No, I’m not talking about Mr. Obama.
Twenty-five years ago I got my first CFO job with a $50 million manufacturer/distributor of electrical products. Howard, the company’s president, had enjoyed over 15 years of success with two shareholders. A public company based in California owned 20%, and a family-controlled equity fund owned the remaining 80%.
Things Went South
But the last year had been difficult for Howard. A large competitor had awakened from his slumber and began aggressively competing in Howard’s market. Another competitor had fine-tuned his operation and began capturing Howard’s business.
Howard’s management team, three sales/marketing types, the old CFO and the VP of operations were in conflict. The company was running out of stock and missing delivery dates.
The operations staff blamed the sales and marketing team for bad forecasts, and the sales and marketing team blamed operations for not manufacturing to the plan – and each other for bad marketing or bad sales. The VP of operations was hit by a rental car bus at the airport and was unable to work. The CFO quit. Howard’s strength was sales, and he treated the VP marketing as the heir apparent who could do no wrong.
After my first week on the job, the California company declared it wanted to sell its share of the business. The family fund responded that it would encourage a management-led leveraged buyout (none of these folks thought to mention any of this during my recruitment, of course.) Howard saw this potential liquidity event as an opportunity to control his company.
No One to Blame But the Boss
Unfortunately, recent events and management turmoil precluded the finding of necessary financing. After three months of searching for financing, the family fund terminated Howard. I asked the company’s chairman why he let Howard go after 15 successful years and one not-so-good year. He replied that his only regret was that he didn’t fire Howard earlier.
He explained that a company’s president is responsible for everything at the company. Howard should have been prepared for the big competitor’s attacking the market. He should have anticipated the smaller competitor getting better. He should never have played favorites.
I asked how it could be Howard’s fault that the VP of operations was hit by a bus. He said Howard should have ensured that there was adequate staff at lower levels.
In all successful organizations, leaders who do not deliver the results are fired. Baseball managers who lose games, generals who lose battles, captains who lose boats and business managers who lose money are all fired.
Or at least they should be.
In World War II, it was expected that American generals who lost battles lost their commands. What you saw in movies, such as Patton and Twelve O’clock High, was based in truth. There were no lucky or unlucky generals, only winners and losers. And the losers were relieved and sent home.
When your business is in trouble, you need to replace management. If you don’t, the next owner will.
Want to learn about good management so you can avoid being like Howard. Then click HERE.
What are your experiences with failing management?