R3: "Bad management to blame for 56% of corporate insolvency"

12 July 2010

After a survey of R3 members (R3 is the insolvency practitioners trade body) President Steven Law commented:“Regardless of the economic circumstance, no business will survive with poor management in place. I have seen a good workforce let down and sometimes laid off due to management which does not admit and correct their mistakes.”The survey showed that R3 members believe there are some lessons that can be learned from the experience as 74% of insolvency practitioners believe corporate failure can drive directors to be more successful.Steven Law concluded: “For some directors, the experience of failure can clearly drive them onto greater successes, but I would share concerns that the current regime is, if anything, too forgiving to directors who have failed. Clearly it would not be practical to educate every director before they are appointed, but there must be enough checks and balances to ensure that directors of failed companies should not put creditors and jobs at risk if they are allowed to repeat their mistakes."In the US of course, the adage that you cannot be a success until you have had a company fail, seems to encourage a much greater understanding of company turnaround options.Hopefully, the current difficult economic times will help educate business people that keeping costs under control, marketing their services or products, learning from mistakes is essential for business survival. HOWEVER, the biggest failing of management that we see is the failure to act soon enough when the business is distressed.