without any pronounced state of
infrmity capable of rendering a corporate leader and his workers ineffective is highly
desirable for achieving a successful turnaround. It will be a calamity for a sick company
to fnd itself in the hands of sick managers or turnaround experts. As human beings,
much pressure from work and serious exertion at times, may result into one sickness
or the other. Hence, adequate health care facilities must be put in place in the company
for the workers. In most cases, the services of very hard-working, consistent,
abulent and rugged workers are needed in turning around a sick company.
(b) Character
Certain fundamental qualities that make a person to be considered good, responsible
and perfect must be found in a corporate leader. Such qualities include; humility,
honesty, openness, fairness, kindness, frmness and straightforwardness. These are
what a leader needs to effectively infuence his subordinates and assert his authority to
realize a promising turnaround (Graig 2008).
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(c) Intellectual Ability
Education is the mother of inventions and a strong weapon against illiteracy and
poverty. A corporate leader wishing to coordinate the efforts of other workers for
ensuring a successful turnaround of an ailing company must be intellectually sound,
knowledgeable and full of ideas. He must not be tossed here and there by other workers
to take a position on a particular matter due to lack of knowledge. Nevertheless, it is
always good for a leader to allow his workers to offer their inputs on a matter if only to
enrich the scope and wealth of his experience (Danon 2007).
(d) Love and Interest for the Job
A corporate leader who intends to effect a successful turnaround for an ailing
company must show suffcient love and interest for the work. He must believe and have
unshakable hope in policies being formulated for managing the company and moving
it forward. A corporate leader who is just working for the purpose of keeping his soul
and body together and ready to leave for a greener pasture at any available opportunity
cannot succeed in moving forward a sick and cripple company.
(e) Vision
A corporate leader must be able to see well and must possess the ability to think about
or plan the future with great imagination and intelligence (Hornby 2000). An ailing
company needs a lot of plans and imaginations for various steps to be taken in future
for its turnaround.
(f) Discipline
Discipline involves self control, personal restraints, respect for others and the use of
rules and punishments for controlling people (Hornby 2000). A corporate leader must
show suffcient examples of discipline which other workers must emulate. He must be
able to live above board, correct erring offcers and give commensurate punishments
for offences committed through due process and the rule of law. In order to accomplish
a promising turnaround for a sick company, a turnaround expert must always lead by
practical, inspirational and motivational examples. He must be ready at all times, to
assert his authority and pride of command.
(g) Justice and Fairness
In an organization without Justice, peace is the eventual casualty. More than anything
else, justice, equity and fairness must pervade the operations of all stakeholders of a
dying company if a successful turnaround is to be achieved. A turnaround expert must
not be hostile, he must be a listening authority who is always ready to give opportunities
to his workers to express their views on any matter affecting the interest of the company.
This can be achieved through regular departmental meetings, conferences, workshops,
seminars or sampling opinions of workers by personal contacts. Failure to give workers
opportunity to express their opinions may bring contempt and mistrust capable of
derailing a turnaround process. This is why it has been said by (Fatai Williams 1983),
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that:
‘If you drive men and women from the public arena
where debate is free, you send them to the cellar where
revolutions are borne. It is indeed better to have an uproar
than a wisper.’
However, much as it is desirable for a turnaround expert to give his workers the
opportunity to express their opinions and assert their freedom of speech about issues
affecting the interest of a company; this opportunity must not be allowed by a corporate
leader to be misused in precipitating crises in the company. A leader must be able to
assert his overall authority and arrive at a fnal or decisive position on any salient affair
of a company. In the words of (Meiklegon 1969):
‘Freedom of speech is not the guardian of unregulated
talkativeness. It does not require that every occasion,
every citizen shall take part in a public debate nor can
it ever give the assurance that everyone shall have the
opportunity to do so. What is essential therefore, is that
not everyone shall speak but that everything worth-saying
shall be said.’
(h) Fear of God
In ensuring an enduring management and turnaround for a cripple company, the
overriding quality which a leader must possess is the fear of God. The fear of God
includes, ability of a leader to run away from sins and temptations, to be sincere,
kind, dutiful and prayerful. The (Holy Bible, 1983), states that the fear of God is the
beginning of wisdom which a leader and his workers seriously need to succeed in their
turnaround efforts. The ability to fear God will also enables a leader and his team to
spend their days in prosperity and their years in pleasures as they manage the affairs of
the company (Holy Bible 1983). Effective exhibition by a leader and his workers of the
outstanding qualities enumerated above does not prevent them from coming across the
following problems or challenges in the process of Management and turnaround of a
cripple company.
