An Ally’s Advice

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Rest and Reflection Breed Solutions

 

When in crisis mode, it’s very easy to neglect any kind of rest and reflection – there simply isn’t time for them.

But if your company is doing well, I encourage you to take days like Memorial Day, when many places close and workers are given breaks, to take a little rest yourself. I know what it is to be an entrepreneur, a CEO, a businessman, etc. and to feel like the cessation of movement is the cessation of life. But it’s not.

What Was It Again

When you take time to rest a little, turning your mind off or at least slowing the chatter, your mind opens to a host of new ideas, thoughts and solutions.

Think about it like this. Have you ever been talking to someone and found yourself desperately trying to come up with a particular word or the name of an actor in a movie or the name of some author you enjoyed a while back, but you just couldn’t place it? I have to believe this universally common experience has happened to all of us many times. No matter how hard you try and wrack your brain, you just can’t remember that darn word or name.

Fine, you acquiesce, as you continue along the conversation, insuring your interlocutor that the perfect word or some person really does exist. And then, 30 seconds later like a flash of lightening – BHAM! – the word comes right into your head and out your mouth before you can finish the sentence you’re on.

Ah! What a relief. You remembered the word and your previous thought could be completed – your problem solved.

Application to Business

This works a lot for me with work. My wife and I enjoy vacationing in Hilton Head, an island off the coast of South Carolina. The beaches are deep and wide, the ocean calm and hypnotic, and there are tons of trails on which to bike and enjoy nature.

And as I settle down in a beach chair and stare out at the ocean, letting my mind wonder rather than staring at a computer screen in deep contemplation, the challenges I’d been having seem to break down and coalesce back into solutions. It’s wonderful, and it only works because I sit back and stop trying so hard to think of solutions.

That’s what it’s like when we stop concentrating on things for a little while and take a, say, Memorial Day rest. I don’t expect you to just go splash around mindlessly in the pool for 8 hours, but I do encourage you to do whatever it is that takes your mind off of the central issues in your life and business so that you can become more open to the solutions that do exist.

Consider These Options:

  • Go for a long drive
  • Go to the driving range
  • Sit somewhere with a nice view (restaurant overlooking a park, balcony near a beach, etc.)
  • Get out of the whatever city you’re in, even if just for a few hours
  • Go on a nice walk or bike ride, preferably in or around nature
  • Go swim some laps
  • If you’re a runner/jogger, go for a run/jog

Notice, too, how many of these activities involve movement, which is a great way to turn your mind to something else entirely, get your blood pumping (which stimulates your brain, by the way) and get the rest from work you need to become better able to do your job.

Those who regularly incorporate these elements or something similar into their lives often find more solutions, in my experience.

What do you like to do to take a break and turn your mind down a bit?

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It’s Always the President’s Fault, a guest post by Vic Taglia

As managing partner of GGG and the Turnaround Authority, I get the pleasure of providing guest posts by our other partners. The following post is by our newest Partner, Vic Taglia.


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?

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The Wonderful Ways of the Whiteboard in Business, Part 1

I love my white board, and quite frankly, I don’t think I could do business as successfully without it. A white board lends clarity to complex situations and helps viewers logically analyze the many issues surrounding a case or problem.

The white board also allows you to see the holes in your logic – and therefore solidify your case by dealing with those holes.

Other white board fleshings reveal that you had the wrong fact in place. Many times I find that people are operating under the pretense of erroneous information, but by sharing their thoughts on a white board, they allow others to see their wrong facts and correct them.

In short, white boards get everyone on the same page.

Whiteboard Timelines

I find that timelines are one of the most useful ways to employ a white board. With one client we strategized a Chapter 11 case and created a timeline that included everything from the details of the date of filing to the date of exiting, thinking the whole process would take 9 months (ambitious, I know).

As we made the timeline we assigned specific tasks and responsibilities to people, and we also added our goals. By placing our goals at appropriate time intervals and getting buy-in from everyone involved, we could see how missed deadlines would affect our actual timing throughout the process.

And timelines aren’t just for bankruptcies. They work with any task: moving production lines, BK plans, relocating your offices, planning a wedding or whatever else.

With a timeline visualized on a white board you can get buy in, understand milestones and see how adjustments need to be made. This also reinforces people doing their jobs on time because their screw ups or lapses are tied into everyone else’s success and the overall feasibility of the timeline and the plan. This creates a great deal of personal responsibility and the consequences become very palpable.

This can all be especially effective if you add a budget to your whiteboard timeline.

An Example – With Horses!

