Business risk: Bet the farm only when the crops are on fire.

How much risk you and your company are willing and able to tolerate over time?  Most people believe that early stage companies should take risks aggressively because there is less to lose and much more to gain with each risky bet or decision.  Common thinking goes on to address large, public corporations by expressing that the relative tolerance to risk is decreased, in favor of protecting the brand or financial health of the enterprise.

Business risk and the casino experience

Either way, as in a Las Vegas casino, the numbers of times risks are taken directly affect the average outcome over time.  Take an extreme risk once, and you may win the bet. Your average is 100%.  But for any sized company to continue to take major risks the averages will surely catch up and the rate of success falls to the mean, which we will assume to be 50% of the risks result in failure.  Depending upon the size of each risk, this may be entirely acceptable, as in small bets at the gaming table.

Betting the farm on a single decision

But let’s raise the ante by addressing only those risks that are game-changing, those that “bet the farm.”  Occasionally, a CEO must make a decision that commits all the corporate resources to a successful outcome.  Using all the company’s cash and credit to produce a new product that is untested but shows every promise of success is one such bet sometimes made by CEO’s of companies large and small.  Automobile companies are famous for making such bets on cars that won’t be on the market for 18 to 36 months from decision date, arriving at a time when gas prices and consumer preferences may have changed dramatically during that time.

[Email readers, continue here…]  Some of those bets were unbelievably successful, such as the introduction of the Ford Mustang. Some were complete failures, such as GM’s emphasis upon design and production of larger cars and SUV’s even as consumers were voting with dollars for smaller, fuel efficient cars from foreign manufacturers. And how about the recent Ford decision to eliminate all but one sedan from their line-up?  What might happen when gas prices rise again to untenable levels?  SUV’s and trucks only?  Would you have made that decision?

Decisions are made with available information

We must assume that the auto company CEO’s made their decisions to build based upon all available information, including consumer tests and market surveys.  Many smaller companies just do not have the resources to do this in depth before committing resources which loom as massive to them toward a new product.  Whatever the outcome, it is a safe statement that a decision-maker should commit major resources amounting to a bet of the business only when there is little alternative, that there is so much to gain that it overcomes the crippling loss that could occur.

There are only so many times a CEO can get away with succeeding with such risky strategies.

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You are watched, mostly when decisions are tough.

If you have been in management or an entrepreneur long enough, you will have experienced the gray area of decision-making where ethics, the law, your needs and expediency all collide.  This is the time when you are paid the big bucks, and when others aware of your plight will be watching most carefully.  It is also the time when you demonstrate your true courage to your contemporaries.

Gray area decisions. Knowing the facts.

I have a Ph.D. friend who teaches a graduate course in entrepreneurism at a local university.  He uses the case method to place as many of these types of decisions in front of his students as possible each semester.  And the responses from students are predictable.  When faced with a gray area decision, the first response is to follow the letter of the law, the rules, the ‘right thing to do.’  The professor then injects one or more new facts into the case, and the students waiver, more and more as the new facts are analyzed, reducing their fervent enthusiasm for the “always right thing” stand.  By the end of each case, most everyone has a position that has modified since the first impression.  Then the professor reveals the action the company executive took to resolve the problem, often one not considered by the students.

A gray example: Is it OK to do this?

Consider the case of the company with goods on the dock ready for shipment, a company with an accounts receivable-based asset credit line that is already at its limit due to the calculation by the bank of availability based upon current receivables.  The rules for “pledging an invoice” as collateral for borrowing call for attaching signed shipping documents showing that the goods have been picked up by the carrier, at which point the title transfers to the customer and the invoice from the company is “good”.

The senior manager, whether the CEO or CFO or head of shipping, walks over to the location where the shipment sits waiting for pickup, complete with paperwork waiting signature by the carrier driver.  The manager picks up the paperwork, and using a blank page inserted into the stack, signs in place of the carrier driver.  He then pulls out the now signed company copy and returns to his office with just that copy in hand.  Within an hour, the bank receives a copy of the invoice with the signed shipping document attached, along with a very standard request to borrow the 80% of the invoice amount.  The bank clerk approves, adds the amount to the loan and company’s cash account, and all is well.  Or is it?

