Summary:In the current economic atmosphere of corporate corruption and the war on terrorism, the number of corporations filing for bankruptcy has increased exponentially, both in size and in scope. Despite the myriad issues and questions surrounding corporate reorganization, however, there is one inescapable solution: good management.
A good management team is not expected to be predict the future; rather, it is expected to respond quickly and effectively to present challenges. Adaptability and liquidity are keys in a winning strategy.
According to Jack Dunn, the three biggest causes of corporate failure are faulty management, financial fraud — as with the WorldCom and Adelphia scandals and loss of market base, such as products becoming obsolete or a loss of credibility with customers. Often a company can survive when it is beset by a single problem; it is when multiple problems arise that a crisis is triggered.
Then what? Is there any way to save a struggling corporation with no cash savings without going to bankruptcy court? Yes, says Craig Mulhauser, who faced just such a challenge with Exide Technologies. "The most important thing you can do as leader of the corporation is to restore confidence from the inside out." Mulhauser advocated designing a specific, concrete game plan and constantly monitoring the company′s progress. All unnecessary expenditures, including personnel and entire divisions, must be eliminated. It is also essential to engage the employees, to inspire them and get them to believe in both the company and its mission. Lastly, clear, effective communication must be present throughout the company in order to ensure that everyone understands their role and decisions can be made quickly.
Though resuscitating a dying corporation sounds daunting, Mark Patterson insisted that it is a relatively simple process. In fact, one of the most common problems in struggling companies is the management′s refusal to acknowledge the problem. "Denial is a terribly common phenomenon," he said, but an honest assessment of the situation is vital to solve the problem. "Find out what the true value of the company is, then exercise your operating options: defer accounts payable as long as possible without violating contractual obligations." The restructuring of aggregate debt is a number one priority, and the fiduciary obligations shift from the stockholders to the creditors.
Sometimes, however, there is no other option than court. The process is extremely difficult and expensive, and things "become polarized between creditors and the corporation," said Mulhauser. The role of the judge is to sift through the emotions and conflict to determine the real worth of the company, and then to divide that sum fairly among the interested parties — creditors, employees, management, and shareholders.
But the role of management, both in corporate success and failure, cannot be overstated. "Management got you into the problem," said Dunn, "and only management can get you out."
