Different Experiences in the Public and Private Sectors

Over the course of the last few months, I’ve had three organizations/businesses bother me in connection with one product sold by one company that we’ll call Round Pals. I found their intersection to be particularly interesting.

Private Company 1

The first organization was a competitor that we’ll call Big Guys. Big Guys wrote a cease and desist letter to Round Pals for using an image online that legally belonged to Big Guys. The cease and desist letter was very well-worded, firm but polite and said, “We would never intentionally infringe on the copyrighted materials of other companies and we believe that Round Pals wouldn’t either, which is why we know that, having brought this infringement to your attention, you will stop using our intellectual property.”

Round Pals immediately stopped using the material and wrote to tell Big Guys exactly that. All was professional and cordial. No harm. No foul.

Private Company 2

The second company was the manufacturer of a major product sold by Round Pals; we’ll call this manufacturer Safe Co. In trying to negotiate for a better price on Safe Co.’s product, based on purchases of the exact same Safe Co.-manufactured product elsewhere, Safe Co. became concerned.

As it turned out, Safe Co. was not selling the product for what Round Pals was getting it for elsewhere, and Safe Co. wasn’t sure how Round Pals was finding the product for so little. However, Safe Co. handled its concern and correspondence in a professional way, despite believing that this, being a safety product, was a major issue. We all really appreciated the way that Safe Co. (so far – the issue remains unresolved) has handled this issue.

Government Agency

And then there was the government agency. Boy was the government agency and its representatives horrible.

They threatened, they intimidated, they bullied, they badgered.

They were rude. They were manipulative. They were unkind. They were unprofessional.

I’d say I’ve never seen anything like it, but as a turnaround professional, I see this all the time.

It was terrible dealing with this government agency because they didn’t care about time or money wasted – they just cared about ticking things off their check lists and moving on. But only moving on between the hours of 8 a.m. and 4 p.m. In the intervening hours they couldn’t care less.

We repeatedly asked this government agency for documented proof of our errors and supposed wrong-doing. We asked to see the regulations. But they had none. Indeed, they misquoted their own documents and regulations, and sent us a 160+ page document about something other than what we were talking about and doing when we asked for clarification on our alleged error.

It was borderline pathetic.

The Moral of the Story

I’ve said it before and I’ll say it again and again and again. We have got to run government more like a business.

There are plenty of problems with the private sector, yes, but when I have private sector problems, I mostly find myself working in professional environments with mutual respect for time, money and energy. We also usually come to fair and amicable solutions to our problems. Not everyone ends up happy all the time or with what they want (often times this isn’t the case), but it’s amazing how different the approach and attitudes can be. Not always, but frequently enough that I found these three instances all revolving around one product a particularly illustrative case.

Do you have any examples that run notably in favor of or counter to my point?

3 Key Findings of a Major Investment Strategy Firm

I recently received an invitation to review the forecasts of an investment firm and research company as they saw things developing in 2012. It shared three key findings.

It would be weird to say that I was overjoyed at reading these findings as they’re not particularly positive, but I was justified in my own assertions that this bear market isn’t going anywhere and that we better prepare to navigate it successfully or fall by the wayside.

I want to share each of these 3 key findings with you in my own words.

1. You’re going to have to do a lot to get a little. That’s been the case for a while now, and it’s not going away any time soon. Count on four years, and don’t be surprised by six. Because it’s just not going to get better out there, that means you have to make things better for yourself by ending waste, embracing austerity and adjusting to this New Norm. As I list those three objectives, I smile to myself because they’re each different yet at the same time they’re all faces of the same die. Evaluate your situation in business and at home and take actionable steps to make your money and efforts last longer.

2. Stocks have been lousy for a while and bonds are following suit. If you thought things were going to get easy, think again. Do you know the saying, “when life closes a door, it opens a window?” Well, in this case, when life closes a door, it also nails the window shut. That’s not a reason to panic, but it does cause me to conclude the following, which, incidentally, is similar to finding 3: “You’re going to have to make your own doors.”