Rotama Park, which I’ll discuss more thoroughly another time, was a race track that took 100 million dollars to build over 18 months – and 30 days to run out of cash.

I wanted to get them out of bankruptcy in 12 months. With my initial filing I also needed marketing plans, PR and other “why we’ll survive” materials. There was an opening period to fine-tune operations for profitability and positive cash flow, restructure debt equity and maintain a line of credit – and by day 300 we needed the disclosure statement hearing and approval so that by day 360 we were out of bankruptcy.

People said it couldn’t be done, but after putting the timeline on the whiteboard so that they could visualize the process, we were able to get buy in by asking each person involved what he needed to complete his responsibilities on time.

Without a whiteboard workout this turnaround never would have happened. Only by mapping everything out for all involved was I able to get buy-in and approval.

Use the whiteboard to your advantage and see where it can take you.

Do you use white boards? How do they help you?

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Dealing with Vendors, Suppliers, Bankers and Other Creditors, a guest post by Vic Taglia

As managing partner of GGG and the Turnaround Authority, I get the pleasure of providing guest posts by our other partners. The following post is by our newest Partner, Vic Taglia.

When dealing with vendors, suppliers, bankers and creditors, tell the truth. Do not be deceitful. Ultimately, deceit will only work against you.

It is ok to give them the Heisman maneuver. If you don’t follow college football, visit http://www.heisman.com/history/trophy_history.php to see the Heisman trophy. Pretend you are the running back, cash is the football, and your creditors are trying to force a fumble. Hold onto the football.

It is not ok to use the Arpege stratagem (“Promise her anything, but give her Arpege” was the slogan on their television ads many years ago.) This may work for a week or two, but you will quickly find yourself with no product and no credibility. It didn’t work with your wife; it won’t work with your creditors.

It is ok to negotiate – hard – with your creditors. Offer partial payments, cash on delivery, payments on past invoices if they continue to ship current product—whatever it takes to keep your business running. But keep in mind the first rule, always tell the truth.

Be aware that some of these practices may become preferential payments if you end up in bankruptcy court. This will most likely become the recipients’ problems, not yours. A full discussion of preferences is best handled with your bankruptcy counsel, and our goal is that you never have to meet him.

Conditional Promises

You can make conditional promises. “We can pay you Friday since I expect Customer A (don’t name them), to pay $XX (don’t name the amount either) on Thursday. If Customer A doesn’t pay on Thursday, we can only pay (some other, lower) amount.” Be sure to call your creditors if Customer A doesn’t come through and you’ll miss your promise.

In fact, call your creditors even if Customer A does pay you. (You can always give him your check number and the exact amount of the check. Credit managers love writing the check number and amount—it shows they are doing their jobs.) He’ll be happy to get some good news, and he’ll want to know how much you’ll pay him next week. This communication will help re-build the trust between you and your creditor. Remember rule number one.

You want to be specific about your plan, but vague about which customers hold your lifeblood in their hands. You absolutely don’t want your creditors to start talking to your customers.

A Warning

Don’t be bullied by collection agencies. They are experts in collections—smart, well-trained, smooth-talking and persistent. If you are dealing with lots of collection agencies, you will feel overwhelmed, and it may be time to call in some expert help.

There is such a thing as lender fatigue. Sometimes both you and your suppliers’ collections managers are just sick and tired of each other. It is ok to ask to speak to supervisors, managers, the company president, owner, etc. You may be able to get more understanding (and a key shipment) from a new listener. But remember rule one.

It is ok to look for new vendors, suppliers, bankers and other creditors. Generally, serious problems seem to quickly become common knowledge, though, so don’t be disappointed if there aren’t lots of folks offering product on open account or new bankers offering unsecured working capital lines of credit at LIBOR plus 10 basis points.

And always remember rule number one—Tell the truth.

Has a lie with a creditor ever gotten you in hot water? Please share in the comments below.

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Assumptions, Assumptions – Who Has My Assumptions?

If you look at the history of big obstacles in understanding our world, there’s usually an intuitive assumption underlying them that’s wrong.
– Jeff Hawkins

You may have learned in your college economics class that controlling for all factors is necessary when trying to understand a task or a problem, but the real world rarely allows us to do that. Thus, we must make assumptions.

What are assumptions? In mathematics, an assumption is something taken for granted, based on which theories are formed. In the business world, we don’t and shouldn’t have such a firm view of our assumptions. Things rarely, if ever, work as we assume they will. Indeed, in business, assumptions are not facts; they are closer to educated guesses – and, since we’re preparing for them, hopes.