Adding facts to the case.  Decision changes?

[Email readers, continue here…]  Invariably the students correctly point out that the company manager falsified a document, which surely is against the law since an invoice was pledged to the bank that was not represented by a completed shipment.  After this discussion, the professor adds that he forgot to tell the students that the shipment made it to the dock minutes after the day’s carrier pick-up and that payroll is due tomorrow and the cash must be in the bank today to cover the direct deposits.  The only way to get that cash today is through the credit line borrowing, and after all, the carrier will pick up the completed shipment tomorrow morning.  Now the students debate ethics against legality against pragmatism.  Some hold their positions. A missed day of payroll is a small price to pay for even this small breaking of the law.  Others state that the reputation of the company as a reliable employer is at stake, and that the employee loyalty will be shaken if payroll is delayed for even one day.  The students divide somewhat evenly over the minor infraction.

Do we have all the facts? The balance shifts.

Then the professor reveals that the shipment on the dock is only a small partial shipment but that the invoice that was pledged to the bank was for the entire amount of the order.  Now the students debate whether the manager should be fired, or the bank informed of the obvious falsification.  And the professor adds that the manager in this case is the CEO himself.

Of course. The Kobayashi solution almost never surfaces.

Interesting enough, no student has yet suggested the Kobayashi Maru solution (remember, Star Trek?) where the CEO merely thinks outside the box or changes the rules.  The CEO could have immediately called the carrier and offered a significant sum, say $500 for a quick custom pick up of the partial order, or called for the current location of the driver and found a way to load the shipment into a car or truck to meet the driver, or even plan to drive to the carrier’s dock itself.

So, what would you have done?

You get the idea.  Decisions go from black-and-white to gray to black-and-white again, based upon relative knowledge of the facts and of course, the law.  Just as a personal test, what would you do if you were the manager?  Or if you were the shipping clerk observing this happening regularly?  Or if you were the bank auditor discovering that this was a regular practice?

A CEO or manager’s life is not simple. But there are lines, both ethical and legal, that just cannot be stepped over, difficult as the result may be. Each of us is tested in subtle and sometimes very public ways often during our careers.  It is a simplification to state that the “good guys finish first”, but looking back over long years of experience, there is a great deal of long term truth in that statement.

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Learn to never handle a paper or email twice

We all do it… to our own detriment.  So, let’s make a pact that we will try, if not succeed, to handle our incoming messages more efficiently.

Personal time management helps immensely to make a better manager of you and me.  All of us have time management tips and tricks to help us get through the day.  I have a mantra I try to live by, and it has helped me more than you know over the years.  “Never handle a paper or email twice” may be extended to include reading and acting upon other forms of messages, and any written distraction.

Fight your human nature…

It is human nature to filter through the stack or inbox, looking for the important items. And that certainly has defensible merits.  But to find what is important, we usually must at least scan a document or email, engaged for no less than a short moment and perhaps for the full reading of the document before moving on to look for important issues to resolve.

… by not doing the common things.

But there is good research to back up the statement that returning to a reading from a distraction causes the reader to lose up to 20% of his or her time in getting back to speed in mentally processing the document and its issues.

My “never twice” rule

[Email readers, continue here…]  By trying my best to adhere to the “never twice” rule, I quickly delete most copy-all emails not addressed to me, and all junk, but handle each personally addressed email as it opens in the reading pane.  The exception is an email with an attachment that appears long and involved, such as an executive summary of a business plan.  Those get shuffled into a separate inbox for later review, without exception.

Speed with efficiency?

Using this policy, I get through my several hundred non-spam emails each day faster than I used to, and with more focus upon those with response required than if reading and returning to the issue later, especially if not in the same sitting.  Of course, exempt emails from your superior and those legitimately marked as urgent, both of which should be either directed to a special handling inbox or immediately culled out from the rest.