3. It’s trite but true: Cash is King (read parts One, Two and Three of Vic Taglia’s series on the subject). Cash is also the number one asset of a turnaround professional. If there’s no cash, there’s no payroll, there’s no business and there are a lot of angry creditors chomping at the bit to get a piece of what’s theirs. As a business owner, it’s your job to do what you need to do to generate cash flow. There’s little in this world that I’m better at doing, and I’ve even shared one of my best tricks with you before. If you want investors to stick with you and your company, you’re going to need to learn to seek non-traditional ways of staying profitable and maintaining cash flow.

I wasn’t shocked to review these findings. Heed the cautious tone, and start thinking about what you can do differently to keep your business ahead and growing. If you’re already experiencing challenges, face your harsh reality, and start thinking creatively. It’s going to be a long and bumpy ride – but I’m here for you.

What do you think about these ideas?

Dr. Freud Says, “You’re Distracted!”

Life is distracting. I know it, and you know it. Hey, it’s life, and we have to relish the distractions. Life isn’t business, after all. Business is a part of life.

When the distractions include the marriages of our children, moving to new homes, graduations, holidays and everything else that comes with life, that’s great – and we probably shouldn’t call those distractions. We should call them life.

But in my line of work I don’t find that it’s this part of life that either results in or compounds the troubles of a turnaround.

I Give Up

I got a call the other day from a client who said, “Lee, I think I’m just going to file for bankruptcy tomorrow. I can’t keep up with this, and I don’t know what to do. It’s too overwhelming, and I’m done.”

It was at that point that I lit my  cigar (not really, I don’t smoke) and asked my client to lay down on his couch (we were, after all, on the phone, and I couldn’t very well have him laying on my couch).

I’ve learned over the years that my job is – in large part – the job of a psychoanalyst. I have to break through what a client is telling me is bothering him and get down to what the real problems are.

Let’s Go Deeper

As I asked my client to tell me what was really going on and what was really overwhelming him, he said that the business was the problem: payroll wasn’t going to get paid, creditors were barking at the door and everyone seemed despondent. Those are pretty standard problems in a turnaround – after all, it’s what I was doing there in the first place.

But why all of a sudden could he not handle the pressure and the issues? Why did he want to give up and file for bankruptcy when I’d told him that we would get through this turnaround without the need?

As it turns out, the issues weren’t really about the business. I pushed a little more and learned that this client’s father’s health had just taken a bad turn and that he was having other problems at home.

He was prepared to handle the issues the business was facing because he knew I was there at his side to take care of them, but what he wasn’t prepared for was handling the business and the rest of life’s more challenging distractions at the same time.

He didn’t realize that I was there to support him through those issues, too.

Have Someone to Turn to

No – I didn’t become his drinking buddy or commiseration pal, but I did use my Dr. Freud skills to listen to his issues and show him that whatever else was happening, he could place the burden of his business on me. It would be my problem to bear in the meantime because that’s what I do best.

When you find that work has become too overwhelming – especially when things are going wrong – consider the fact that you may be distracted by a lot of life’s other challenges. Maybe you should talk to someone and maybe you should lean on some of the key people in your life to take the burden off of you.

How do you deal with distractions and focus when you really need to?

Embrace the Change that Life Brings

Change can be a good thing. Indeed, it often is. Sure, change to an oppressive political regime isn’t the kind of change people want to see, but progress is built on change, however resistent we might be to it happening in the first place.

I’ve been going through some interesting changes in my life recently.

At first, I was not pleased by the idea of these changes. They challenged what I thought I wanted to be doing with myself, the way my life was structured and what I thought the right thing was. The changes were practically an affront and I felt like the alligators were snapping.

But I’m a turnaround guy, and I pride myself on my ability to assess a seemingly negative situation and changing conditions, understand them from everyone’s point of view, and seek amicable and advantageous solutions for me and my side and whomever else I can.

When I stopped being bothered by the challenge of change that I didn’t want, I started to make peace with the notion, really evaluating why it was that this change was confronting me at this point.

And the more I thought about it, the more comfortable I got – indeed, the more I wanted it. I realized that I just wanted the change to happen in a different way. Ultimately, the change would be there, but I needed to see why it was good and make it so.

