How Not to Hire a Guy Like Me

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Learning the Family Business – In a Classroom

While many college students due to graduate in 2013 are stressing over finding a job, a lot of students already know where they will be spending their days after turning the tassel on their mortarboard. The family business.

Family businesses employ 62 percent of the U.S. workforce. Two out of five Fortune 500 firms are family businesses so every year thousands of recent grads will join family members in the workplace.

A lot of colleges, particularly those with entrepreneurship programs, are responding to the large numbers of young people who are taking that path by teaching courses on managing family-owned businesses.

urlAccording to a recent article, Northeastern University launched a class in 2011 and Rice University in Houston and University of Denver have recently launched courses.

New York University added an undergrad course on family business this semester and Savannah State University will add one next year. Some schools, including Saint Joseph’s University in Philadelphia, have family business majors.

It’s probably a lot easier to get the parents to foot the bill for tuition when it’s an investment in the future of the business as well as in their kid.

Students who are juggling multiple interviews, nervously waiting for calls for a second interview or contemplating the horror of moving back into their 1990’s-era childhood bedroom under the draconian rules of mom and dad may be feeling a bit envious of their classmates who never had to answer a question like, “Where do you see yourself in five years?”

Those kids won’t be sitting across the large wooden desk of some executive asking, “Tell me about yourself.” Their future employer changed his or her diapers or watched them blow out candles on multiple birthday cakes.

While these young folks slotted to join the family business may not have to worry about finding a job, they have a lot to deal with when it comes to actually doing the job and maintaining family relationships.

You can quit a company and never hear from them again, with the only reminder the W-2 you’ll receive the following January. But you can’t quit your family.

I write a lot about family business in my new book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.” While it’s true that family businesses make up a majority of those in the U.S. and can be extremely profitable — take Walmart for one — they involve additional complications. Why do you think so many companies have anti-nepotism policies?

In my work as The Turnaround Authority, I have often been called in to run or consult with family businesses and have seen all the difficult situations that can arise when you mix family and business.

There can be issues of family members in the wrong jobs making poor decisions, questions of favoritism and bad morale among the staff for non-family members. And if you think it’s hard to fire any employee, think how much harder it is to fire Uncle Ned, especially when he and Aunt Irene host Thanksgiving every year.

No matter how many classes you take, you can’t learn everything you need to know to run a family business. Or any type of business for that matter. But taking courses in topics such as family succession and governance can be beneficial to students.

One young man mentioned in the article is Tony Holzbach, who is taking classes at Texas Christian University and will one day take over a wholesale and retail garden center in Forth Worth that his parents started 30 years ago.

He wasn’t too sure about what he could learn by taking a class and thought his dad knew everything about the industry. But after just a few weeks, he said, “I have discovered that there is much more to family businesses than I had realized.”

Just getting someone to admit that there’s a lot they don’t know is a great first step.

 

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Low-Tech Fraud Thrives in High-Tech Era

Some things never go out of style. Take all kinds of fraud, for instance. Even in the era of increasing high-tech fraud committed on the Internet, good old-fashioned low-tech fraud is here to stay.

Just this week I read about three cases in the news that involved fraud of the low-tech variety. People stole millions of dollars with nary a click of a mouse.

The ironically named Angel Food Ministries was in the news again because the founders of the now-defunct faith-based non-profit that provided low cost food through a network of churches and civic organizations pleaded guilty to federal charges.

The indictment, which was a whooping 71 pages, included allegations that pastors Joe and Linda Wingo and their son Andy took kickbacks from vendors, used ministry credit cards for personal purchases and trips to Vegas and New York, and used ministry bank accounts for their own benefit.

Staten Island deli king Saquib Khan took the concept of check kiting to a whole new level

Staten Island deli king Saquib Khan took the concept of check kiting to a whole new level

It’s hard to understand why the pastors needed to treat the ministry’s accounts as their own when they were paying themselves $2.5 million in executive and family compensation. I guess angels have a lot of expenses and those wings won’t fly them all the way to Vegas.

Another case of low-tech fraud in the news involves postal workers with sticky fingers. Remember how your mom told you never to send cash through the mail? Well, these folks were stealing more than $10 bills tucked inside little Susie’s birthday card.