Wouldn’t you like to regain some percentage of your time with little or no effort?  Try this one.

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How can you let a talented employee go to pursue a new career?

It is tough to lose your best employees wanting to advance their careers.  Sometimes you can be the coach, helping them even if it means losing them.  And, as in today’s story, sometimes it can mean the beginning of an amazing journey leading to a story for the ages…

We’d all like to retain our best managers and employees forever or at least for as long as possible.  But sometimes our corporate wants and needs conflict with what is best for an employee and his or her career development.  We cannot legally stand in the way of an employee resigning to pursue a dream, but we can leave a bad taste with that person and chip away at our corporate culture by not cooperating or even helping the employee move on.

Celebrate the transition

It doesn’t take much to publicly wish a departing employee well, to throw a small celebration, to coach the outgoing person if asked, and to listen and receive fair criticism at the moment of the exit interview.

Feel good about the former employee’s success

And sometimes, the story that results is one that joins the ranks of super-tales, to be told again and again.  Here is one such departure story I tell often.

Tom rose through the programming ranks to become the chief architect of my software

company, with 26 programmers in his fold.  The company had grown to 233 employees and served 16% of all automated hotels worldwide at that time.  Each week, Tom and I would have an informal lunch and discuss issues that ranged far and wide.  Tom almost always had ideas to contribute, particularly about marketing programs and opportunities.

How to handle it when a valued employee wants to move on?

[Email readers, continue here…]  One day Tom came to me and said, “I want to transfer to marketing. I am tired of programming.”  “But Tom”, I protested,” you are in charge of the family treasure.  All of us depend upon you.  Oh, the humanity…”  Tom insisted, and nothing I could say would stop him from resigning, selling his home, and moving away. Five years later, I received an email from Tom.  I keep that email in my leather note portfolio, carrying it with me wherever I go, pulling it out often to read portions to audiences during my workshops, or just for fun to fellow private equity investor friends.

An email to preserve and show

“Hello again, Dave,” it began. “After looking around a lot, I have landed as employee number seven at a Seattle-based startup called Amazon.com.”  Tom goes on to extol the opportunities, describe his job in marketing with creative opportunities at every turn, and then… “My founder is in round two of capital-seeking, looking for increments of $100 thousand, and if you’d like, I’d be happy to introduce you…”

In one of the most understated several word paragraphs in history, I responded by email, “Gee, Tom. Good to hear from you.  Keep me informed.”  After recounting this story, I then ask my audience to guess what an August 1995 angel stage investment in Amazon might have been worth at the IPO, getting lots of range in the responses.  The answer is $33 million.  $33 million return from $100 thousand investment, or 330 to1. That story always gets a laugh as most everyone of us recalls the deal we didn’t do, the investment we didn’t make, the opportunity we shunned that turned to gold.

And it can get better over time

After telling that story recently to a large audience at an international meeting of early stage investor group managers, two of them pulled me aside as I came off the stage, showing me their iPad graph of where Amazon had grown to by then. If held for all those years, that $100 thousand investment would have been worth over ten billion, then stated.

Wow!

So, you never know what good things will someday come, especially from talented, driven associates you nurtured but released into the wild when their time had come.  Or whether you should invest in those who introduce you to a new opportunity as a result.

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Posted in Depending upon others, Surrounding yourself with talent | 2 Comments

You are your company’s moral compass.

Here’s yet another story that you may identify with – or have yet to experience in your business life. It’s one of those that define your leadership for all to see, sometimes based upon decisions made in the moment – such as this one.