In the last few days, I’ve actually come to realize that if the change doesn’t happen, I’ll be downright disappointed. And I want it to happen fast. But that’s the nature of a turnaround guy. When we want something to materialize, we roll up our sleeves and make it happen.

So, change, I await you with open arms.

What changes are going on in your life or business? Are you excited or wary? Why?

Pick the Right Receiver

One thing I’ve noticed recently about receiverships is the number of receivers getting appointed for the wrong reasons. That is not to say that many receivers are not qualified business people – I actually believe that a good many, if not most of them, are.

However, the key to a good receivership is finding the right receiver for the right business, and not just a receiver with business experience.

This may seem obvious, but frequently a less-than-appropriate receiver is selected because of the nuance of my point. Allow me to elaborate.

For an operating business you need a crisis manager who knows how to hold the operations together and to create value.

On income producing property you need a receiver who understands property management and who has experience with the particular type of property e.g. strip center, apartments, vacant land, office complex.

When there is an inadequate match between the receiver and the business it diminishes the results and the return on the bank’s investment.

Because the lender will typically fund a receivership and the associated fees, it’s particularly important that the receiver chosen be the right – and most qualified – one. Though a chosen receiver may have been successful elsewhere s/he needs to be the perfect match in order to optimize the chances of success and the bank getting a proper return.

When the alligators are biting, there isn’t time to give the receivership to just anybody. A receiver needs to know what he’s doing in the environment of the business in order to successfully complete the receivership, whether by selling the property or turning the business around.

What are your experiences with the wrong people in the right jobs?

“Just Because I Understand Doesn’t Mean I Have to Like It”

As I was working yesterday I had a moment that allowed me to reflect on and connect with the sentiments of many of my clients.

Though I am a turnaround professional and my clients are in trouble long before I get there, I am still quite often the bearer of bad news. Yes, I fix things. Yes, I save my clients millions of dollars, their companies, homes, jobs and livelihoods. Yes, my clients like me.

However, that doesn’t keep me from being the one to say that the only resolution to their situations is to, for example, close a factory, lay off 100 people, fire their son, file for bankruptcy or who knows what else. That’s just the business I’m in.

It’s not that each of these moves isn’t necessary and ultimately for the greater good – each move means survival – but it does mean that people look at me as the bearer of bad news because I am not a yes man. I do not tell clients what they want to hear, as some of their other advisors may – I tell them what they need to hear.

And yesterday, as someone explained something to me that I wasn’t thrilled to hear – it wasn’t bad news, it just wasn’t what I wanted to hear – I found myself in a similar situation as my clients when I explain something to them that they understand but that they don’t like.

Hence, I said to my interlocutor as he misperceived my silence for misunderstanding, “Just because I understand doesn’t mean I have to like it.”

It’s obvious to say that understanding doesn’t mean agreement, but when we go along with things we undertand – agree or not – those things need not thrill us. It’s just important to see the value of the greater good on the other side as we go along.

What in business have you consented to and understood but didn’t like?

5 Foolish Faux Pas of CEOs in Crisis

While preparing for my speech on “How Not to Hire a Guy Like Me: Lessons from Past CEOs’ Mistakes,” I realized that it was worth sharing a few of the biggest faux pas CEOs make along with a few of my more colorful anecdotes.

What follows are the 5 things CEOs in crisis do that you want to avoid as the leader of your company or organization.

1. They Act Like Deer in the Headlights

In crisis situations, it’s amazing how many CEOs and company leaders act like deer in the headlights. They just freeze up and wait for the impending SMACK!

I was working with a guy whose company had entered a crisis. In the midst of this crisis, his very time-sensitive catalog that directly generates 80% of his 65 million dollar annual revenue within 90 days had to go out. It was hours before the catalogs had to be postmarked and mailed, but in order for this to happen we had to have $10,000 – immediately. In a cash crisis, this guy, worth a few million, wouldn’t take $10,000 out of his own pocket to pay the postage. If anything went wrong, he was personally guaranteed on 40 million dollars. He would have been totally wiped out had he defaulted, and all he had to do was personally put up $10,000.