Gerald Eason and Deborah Fambro-Echols stole more than 1,800 tax refund checks, Social Security and veterans’ benefit checks in Georgia for the past four years while working at the Atlanta Processing and Distribution Center. They recruited some equally unethical people at banks and businesses to cash their stolen checks.

They’ve been sentenced to jail and fined, as have some of their equally shifty cohorts who cashed the checks.

My favorite story involves Staten Island deli king Saquib Khan, who committed fraud to the tune of $82 million. That’s no bologna, no matter how you slice it.

Trained as a doctor in his native Pakistan, Khan moved to the U.S. in the 1980s and wound up working with his sister and brother-in-law in the deli business. He then founded Richmond Wholesale Company and owns three delis of his own. Sales last year for the cigarette and grocery business were $125 million.

After Hurricane Sandy caused his business to encounter financial troubles, Khan put that creative entrepreneur mind to work and devised a scheme that involved writing hundreds of worthless checks to himself, then depositing them in accounts in several banks under his name or in one of his businesses names, and withdrawing money.

In just two weeks in November he wrote more than a dozen checks a day to himself, drawing from accounts at six banks. Several lawsuits are pending against him and he is trying to pay the money back, which may involve selling his business. Khan may have sliced his last salami.

No matter how technologically advanced our society becomes, low-tech fraud will always be with us and cost corporations billions of dollars a year.

That’s why I devoted an entire chapter to fraud in my new book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs Mistakes,” with tips on how to prevent it and what to do if it occurs. No matter what business you are in, or how big it is, you are susceptible to fraud.

And remember, mom was right. Don’t send cash through the mail.

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Admit Your Mistakes

“The CEO of Apple says a leader should admit when he’s wrong.”

“That won’t work for me because I’m never wrong. The best I can do is admit when other people are wrong.”

“That sort of misses the point.”

“Well, I humbly admit you’re wrong.”

— A Dilbert cartoon by Scott Adams

A friend was interviewing a woman for a high-level position in his company and asked a fairly typical question. “What was a mistake you made and how did you handle it?”

“Well, I’ve never made a mistake,” she said.

I would have ended the interview right there. With those six words, that woman revealed that she is not someone I want to hire. She let me know that she did not recognize her mistakes and that when things do go wrong, she’ll either deny them or blame someone else.

Every person and every company makes mistakes. The important part, and the way to judge someone’s integrity and business savvy, is what they do next.

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Steve Jobs would admit when Apple made mistakes. “But we learned from it,” he would say.

I encourage the executives I work with to admit their mistakes. The first chapter of my new book, “How Not to Hire a Guy Like Me,” starts with my encouragement of presidents, CEOs or owners of businesses to admit their mistakes. While my book is based on lessons learned from CEOs’ mistakes, my readers can’t begin to handle the problems facing their own companies until they admit their mistakes.

When Steve Jobs introduced the iCloud in 2011 in one of his famous keynotes, he dealt with the elephant in the room — Mobile Me — straight on and with humor. Everyone in the room knew that Mobile Me had been a failure and had been clobbered by its competitors. The iCloud was the new product Apple was introducing in its place.

As he was introducing iCloud, he said, “You might ask, why should I believe them? They are the ones that brought me Mobile Me. It wasn’t our finest hour — let me just say that. But, we learned a lot.”

Many people, perhaps men in particular, worry that admitting their mistakes will make them look stupid. Well, what happens when they don’t admit their mistakes and they get found out? Then they look foolish and deceptive.

But if you admit your mistakes, people will trust you and respect you as a leader. And trust and respect are important to building strong business relationships with your employees and customers.

I tell a story in the book about a CEO that refused to admit when he made a mistake, choosing instead to gloss it over. That refusal ended up costing the company $8 million. See what I mean about learning from CEOs’ mistakes? That one was a doozy.

We are all going to make mistakes. They can actually be turned into opportunities. As Albert Einstein said, “Anyone who has never made a mistake has never tried anything new.”

The most important part is admitting the mistake and then to follow Steve Jobs’ example: learn from it. And move on.

