How Not to Hire a Guy Like Me

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Funny, But True: Give a Second Thought to That Second Chance

You have an employee who makes a big mistake, but comes to you to admit it and offers a solution. So, you forgive him and move on. We all mess up sometimes, and this employee handled it correctly. You give him a second chance.

As Warren Buffett said, “I make plenty of mistakes and I’ll make plenty more mistakes, too. You’ve just got to make sure that the right things overcome the wrong ones.”

But some mistakes aren’t forgivable and employees who make them don’t deserve a second chance.

publishing-scamI once worked with a company whose sales manager was running a scheme. He would sell their widgets to a customer who was a partner in his crime. After the sale, the sales manager would issue a credit, reducing the price of each widget by $1 to that customer. The sales manager and the customer split the extra $1.

The scheme went undetected and over time amassed both the sales manager and the accounts receivable manager a lot of money.

The fraud was only detected because the sales manager accidentally sent a credit to the wrong company, which reported the error. The fraud was uncovered and both managers were fired. But they were not prosecuted for their crimes. (I always advise business owners to prosecute thieves. Read more about that in “Why You Should Always Prosecute Fraud”)

And it turns out the sales manager was actually really good at sales, and once he left, sales declined 25 percent. The CEO couldn’t find a suitable replacement in the following year, so what did he do? He hired back the thieving sales manager.

The CEO’s explanation? While the sales manager never paid any of the money back, he said he was sorry. During that past year, he had found God, repented his sins and begged for forgiveness as a friend and long-term employee.

He lasted six months, until he moved. To jail. Where he was sent for stealing again.

Beyond the obvious lessons of prosecuting fraud and not rehiring people who steal, the other lesson is that some people deserve a second chance and some don’t. As a business owner/CEO you need to know the difference.

 

 

 

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The Value of a Successful Failure

A successful failure sounds like an oxymoron, right? Like jumbo shrimp, open secret or one of my favorites, only choice. So, what is a successful failure? It’s an endeavor that did not succeed at its original goal, but its failure taught you lessons that you turned into a success.

Apollo 13 has been referred to as a successful failure. As you may recall from the popular movie about the mission, aptly called “Apollo 13,” the spacecraft launched on April 11, 1970, the third spacecraft destined to land on the moon. But the landing was aborted after an oxygen tank exploded two days after launch. After hearing, “Houston, we have a problem” from the astronauts, NASA then spent several tense days working through multiple problems to return the crew and the spacecraft safely to earth.

Mission Control in Houston dealing with the explosion onboard Apollo 13. (Photo courtesy of NASA.org)

Mission Control in Houston dealing with the explosion onboard Apollo 13. (Photo courtesy of NASA.org)

The mission to get to the moon was a failure. The recovery of the crippled aircraft and saving the lives of three crew members was a success.

“A ‘successful failure’ describes exactly what 13 was – because it was a failure in its initial mission — nothing had really been accomplished,” said Jim Lovell, the commander of Apollo 13 as reported in an interview. But he called it, “a great success in the ability of people to take an almost certain catastrophe and turn it into a successful recovery.”

I have dealt with several successful failures in my turnaround career. By the time I’m called in, many companies are on the verge of total failure, and we are often able to salvage some value out of the company, resulting in a successful failure.

I like to think of the quote from Nelson Mandela who said, “I never lose. I either win or learn.

Read more about Successful Failures in my two-part series, “How to Have a Successful Failure.” You’ll love the story of the college drop-out who started a business and become a millionaire, then bankrupted that company. Using the lessons he learned from that failure, he started another business and became a billionaire. Now, that’s what I call a successful failure.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

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Leftover Vacation Days and the Impact on Your Business

Americans did not use 658 million vacation days last year. For the first time ever, more than half of Americans (55%) did not use all of their days off, according to a study done by Project: Time Off. We are becoming the “No Vacation Nation.”

While Americans used to average three weeks of vacation a year in 2000, in 2015 they only took 16.2 days. That represents a loss of almost one week in 15 years.