I was brought in within hours of the deadline and convinced him to put up the cash. This was the first of many critical decisions amongst endemic problems, but thankfully, this incident established trust and a working relationship that led to a successful restructuring plan.

2. They’re Only as Smart as the Last person They Talked to

Many CEOs (and people for that matter) are only as smart as the last person they talked to – especially in a crisis. They cease being able to think for themselves, whether out of the hope of being able to pass the buck or because anything and everything sounds better than what they’re doing.

At a non-profit educational institution, the president was kicked out of office for various well-deserved reasons, resulting in a crisis of leadership, and the interim president kept changing the restructuring plan with every person to whom he spoke. He’d announce firings and closings almost daily, and then backtrack when someone objected, subsequently calling those he’d fired to tell them to disregard the two week notice they’d received. Back and forth he’d go like this, only spouting the last thing someone else said to him.

The only smart thing he did without changing his mind was hire me – and I fired him six weeks later. In restructuring, you generally get one plan to move forward with – it’s a house of cards and you don’t want it to fall from a lot of movement. Keep your plan conservative and reasonable, and don’t be as smart as the last guy you talked to.

3. They Can’t Check Their Egos at the Door to Admit Mistakes

The president at an electronics parts manufacturer found some cost accounting discrepancies that meant he was selling products under cost. Though he didn’t tell the bank, perhaps thinking that his Ivy League Ph.D.s would save him, the truth emerged a year later when his cash flow continued to deteriorate until the bank noticed. If he’d set his ego aside, spoken to the bank and brought in a professional early, he’d still be president, but the bank gave him the boot and brought me in. He lost everything because his ego got in the way.

Queue the Dragon Lady of El Paso: his wife and executive VP. Upon arrival, my first goal was to build loyalty and get buy in, and an opportunity dropped into my lap. The assistant immediately asked for twenty bucks to buy coffee and toilet paper. “Huh?” I asked. Apparently, in the interest of the budget, the company was rationing coffee and toilet paper. The Dragon Lady was losing millions on her left side while hoping to limit enough toilet paper and coffee for 60 people on her right side to balance out the equation. I gave the assistant $100 and told her to buy the biggest can of coffee and pack of toilet paper she could find, telling the other employees, “compliments of Lee.” From then on, they loved me. I had full buy-in, no one lost his job and we sold the company in full six months later.

4. They Don’t Depend on Their Key Subordinates

I hire people who are smarter than I am. I have no problem with people making more money than I do or being smarter. I view myself as a catalyst for positive change. However, I was brought into a company at which the CEO did not share this sentiment.

The CEO had created a generous sales commission structure, and the Sales Manager did a great job  for the company, meeting and exceeding goals. Resultantly, he made twice as much as the CEO in his first year on the job. When the board refused to give the CEO a raise to exceed the Sales Manager’s salary, the CEO attempted to lower the sales team’s commission structure, thereby dis-incentivizing them, even though they had been very successful on behalf of the company.

After the CEO forced a changed pay structure, the Sales Manager quit and went to work for a competitor. The board of directors found out and fired the CEO. While this echoes the sentiment of the ego problem, it also highlights the issue that CEOs fail to utilize good talent and rely on key subordinates.

5. They Don’t Get Buy-In

Buy-in is so important, and the CEO who isn’t getting it is looking for trouble because nothing goes forward for long without buy-in. At WYNCOM the CEO didn’t want any bad news, and he never wanted to hear what anybody had to say. He therefore didn’t have 100% of his team’s focus to make his wishes a reality. Subsequently, he lost 8 million dollars in 2 years.

As a CEO it’s important to know which way you want to go, and though a business is no voting democracy, you shouldn’t be handing down dictates from on high either. Have a conversation with your people, and let them tell you what they think. Even if they disagree and you still go the way you want to go, you can incorporate their feedback and by doing so, get their buy-in and support.

All I did when I became CEO of WYNCOM was act as a catalyst and seek others’ input, Thus, we went from an EBITDA of negative four million to positive four million in 12 months. In fact, we saved a half million dollars in postage just because I listened to someone.