Business Maverick

BUSINESS REFLECTION

After the Bell: The art of finding the right CEO for failing state enterprises

After the Bell: The art of finding the right CEO for failing state enterprises
Illustrative image | Eskom; Prasa; Transnet; Post Office. | (Photo: Waldo Swiegers / Bloomberg | Gallo Images / ER Lombard | Dwayne senior / Bloomberg | Ashraf Hendricks)

I happen to know what it’s like to work for a failing enterprise that managed to resurrect itself from the other side of the dark night, so I have some pointers that may or may not be useful.

Buried somewhere in the depths of the departments of finance and public enterprises are groups of people trying to work out what to do with failing state-owned enterprises. What’s blatantly obvious about this point in South Africa’s economic history is that the failure of state enterprises is becoming endemic — and even epidemic. It’s not just SAA requiring bailing out and restructuring, it’s basically all of them: Eskom, Transnet, Prasa, Sanral, the Land Bank, the Post Office, you name it. The crisis of state-owned enterprises is spreading like wildfire. 

And beneath this crisis is an extremely hard choice: should these enterprises be saved? One option is to allow them to disintegrate and, you know, some innovative, new tech-savvy alternatives may emerge. What is the modern adage? If you are going to fail, fail fast.

But between the power of inertia, the fact that the government can open the taps on other people’s money (aka taxes), the potential loss of jobs, the ideological dynamic and the spectre of political embarrassment, the government will try to save many of the organisations that should probably go bankrupt.

Oddly enough, I happen to know what it’s like to work for a failing enterprise that managed to resurrect itself from the other side of the dark night, so I have some pointers that may or may not be useful. They might also explain this: however bad the government is at running enterprises, it’s much worse at pulling failing enterprises back on track. Just watch this space.

Early in my career as a journalist in the late 1980s, Johannesburg was served by two newspapers with great reputations: the Rand Daily Mail and The Star. They were owned by separate companies, but ultimate control was vested with the behemoth of the era, Anglo American. The Mail was a campaigning paper, with a generally liberal audience, fighting the terrible “Nats”. It was hardly revolutionary, but for its time, it was bold and worthy. The Star was an afternoon newspaper, appealing to a slightly broader but still middle-class audience. It was suburban and genteel, but still firmly anti-apartheid.

The Rand Daily Mail ran into trouble financially. The root cause was the decline of the economy generally, which was starting its late-apartheid slide in the early 1980s. But there were other problems too. It’s possible the middle-class audience was slightly turned off by the relentlessness of its message. It came to be seen as one-dimensional. And yet, the quality of much of the journalism was excellent and the paper was notably responsible in part for exposing the Information Scandal — the revelation that taxpayers’ money was used to establish a new newspaper, The Citizen, which the government used to propagandise.  

The Mail was a reference point for foreign governments and a crucial anti-apartheid bulwark, particularly after the banning of four “black” newspapers in 1980.

The point is that the Anglo board didn’t know what to do with the paper; editors were changed, sections were substituted, staff were moved around — and nothing seemed to help. Advertisers, as they still do today, shunned intensely political content. 

In a moment, I suspect, of panic, it was decided in 1985 to close the paper. It’s hard to imagine today what the decision meant; newspapers were a crucial part of the informed life of the body politic. The Star’s daily circulation at the time was about 200,000. The building shuddered when the enormous presses kicked into action. Compare that to today’s circulation figures for The Star, about 12,000 a day — the social context then was massively different.

The Mail did have a good business section and as something of a compensation, or reparation, for their high-handed act of closing the paper, the owners decided to bring out a standalone business publication based on the section, saving some of the jobs lost when the paper was closed. The editorship was handed to their star columnist Ken Owen, who was fired on his third day. Crazy. He lost his job for deciding to scrap the horseracing pages, which were a favourite of the then publisher, Stephen Mulholland. 

That these two hard-headed, belligerent, short-tempered men came into conflict was preordained. They were both “my way or the highway” kind of people, and I mean that in the nicest possible way. Mulholland did recognise that Owen was a great columnist so he continued to work for the new newspaper and a few years later, his editorship was restored.