Why would people essentially volunteer a week of their time every year for their company? The two biggest factors cited in the study were fear they would return to a mountain of work (37%) and that no one else can do their job (30%).

Unlike other developed countries, in the U.S. employers are not required to give employees paid time off. Employees in the European Union get a minimum of 20 days a year.

While a business owner or CEO may appreciate that their employees didn’t take their allotted time off, research shows their productivity may actually be lower when they don’t take breaks.

Studies show that when employees take time off, their productivity increases. “There is a lot of research that says we have a limited pool of cognitive resources. When you are constantly draining your resources, you are not being as productive as you can be. If you get depleted, we see performance decline. You’re able to persist less and have trouble solving tasks,” said Allison Gabriel, an assistant professor of management at Virginia Commonwealth University in the article “The Secret to Increased Productivity: Taking Time Off.”

In a Wall Street Journal blog, Dr. Kathleen Potempa wrote, “In addition to mental and physical stressors, long periods of work without vacation can lead to reduced productivity, diminished creativity, and strained relationships. Americans seem to believe that logging more hours leads to increased output, but respite deprivation can actually increase mistakes and workplace animosity—in addition to prompting or exacerbating stress-related illnesses.”

CEOs and business owners should look at their own calendars and clear time for vacation as well. Reed Hastings, the CEO of Netflix, takes six weeks a year. “I take a lot of vacation and I’m hoping that certainly sets an example. It is helpful. You often do your best thinking when you’re off hiking in some mountain or something. You get a different perspective on things.”

COO of Facebook Sheryl Sandberg says she was able to write her best-selling book “Lean In: Women, Work and the Will to Lead” because she took all of her vacation days. (I’ve written a book, and would be on the side of people who argue that’s not quite what I’d call a vacation.)

Tony Schwartz, the president/CEO of The Energy Project and author of “Be Excellent at Anything” says at The Energy Project they teach “the greater the performance demand, the greater the need for recovery.” Feeling burnt out one year, he went on vacation and completely disconnected from digital distractions. “By the end of nine days, I felt empowered and enriched. With my brain quieter, I was able to take back control of my attention. In the process, I rediscovered some deeper part of myself.”

Mark Douglas, CEO of the marketing and advertising company SteelHouse, recognized the need for his employees to take vacation and offered them unlimited vacation when he founded the company in 2010. But perhaps due to the reasons stated above, people weren’t taking much.

So he decided to pay them. To take vacation. He pays his employees $2,000 a year to go anywhere in the world. They can split up the money for more than one trip, or use it all at once. Employees who request the money in the form of a bonus are turned down. They must spend it on a vacation.

As a result, his turnover rate is extremely low. Out of 250 employees, only five people left the company in a three-year period, with three of them leaving for reasons unrelated to the job.

So if you are feeling a bit anxious when you see all the empty desks and email vacation notices at your company over the holidays, think of it this way: they are recharging their batteries and will come back more productive than ever.

Take some time off yourself. And enjoy.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

 

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Funny, But True: When Employees are Naughty, Not Nice

The popular song may claim this as the most wonderful time of the year and the hap-happiest season of all. December is also the least productive, as many workers take time off for the holidays and when they are in the office, they are distracted. And possibly doing their gift shopping online.

Having employees take adequate vacation is important and critical to the well-being of your business. I encourage every company I work with to encourage employees to take time off, and in fact to mandate the CFO take two consecutive weeks off every year. No, I’m not playing Santa Claus here. It’s about uncovering fraud.

In addition to the benefits of having an employee come back refreshed and rested, vacation is the time companies uncover naughty things some employees may have been up to.

Take the example of dear Aunt Tess. She was a payroll clerk at a company I was working with. She was a loyal and dedicated employee of 25 years, who had never missed one single payroll. Not even less than 24 hours after she had her appendix out. See any red flags yet?

