CEOS Behaving Badly

Just like my many stories of fraud, there will never be any shortage of stories about CEOs behaving badly. I’ve witnessed several notable incidents myself during my career as the Turnaround Authority and include many of the more salacious ones in my book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes” in the section called The CEO Can’t Keep It Zipped. You can figure out what those stories are about.

It’s not just philandering that gets CEOs in trouble. The latest tale comes from the CEO of T-Mobile, whose mamma apparently neglected to inform him that you don’t go to parties to which you have not been invited. Claiming he was a fan of the band Macklemore, John Legere crashed a private concert party in Las Vegas hosted by competitor AT&T with whom he’s been engaged in a public battle after AT&T offered T-Mobile customers $200 in credit to switch. He was barely there for 20 minutes, long enough to have his photo posted on Twitter, before he was escorted out of the party.

Of course, the flashy CEO attempted to turn the event to his advantage, and milked his expulsion for everything he could on social media, making himself the talk of the International Consumer Electronics Show.

Jason Goldberg founded, an online shopping site. He took to Facebook to express his dissatisfaction with a fellow passenger on a flight from Stockholm to Newark who had the audacity to turn down his offer of $100 to switch seats with him. The other passenger’s lame excuse? He wanted to sit close to his family. “Who does that? … Grrr.” Goldberg posted, exposing both his arrogance and disdain for people who seem to care about their family members.

Tumblr founder David Karp managed to alienate his entire workforce when he attended the Cannes Lion International Festival in June. He went there to talk with advertisers, but apparently became impressed with the crowd he was addressing. “You guys are more talented than anyone in the Tumblr office or in Palo Alto or Sunnyvale. We’re constantly in awe. Constantly in service.” I doubt he got much of a welcome back party on his return.

The CEO of Barilla Pasta Company found himself in very hot water. (Sorry, couldn’t resist that one.) For some reason, Guido Barilla felt it was important to let the world know that he would never have gay people in his ads. “We won’t include gays in our ads, because we like the traditional family. If gays don’t like it, they can always eat another brand of pasta.” He later claimed he “simply wanted to highlight the central role of women in the family.”

I didn’t read much response from women, many of whom may not feel that their central role is to boil noodles, but one gay person politely responded. Aurelio Mancuso, president of Equality Italia, said, “We accept his invitation to not eat his pasta.”

Meanwhile Barilla US fought the huge PR crisis he dumped on that division by apologizing profusely on Twitter and Facebook.

CEOs who behave badly may enjoy the resulting publicity or just may not have anticipated how widely news of their antics would be spread. Whatever the reason, it’s a dangerous game. They risk alienating their customers, who may also invite themselves not to use their products or services.

It’s a good reminder that when you are a CEO or business owner and are interviewed or go on social media, you are always representing the company, not just yourself.

5 Tips to End Family Feuds

There are around 5.5 million family businesses in the United States, employing 63% of the workforce, according to Family Enterprise USA, a non-profit advocacy organization. In any business, you’ll have conflict but that conflict can be magnified several times over when the emotional entanglements of family members are involved.

Let’s say a fight has started in the business, one that threatens to derail morale throughout the entire company and possibly impact productivity and profitability. How do you handle it?

Here are a few tips to get the business, and the family back on track.

1. Discuss the situation when everyone is calm

This rule applies to any conflict in your life. Nothing much productive will be accomplished when emotions are running high. Wait until the seas appear calm and people can engage in problem solving in a more rational way.

2. Allow everyone to air his or her thoughts and concerns

Make sure every member of the family has an opportunity to express their thoughts. Sometimes those who don’t speak up at a meeting are the ones who are escalating the conflict with others. And if people don’t feel that they have had a chance to speak, they become resentful. The problem will not be resolved and will resurface at a later time.

3. Define what the real issue is

This can be the most complicated part of any conflict resolution efforts, particularly in a family business. You may start solving the issue that has seemingly caused the conflict, for example that Uncle Roger has not been meeting his sales quota and the other salespeople are resentful.