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How Not to Hire a Guy Like Me

I’ve had a lot of memorable moments in my career. Some are good: like telling a CEO we can save his company millions of dollars or telling a business owner his company doesn’t have to fail.

Others are memorable in a bad way. Like getting shot at, twice. (They missed, twice!) Or watching a grown man attack his mother with a knife.

Today is one of my most memorable moments. A very good one. Today I announce the publication of my first book, “How Not to Hire a Guy Like Me.”

After working in the turnaround business for 30 years, I’ve gained a lot of knowledge about how successful businesses work and how to fix them when they aren’t working so well. And I’ve seen a lot of mistakes made that caused businesses big problems. That’s why the subtitle of my book is “Lessons Learned from CEOs’ mistakes.

HowNotCoverUsing real-life examples, I offer advice on how to avoid making those same mistakes. As one of my endorsers, Rafael Pastor, CEO of Vistage International wrote, “Lee Katz covers what they didn’t teach you in business school— how to avoid the land mines and what to do if you happen to step on one.”

That is one of the reasons I wrote this book: to educate people. This book is for business owners, C-level people, entrepreneurs or anyone who operates in the business world. They can all benefit from the tips in the book.

In addition to learning from the mistakes of others, a major lesson I’d like readers to take away from the book is that admitting your own mistakes and then moving forward is much better than denying or ignoring them. In fact, the title of the first chapter is “Check Your Ego.” Running a successful business is not about your ego and what you want. It’s about how to work with other people as a team toward a common goal. A one-man company doesn’t survive.

Other chapters include advice on confronting your harsh realities, how to be a proactive leader, how to make your banker your partner and how to prevent fraud.

Another reason I wrote the book is that it’s a way for me to give something back to the business community, where I’ve worked for more than 30 years. It’s the same reason I do a lot of pro bono work for organizations I believe in. I enjoy using the benefit of my knowledge to help others.

I’ve been lucky enough to work with some of the best business people in the country and they were generous enough to endorse my book. Bernie Marcus, Chairman of the Marcus Foundation and co-founder of The Home Depot wrote, “What you are about to uncover inside this book can help ensure that you, as a leader, also avoid pitfalls. Read it. Learn from it. Benefit from Lee’s many years as The Turnaround Authority.”

Alex Gregory, Chairman of the Board and President of YKK Corporation of America wrote, “You name it, Lee has done it. Fortunately, Lee has shared his invaluable experiences with us in this extraordinary book. We can learn from the mistakes of others, through the wizardry and humor of Lee Katz.”

You can purchase the book by clicking on the book cover on the right, or on Amazon.com. Yes, that’s my smiling face you see on the cover. It’s an easy read, and I hope you’ll benefit from the advice it contains. As Bernie Marcus wrote, “That way, the only time you will ever see Lee’s face is either on this cover, or smiling across the table at a philanthropic endeavor.”

Enjoy it, benefit from it. And let me know what you think. Even if you’ve never been shot at or the victim of fraud, I’d love to hear your stories. Email me at Lee@TheTurnaroundAuthority.com.

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Companies Need to Own Up to How They Are Doin’

“How’m I doin’?” was one of the phrases that Ed Koch was famous for. The infamous former mayor of New York City died last week, and I doubt we’ll ever see his like again: a politician who speaks his mind and damn the consequences.

One of his most entertaining quotes is, “If you agree with me on nine out of 12 issues, vote for me. If you agree with me on 12 out of 12 issues, see a psychiatrist.”

But the one quote I read by Koch that resonated with me in my position as a turnaround authority is, “I’m the sort of person who will never get ulcers. Why? Because I say exactly what I think. I’m the sort of person who might give other people ulcers.”

Ed Koch, outspoken former mayor of New York City, died last week at the age of 88.

Ed Koch, outspoken former mayor of New York City, died last week at the age of 88.

Now, I hardly go around trying to give people ulcers. But I am hired to give my expert opinion on what needs to be done to turn failing companies around. And that often involves telling people things they don’t want to hear.

In my new book, “How Not to Hire a Guy Like Me,” (available in a few weeks on Amazon.com), I have devoted an entire chapter to how CEOs and business owners of failing companies need to face their harsh realities.