OPERATIONAL CHALLENGES AND STRATEGIES
(a) Deplorable Company Position
One of the frst and glaring challenges or problems of leadership in a corporate
turnaround is the deplorable state of affairs in the company. The company must have
been in serious debt or in a state of infrastructural decay like lifts not working, vehicles
grounded coupled with a regime of disloyal, non-challant and unproductive staff. This
is obviously a discouraging state of affairs in a company. A good leader who is a
competent turnaround expert fnding himself in this situation must be able to exhibit
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a combined qualities of courage, tenacity, vision, hardwork and quick reasoning to
generate immediate results.
(b) Lack of Capital
Absence of funds in an ailing company to carry out corporate functions like payment
of salaries and maintenance of infrastructure may be a serious challenge. This is where
a turnaround expert must demonstrate his intellectual and business skills by formulating
certain strategies for overcoming perceived challenges. Management and turnaround
strategies in this regard may include diversifcation of the company’s operation,
investments and business endeavours. Loans may also be taken provided interests are
not unbearable and that sound policies are in place for quick repayment.
(c) Staff Indiscipline
Operational challenge in the nature of staff indiscipline is often a feature of an ailing
company. Many at times, workers have been found to engage in acts of corruption,
frolicking, laziness, negligence, disloyalty, wickedness and absenteeism. In order to
overcome this challenge, a leader must be disciplined, an embodiment of good example
and be ready to curtail excesses of his workers through appropriate punishments within
the framework of due process and rule of law.
(d) Mismanagement
One of the factors often responsible for the downfall of a company is gross
mismanagement in the hands of workers. Acts of mismanagement include, corruption,
favoritism, putting round pegs in square holes, disrespect for constituted authorities
and disregard for company rules and regulations (Stephens & Co 2006). Some ways
of curtailing unlawful mismanagement acts of workers include, the establishment of
appropriate structure and hierarchical regimes for the company, making sure people
know what to do and they are doing it, giving appropriate punishments to defaulters and
appropriate rewards to hardwork and effciency.
(e) Internal and External Competitors
Unfair and wicked competitions from cognate business companies within and outside
the nation capable of weakening or drastically reducing the operational endeavours
of the company are serious challenges of leadership in a corporate management and
turnaround. These features of competitions against a distressed company will require
the use of intellectual, academic, technical and professional skills of a leader and his
workers to tackle the activities of unfriendly competitors. To achieve this, different
surprises and innovations can be introduced in product-brandling and operations.
Workers must also be ready to keep their secrets secret and maintain effective espirit de
corps among themselves.
(f) Change
One of the biggest challenges of leadership in a corporate management is change.
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The only thing that is permanent in human affairs is change. A turnaround expert must
be ready to change his policies and strategies to meet exigencies and circumstances of
time. The abilities of other companies around to effect changes in their operations and
products may not be easy to be physically curtailed. Hence, a leader and his team must
learn how to respond quickly to certain changes noticeable in the operations of their
corporate competitors. One of the strategies for accomplishing this is to always train
and retrain company workers so as to make them professionally and physically ready
for any emergency in their schemes of operations.
(g) Hostile Authority
On grounds of political considerations, jealousy and executive lawlessness; certain
authorities of government or community where a company is operating may decide to
intervene unlawfully in its affairs or even decide to acquire it illegally. This amounts to
a serious challenge notwithstanding the corporate and operational state of that company.
If this happens, a corporate leader must be courageous enough and use all legal and
constitutional means to defend his right and that of the company. An example of this was
demonstrated by Authorities of NICON and Nigeria – Re. v. A.G. of the Federation of
Nigeria and Minister of Finance & Ors., In this case, Barrister Jimoh Ibrahim instituted
certain court actions against some federal authorities for unlawful intervention and take-
over of NICON and Nigeria-Re which eventually led to the handing-over of the two
companies back to him. Another example was the courageous and dynamic efforts of
Bill Gate against the oppressive antitrust laws of the United States of America over his
Microsoft monopoly.
(h) Insecurity of Life and Property
On several occasions, there may be incidents of serious threats to life and property or
apparent break down of law and order in a place where an ailing company is operating.
This is a disturbing feature of many African nations including Nigeria. This can be
a challenge to all efforts of a corporate leader and his team to formulate appropriate
policies or even implement policies already put in place for ensuring any successful
management and turnaround. The issue of national security must not be left to
governmental authorities and agencies. Appropriate security strategies include, the
ability of the company workers and other citizens to maintain public discipline, obey
the law, volunteer useful and credible information on crime to the Police and other law
enforcement agents.
(i) Political Instability
In most developing nations, political instability is usually the basis of the following
governments’ inconsistent policies capable of negatively affecting the operations
of all companies whether buoyant or distressed: fnancial policies on banks’ interest
rates, import duties on raw materials, increase in fuel price and salaries of workers
etc. In all these situations, a worthy corporate leader and a turnaround expert must
think fast and fashion out appropriate strategies capable of coping with such exigencies.
