STRATHMORE BUSINESS SCHOOL

NAIROBI, KENYA

FREDDIE R. ACOSTA, PhD

ARLENE S. ACOSTA, PhD

Abbas Gullet (B) at Kenya Red Cross Society

Most of the donors felt there was need for the Society to restructure and improve its accountability
before further support could be given. 2000 Annual Report and Accounts, p.5
Putting Humanity First 2000 Annual Report and Accounts, p. i

On an early Thursday morning in February 2001, Abbas Gullet walked into his new office at Kenya Red
Cross Society (KRCS) Headquaters in Nairobi. The International Federation of Red Cross (IFRC) seconded
him to be the Secretary General of KRCS. His eyes were immediately drawn to a letter from the lawyer of
the former Secretary General who had left the society in 1999. The letter contained strong words demanding
for unpaid dues, a notice period to settle the amount, and a threat of legal actions for non-compliance.
Prior to that, he had learned that in mid-2000, the acting Secretary General was arrested and detained by the
police as per complaints from the National Social Security Fund (NSSF) for failing to pay statutory dues. He
was later dismissed by the Board.
Gullet remarked:
I had some prior informal discussions with former colleagues about the situation of KRCS. I came
here with very low expectations. I knew the situation was bad, but found it worse than I thought.
The rot and the problems were overwhelming.
The society was troubled. In the previous year, a survey by IFRC showed that majority of the international
donors and partners perceived KRCS as a leaking bucket. It was considered one of the most corrupt and
mismanaged societies among the 185-member organizations. The societys internal service numbers told the
same story. In the late 2000s, its responsiveness record was dire, making KRCS unable to carry out its
mandate.
Not only was the society suffering from embarassing service level and a terrible image, it also had serious
financial woes. They didnt have money (See Exhibits 1 and 2). Donors and partner organizations had
walked away. The Societys HQ current liabilities exceeded the current assets by Shs 26,442,603 and
accumulated deficit stood at Shs 31,503,296 at the end of the year 2000.

A Brief About the Kenya Red Cross Society (KRCS)

KRCS was recognised by the Kenyan Government as a voluntary relief Society auxiliary to the public
authorities in the humanitarian field and particularly to the medical services of the armed forces in
accordance with the provisions of the Geneva Convention and as the only National Society mandated to
carry out such activities in the Kenyan territory.

Spouses Dr. Freddie R. Acosta and Dr. Arlene S. Acosta prepared this case as a basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation. SBS cases are not intended to be used as primary sources of data. The authors
might have added some information to demonstrate teaching points or changed some names to protect identities.

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National Red Cross and Red Crescent Societies including the Kenya Red Cross Society embodied the work
and principles of the International Red Cross and Red Crescent Movement worldwide. The Kenya Red Cross
Society3 was a humanitarian relief organisation created through an Act of Parliament, Cap 256 of the Laws
of Kenya of 21st December, 1965 (See Exhibit 7). Previously, the Kenya Red Cross existed as a Branch of
the British Red Cross between 1939 and 1965.
Abbas Gullets Finance Dilemma
Immediately after reporting to the office, Gullet sensed serious anomalies. He commissioned some staff to
investigate invoices and claims from creditors. Their mission was to find out enough details about these
transactions and then compare them with actual market prices at that time.
This exercise revealed that a lot of those figures were deliberately inflated due to bribery, staff commissions
and delayed payment. Prices were inflated at an average rate of 50%. Further to his own investigation, the
society also owed huge amounts of money to the Kenya Revenue Authority, National Social Security Fund,
and National Health Insurance Fund. Statutory dues were collected but never remitted to the government.
The principal amount was dwarfed by the accumulated interests and penalties.
No societies can survive deficits on this scale. Unless we take decisive action now, there is a real posibility
that KRCS will go out of business for poor image and lack of money. We have to cut our costs sharply and
we have to cut them fast to restore our reputation. We have no more choice and no more time..., Gullet said.
His investigations were substantiated by other stakeholders. The Chairman of one Branch had this
interesting to say:
The situation at the headquarters was pathetic, because there were mismanagement activities on the
procurement of services and goods. The Governor was the one supplying insurance services to the
Society through his own brokerage firm while all KRCS vehicles were directed to fuel in his own
petrol station. The past Secretary General, on one hand, was directly involved in giving out LPOs
and purported to have received the goods.
The Auditors4 reported their impressions of the status at KRCS:
Proceeds from the disposal of the Societys assets were not receipted and as a result, our audit was
limited to the income that had been banked. We were therefore not able to ascertain whether all
income received from such sale of assets had been completely recorded in the books.
The system of recording the Societys liabilities is weak. Orders and commitments to suppliers are
placed without proper documentation and the record of invoices for goods received and services
rendered is inadequate to ensure inclusion of all the Societys liabilities. We have therefore been
unable to fully determine the completeness of the Societys creditors and accruals at the year-end.
Abbas Gullets Board of Directors Dilemma
Gullet revealed:
Since the Board knew me and I was the incoming Secretary General, they invited me to their
meeting on 26th January 2001. I was shocked to witness how the Board conducted its affairs. The
board meeting went on from 2pm to 10pm. They talked about day to day management issues of the
society. And in that meeting, I was asked to speak and I addressed them.
In his first few days of office, Gullet noticed that the Board had a peculiar mentality. The current Governor5
had an office at the KRCSs headquarters. He reported everyday. He called members of staff, read all the
http://www.kenyaredcross.org (accessed 18th July 2010)
PricewaterhouseCoopers, KRCS 2000 Annual Reports and Accounts, p.27
5
The Governor was a former politician.
3