But once you communicate that Uncle Roger’s largest client went under and he is slowly building his sales back up, people are still unhappy. You dig a little deeper and find out that they really resent him because he just got an expensive new office chair and the other salespeople feel they deserve one too.

Now that you’ve determined the real problem, you can begin to problem solve effectively.

4. Get buy-in on any solutions

Deciding on a solution without family members agreeing to it pretty much guarantees failure.  Make sure everyone involved has come to an agreement on what the resolution to the problem should be.

The concept of buy-in for any business is so critical that I devoted a chapter to it in my book, “How Not to Hire a Guy Like Me: Lessons Learned From CEOs’ Mistakes.” Along with communication, it’s one of the keys to success.

5. Make sure the roles for each family member for enacting the solution are clearly defined

Once a solution has been reached, if action is required, make sure each person clearly understand their role and when the action should be completed. Have someone present at the meeting write down what steps were decided on, who is going to complete them, and what the deadlines are. Have it circulated in an email, with a note thanking the staff for their participation in the problem solving process.

Despite all your best efforts, sometimes a conflict just can’t be resolved within the family. At this point, it can be beneficial to bring in a third party to mediate the real issues between the family members. A third party can often bring a different perspective and develop a creative solution, one that family members who are immersed in the issues aren’t able to do.

Some of the most successful businesses in this country are family ones. Good conflict resolution is one of the keys to help your family business thrive.


Sold! To the Highest Bidder

jackson_edisonwalthallentranceI’ve been operating as a court-designated receiver for a downtown landmark in Jackson, Mississippi. Now the former Edison Walthall is headed to auction. Read about the current state of this 1928 205-room hotel in this recent article:

The Top Reasons That Start-ups Fail

People in the United States love to start new businesses. In 2009, the last year that figures are available, 552,600 small businesses were started. And 660,900 shut down. These are according to numbers from the U.S Small Business Administration.

There are a lot of reasons businesses fail. Like anticipating a market that just doesn’t materialize. poured money into its website that sold pet supplies. The company spent millions on an extensive marketing campaign with a popular sock-puppet mascot, whose name, according to an interview on CNN was Sock Puppet.  It made an appearance in the 1999 Macy’s Thanksgiving Day Parade and even starred in a commercial in the Super Bowl in 2000.

(Here’s a fun fact: In January 2000, during the dot-com boom, 19 online start-ups bought Super Bowl ads. Eight of them are no longer around. Only one had an ad in Super Bowl XLV. Got a guess who it was? I’ll give you a hint — their ads feature talking babies.)

A cute mascot and a multi-million dollar marketing campaign doesn't guarantee a company's success.

A cute mascot and a multi-million dollar marketing campaign doesn’t guarantee a company’s success.

While people enjoyed the advertising, the market just wasn’t there for online pet supplies. Launched in 1998, went from an IPO on NASDAQ to liquidation in 268 days. At least Sock Puppet found work. He moved over to BarNone, replacing Fran Tarkenton in its advertising. If you’ve ever lost a job, just console yourself with this thought. At least you weren’t replaced with a sock puppet.

In my work with failing companies, I’ve seen many other reasons start-ups fail. Here are just a few of them.

The entrepreneur is inflexible during the start-up process.

Products, product lines or services will most likely morph or change as they become further developed in response to consumer demand. Some entrepreneurs are unwilling to embrace the necessary changes and end up standing in the way of their own success.

The entrepreneur doesn’t have enough in reserve or doesn’t borrow enough to keep the business going.

When changes occur it can take longer for a company to break even than the business plan indicated. More time means more money. You may have to keep people on the payroll longer and incur more manufacturing and development costs. The entrepreneur either has to have a large enough reserve to cover it, borrow more money than he thinks he needs initially or bring in new sources of money in time to cover the additional expenses. Failure to do so means the business can become one of the approximately 1/3 of all start-ups that fail within the first two years.

The number one piece of advice I give to anyone considering a start-up: No matter how much money you think you need for the venture — double it! Every start up needs a contingency fund.

The entrepreneur has no contingency plan.