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Strategies of such nature may include, increase in salaries, reduction of staff strength,
relocation of certain facilities, development of new products etc. In his consideration of
multinational corporate leadership, (Andy Knight 2009), was of the strong view that its
political and ethical manifestations in developing and multilingual societies have been
posing serious challenges to socio- economic contributions of many companies and
other corporate organisations toward the overall development of their host countries.
This is quite relevant to the current situation in the Niger Delta of Nigeria where there
are protracted agitations against environmental degradation due to the oil exploration
activities of Multinational and Corporate Bodies. The revenue allocation from the
Federal Government for the development of the region over the years had not been
effectively utilised due to incidents of mass corruption cum political and ethical effect
of the multinational corporate leadership.
(j) Environmental Problems
Environmental Problems in the nature of natural disasters like food, hurricane,
erosion and desert encroachment have been experienced in Nigeria. Few of these
disasters have also worked against effective operations of many companies especially
those in agricultural sector. It is also possible for the operations of a company to
cause environmental problems like the operational activities of the oil multinational
companies in the Niger Delta causing pollution, gas faring and soil degradation (Idowu,
1999). While it is desirable for corporate individuals to respect the environmental
impact assessment policies and laws of the Federal Government in their operations,
there is no way by which human beings can avoid the infuence of the environment over
their personal and corporate endeavours. Hence, (Glassey 1947) once asserted that:
‘It is an axiom of social science that however strongly
individualistic a particular personality may be, however
unique his contribution to life, he is inevitably infuenced
by groups of factors known under the general name of
environment. Environment and heredity are considered the
two great forces shaping individual destiny.’
CASE STUDIES
At this juncture, it may be ideal to examine some foreign and domestic companies
which needed the intervention of some corporate turnaround experts having experienced
serious downward trends in their operations and outputs.
(1) GEC British Electrical Company to Marconi Plc (Stuart 2006)
The British Electrical Company fell into trouble through mismanagement to the debt
profle of about 4 billion pound. The new managers and turnaround experts actually
embarked on two years restructuring processes which encompassed fundamental
management, operational and fnancial changes such as a Board clear-out, disposals of
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over 20 businesses, reducing headcount by over 50%, delisting and relisting of stock
market and change of name to Marconi Plc. These strategies enabled the management
team to ensure the long-term viability of the stricken telecom suppliers in the United
Kingdom.
(2) Price Waterhouse Coopers (PWC)
PWC was a family-owned company which specialized in the production of carbonated
drinks in the United Kingdom (Stuart 2006). The company ran into serious problems
to the extent that it needed about 4 Million Pound to recuperate. Through leadership
skills and quality of independent thinking, discreet judgement, ability to identify talents
in workers and give rewards to hardwork; David Jones and his team were able to assert
their full control of the company for two years and pay off its creditors to the tune of
about 44 Million Pound.
(3) NICON Insurance Plc and Nigeria – Re
NICON Insurance is a notable insurance company established in Nigeria since 1969
by the National Insurance Decree No. 22 now National Insurance Corporation of
Nigeria Act, Cap. 263, laws of the Federation of Nigeria, 1990. Its major goal is to
protect the properties of the Federal Government on land, on water and in the air by
way of Insurance. The Company had established itself as the most leading insurance
Company in Nigeria and in the continent of Africa. The Nigeria-Re Insurance is another
formidable Insurance Company which had been leading in the business of re-insuring
gigantic life, property and transport services especially in aviation, rail and maritime
industries. Due to mismanagement, corruption and misplaced priorities in the running
of the affairs of the two companies by various authorities and individuals, the regime
of President Olusegun Obasanjo decided to privatize them for better effciency and
services.
Having been sold to Barrister Jimoh Ibrahim in 2005 through the provisions of
the Public Enterprises (Privatisation and Commercialisation Act, Cap B.38) Laws of
the Federation of Nigeria 2004; practical efforts were made to change the fortunes
of the companies by cutting down management costs, reduction of wastes, prunning
unwieldy staff strength, provision of modern equipment, improving staff welfare and
computerized services.
Due to lack of suffcient communication, undue attention to political sentiments by
authorities of some regulatory bodies such as the National Insurance Commission and
Ministry of Finance, the new investment authorities of NICON and Nigeria-Re were
alleged to have neglected some regulations in the management of the companies since
2005. Hence, the regulatory authorities decided to intervene in the management of
the companies on November 14, 2007 by deploying fully armed mobile Policemen to
Abuja Headquarters of the two companies and announced the sacking of their Boards
of Directors (Punch 2007). The Core-Investor, Barrister Jimoh Ibrahim proceeded to
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a Federal High Court in Abuja and obtained three independent injunctions restraining
the Federal Government Regulatory Agencies form any act capable of interfering with
the interest of the owner and ordering them to surrender the companies to him (Punch
2007).