mail, went to town and met ministers and ambassadors with a KRCS car and driver. He wanted to use the
Society to profile and glorify himself.
I am the Secreatary General, employed by the International Federation in Geneva. I have to deal with the
Board and this Governor who wants to be the CEO. Right now, there are two centres of power and the staff
are in limbo, Gullet narrated. The Board was divided on his behaviour. They do not understand their roles
and responsibility. What do I do with this Board? Gullet asked.
The Legal Advisors opinion was as follows:
The way the Board conducted elections was wanting. They would come and say Mr. Oleperio is
retiring. Mr. Wamuci wanted to be reelected for another term. There were so many discussions
before hand and no elections done, therefore the Board continued to be in office. It was clear that
the Governor had no clear focus of where and what he wanted to do with the organization.
Abbas Gullets Human Resource Dilemma
KRCS top management had known that the society was overstaffed. Gullets estimates suggested that at
least 50% of the societys staff needed to be let go if its costs were to be brought into line with standards.
Benchmarking revealed that in terms of qualification and experience of employees, KRCS was below
federation standards. KRCS was competitive only by virtue of its low labour costs. Staff members were paid
$100 or $200 per month. The Secretary General was paid only $700 per month. However, as recently as 2
years ago, management had been forecasting increases in donors money into their programs and core costs
which they thought would be sufficient to absorb the overstaffing and allow them to avoid complicated and
costly employee reductions. Contrary to their plan, the expected donors money didnt come. By the end of
2000, KRCS was struggling to survive.
As you can imagine, morale in the organizsation is at rock bottom, Gullet said.
I had 70 staff members when I arrived. Most were untrained, underpaid and not paid on time.
How can we expect serious results from staff with a civil servant mentality, disillusioned,
uncommitted and unqualified? What do we do with them? I couldnt fire nor hire because the Board
would not approve it. Personally, I also wouldnt fire anybody until I could pay what was rightfully
his/hers. I needed money upfront. Could I ask for money from the ICRC? Could I talk to donors
and partners? I planned to restructure and already identified four senior positions (Exhibit 3) for
which I wished to pay a minimum salary of USS$2,000 a month. What would I tell our donors and
partners?

Conclusion
Gullet took over as Secretary General of KRCS less than a month ago. Well-known for his almost singleminded focus on humanitarian service, his philosophy is rooted in the intensely competitive corporate
business where people are key to an organizations success. As he tells you now, it is very simple: Good
governance and accountability are what make the difference. The challenge for Gullet is to change the
public perception of KRCS while continuing to cut costs, but remain responsive to the needs of the
community.
Well aware of your experience and keen intuition, the newly appointed Secretary General of the Kenya Red
Cross Society, Abbas Gullet, is asking for your help. He is asking you to come up with some ideas in
response to two questions:
1. What should I do to turn around this organisation? Help me by coming up with a plan, or at least a
list of suggestions, of what I should do and in what order.
2. What should I tell my board and my people when they ask how long this turn around change will
likely take?
3

Exhibit 1 KRCS Treasurers Report for Financial Period 20006

INCOME
1. Local Resources
a. Fund-raising income
b. Grants and Donations
c. Rental Income
d. Mileage Recoveries
e. Administration charges
f. Disposal of Assets
g. First Aid Training
h. Branch Levy
i. Recovery from programmes
TOTAL
2. External Donors
a. Swedish Red Cross
b. ICRC
c. Norwegian Red Cross
d. Chinese Embassy
e. USAID (FHI)
TOTAL
GRAND TOTAL

11,153,081.00
15,288,493.00
335,589.00
3,700,000.00
1,446,575.00
31,923,738.00
52,533,803.00

GRAND TOTAL

KShs.
16,892,847.00
12,236,811.00
32,678,142.00
61,807,800.00

EXPENDITURE
1. Personnel Expenditure
2. Administration Expenses
3. Programme Expenses

Exhibit 2 Assets Ending 31st December 2000.