From the moment you wake up, you begin making assumptions. Some assumptions, when they are wrong, will not hurt you as much as others. Assuming you can arrive at the office in 30 minutes in rush hour traffic may make you late for a meeting, while overestimating the demand for a new product even slightly may require you to adjust revenue forecasts significantly.

The ability to make well-reasoned assumptions in the business world can make you very successful – if they’re right.

So, the question becomes, what do we do with assumptions? The answer: contingency plans. If assumptions prove wrong, we need contingency plans (and we often still need those contingencies when assumptions are right, too).

Contingency plans may be the ability to run a factory 24 hours for a week, a cash reserve, property that’s ready to sell or any number of things, but knowing your options and keeping lines of communication open with others who affect these plans is all part of being a good leader.

Wherever there are assumptions there must be contingency plans.

How do you make assumptions? Do you often go with your gut or do you strive to gather every piece of information you can before making an assumption?

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“Know Thyself” and Know Thy Weaknesses, Too

Growth begins when we start to accept our own weakness.

  • Jean Vanier

There’s little I find as useful in business as knowing my weaknesses. This applies to me as a person just as it applies to my business, GGG, and any business that I am leading or involved in.

It is in weaknesses that I find opportunities for growth or increased stability and future success.

As a human being, my partner in life – my wife – makes me a better person. I know my weaknesses, and I know that with and because of her, I will grow into a stronger person. I like to flatter myself by imagining that she feels the same about me, and that many healthy, enduring and strong relationships include this dynamic.

As a business leader, I find that it is best to surround myself with those who can do what I cannot. Whenever Grisanti, Galef & Goldress brings on a new associate or partner, we ensure that this person has skill sets and areas of expertise that are outside of what we already know, do and provide. In that way, our business and its services grow and evolve and we get stronger as a company.

Successfully bringing on someone who fits this bill begins with understanding our weaknesses as a company.

Similarly, when I am brought in to lead another company, I want to know where the weaknesses are. Considering the crisis situation a company is in when I’m brought on, no doubt the immediate weaknesses are apparent to me – as they are to others. However, it’s an analysis of everywhere else that the company is weak – and therefore vulnerable – that allows me to start shoring up those holes and preventing further and future catastrophe.

For instance, if I’m brought in to manage a cash crisis, but discover that a company’s key products have not evolved in two decades and are now competing in a saturated market, that’s a weakness that needs to be addressed and is no doubt linked to the cash crisis – or will be one day. If I learn that we have a Big Gorilla as a client, then I’m going to see how that potential crisis can be mitigated early as well. It’s knowing these weaknesses that help with current problems and stave off future ones.

Knowing your weaknesses allows you to address them and grow as a person, company and business leader. Face the harsh reality.

Want to learn the kinds of questions you should be asking yourself to face your harsh reality and learn where your weaknesses might be? Then read my 3 Part series (Part 1, Part 2, Part 3) and find out!

What are your weaknesses? How do you plan to deal with them?

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Honor the Month of April: Become Financially Aware & Reduce Stress

Last month was National Fraud Awareness month. This month is important, too. First, it’s Financial Literacy Month, and second – and I think quite complimentary – it’s Stress Awareness Month.

On top of both of these issues, April 18th is also Tax Day (yes, it’s usually April 15, but due to a Washington DC holiday, we can all enjoy an extra weekend to squirm over our taxes).

As you think about becoming aware of and learning to reduce your stress this month, I want you to also think about the role that finances have in your life – and your stress level.

Most people stress about their finances, and much of that stress, I believe, comes from a lack of awareness about their financial situation and where it’s going.

In business, if you don’t know where you are at every moment financially, you can’t move forward successfully in the long-term.

I think this also holds true in one’s personal affairs, and I have no doubt that with financial knowledge comes a reduction in stress – or, if finances are bad, at least the ability to predict and therefore manage that stress with greater ease.

In honor of both of these months – and taxes coming due – I encourage all of my readers and clients to do a few things this month, both in their businesses and their personal lives.

1. Make a budget or do some financial planning.

This need not be professional consulting with a financial manager (though that’s always nice). Just get a better understanding about how much you’re spending and on what you’re spending it. You never know which areas of your spending could easily be trimmed. Though you may not “need” the extra money you free up, it certainly could be nice to put it towards that vacation you were looking to take, right?

If you don’t know how to make a budget or you need some financial tips, consider financial magazines like Money (by CNN) or Kiplingers. If you are savvy with your financial management and awareness, make sure you’re passing these values along to your children (and/or employees) effectively. If you’re a business owner, consider offering a financial management and planning seminar for your employees.