He then, in a seminal moment for the paper, hired me. Joking, obvs. I don’t know why I was attracted to the paper. It was struggling. It was losing more money than the Rand Daily Mail was at the end of its life. I had a very good job on The Star at the time, but Business Day seemed to have a spark. That spark, I learnt later, had everything to do with Owen’s dedicated and pugnacious leadership. Owen was unstoppable; he was extremely demanding of his staff, very acute, and he read every newspaper cover-to-cover every morning.

I remember once the deputy editor wanted to know why so many journalists were dialling 1026 to get the time. The reason was that whenever Owen walked into the newsroom, everyone desperately wanted to look busy, so they would grab a phone and dial 1026.

I later asked Owen what it was like being editor of Business Day in the early days when it was losing so much money. He said it was like trying to stay onboard a runaway train that would crash through absolutely everything in its path.

As for Mulholland, saving Business Day, among other things, gave him a reputation as a crisis manager for newspapers and he was given the very tough job of trying to save the Fairfax papers in Australia. I once asked him what this job was like, and he gave me a one-word answer: “War.” When he left, a reporter at one of his former charges asked what his favourite place was in Australia, and he said, “The departure lounge of Sydney Airport.” 

It might sound like I’m castigating these two men, but I’m absolutely not. I liked both immensely. But neither was your average plumbago. And that’s part of the point.

My lessons about saving a struggling company drawn from this period are slightly obvious, but no less true as a result. If you find yourself in a struggling institution, the harsh fact is that everything is running against you. Staff are demotivated and cynical. Confidence is low among all key constituents — customers, suppliers, bankers, shareholders, you name it. The ability to raise finance is minimal. Nobody wants to do this job; people like to work in growing sections of the economy, and you get no thanks for what you do because often it’s harsh. It’s your average day-to-day nightmare.

Part of the strategy, I suspect, in most cases, is to retreat to a defensible line. Hence the decision to change the brand from the Rand Daily Mail to Business Day. But the process of retreat will bring you a new range of enemies. Then you have to have a very thick skin and a will of iron, because anything less is not going to cut it. Next, you have to keep at it for years, working harder than your competitors. And then maybe, just maybe, the tide will turn. But more likely, you will fail. 

As it happens, Mulholland and Owen succeeded, but against massive odds. For decades afterwards, a long succession of journalists benefited from their wilfulness and resourcefulness, myself included. But one thing I know: I could never have done what they did. Turning failing newspapers around is not for sissies. 

With regard to failing SOEs, what I want to know is this: is the government trying to hire hard-headed people with dedication and insight who will be relentless in their integrity and in their pursuit of providing a useful and functional organisation? Obviously, we don’t know, because they seem completely unable to hire anyone, so vacant CEO jobs stand open for months on end. But are they looking for that kind of person — or are they looking for someone politically compliant, from the right demographic, with the right connections? 

I’m guessing the latter. Just saying. DM

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Comments - Please in order to comment.

  • Dermot Quinn says:

    Can you imagine running an SOE?
    No freedom to hire and fire, no performance criteria except for you, the shareholder is stealing the cutlery, you answer to people who have no clue about business or anything except cadre loyalty, ideology trumps logic, your boss will refer to your “business” as if it’s actively trying to sabotage the country and has nothing to do with him, you don’t actually know who your boss really is as power plays are rampant, you know before you take the job that its stupid, hell your wife told you and everyone else you asked.

    If you have the ego to take on an SOE you may as well run the country because the things you need to change are only in that purview.

    • Hanlie Roets says:

      “is the government trying to hire hard-headed people with dedication and insight who will be relentless in their integrity and in their pursuit of providing a useful and functional organisation?” I think Andre de Ruyter was such a person. But, as we could all see, that’s not what Government wanted.

  • Solly David says:

    It’s like my boss used to say…throw sh*t against the wall N hope it sticks.

  • Mkulu Zulu says:

    The last sentence sums it up,they will all fail!

  • Grant Turnbull says:

    If I was offered such a position, I would insist on a contract that allows me to hire and fire as I see fit. Then on day 1 I would make everyone re-apply for their post with justification for their past history in that role.
    I don’t think I would get the job.

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