A story of a CEO’s snap judgment call

Years ago, when I was CEO of my record manufacturing company in Hollywood, I happened to walk around the plant into the press room just as Bobby, one of the employees’ favorite coworkers, was offering stolen merchandise to his fellow pressmen from a bag he was carrying.  He halted, and waited for me to react, obviously caught in the act.   Everyone loved Bobby, a hard worker and good friend.  But I fired him on the spot; the only possible response to the situation presented me so suddenly.  After initial shock, a number of employees came to me that day and said that they understood how hard that decision was, but that they knew it was the right thing to do.

How your decisions affect your company

You will find many times during your management years when such decisions are placed before you, requiring quick unwavering response to an ethical challenge to you or your company.  How you comport yourself in these situations is absolutely the litmus test for how your company culture will reflect your actions.  Take home company supplies for personal use?  Your employees will surely follow your lead, no matter what the policy.  Treat personal expenses at company cost, and your sales people will feel just fine doing the same until caught.

[Email readers, continue here…]  Behave without regard for an individual’s dignity when separating an employee who is a direct report, and other managers will feel little compunction to spend the extra time and energy softening their actions.  Alter any accounting result for the sake of making a month look good, and your accounting department will get the message that GAAP accounting is just for show.

It is the difficult decisions that define your leadership

It is not easy to always be the moral compass for the organization, but it is the right thing and cannot be compromised.  And you will continue to enjoy the stories of times taking the high road as retold to you by your employees over time.

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Posted in Protecting the business, Surrounding yourself with talent | 3 Comments

Have you been celebrating each victory?

Here comes another story.  Of course.  This one may be like one or more you have experienced in your company.  It is a story about focus upon the customer, first.  And about reinforcing the culture of the company in support of that important focus by senior management, and by all employees who see that leadership in action…

Some examples of celebration you can use

Growing companies give rise to many events that great managers will take advantage of to create and shape the culture of the company itself.  Each new plateau in revenue growth, each time a month’s orders hit a record, each large order from the sales department, all of these and more give rise to opportunities to celebrate publicly.  Everyone in a stressful corporate environment loves to pause and relish the latest victory.

My personal story of celebration

Each time our company would hit a new milestone, I would make a public announcement personally, then, with my payroll person in tow, walk the floors of the various company buildings handing out $50 or $100 bills to all employees as instant bonuses.  You wouldn’t believe how much people seemed to enjoy the boss’ visits.  The goodwill created and buzz that continued for days were well worth the small cost.

Everyone got the message: growth is great, and everyone is treated equally in celebrating.  Each distant or foreign office was included, although not often enough with personal delivery services.  This is different from “managing by walking around”, which requires no reason or structure other than the willingness to listen and learn from people on the line.

How about that bell on the wall?

[Email readers, continue here…] Many companies have a bell hung somewhere in or near the sales bull pen, rung each time a sale is consummated.  Managers should encourage everyone within the hearing of the bell to stop long enough to applaud, reinforcing the unanimity of approval for each new sale.

An event of extraordinary customer service

Victories that shape a company’s culture can take many forms.  Years ago, an emergency phone call was directed to my office from our distributor in Australia.  Their largest customer, Hamilton Island Resort, had just suffered a fire that destroyed the building containing their large minicomputer installation.  No-one was injured, and there was a backup from the night before stored in a safe location.  But there was no replacement machine in Australia, and each day that guests checked out without paying their bills amounted to a day where cash flow was at least temporarily reduced by at least $250,000, not a small amount as it accumulated.

Simultaneously, we had a new machine with identical specs on the shipping dock for a Florida installation at a property whose managers were pushing the company for an instant delivery.   I made the decision without pause to redirect the shipment to Australia that day.  Then I immediately called the CEO of the Florida customer to explain.  Not too happily, he acquiesced.

Everyone within the company knew of the problem and of our instant reaction to aid our customer, even in the light of pressure from the Florida customer now back in line for shipment.  We oversaw the successful installation in Australia the next day in a temporary building and our people helped key in data subsequent to the backup.

Customer first, always!

