Easy as ABC?

The collapse of ABC Learning was perhaps the most spectacular of the GFC because it affected so many people. While shareholders and creditors took the biggest hit, it also left a huge impact on customers, staff, landlords, politicians and, of course, the children in the centres.

This week, the Federal Court in Sydney has been the scene of public hearings conducted by ABC’s administrators. Most of the big players in the collapse – including founder Eddy Groves and his ex-wife Le Neve – have appeared to explain their role in the business.

Some of the allegations have been extraordinary, including claims Eddy spied on Le Neve, was involved in critical changes to financial reports and oversaw a culture of little or no corporate governance.

Eddy Groves has denied these claims, and sheeted the blame for the collapse to other key executives.

Given there has been so much contradictory evidence given at the hearings, it is unfair to speculate on what conclusions the administrator might reach or criticise any one person.

But here’s the key lesson I have taken out of the affair – complexity can kill.

ABC was a business with a complex business model, a complex way of accounting for certain parts of the business, complex funding arrangements and an apparently complex management structure.

There were also complex personal relationships within the business, not least of which the relationship between Eddy and Le Neve, who separated more than a decade ago but continued to work together until their relationship disintegrated.

Complexity is okay when it is tightly managed with rigorous systems and processes. But when things start to get even slightly messy or the business comes under stress, they can unravel very quickly.

Are there parts of your business that are starting to look a little messy or complex? The ABC case should be a trigger to start thinking carefully about streamlining your processes, your model and your structure.

Now. Before things even look like starting to unravel.


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