I did, and after a bit of investigation, found dear Aunt Tess had been paying fake employees for 25 years, diverting their income to herself, to the tune of $75,000 to $100,000 a year. She had stolen millions of dollars.

So, I may sound a bit Grinch-like, but when your employees take time off during the holidays, make a list of who has access to your books and do a little checking it twice.

Next week, why did Americans leave 658 million vacation days unused last year, and what impact does not taking those vacation days have on your employees?

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Funny, But True: Having a Blast

Well, at least some people thought it was funny. I didn’t happen to be one of them.

I was in a staff meeting of a steel company where I was the chief restructuring officer. The company was not doing well for multiple reasons and was facing a huge cash crisis.

We had decided our only option at this point was to reduce the 2,500-person workforce by at least 10 percent to keep the company competitive, a tragic outcome for those 250 workers and their families. We were also going to have to reduce union employee benefits, which we had discussed the day before with the union representative.

All of a sudden, I hear BAM! BAM! BAM! BAM! In shock, I quickly hit the floor, only to find I was the only one there. When I got back up, the other senior staff at the table were laughing at me.

I was right to duck – those were shotgun blasts that smashed into the windows. But none of them made it through the bulletproof windows the company had installed 20 years previously. It seems shotgun blasts were a frequent means of expression for unhappy union members.

So here’s some free advice. If your workers are routinely so unhappy they are shooting at senior staff, rather than spending money installing bulletproof windows, spend time thinking about rethink how you are managing the company.

My book, How Not to Hire a Guy Like Me: Lessons Learned from CEO’s Mistakes, is now available as an ebook.

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3 Tips to Help Ensure Your Company Recovers from Bankruptcy

“Capitalism without bankruptcy is like Christianity without hell,” said US astronaut Frank Borman and former Chairman and CEO of Eastern Airlines.

While I understand where he is going with that, I wouldn’t explain bankruptcy quite that harshly. True, like hell, no one wants to go there. But there is an escape and it doesn’t have to feel like you are stuck in eternal flames. Or whatever your version of hell may be.

Sometimes the best option to preserve your company is to file bankruptcy. Your business can emerge strong, with happy employees and your reputation intact. Here are three tips on how to accomplish that.

  1. Keep a positive attitude 

I learned this from one of my first turnarounds, a story I tell in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”  Cheerleader Supply, a $65 million a year company with 750 employees, made cheerleading uniforms and supplies and directed camps nationwide. It fell on hard times and I was called in to see it through a Chapter 11 restructuring.

That CEO taught me the value of being a cheerleader in your company as he keeps a positive attitude throughout. When the home team is down, the cheerleaders get up and motivate the crowd, right? They don’t head to the nearest Starbucks and call it a night.

When a company is going through bankruptcy, employees are scared and nervous, which leads to lower productivity. You need your team to be on top of their game. And that requires pep talks. You need to keep your team inspired and motivated so they will keep working hard for you.

I’m happy to report that Cheerleader Supply successfully emerged from Chapter 11 bankruptcy, and I learned that a positive attitude from the leader is crucial.

  1. Be transparent with your employees about what is going on

Another way to keep your employees motivated is to be transparent with them about what is happening. If you and your senior management are meeting behind closed doors and not communicating with your employees, you are fueling the panic and the rumor machine.

People can handle a lot if you are honest with them. What they can’t handle is lack of information. If you don’t let them know what is happening, they will spend a lot of time filling in the blanks themselves, time they could have been working to help your company.

  1. Keep your reputation by communicating with your investors, vendors and customers

To follow up on #2, you also need to communicate with your other constituents, including your investors, vendors and customers.

United Airlines filed for bankruptcy in 2002, then the largest bankruptcy filing by any airline. Prior to filing, the CEO flew to Chicago to meet with employees, while top executives flew to other hub cities. Then after they filed for bankruptcy, the company took out full-page ads in major newspapers around the country explaining the situation and what they were doing about it.