Headquarters
KShs.
Fixed Assets
59,042,846.00
Investments
665,725.00
Current Assets
2,334,533.00
Current Liabilities
(28,777,136.00)
33,265,968.00
Source: Organisation Data

KShs.
2,856,055.00
528,902.00
4,380,009.00
393,210.00
1,494,634.00
1,755,170.00
375,636.00
84,000.00
9,742,449.00
20,610,065.00

Programmes
KShs.
0.00
0.00
14,487,056.00
(3,951,155.00)
10,535,901.00

Total
KShs.
59,042,846.00
665,725.00
16,821,589.00
(32,728,291.00)
43,801,869.00

2000 Annual Report and Accounts, pp.24-25

Exhibit 3 Abbas Gullets Proposed Structure

Exhibit 4 The International Federation of Red Cross (IFRC)

The International Federation of Red Cross and Red Crescent Societies7 is the worlds largest humanitarian
organization, providing assistance without discrimination to nationality, race, religious beliefs, etnicity, class
or political opinion. Founded in 1919, the International Federation comprised 185-member Red Cross and
Red Crescent Societies with an additional number in formation, a Secretariat in Geneva and more than 60
delegations strategically located to support activities around the world, including Nairobi. The Red Crescent
is useful in place of the Red Cross in many countries, but it is not based on religious affiliation.
The International Federations mission is to improve the situation of the most vulnerable people, those who
were at great risk from situations that threaten their survival, or their capacity to live with an acceptable level
of social and economic security and human dignity. The Internation Federation coordinated and directed
international assistance of the movement to people affected by natural and technological disasters, to
refugees and in health emergencies. It combined its relief activities with development work and worked
closely with ICRC to strengthen the capacities of National Societies and through them individual people.

Exhibit 5 The International Commission of the Red Cross (ICRC)

ICRC was created in 1863 and was the founding body of the movement. ICRC acts chiefly in situations of:
International armed conflict involving the armed forces of at least two states
Non-international armed conflict, which take place on the territory of one State and in which the
regular armed forces fight identifiable armed groups, or various armed groups fight each other
Internal strife in which the international order is seriously disrupted by acts of violence which do not
have the characteristics of an armed conflict (e.g. riots, factional fighting, popular uprising).8
ICRC acts in these situations on the basis of humanitarian law and the right of humanitarian initiative
conferred on it by the States, to protect and assist victims of armed conflicts and its direct results. This may
involve caring for the war wounded, visiting prisoners of war and security detainees, restoring family
contact disrupted during the conflict, protecting civilians or providing food and other forms of assistance to
them.

7
8

http://www.kenyaredcross.org/index.php (accessed 18th July 2010)

KRCS 2000 Annual Report and Accounts, p. ii

Exhibit 6 Abbas Gullets Carreer Highlights

Abbas Gullet was born on 18th February 1959 in a Northern Kenya district called Garissa, in a small town
called Madogashe. He started his career with the Kenya Red Cross Society as a National Youth Officer in
1985. Other highlights of his career include:
Branch Development Manager ended in 1991, when Gullet got a call from IFRC. He was offered a
chance to serve as Youth Officer for Africa at the IFRC Youth Department in Geneva for 6 months.
He wrote two manuals on Red Cross and Red Crescent Youth Leadership and another on Youth
Environment, jointly produced with United Nations Environment Programme (UNEP).
Relief Administrator of the IFRC Malawi from 1991 1992. He was responsible for three districts
hosting 250,000 Mozambican refugees and in assisting and advising Malawi Red Cross staff in
planning, coordinating, monitoring and reporting on food and non-food distributions.
Relief Coordinator of the IFRC Malawi until 1993. He was responsible for managing and running a
drought operation for 600,000 Malawians with support of 2 delegates and 200 Malawian staff. His
responsibilities were planning and carrying out registration of beneficiaries, food distributions,
warehousing, transporting and reporting to headquarters.
Head of Delegation, IFRC, from April 1993 June 1993. Gullet oversaw three operations:
Mozambican Refugees; Malawi Drought and Malawi Cholera/Bloody Diarrhoea. He managed a
team of 10 expatriate staff and co-managed 30 full-time and 3,000 part-time Malawi Red Cross
workers with an annual budget of CHF 8 million.
June 1993 September 1993, Gullet was appointed Head of Sub-Delegation, IFRC Malawi,
responsible for Mozambican refugees programme of 1 million people, by providing food and nonfood items. He managed 7 expatriate staffs with an annual budget of CHF 6 milllion.
In September 1993, Gullet was appointed member of a review team to the Youth Family Life
Education programme of the Tanzania Red Cross Society. His tour of duty in Tanzania was cut short
due to his appointment as Head of Delegation, IFRC Uganda from December 1993 September
1994. He was responsible for managing the delegation which was running a multi-sectoral
programme for 90,000 Sudanese and 15,000 Rwandese refugees with an annual budget of CHF 5
million.
Head of Youth Department (Geneva) from September 1994 November 1995. He was responsible
for assisting National Societies in establishing, implementing and monitoring the International
Federation Youth Policy. One of Gullets notable successes was the establishment of Regioanl
Youth Networks globally.
Head of the biggest Federation Relief Operation for Rwandese and Burundian Refugees who were
living in Tanzania. The operation included Health programmes, both curative and preventive, with 1
fully-fledged referral hospital with 200-beds and catering for 700,000 refugees, one dispensary with
70 beds and three clinics with a total of 100 beds, a sanitation programme which included
constructing and maintaining of 25,000 latrines and a solid waste programme.
In May 1996 - February 1997, his team responded in assisting the Tanzanian Government to
recover dead bodies from M/V Bukoba which had sunk with 1,000 people on board just 8 kms
outside Mwanza, on Lake Victoria. He managed an annual budget of CHF 20 million.
From March 1997 to November 1997, Gullet was appointed Deputy Head of Regional Delegation,
IFRC for Eastern Africa in Nairobi, Kenya.
From December 1997 to May 1999, Gullet was appointed as Head of Delegation, IFRC in Sudan.
He was made responsible for managing 3 expatriates and 12 national members of staff and an
annual budget of CHF 5 million.
From June 1999 to December 2000, Gullet was Head of Regional Delegation, IFRC of the Pacific
Region, covering 14 national societies. His main area of responsibility was providing technical
support to the Societies in institutional development, disaster prepareness, health and youth
programmes.
He applied as Head of Delegation, IFRC in Indonesia. Although he was the most qualified, he was
turned down on the basis of his being an African. Asian societies preferred someone from the West.

