It is official –– Rhode Island is in a real economic crisis. The state’s employment continues to decline. Last month, according to the state Department of Labor and Training, the state lost 1,200 jobs, bringing the unemployment rate up to 5.8 percent, the highest level since November 1994.

Any optimism for job creation next month has disappeared as the state, region and national economy slide downward. For years, we have been dealing with a partial truth that higher salaried jobs are on their way to the state and a reduction in taxes and new incentives will lead companies to move to Rhode Island. There is little evidence that any of these events took place in the last 18 months and evidence that the state’s future expectations for growth may be unrealistic. There is no solution to the state’s economic problems in sight.

Some legislators are introducing bills in this session to harm existing businesses and deter other businesses from coming to the state. The state needs an emergency management plan that takes advantage of the “best practices” of business. The state cannot respond to its bad economic performance with denials, blaming it on unions, Band-Aids, and smoke and mirrors that in the past have led nowhere.

If Rhode Island was a business with subsidiaries such as cities, towns and municipalities, what would the board of directors of the company do to preserve the wealth of the shareholders (in our case, the taxpayers), employees and suppliers and put the company back into motion?

A board of directors following a duty of loyalty, care and fiduciary responsibility (all required roles for a board member) would make informed, reasonable and careful decisions that are in the best interests of the company and not in the best interest of the individual director, officer or anyone else. Here are the steps that would be taken if Rhode Island was a real business.

First, terminate those individuals responsible for the business being in the current situation. A business that finds itself with a budget shortfall of hundreds of millions of dollars is close to filing for bankruptcy (Chapter 11-reorganization or Chapter 7-liquidation and/or sale of assets) depending on the value of its current assets and after assessing its liabilities.

Second, retain professionals who know how to “turn around” a business by evaluating the company’s past performance and future projections and assumptions and coming up with an immediate action plan. Professionals would be selected with a track record of success in accounting, finance, law, management and other disciplines who know how to bring about change. The professionals should have no ties to the former management team. The time and effort needed to address the organization’s problems should not be underestimated or handled in a business-as-usual manner. However, time is of the essence.

Third, all current sources of revenue need to be studied, and factors that impact these sources need to be examined so that additional shortfalls can be identified early in the process. The seriousness of the revenue problems should not be underestimated. Based on the size of the existing budget deficit, it is apparent that any increase in revenues would, as in the past, lead to greater expenditures and bring less of a return to the organization. For this reason, any new sources of revenue should show increased surpluses and cost less than delivering the current revenue.

Fourth, expenditures and accounts payable must be reviewed and reduced, and long-term contractual commitments must be examined. If the long-term commitments are not competitive, renegotiation needs to take place. Without renegotiation, a bankruptcy petition may be the only way to turn the organization around.

Fifth, financial information needs to be accurate and communicated to everybody in the organization so that the information can be used to manage assets and resources more effectively.

Sixth, criteria must be established for each of the business units (departments, subsidiaries, etc.) to determine whether the business unit adds to the purpose and mission of the organization. The units that are hard to justify should be candidates for elimination. The elimination decision must be objective, transparent and not based on political reasons.

Seventh, the personnel required to run the “new” organization needs to be determined and excess personnel eliminated. Without dramatic changes in personnel, the chances of the business getting out of trouble are low. A zero-based budgeting system needs to be installed so each expenditure for personnel and other resources can be evaluated before a final decision is made. All budgets start at zero and every addition justified by a cost-benefit analysis. Once the business improves, some terminated personnel may be rehired. Bargaining units must be part of the discussion and should be brought into the discussion early on.

Eighth, new sources of revenue have to be found. It is important to look at all potential sources of revenue without preconceived notions as to the source’s value. Each of the sources should be studied as to how much revenue could be collected and at what cost. Without new sources of revenue, additional personnel cuts will be necessary.

Ninth, the business processes, policies and procedures must be rationalized to eliminate redundant and costly activities that are not important to an organization in trouble.

Tenth, prepare, communicate and implement the plan to turn around the business. The plan must be complete and understandable. The plan should adopt “best practices” which are the organization’s commitment to doing things the right way.

One of the most important activities in a “turnaround” situation is to communicate with management (the taxpayers) and the employee work force (state and municipal workers) about what is being done. Make sure real information is being shared with all of the parties critical to the success of putting the business back in shape. It is important not to treat the various constituency groups (such as bargaining units and suppliers) as spectators. The success of the plan depends on communications. There is no packaged solution to Rhode Island’s economic problems. The governor and legislature must make sure the current processes to deal with economic problems are transparent so that taxpayers, consumers and businesspeople have confidence the state is moving in the right direction.

Edward M. Mazze is distinguished university professor of business administration at the University of Rhode Island