With most start-ups people leverage a lot of their personal assets to get the business going. While I never advise betting everything you own on the success of a new business, if an owner does put a lot of his personal assets into a business, what happens if he gets in an accident? What if he becomes disabled and unable to work, or dies? He needs to have disability and life insurance policies so his family is not left with no viable business and a mountain of debt.

The entrepreneur fails to bring in a partner when necessary.

Whether it’s for an additional source of funding or because a partner has a needed area of expertise, there can be good reasons to bring a partner into a business to ensure its success. A piece of pie is better than no pie.

If entrepreneurs understand why most businesses fail, they can take steps to ensure that theirs is one of the businesses that succeeds. As author Maria Robinson said, “Nobody can go back and start a new beginning, but anyone can start today and make a new ending.”

A Thieving Pizza Girl and a Lesson on Fraud

The story started with a pizza delivery.

It ended with an important lesson about fraud that I always relay to CEOs and business owners I work with. Always prosecute employees who commit fraud.

pizza-delivery-guy-01-afIn my business as a turnaround authority I often deal with the consequences of fraud. I’ve spoken at seminars and on radio shows about fraud. There is a section on fraud in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

Last year fraud cost companies in the US more than a trillion dollars. It’s a topic worth discussing.

While this story told by a young man about a pizza delivery gone wrong deals with the theft of a small amount of money, it illustrates an important point about fraud that this young man recognized. If you don’t prosecute people who steal from you, they will steal from someone else.

The story was on a podcast from The Moth, a site dedicated to storytelling and was told by Tristan Jemerson, who at the time was a student also working a minimum wage job. He had his identity stolen and all the money drained from his bank account.

He thoroughly investigated the crime himself and discovered that a woman who took his credit card number when he ordered a pizza at Domino’s was the one who made all the charges on his account. Working with the police, he had her arrested and the bank reimbursed all his money.

Then he got a call from the CEO of Domino’s. He thanked Tristan for his help on the investigation, conveyed his apologies and asked Tristan what he could do for him. After considering the offer and rejecting the idea of a lifetime of free pizzas or a pizza named after him, Tristan said, “I don’t want this to happen to anyone else. I want you to pursue it to the furthest extent of the law. And I want every new Domino’s Pizza employee to hear this story and be told that if they mess with credit card numbers, they will go to jail.”

The CEO said he could do that. And Tristan received a personal thank-you letter from the CEO that included a check for all the money that was stolen, although Tristan had said the bank was reimbursing him, and $500 in Domino’s bucks.

What Tristan recognized that many business owners don’t, or choose to overlook, is that once someone commits fraud and is not prosecuted, they most certainly will do it again.

I have dozens of examples of controllers, CFOs, warehouse managers and payroll clerks who were never prosecuted when they were originally caught stealing, and nearly every one of them stole again, eventually.

I know, because I’m the one who caught them and then finally had them prosecuted.

In one case a bookkeeper at a church stole millions of dollars from the church. She had done the same thing at a previous church in another state, but because that church chose not to prosecute, she just relocated and started stealing again.

If you experience fraud at your company and are tempted to let it slide, I hope you’ll remember the lesson of Tristan and the pizza delivery. Prosecute anyone who steals from you.

Feeling Thankful for CEOs, Companies That Get it Right

“Feeling gratitude and not expressing it is like wrapping a present and not giving it.”

  ~William Arthur Ward

In the spirit of expressing gratitude during this Thanksgiving week, I want to thank a few CEOs and companies that get it right and for whose policies I am thankful:

Delta CEO Richard Anderson, who is bringing back the traditional values of the airline company and says that we need to recognize that only companies that have a sense of integrity survive. He has a bell on his conference table and during meetings anyone who thinks a rule is being broken can ring the bell.

David Siegel, CEO of Westgate Resorts, who before the presidential election warned his 7,000 employees that they could face layoffs if Obama was re-elected. Instead he gave everyone a five percent raise.

Ninety-three billionaires have taken The Giving Pledge, including (clockwise from top left) Warren Buffett, Bill Gates, Ted Turner, George Lucas, Larry Ellison and Mayor Bloomberg.

• The department store Von Maur because it refused to bow to the Black Friday madness and is staying closed on Thanksgiving Day so its employees can enjoy the time with their families.