Exhibit 7. KENYA RED CROSS SOCIETY ACT (EXCERPT)

[Date of assent: 24th November, 1965.] [Date of commencement: 21st December 1965.]9
An Act of Parliament to provide for the incorporation of the Kenya Red Cross Society and for matters
incidental thereto and connected therewith:
3. Establishment and constitution of Society, etc.
(1) There is hereby established and constituted the Kenya Red Cross Society which shall be the sole national
Red Cross Society in Kenya.
(2) On the commencement of this Act
(a) All the assets and liabilities of the Branch shall be transferred to and be vested in the Society by virtue of
this section and without further assurance, and the Society shall have all the powers necessary to take
possession of, recover and deal with such assets and discharge such liabilities;
(c) Officers of the Branch shall hold corresponding appointments in the Society until other provision is made
in accordance with rules made under this Act, and Life Associates and Associates of the Branch shall
become corresponding Life Associates and Associates of the Society, but subject to any provision contained
in the aforesaid rules.
4. Incorporation of Society
The Society shall be a body corporate under the name of the Kenya Red Cross Society, having perpetual
succession and a common seal, with power to sue and be sued, purchase, acquire, hold, manage and dispose
of movable and immovable property, and to enter into any such contracts as it may consider to be necessary
or expedient for the purpose of performing its functions or achieving its objects under this Act.
6. Recognition of Society as a voluntary aid society
The Society is hereby recognized by the National and County Governments as a voluntary aid society
auxiliary to the public authorities both for the purpose of the Scheduled Conventions and otherwise, and
shall have the right in conformity with the Scheduled Conventions to use the heraldic emblem of a red cross
on a white ground, formed by reversing the Swiss Federal colours, or the emblems of the red crescent or red
lion and sun on a white ground or any colourable imitations thereof or the words Red Cross.
7. Independence of Society to be respected
The independent and voluntary nature of the Society shall at all times be respected in accordance with the
resolution relative to National Red Cross Societies adopted by the General Assembly of the United Nations
on the 19th November 1946.
8. Council of Society
(1) The governing body of the Society shall be a Council (Board of Directors) constituted in accordance with
rules made under this Act.
(2) The Council may from time to time appoint an Executive Committee with such powers and duties as
may be prescribed by rules made under this Act.
(3) The first members of the Council shall be those persons who immediately before the coming into
operation of this Act are the members of the Committee of the Branch.
9. Rules
(1) The Council shall as soon as possible after the commencement of this Act make rules for the
management of the affairs of the Society and the accomplishment of its objects, and without prejudice to the
generality of the foregoing may make rules providing
(a) that membership of the Society shall not be withheld from any citizen of Kenya on the grounds of race,
class, sex, religion or faith or political opinions;
(b) that all members and associates of the Society shall have representation on the Council.
9

http://www.kenyalaw.org/klr/fileadmin/pdfdownloads/Acts/KenyaRedCrossSocietyActCap256.pdf