Lenong Road Maintenance
Responsible for the general road maintenance in the Ekurhuleni Metropolitan Area, Lenong General Road Maintenance faced numerous challenges. The company’s financial statements showed it was in decline. Before Lenong approached Productivity SA, the company faced a bleak future. Despite an increase in turnover between February 2007 and February 2008, Lenong’s net loss had increased by 156%, from –R223k in 2007 to –R571k in 2008. Consequently, the company lacked working capital to execute new projects, which was worsened by funders that insisted on the implementation of operations systems before funding could be extended.
A Turnaround Solutions strategy was jointly developed between Productivity SA and the Future Forum – a dedicated initiative we established at Lenong, aimed at finding long-term answers to identified problems.
The following interventions were developed and implemented:
Performance Management/Labour Relations System
Performance measurement and improved labour relations systems boosted staff morale, cultivated a sense of belonging and accountability, and improved employee engagement.
Defined Operation Models
With clear operational procedures in place, enhanced quality and improved client satisfaction, Lenong’s fixed expenses decreased by 5% while turnover correspondingly increased by 5%.
Financial/Working Capital Management Systems Review
A Financial Management Procedures Manual was formulated, and a full-time accountant employed, who immediately implemented a new system, installed a computerised accounting package and streamlined the finance department.
Quality Management System
Excessive re-works was identified as part of the problem at Lenong, so a Quality Management System was drawn up. This proved to be crucial in the application for funding, because without quality procedures and measures in place, investors were reluctant to risk their capital.
Construction Management Procedures Manual
To add to the bottom line through improved working methods, a Construction Procedures Manual was created to work in conjunction with the Operations Model and Quality Management System. The result was a decrease in both variable and fixed expenses, while positioning Lenong as a highly organised company, capable of delivering a quality product, on time and within the allocated budget.
Source Funding and Creation of a Performance Guarantee
A lack of working capital to execute new projects threatened lucrative new projects, valued at approximately R20m. When Lenong approached the IDC for a performance guarantee of R2m, and financing of R5m to begin work on the new projects, Productivity SA helped the company develop a business plan and quality systems, which secured the financing.
Training of Senior Managers in Project Management
Training and development of Senior Management enhanced their ability to multi-task and run Lenong’s projects profitably, and increase clients’ satisfaction.
- Through Productivity SA’s involvement, Lenong Road Maintenance turned itself around and raised a loan facility of R16m, including a performance guarantee, which enabled the company to continue undertaking successful new projects.