The companies were formally handed over to Barrister Jimoh Ibrahim sometime in
May, 2008 through an instrument of a Judicial settlement out of court (Nation 2008).
Entrenched in the terms of settlement are certain important steps to be taken by the
Core-Investor to move the two companies forward. The key-step was the injection of
N25 billion ($0.173 billion) into the two companies to meet certain requirements of
recapitalization (Vanguard 2008).
Since the two companies have been surrendered to the Core-Investor, the following
major steps have been taken to ensure proper turnaround of the companies to allow
them take their pride of place in insurance industries:
(a) Injection of N25 billion ($0.173 billion) to satisfy the requirement of recapitalization.
(b) Major restructuring of the two companies in terms organization, staff and functions.
(c) Addition of competent, intelligent and notable insurance experts to the Board of
Directors of the two companies.
(d) Sponsoring public advertisements in electronic and print media to educate
members of the public on recent development about the activities of the companies.
(e) Diversifying business endeavours of the company from insurance to hotels,
aviation, oil and gas, carpentry, property and other related industries like publishing of
newspapers.
(f) Improving the scientifc and computer skills of workers in the performance of the
businesses of the two companies.
(g) Ensuring prompt and full payment of all clients’ legitimate claims.
(h) Expanding the operations of the companies within and outside the shores of
Nigeria.
(i) Ensuring effective and enduring strategies capable of enhancing the integrity of
the two companies as their offcial currency.
CONCLUSION
In the course of this study, certain issues bordering on various processes of ensuring
proper management and turnaround of distressed companies were observed. First,
different factors which account for the downfall or partial collapse of many companies
cannot be completely removed from the corporate jurisprudence and business activities
of stakeholders within the economy. These factors emerge as challenges from time to
time and being partially or wholly overcome through trial and errors in the course of
operational techniques.
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Second, incidents of collapse of companies have thrown many persons out of jobs,
caused reduction in the availability of corporate goods in circulation, discouraged both
local and foreign investors and slashed the fnancial inputs of companies to the Gross
Domestic Income of many nations.
Third, the two indices of personal qualities and operational skills traceable to a leader
in the course of a corporate turnaround must be properly harmonised through effective
cooperation between the leader and his workers in order to achieve a successful
turnaround of a distressed company.
Fourth, the present socio-economic, cultural and political circumstances in many
countries, especially Nigeria, are not very conducive for business endeavours and
entrepreneurial activities. Added to this problem is insecurity of life and property in
different countries including Nigeria, especially the Niger Delta where the activities
of militants are now a source of concern for the government and the people (Thisday
2008).
RECOMMENDATIONS
1. A distressed company to be turned around must have identifable structure and
operational systems clearly recognized by law.
2. All the stakeholders of an ailing company must always ensure effective running and
management to prevent further collapse and dilapidation.
3. A corporate leader and a turnaround expert must be a person of impeccable character,
wit and candour capable of being relied upon by his workers and whose involvement is
sure of yielding a proftable turnaround.
4. Workers in a distressed company must be ready to learn from past mistakes and take
challenges with enthusiasm so that their leader will be encouraged to put in his very best
in pursuing policies capable of yielding good results.
5. In ensuring a successful turnaround, all relevant laws, procedures and regulations
governing the operation of a distressed company must be strictly followed. In the
case of Nigeria, defective provisions of he Companies and Allied Matters Act, 2004
which are not effective in compelling owners of registered companies to ensure proper
management of their companies should be amended.
6. Government should provide a more conducive environment for security of life and
property for business investors to operate. In the case of Nigeria, governments at all
levels should go back to agriculture with a view to attaining the goals of food security
and industrial development.
7. A corporate leader and his team must not leave GOD aside in their equations. Without
God, nothing is possible (Holy Bible 1983).
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Submitted: 19 June 2009
Revised version submitted: 11 August 2009
Accepted: 13 August 2009
Double-blind refereed anonymously
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Author(s) Information:
Amos Adeoye Idowu is a Senior Lecturer and Acting Head, Department of Public Law,
Obafemi Awolowo University, Ile-Ife, Osun State. Nigeria. He had Ph.D in Law with
particular emphasis on Constitutional Jurisprudence and Human Rights. He has been
teaching students and supervising theses at both graduate and undergraduate levels in
various courses within the purview of Public and International Laws since 1992. He has
also attended local and international conferences in which he delivered academic papers
already published in some domestic and international journals.
A. A. Idowu
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