Corporate turnaround strategy in Nigeria : a case study of NEPA.
The main objective of this study is to establish why NEPA has persistently failed to
effectively turnaround with a view to recommending an effective corporate turnaround
strategy. The corporation has performed very poorly for several decades in both monetary
returns and service quality. Several attempts to reverse the situation have failed, thus
frustrating the government who own the corporation and the consumers who use its
services. To do this we start by building a theoretical framework to learn from experience
of other organisations and establish the parameters for performance measurement,
necessary for a successful corporate turnaround.
Corporate turnaround strategy is only necessary if there is corporate decline. Corporate
decline, however, does not occur as one of those things in an organisation but starts in one
area and systematically spreads to the other areas. There are two sources of corporate
decline, one internal to the company and the other external to it. While the managers may
influence the internal causal factors of decline, it is not easy for them to influence the
external causal factors of decline. However, good managers may minimise the effects of
external factors of decline on their organisation.
The main internal cause of corporate decline is management, along with other variables
such as finance, organisation structure, bureaucracy and poor management decisions. Most
corporate decline situations arise as a result of poor and inefficient management among
others which include ineffective financial policy and control, overexpansion and large scale
investments without proper costing. Yet. other factors include building.... of high cost structure in an organisation, poor marketing efforts and wrongly judged acquisitions and
mergers. NEPA possesses most of these attributes of decline during the period of 1970 to
The key symptoms of declining organisations are grouped in seven basic families of
problems which are mainly liquidity, poor debt collection, declining profitability, quality
failures, low employee morale and poor organisation structure. To reverse these trends.
most turnaround strategies start with change of top management. The new management
carries out the restructuring of the rest of the organisation, first by assuring that the
organisation has enough funds to function and is heading towards the desired direction.
Such actions include assets I reduction, improved cost efficiency and redirected investment.
Following the completion of theoretical framework, we carried out field research directed
at four stakeholders of NEPA. We drew up and administered a different questionnaire on
Residential Consumers, Commercial and Industrial Consumers, NEPA Staff and Other
Interest Groups (Ministries and other Parastatals) to capture the perception of these groups
on the performance of NEPA. The responses from the questionnaires have been analysed
and reported in the study.
Our findings show that NEPA is characterised by the indicators of corporate decline such
• poor management
• weak finance team
• high cost structure
The combined effect of these is poor performance in product quality and loss of revenue as
shown in its operating records. The first attempt to improve product quality of NEPA in
1972 by merging the two bodies (ECN and NDA) into one body failed to produce
noticeable effect. The corporation has therefore continued to decline over the years and the
consumers had to tolerate the situation as there was no ready alternative source of power
supply. Recognising the problem, another attempt to turn NEPA around was made in
1989, by adopting turnaround strategies which involved changing top management and
restructuring the organisation. It still did not improve its performance because the new
management was not better than the one replaced. The corporation thus continues to
Recognising NEPA's operational problems and managerial difficulties, we recommended
corporate turnaround strategies that will lessen the burden on the executives and make
NEPA an efficient company. We have recommended change of management, preferably
with an outsider, as the first step in the corporate turnaround process in NEPA. This step
was followed by the recommendation of large scale reorganisation of the industry. The
reorganisation involves the formation of a Holding Company out of the current
headquarters, with drastically reduced workforce and ten subsidiary companies. Our
recommendations involve the creation of a generating company, a national grid company
and eight distributing and supplying companies.
We appreciate the resource implications of our recommendations, which involves the
injection of new funds, new personnel requirement and the government's approval. The subsidiary companies would inherit most of their staffing requirements from the current
NEPA staff, except for Distribution and Supply companies, where a large number of new
personnel should be employed. The staffing requirements of Distribution and Supply
companies will differ from the other companies in the group. The high calibre professional
staff needs shall be met by offering appropriate incentives, comparable to those in the
private sector. The corporation has already got premises that will house the subsidiary
companies and funding will come from both improved operating and financial performance
as well as a one off grant from the government. Despite these resource implications, we
are convinced that if NEPA is keen to improve on its performance, our recommendations
will be the way out for the corporation.