2. Do something to de-stress yourself.

If you’ve already done your taxes, great, and even if you haven’t, reward yourself with something de-stressing afterwards like a massage, weekend trip or a day off. Becoming aware of our stress is the first step to reducing it, and with reduced stress comes a greater quality of life. Better financial knowledge and management almost always reduce stress.

What will you do to raise financial awareness in your life this month? What will you do to de-stress?

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6 Questions to Ask Yourself to Face Your Business’s Harsh Reality, Part 3

For the last two weeks we’ve been discussing the questions you should ask yourself to confront your business’s harsh reality. Read about Part 1 HERE and Part 2 HERE. This week, we’re going to ask ourselves the next two questions your should be asking.

5. Am I protecting the financial integrity of my company during downturns so that I am prepared to profit during better times?

Bad financial times prompt too many managers to take the turtle mentality. Don’t put your head in your shell until things turn up. Take the opportunity to see what is inefficient in your business by eliminating loss leaders and reducing inventory, and increasing marketing and sales expenses in high profit-margin areas. By shoring up problem areas during a downturn, you prepare your company to run lean and mean at all times.

This is not an excuse to avoid monitoring, evolving and preparing during good times, though. Many companies ride the wave of what’s working and worry about problems after the wave crashes on the shore. That’s the wrong approach. As long as you know it’s a wave, you know it will end. Come smoothly onto the shore, long since ready for the next wave. Companies that ignored this advice (not that they asked me) were satellite TV companies and Blockbuster. They both road their waves until they crashed into the shores of cable television and Netflix.

Speaking of crashing, if all of your assets and capital are invested in one area, and a problem occurs, operations will grind to a halt. If you have a Big Gorilla – one client, customer or product that accounts for 25% of more of your sales – you need to rethink what you’re doing. Along these lines, don’t bet the ranch on other opportunities; remain grounded in your decision making. In our experience, Big Gorillas are one of the top five reasons companies experience crises.

As above, consider the advantages of protecting your company’s financial integrity for more profitable times. There are always competitors who have issues, and if you keep cash or credit lines available then you can take advantage of someone else’s mistakes, acquiring new product lines or growing old ones.

6. Do our financial departments have sufficient controls and a fraud awareness policy?

75% of the fraud I discover is from first time offenders. That means the people who ultimately commit the fraud are not those who will come up in criminal background checks. Therefore, when working with your auditor, integrate sufficient checks and balances.

As the CEO you have to have a constant feel for your business financially. Walk the company and manufacturing floors – be hands on. Don’t let your guard down by taking your tie off and lounging in your office. Stay involved.

I once had a BBQ at 1 a.m. for a production crew at a company that ran 24/7. While doing this I discovered a multi-million dollar fraud. Do what would be considered out of the ordinary, and you never know what you’ll find.

One thing I recommend without exception is making your CFO/Controller take a two week vacation once a year. Don’t even let him in the building. Sit at his desk, or have someone else do it, and see what happens. You’ll be surprised every time as you find duplicate expenses, continued payment on cancelled leases or sold equipment, and perhaps personnel that don’t exist.

Conclusion

I hope these 3 posts about the 6 Questions to Ask Yourself to Confront the Harsh Reality of Your Business have been helpful. I’d love to know the answers to any of them if you care to share or questions that you would add to the list and that help you confront your harsh reality. Please share in the comments section below.

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If You Want Glory, Join the Marines – Turnaround is Not About the Accolades

The greater the obstacle, the more glory in overcoming it.

  • Moliere

If overcoming obstacles of enormous size yielded glory in such volume, there would be more awards in the turnaround business.

I appreciate the sentiment, Moliere, I really do, but I have to say that I’m not with you 100%.

Turnaround Accolades

General MacArthur was certainly acknowledged  for his work in the Pacific Front during World War II, speaking of enormous obstacles and the glory that goes with them, but for us turnaround professionals, the glory is less, shall we say, pronounced.

Is that maybe because the obstacles aren’t so great?

Far be it for me to crack up the complexity of the problems that face turnaround professionals, but I think most of us can agree that restructuring billions of dollars in debt, successfully renegotiating terms with dozens of creditors, saving tens of thousands of jobs, and preventing hits to the US economy – and sometimes in the business blink of an eye – is no cake walk. And even though much of the work is on a smaller scale, jobs are still saved, money is still recovered and businesses keep going. And all of that is good for the economy.

