Many organisations mistakenly believe that financial distress is primarily an accounting issue.
In reality, financial distress becomes a crisis when stakeholders lose confidence. Money can often be raised, yet rust is much harder to restore.
In the case of OK Zimbabwe, what followed illustrates this point clearly.
As suppliers tightened payment terms and eventually withheld stock, customers encountered increasingly empty shelves. Revenue declined further. Cash flow deteriorated. Suppliers became even more cautious. The organisation entered a vicious cycle.
A retail business cannot thrive without inventory. Yet inventory depends on supplier confidence. Supplier confidence depends on trust. Once trust weakens, operational problems quickly follow. This sequence of events should concern every boardroom in Zimbabwe.
The first lesson from the OK Zimbabwe experience is that suppliers are not vendors. They are strategic stakeholders.
Too many boards devote significant attention to investors while paying limited attention to supplier relationships.
The stakeholder theory of corporate governance asserts that a company's ultimate goal is to create value for all its stakeholders, rather than exclusively maximising profits for its shareholders.
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Yet suppliers often possess more immediate influence over operational continuity than shareholders. When suppliers stop believing in an organisation's ability to meet its obligations, the consequences can be swift and severe.
A second lesson concerns environmental scanning.
One of management's most important responsibilities is identifying weak signals before they become major threats. The warning signs were visible; supplier payment concerns, reduced stock availability, changing consumer behaviour.
And then there was the growth threat of the informal retail sector. Business intelligence pointed to some suppliers diverting their products to tuck shops sprouting all over the country.
The motivation? They paid in US dollars in cash up front. This was more attractive than what the huge chain stores had relied on for years, that is, negotiated 30-to-90-day credit.
Then there were the increasing operating costs and currency pressures, where they found themselves stuck with a local currency that had lost favour among most suppliers. Each development represented a signal requiring strategic attention. The challenge facing many organisations is not the absence of information.
The challenge is recognising the significance of information while there is still time to act. Good management teams collect data and great management teams interpret data. Exceptional management teams act on it. This is where boards play a critical role.
Corporate governance is not simply about compliance. It is about oversight. A vigilant board should continually ask uncomfortable questions. What are suppliers telling us? What is management not telling us? What are customers experiencing? What concerns are employees raising? Which risks are growing quietly beneath the surface?
Unfortunately, many corporate crises emerge not because organisations lack information but because they fail to connect the dots. The OK Zimbabwe experience highlights another important principle of stakeholder management. Stakeholders rarely become active simultaneously. They activate in stages. Suppliers often recognise problems first because they have direct visibility into payment patterns. Employees follow because they observe operational realities from within.
Customers notice when service levels deteriorate, and the media becomes interested when visible evidence emerges. Investors react when performance indicators decline. Understanding this sequence provides leaders with a valuable opportunity. Early stakeholder concerns can serve as an early warning system.
When suppliers become anxious, employees become uncertain, and when customers begin complaining, management should listen. The cost of listening is far lower than the cost of recovery.
Another notable feature of the OK Zimbabwe crisis is the apparent transformation of stakeholders into what Professor James Grunig’s situational theory describes as active publics. Active publics do not merely observe events. They act. Suppliers withdrew credit. Customers shifted their spending elsewhere and employees expressed concerns through labour representatives. The media intensified scrutiny.
Each stakeholder group exercised its influence in ways that accelerated organisational pressure. This is why stakeholder management cannot be treated as a communications function alone. It is a strategic management responsibility.
Public relations practitioners have long argued that organisations should build relationships before crises occur.
The events surrounding OK Zimbabwe reinforce this argument. Trust accumulated over years can provide resilience during difficult periods. Trust neglected over years can magnify vulnerability.
Perhaps the most significant lesson for boards and executives is that crises rarely begin when newspapers start reporting them. By the time journalists arrive, stakeholders have already formed opinions. Trust has often started eroding by the time social media begins debating an issue. By the time corporate rescue becomes necessary, the crisis has usually travelled a considerable distance.
The role of leadership is therefore not merely to respond to crises. It is to identify the conditions that create them. This requires curiosity, humility and leaders willing to hear uncomfortable truths.
Most importantly, it requires organisations that recognise stakeholders not as external audiences but as partners whose perceptions can determine corporate survival.
The OK Zimbabwe story is still unfolding. Corporate rescue may yet provide a pathway to recovery. New investors may emerge, operations may stabilise and confidence may return. However, irrespective of the eventual outcome, one lesson is already clear.
Companies do not collapse when cash runs out. More often, they begin collapsing when stakeholders stop believing. And once belief is lost, recovery becomes infinitely more difficult.
* Lenox Mhlanga is a strategic communication consultant with over 26 years’ experience in the Public Relations profession. He is considered a thought leader and has worked for various organisations including the World bank. He is also a lecturer, facilitator and speaker. He can be contacted at: Mobile - +263772400656 or Email: [email protected]
