Ideas & Debate

Does Kenya have any turnaround artists to boast of?

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Turning around corporates peering into the abyss is not a sport for small boys. FILE PHOTO | NMG

In the past three years, business (and near) bankruptcies have soared. Big or small. Storied or uncelebrated. The list is long and cutting across several sectors; retail, finance, aviation, transport and so on.

But for a very special kind of people – turnaround specialists, this has been a very good time.

For these guys, trouble is like manna from heaven. They enjoy breathing new life into dying companies, restoring sickly ones to health and jumpstarting the engines of businesses that have run out of steam.

But for all their glory and mystique, Kenyan turnaround specialists have had rather mixed results. While some of their successes have progressed to newer heights (Kenya Commercial Bank #ticker:KCB) some have quickly turned into nightmares (National Bank of Kenya #ticker:NBK). With such a so-so type performance, I wonder whether we are placing too much hope in these corporate fixers. 

Granted, when a company gets into trouble, it’s often difficult for the incumbent management to recognise its mistakes and do anything about them. Very often the appropriate thing is to bring in a corporate fixer.

This is because they eventually do the “dirty work” – firing employees, simplifying processes and letting go of non-core projects – and also figure out how to grow the business. That said, turnarounds are known to have a high failure rate.

Some studies show that nine out of 10 turnarounds fail. Furthermore, according to CII study, over 80 per cent of turnarounds experience cost overruns, about 50 per cent suffer schedule slippages and over 90 per cent of their critique recommendations are never implemented.

In a nutshell, turning around corporates peering into the abyss is not a sport for small boys. Moving businesses back into the black is extremely challenging.

READ: Thousands of jobs at risk as firms try to protect profits

Here at home, the situation is further complicated by a couple of challenges. First of all, CEOs staying too long at companies even after “beating them into shape” a la Uchumi Supermarkets is rather an odd challenge.

Wise words from one of the foremost turnaround specialists, the late Robert Louis-Dreyfus “with a turnaround, you’re only expected to restore a company to good condition, and then move on” seem not to apply here.

Second is the big-name CEO called upon to revive failing business. Often many investors are so impressed by the candidates achievements that they fail to consider how compatible these are with situation they are walking into.

The notion that CEOs are generalists with skills that apply equally no matter the company is rarely true. Mumias Sugar #ticker:MSC has had a few of these.

Thirdly, Kenya lacks specialists in corporate reorganisations. This fact is often ignored because we seem to confuse turnaround specialists with corporate managers, completely ignoring that turning around failing businesses is a highly specialised skill.

In the high stakes, high-pressure corporate repair business, not everyone with knowledge of management principles can call themselves turnaround consultants.

For businesses on the verge of bankruptcy, a crisis manager is what they need and not just a good solid corporate manager. But then again, where are they?