Everyone knew from management’s actions and their own efforts that the customer comes first, always.  This story has a second happy ending.  We engineered a rerouting of the Florida order a week later so that the computer to be shipped would be the 1,000th of its model.  Before packing it in its large shipping crate, we held a party in the shipping dock for all employees, with streamers and cake and the world’s largest greeting card – hundreds of sheets of continuous form computer paper, which every employee from software programmer to shipping clerk signed with a message of thanks and goodwill for the Florida customer’s sacrifice.  That week, we scored two great customer stories and more goodwill throughout the organization.  And most of all, we reinforced the culture of focusing all actions and activity on the needs of the customer.

Victories come in many shapes, sometimes when least expected.  Celebrate them all.

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Here’s a rule for companies with outstanding loans

 

Here is one that is so important to the continued health of a growing company that it cannot be overstated. It’s a bit complex for novices. But hang in there as I explain a bit about accounting classification of assets and liabilities.

Differences between types of assets and liabilities

First, let’s be sure we know what is short in term and what is long in term.  Long term debt is taken on for the acquisition of fixed assets such as equipment, cars, facilities and acquisitions of companies or their assets.   Short term debt is often composed of accounts payable to the trade or employees for expenses, payroll liabilities, accrued but unpaid vacations, customer deposits, and the portions of any loans due to be repaid within one year.

How much can you borrow against company assets?

Asset-based financing is common for companies with accounts receivable and / or inventories.  There are numerous lenders engaged in this practice, including most business banks.  Typically, companies may arrange to borrow between 70% and 80% of those non-government receivables that have not aged past 60 days from invoice, up to a maximum amount, or “credit line”.

[Email readers, continue here… ]  Other companies have both the creditworthiness and relative size to be able to borrow from private and banking sources without collateral, with unsecured loans.  Many of these lines of credit require that the borrower “clean up the line” for one month out of every year, that is to be out of debt with the lender for that period to prove to the lender that the need for the cash is not permanent, used like a long-term loan.

How to get in trouble mixing cash use and loan classes:

Numerous companies have gotten into trouble by using the easy availability of these short-term lines of credit, meant for rising and falling working capital needs, to make payments upon long term obligations such as asset loan payments when due.  And worse, some even purchase assets such as equipment with money from short term loans.  Matching the term of a loan with the life of the asset is an important business principle.

The “coffin corner” to avoid in cash management

Receivables are assets for only 60 days for the purpose of these lines of credit, and the available line can be reduced automatically as receivables reduce with payments by customers or aging beyond 60 days.  We all expect new receivables to be added to replace these, but a cyclic business; a disruption in the general economy; a reduction in the company’s revenues would each contribute to a reduction in the amount available for such borrowing.

To avoid the coffin corner of an over-borrowed asset-based line with no cash for working capital, remember that short term borrowings such as these should never be used to pay any long-term obligations or to purchase fixed assets.

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Posted in Protecting the business | 3 Comments

Have you made the mistake of hiring too soon?

Well, you may not be alone. Many executives and managers have made the mistake of using the financial and sales forecast to plan and execute hiring of new employees – so that they could be trained and up to speed when the demand arrives.

The balance between preparedness and cost

Although hiring early does add to overhead by bringing employees aboard before they

become economic contributors to the bottom line, there is much to be said about consistent or improved service quality by having trained employees already on the front line when the customers want and need them.

Perhaps it all depends upon how you want to deploy available cash during good times.  We’ll assume that you don’t have the freedom to do so when cash is tight.

Hiring when growth is steady or if unpredictable

So, there are periods in any economy or industry segment when growth seems steady and there are few warning flags ahead.  In such instances, it is much less risky for a company to execute its plans for spending in coordination with forecast revenues.

[Email readers, continue here…] But there are many more times in which the near-term future is far less predictable, and when early hiring decisions may be just the wrong move, reducing flexibility and reducing reserve resources.  It is during such more common times, that you should consider using temporary employees to fill demand as needed, even if brought aboard a bit early for pre-training.  And increasingly, there are off shore service providers able to contribute to production and service, expanding and contracting at will, with some sacrifice in control and sometimes in quality.