By being open and communicating with all its constituents, United Airlines came out of bankruptcy with its reputation intact a little more than three years later. Its reported net income last year was $4.5 billion.

Back to that quote about hell. Maybe filing for bankruptcy does feel like that. But remember what Winston Churchill said. “If you are going through hell, keep going.”

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Funny, But True: Penny Wise, Pound Foolish

We’re all familiar with that phrase of British origin that means you may be saving a few pennies in one area, but wasting bigger money in another. But in one case I dealt with, it was more like, “Thousands wise, millions foolish.”

I took over the presidency of an apparel company that was in serious trouble. During this crisis period, we needed to send out a time-sensitive catalog. Sales from this catalog would generate 80 percent of the annual revenue of $65 million for this company within a four-month period. That’s how important getting this catalog printed and mailed out was.

But we needed $25,000 cash immediately to make sure that happened. We had to pay for postage. The company didn’t have it, and there was nowhere else to get that much cash, desperately needed to generate more than $52 million in sales.

The CEO was worth several million dollars. But he froze when I asked him if he could put up the $25,000 to get these catalogs out the door. It was such a no-brainer to me that I was stunned. Because guess who would be wiped out if we didn’t make the projected $52 million in sales from that catalog? The CEO was personally guaranteed on $40 million.

It took all my powers of persuasion, but as we were just up against the deadline, he finally agreed. The good news is he followed my advice after that and we were able to successfully follow our restructuring plan.

So next time you’re tempted to save a few pennies, remember that other famous quote. The Roman playwright Plautus (born 254 BC) said, “You must spend money to make money.”

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Funny, But True Stories: The Thoughtful Thieves

 

“No way that really happened!”

You know that saying, “You can’t make this stuff up.” I’ve lived that during my career in the turnaround industry. I’ve seen the look of disbelief cross people’s faces when I’ve recounted one of my unbelievable-but-true stories. Like the one I call The Cases of the Thoughtful Thieves.

I’ve dealt with my share of messy fraud and embezzlement, cases in which I had to dig deep and do a lot of research to track down the missing funds and identify the perpetrator. That’s why I was so appreciative of the Thoughtful Thieves. They made my job so much easier.

I was sitting at a CFO’s desk one time while he was on vacation. I recommend to all my clients they encourage their CFO to take two consecutive weeks off and sit at his or her desk, open their mail and just see what happens. You can learn a lot that way.

So I decided to check out this CFO’s mail. Imagine my surprise when I found bank account statements from an account in the Cayman Islands where he’d been stashing the money he had been stealing from the company. Had I been his advisor, I would have strongly recommended having those statements sent to his home or a PO box. Anywhere other than to the company he was stealing from. But maybe there aren’t a lot of fraud consultants available with these handy tips for success.

I was poking around on the computer of another CFO and found a folder on the desktop. It was password protected, but with the blessing of the CEO, I used my handy-dandy password decoder and opened it up. And I found an Excel spreadsheet neatly detailing all of the money he had stolen from the company. Everything had a date on it and tracked the path of the funds he had embezzled. He even had an entry for paying the contractor for his home, done with company funds he’d helped himself to. It’s like he had given me a gift, one that I happily shared with senior management at the company.

For more stories, check out my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

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5 Business Lessons from Olympic Athletes

Earlier this week Bill Murray tweeted “Every Olympic event should include one average person competing for reference.” It’s true – when those divers leap off the diving board, gymnasts fly through the air or rowers zip through the water, they make it look almost effortless.

If you take a closer look or read their stories you’ll see how much work, sacrifice and mental energy went to achieving that level of success. Although we may never compete in the Olympics ourselves, here are a few lessons we can learn from these top athletes.

  1. You have to set goals and be focused on them.

No one achieves a high level of success without setting a lot of goals for themselves, both short-term and long-term. That’s how seven-time gymnastics Olympic gold medalist Shannon Miller claimed she reached her ultimate goal of competing in the Olympics. “It’s great to have the ultimate goal, but regardless of what that long-term goal is, you have to set short-term goals. Think about what you can do each and every day to make that long-range goal happen.