TOMS shoes for donating a pair of new shoes to a child in need for every pair the company sells. To date the company has given away two million pairs of shoes in 25 countries.

• Warren Buffet and Bill Gates for starting The Giving Pledge, a campaign to encourage very rich people to give most of their money to philanthropic causes. Ninety-three people have taken the pledge, representing untold billions of dollars of wealth that will go to do good in the world.

Southwest Airlines for not charging those rip-off change fees.

• Retired CEO of Xerox Corporation Anne Mulcahy. Although the company’s stock dropped 15 percent the day her appointment as CEO was announced in 2001, she led the turnaround of a company that was $18 billion in debt, on the verge of bankruptcy and facing an investigation by the SEC. Anne spent her first 90 days flying around all the country just listening to peoples’ perspective on what was wrong. By 2005, Xerox earned $978 million on $15.7 billion in revenue and had no core debt by 2006.

Here’s a quote from Anne that CEOs in the midst of trying to salvage failing companies should take to heart:

“By the time I stepped down as Xerox’s CEO in 2009 — and as chairman in January 2010 — Xerox had become the vibrant, profitable and revitalized company that it still is today. What made the difference was a strong turnaround plan, dedicated people and a firm commitment from company leaders.”

Lastly, I am thankful for all the businesses that hired me and allowed me to make a difference for companies and their employees.

And it’s thanks to them and all the lessons I’ve learned during my decades of experience that I have plenty of material for my soon-to-be-published book, “How Not to Hire a Guy Like Me.”

Fraud Prevention Tip: Don’t Rehire People Who Steal From You – Seriously

My lengthy post on the need to always prosecute those who steal from you included an exploration of those reasons that people fail to prosecute and how not doing so is a larger problem for the business world. Now I’m going to provide you with a very concrete story that I hope highlights why you always prosecute and why you never – ever – rehire people who steal from you.

I was once turning around a company at which a sales manager had a scheme with a customer.

The published sale’s price of this company’s primary widget was $8.50. The salesperson in question would place an order for a particular customer of his, ship the merchandise to the customer and then go to accounts receivable and put through a credit memo for that customer which would net the customer a price below the list price of $8.50. The customer would then slip the salesperson 50% of his savings. That is, the customer would pay $4.50 for the widget, thereby saving a total of $4/widget, half of which ($2) he would give back to the salesperson.

Because something like this can easily slip below the radar in a company with enough customers the financial impact might be minimal; thus, it’s very easy to go undetected for a while. The reason I discovered that this was happening was because the guy got greedy and started doing this with multiple customers. In his hastiness he put the credit through for the wrong company. The accounting department at that company was honest and came to us to disclose this erroneously applied credit. When we researched the credit we discovered what was happening, and the whole scheme unraveled.

As a result, this guy was fired (thank goodness) and never prosecuted (rats).

Apparently, this guy was an excellent salesperson, and even though he was ripping off the company for which he was working, he was simultaneously drumming up a remarkable amount of legit business. After he was fired the company’s sales declined by 25% over the next two years. Unsure of what to do and unable to find a suitable sales force to replace this one guy, the CEO rehired the once-thieving salesman (and as I always say, “Once a thieving salesman, always a thieving salesman”).

When asked why, the CEO said that the salesman had found God, repented for all of his sins and begged forgiveness. Though he never made monetary restitution for his misguided ways, he nonetheless apologized sufficiently enough for the CEO, who rehired him to return the company’s sales to a profitable level.

Lo’ and behold, six months later they (finally) put the salesman in jail because he started stealing again. Don’t make me say the following twice – please.

Do not rehire people who steal from you – ever.

This one is not a tip or a simple recommendation – I’m imploring you.

I believe in second chances in life. We all screw up at one point or another, and I dare say, we all deserve to find forgiveness. Despite that, do not rehire people who steal from you. If you think that you might not be able to keep to this because you’re such a forgiving person, then put it in your company’s bylaws to prohibit you from rehiring thieves despite your wishes otherwise.

Do not rehire people who steal from you. Seriously.