My reflections on Moliere’s remarks have brought me to the conclusion that the turnaround profession is incredibly satisfying in its own right for the very reasons listed above – accolades be forgotten.

Be Your Own Turnaround Manager

When done right, turnaround work is not the kind of consulting that borrows your watch to tell you what time it is. Turnaround management is about rolling up your sleeves, getting into the trenches and getting your hands dirty. It’s about apologizing for mistakes you probably didn’t make and accepting burdens that weren’t otherwise yours to bear.

This isn’t meant to elevate turnaround management to unwarranted heights or make myself feel better about my work.

I want you to derive a lesson from this when it comes to your business, whether or not you’re the leader of that business.

Why wait to hire a turnaround professional? Sure, experience breeds insight and knowledge into many potential solutions, but if you could take on a lot of what I’ve already said, then you’re halfway to resolving your problems:

– Take responsibility for what’s gone wrong

– Accept the burdens for resolution on your shoulders

– Get dirty by rolling up your sleeves and getting down in the trenches; don’t just sit behind your desk and hide – get out there and make tough decisions

No, these things alone do not turn around companies, but when those around you perceive that you’ve taken responsibility, accepted the burden of making things right, and gotten your hands dirty, they will pull behind you and get on your team. They will listen when you ask them to act; they will share with you and be honest about their ideas and yours.

Conclusion

This is what much of turnaround management is about. As I said, the experience and insight allow us to have a better idea of what will work and what won’t – and how best to do it – but for successful turnarounds, all of this ground work has to get laid down first.

You won’t wind up with a ton of glory when it’s all said and done, but I assure you that it’s rewarding in and of itself. When done right, your job will still be there when you’re done, as will those of your colleagues.

Glory be what it will – I’ll take turnaround any day.

Have you ever accepted responsibility for something that you didn’t have to? What was the outcome?

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For Fraud Prevention Month, Prevent Some Fraud

March is Fraud Prevention Month, and as far as I’m concerned, that’s a great thing to spread awareness about.

I see fraud all the time. Here’s one of my more recent forays.

So Much Fraud. So Little Time.

In my experience, 75% of fraud is committed by people who have never been caught before. That means the person or people in your business who are likely to commit fraud are not going to come up when you do criminal background checks.

Oh, and don’t forget about family. Family members commit fraud all the time. When you employ family, resentment could lead to stealing, and there’s always a certain sense of entitlement that facilitates matters.

I’ve even seen a CFO who was stealing methodically, and when I looked back I saw that his father had been the previous CFO who was stealing methodically in the exact same way.

Stupid Fraud

Most of the fraud I see is idiotic.

I’ve seen people with folders on their desktops that may as well have been labeled fraud. When I opened the folder there was a spreadsheet inside with every single perpetration.

I’ve seen a CEO who had the account statements from his bank in the Grand Cayman Islands sent right to the office.

I’ve seen a woman who everybody loved and who worked as the payroll processor at a company for 25 years check out of the hospital 24 hours after a heart attack only to process payroll and return to the hospital hours later. She never missed a payroll in 25 years. And as it turns out, neither did the three fake employees she had on the books whose social security cards and accounts she controlled.

And people love to spill the beans. I’ve had people shove USB keys filled with data and file folders and so much more under the door of my hotel room in the middle of the night.

How Do You Minimize and Catch Fraud

Be out of the ordinary.

Fraud happens when complacency abounds. People steal a little, maybe even by accident, and realize that no one was looking, noticed, said anything or seemed to care. So they took a little more. And then a little more. So mix things up.

As I’ve mentioned in another post, I once caught a multi-million dollar fraud by holding a BBQ at 1 a.m. for a 24 hour overnight crew. A guy came up and just told me about something that didn’t make a lot of sense to him. I only caught the fraud by doing something out of the ordinary. When’s your next late night BBQ scheduled for?

Always force your CFO to take an annual two week vacation in which he’s not allowed in the building and he’s cut off from business email. Sit at his desk and do his job, and you’ll be amazed at what you find.

Fraud also happens by working outside the known bounds of your auditors’ checks. If auditors only look at transactions above the set limit of $5000, then once every few months check everything below $5000 also – that’s where all of the fraudulent checks will be. You’ll discover that you’re still paying for leased equipment you’ve long since sold or that you’re paying rent on property you no longer own.

You’ll find all kinds of things. Just do what’s out of the ordinary.

Help prevent fraud in your company and raise awareness of fraud during Fraud Prevention Month and every month hereafter.

What kind of fraud have you found?

P.S. If the answer was none, you’re not looking hard enough.