Your reputation with your employees at risk

Further, a company suffers in its reputation with its employees when hiring and firing in short cycles to meet short term needs, unless those brought aboard are hired as temporary or seasonal workers.  Every employee wants a stable work environment and does his or her best work in a culture of mutual trust as to continued service as a reward for good work.  Constant interruptions in the chain of command, changes within the ranks and threats of impending layoffs together combine to form one of the greatest impediments to efficiency and a strong corporate culture.

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So, what if you run out of money?

Money in the bank is like oil in the car.

Certainly, you have many ways you are pulled every day, both tactical and strategic. But when money is the issue, your time, energy and focus are drained from other important areas of your life or business.

Running out of money is not always synonymous with “going broke”.  Many great businesses in their growth periods find themselves stretched for cash.  If fixed expenses, especially payroll, are paid out before cash is received from services or shipments, the company is financing its growth with ever-increasing working capital needs. Without remaining availability from a bank line, many businesses are stretched to the limit just when they seem to be doing better than ever.  This is one interpretation of “It takes money to make money”, although that statement was probably created to describe new investment opportunities.

Speaking of which, those companies with cash in the bank and cash available are the ones to scoop up the bargains, from suppliers and in acquisitions especially during tough times.

And oil is a lubricant…

But the most important lesson to remember is that cash is the great lubricant for businesses.  Without at least a month’s working capital needs on hand in the form of cash, receivables that will be cash, or an untapped credit line as a fallback, you should worry over cash flow issues on a daily basis.  Any disruption to the tedium of daily activity from weather, disaster, revenues slowdown or product problems will stress the company infrastructure if there is not a cushion to use during such times.  Stress of this type always forces you or senior management to lose focus upon strategic issues and drop into day-to-day tactical mode.

[Email readers, continue here…]  I find it a great thrill to consult to companies and their senior management when they have plenty of “firepower” (extra cash beyond needs) for acquisitions and strategic initiatives.  It seems that the first subject that comes up in such assignments is the health of the competition.  Such bargains; so little time.

Cash and the value of your business

Running out of cash denigrates the very value of a business, reducing greatly any bargaining power with suppliers or acquirers.  A company that otherwise might be valued at twice book value, 1x revenues, or 10 times earnings will be valued at a lower amount by potential acquirers knowing that the company shareholders are in a tough position and management hungry for leverage and a little more sleep at night.

Never run out of money, even at the expense of slowing growth for a time.  A fast-growing but undercapitalized company is not highly valued in an acquisition.  For early stage businesses worrying over dilution when faced with an offer of more money than they need, the professional advice is most often to take the money and suffer the dilution because the money may not be available if needed later.

Cash is such a powerful inhibitor or driver of growth that management of the corporate cash is as important as strategic vision, and perhaps over time a good indication of the success of that vision to drive profits.

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Posted in Hedging against downturns, Protecting the business | 2 Comments

The 18-month rule and a harrowing tale

It can take 18 months from initial concern about a critical employee to getting a replacement up to speed.

Of course, I’ll tell another harrowing story here. But first. an old friend, Dick Tanaka, gets credit for the 18-month rule.  He observed that the process we follow to be humane in our handling of under-performing employees, manage the risk of future lawsuit, finally then move to separate the employee, define the open position, recruit the candidate, train the new hire and count the new hire as up to speed in the job can take all of eighteen months.

The costs for a failed hire and underperformance

That is a shock in so many ways. First, the costs for under-performance are both tangible and intangible, with lost revenues, lost opportunities, lost savings and loss of productivity from low employee morale difficult to estimate.  There are those in the recruiting industry that have attempted to do so and depending upon the size of the company and the position replaced, seeming to settle upon astronomical lost costs that overwhelm most of our ability to understand.  All of us will admit that, looking back at a failed employee hire, the costs were well beyond the payroll cost for the individual.

How about senior managers no longer at speed?

