Under these conditions and with an incorrect accounting system
to begin with, it is no surprise that a backlog of work began to
grow from the start; that orders went unfilled; that items were or-
dered which were already overstocked; that it was not possible to
tell if goods were selling at a profit or at a loss; and it became in-
creasingly impossible to make changes which would correct a
worsening situation. The 1970 accounts were not signed by the
auditors because of unexplained irregularities with respect to
stocks, debtors, creditors, sales revenue and gross profits.

It should also be obvious that enlightened management
decisions were not possible, since they depended upon reasonably
accurate information coming from the accounting system.
Marketing research was non-existent and capital planning was of-
ten reduced to guesswork and rule of thumb criteria. The com-
puter system, which had great difficulties in its own right (mainly
owing to the fact that a computer was rented on long-term con-
tract which was totally inadequate for the planned needs of
S.T.C.), was no better than the accounting inputs.

Without correct and up-to-date accounts, financial control was
also out of the reach of the Corporation. Creditors’ statements
were often not checked against invoices because the latter could
not be found; in October 1971 when the Corporation was granted
an extraordinary overdraft extension to clear its debts, over Shs. 5
million was paid without invoices! Stocks were financed almost
entirely out of overdraft facilities from the National Bank of Com-
merce but since stock management was virtually non-existent, the
overdraft was never based on forward cash planning (ie. no at-
tempt was made to forecast the timing of sales and cash receipts).®

The high degree of centralisation was a major constraint for
S.T.C. There were three layers in the McKinsey system. At the top
was the Head Office, in charge of policy, planning and marketing,
personnel and certain accounting operations. The Directorate of
Trading Operations was the second layer. This was made up of
three parts: (1) the General Merchandise Division with eleven
separate product divisions (eg., groceries, wines and spirits, hard-
ware); (2) the Agricultural Machinery, Electrical and Technical
Division with five separate product divisions; and (3) the sales
division. The third layer was the branches (one in each main
regional town with stocking and sales offices planned from each
main district towns). This structure was centralised in several im-
portant ways.

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