As Usain Bolt, three-time Olympic gold medalist and fastest person ever said, “Dreams are free. Goals have a cost. Time, effort, sacrifice, and sweat. How will you pay for your goals?”

  1. You have to surround yourself with people who make you better.

Top athletes are smart enough to hire the best coaches. Look at the women gymnasts. They nicknamed themselves the “Final Five” in tribute to their coach, Martha Karolyi. She and her husband have been training gymnasts for five decades on a ranch in the middle of nowhere, Texas.

As I mention in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” I hire people who are smarter than me. Many business people like to think they know it all. No one does. When you need help, reach out to others to provide that help.

  1. You always have to be on the lookout for competition.

No matter how successful you are or how unique your product may be, you will face competition. Failure to take competition into account can be disastrous. In my book I talk about what happened with Q-Zar, initially a huge success in the laser tag field. But the company didn’t pay attention to the competition that came in the form of big-box stores selling laser tag sets for home use. That failure, coupled with massive fraud in the company, led to its demise.

You don’t have to wait for competition to come to you. The late Norwegian marathon runner Grete Waitz said, “You’ve got to look for tough competition. You’ve got to want to beat the best.”

  1. You have to persevere when the unexpected occurs.

It was heartbreaking to see Annemiek van Vlueten, the woman cyclist from the Netherlands, who was minutes away from winning a gold medal, crash on the wet pavement, and rather than taking her place on the podium, wound up in the hospital.

You’ve worked hard for years, your business is doing well, then bang. Something unexpected and unpredictable happens to derail you. You uncover massive fraud in your company. Or as happened with one of my clients, your biggest client asks to revamp your manufacturing capabilities. You spend millions to do so, then one day, the client cancels the order.

What do you do? You keep going. Olympic track athlete Brenda Martinez knows how to keep going. During the Olympic trials for her best event, a runner behind her tripped and knocked into her, throwing her off and killing her chances of getting an Olympic slot in that event. She just focused on her next event, and came in third, securing that coveted spot on the team. “The track doesn’t care about your feelings,” she said. “You’ve just got to move forward.”

  1. You have to keep your cool under pressure.

It’s hard to imagine the level of pressure these athletes feel. Many of them are just teenagers, but are carrying the weight of the expectations of their families, teammates and their entire countries as they perform superhuman feats. They have all found a way to deal with it. Gymnast Gabby Douglas said, “For the most part, I’m kind of used to it, because it has been a part of me for my whole life. I’m trained to deal under those circumstances—at the gym we do pressure sets.”

CEOs and business owners have to learn to deal with and perform under extreme pressure as well. As Mike Myatt wrote in “6 Ways to Conquer Leadership Pressure,” “How leaders deal with pressure is often the difference between catapulting an organization towards success, and contributing to its demise.”

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Want People to Work for You? Make Them Feel Heard

They have 14,000 employees. And more clamoring to come on board.

Under Armour was recently included on LinkedIn’s U.S. list of Top Attractors, the top 40 companies at attracting and keeping the best employees. In an article referencing the inclusion, “To Thrive at Under Armour, You Have to Answer Kevin Plank’s Three Questions,” I found out one of the reasons why more people want to join the ranks at the sports clothing and accessories company with close to $4 billion in revenue.

The three questions management is encouraged to ask after every meeting or conversation are:

  • This is what I heard
  • This is what I think
  • This is what we are going to do

The goal of the questions, Kevin said, is to make sure you heard and understood what people said. With this method you don’t waste time on miscommunication, you facilitate buy-in and people feel their ideas have been heard, a huge factor in employee morale and retention.

My favorite method for clear communication is the whiteboard. I’m a huge fan of the whiteboard, even writing a whole chapter on its use in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

For more reasons I love the whiteboard, please read my post “The Value of the Low-Tech Whiteboard in a High-Tech World.” Good luck with your new and improved communication.