Perhaps this is a good time to speak about senior managers that are well-entrenched in the organization but are under-performers because the organization has passed their ability or span of control.  It is important to note the trauma of separating an old friend or close associate, or even a family member.  There are few good rules for conduct in these instances, other than honesty in pointing out the problems, and doing everything possible to preserve the individual’s dignity.

A personal story illustrates the point too well

[Email readers, continue here…]   Early in the rapid growth phase of my computer software company, I hired an excellent, IBM-trained vice president of sales to further growth and begin our international expansion.  He did so with gusto, and for several years was directly responsible for our growth into a total of 29 countries, including establishment of six foreign subsidiaries.  Annual growth in revenues was between 50% and 100%, amazing and exhilarating.

But he had a habit of bellowing out at underperformers, bullying others to get his way, and doing so in ways that rubbed all other managers the wrong way as he dominated meetings, and made it difficult for others to contribute.  Surely a result more of his urban New York upbringing, I put up with these character traits as the cost for his amazing performance.  And you might guess that, as his superior, I did not experience any of the threats to my job or dignity that apparently all others did.

The confrontation that came out of nowhere

I received a call one day from one of my country managers, stating that he and all my senior managers would be at a meeting room in a nearby hotel the next evening at 7.00 PM, and that the vice president of sales, presently in the air traveling to the very country where the manager was to meet him, was not to be present.  I was shocked and disoriented, a CEO with no idea of the urgency of the situation that was developing, since there had been no warning.  Fourteen people, including the country managers and all the vice presidents, were to be there.

I immediately called an industrial psychologist I knew, asking him to be at my side during the meeting to listen and interpret the mood of the meeting.  (I have an industrial psychology educational background but could not count upon myself to be completely objective here, of course.)

Then the meeting no CEO would want to attend

We walked into the meeting at the appointed time.  Apparently, the meeting had been going for some hours.  Everyone but the sales VP was present as anticipated.  As the psychologist and I listened to one after another of these, my most senior talent minus one, describe the assaults to their very souls, the affronts to their self-respect, the hobbling of their ability to perform, I was overwhelmed.  There had been comments from some of these individuals in the past, but never voiced as an orchestra, and never with evidence so overwhelming and irrefutable.  As the presentations of each concluded, my senior-most VP stood and stated calmly that if I would not remove the affronting individual, each and every one of the people present had agreed to resign.  Now that’s an act of desperation or defiance rare, perhaps unique.

An industrial psychologist helps (me) the CEO

I asked for a few minutes to confer with my associate, the industrial psychologist.  You might guess that it took less than that few minutes.  As we returned to the room, I turned to the psychologist, the only third party in the room, and asked him to give the group his candid response to what he had heard.  As I recall, he stated quite clearly that in many instances he is hired to repair relationships at senior levels in companies with such problems, paying special attention to coaching and training the offender, sensitizing him or her to the traits probably not noticed in self.  But, he stated, as I recall, “This one is for the books.”  He had no advice other than to just do it and now.  Of course, I had come to the same conclusion, even though at least in the short term, sales growth would suffer.

How a difficult executive separation payed out

The rest of this story, if I took the time to tell it, would deal with the humanity of this next step, and retention of the dignity of a superior performer in all ways but one in his management abilities and in dealing with contemporaries and subordinates.  I recalled him immediately back to corporate headquarters from his landing in Asia, and fired him after discussing the reasons with care, negotiating a reasonable separation package.

The culture of the company thrived, and I could feel a collective sigh of relief from people even far below the level of senior management.  Although we had little contact after all the years, I remained friends with this superior performer to the day of his death years later.  He understood, acknowledged the personality trait that failed him as one that had haunted him in his past, and became part of the solution once he and I had all the facts on the table.

It is a story that is extreme, relies upon one fatal character trait, but in other ways probably could match one or more of your own stories to tell or someday to experience.

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Posted in Depending upon others, Growth!, Protecting the business | 5 Comments