One of the biggest mistakes CEOs make — whether or not they are in trouble — is refusing to recognize challenging situations. They need to have contingency plans for worse-case scenarios and act on them if those scenarios arise.

Sometimes I don’t need to dig too deep to discover the problems — they may be staring a CEO right in the face. But he has been refusing to recognize them because doing so would mean having to handle them. Though tackling a big problem might seem taxing, I assure you that not dealing with it is worse.

Here are just a few of the harsh realities I address in the book:

• Markets are changing and evolving and your business is not. If you’re out of ideas and your new ones aren’t working, it’s time to confront your harsh reality. Don’t get stuck on played-out ideas, especially if you’re in the technology industry.

• Your employees are losing faith in you and your company. If your employees show up in the morning looking like they’d rather be washing dishes at the local diner than work for your company, you’ve got a problem you need to deal with.

• You have lost track of your personal guarantees. When I ask a CEO or business owner about any personal guarantees they have that are still in force, they often tell me they don’t have any. That’s a big red flag to me. Personal guarantees come in the form of business loans, American Express business cards, and agreements to process credit cards, just to name a few. It is crucial that you know about all your personal guarantees, so if your business does go under you won’t lose everything you have.

These are just a few of the many harsh realities I force people to face when they are dealing with a failing or faltering company. You can’t anticipate all the issues your company may face, but you do need to be prepared to acknowledge them and react quickly and nimbly.

Ed Koch left his mark on New York City during his 12-year tenure as mayor from 1978 to 1989 and among his other accomplishments, is credited with restoring the city’s fiscal integrity. That’s one of my goals as well, when I work with companies as a turnaround authority. And I try hard to not give anyone ulcers.

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Two Ingredients for Success Never Change

“I’m a greater believer in luck, and I find the harder I work the more I have of it.”

― Thomas Jefferson

“Innovation distinguishes between a leader and a follower.”

— Steve Jobs

Our society is always looking for the next thing that will lead to success and while theories on what makes people successful may vary, I believe there are two ingredients for success that never change: hard work and creativity.

In Malcolm Gladwell’s book “Outliers,” he writes about the 10,000-hour rule, which was based on a study by Swedish psychologist K. Anders Ericsson that claimed it takes 10,000 hours of practice to master a task.

He uses examples like the Beatles. While he acknowledges their talent, Gladwell claims that an invitation the band received to play in Hamburg, Germany, while they were starting out is what led to their monumental success. In Hamburg, the Beatles played five hours a night, seven hours a week, and honed their skills, preparing them for worldwide stardom.

The Atlanta Crackers minor league baseball team played in this stadium on Ponce de Leon Avenue

The Atlanta Crackers minor league baseball team played in this stadium on Ponce de Leon Avenue

I’m a big believer in the value of hard work. I’ve been working since I was 12 years old. In the warmer months I dragged a lawn mover around the neighborhood and cut lawns. When I was 15 I got a paper route, waking up at 4:00 a.m. to make sure my customers had the latest news from the Atlanta Constitution when they woke up.

While I learned valuable skills from these jobs — responsibility, reliability, how to land a newspaper squarely on a front porch and collect from delinquent customers — the job where I honed many of the skills I would use the rest of my life was as a peanut vendor at the Atlanta Crackers baseball games.

The Atlanta Crackers, a minor league team, played from 1901 to 1965, prior to the Braves coming in 1966 from Milwaukee. The games were played in Ponce de Leon Park, destroyed long ago and replaced by a shopping center.

I sold peanuts for a penny a bag commission. The top seller for each game got a $20 bonus for selling the most peanuts. It didn’t take me long to figure out that even if I threw away 100 bags and paid the $10 for them myself, I’d still come out ahead if I sold more than anyone else.

So during every game I’d try to track the other boys’ sales and then would buy whatever additional bags I guessed I needed so I could be the top seller and win that coveted $20. I won it every time and some weeks there were multiple games, so that extra $20 really added up.

While walking up and down those stands week after week, handing out bags of peanuts to baseball fans in the 20,000-seat stadium, I learned then that two of the keys to success are hard work and creative thinking.

I could have just worked hard selling the peanuts. But it took the creative thinking to land that additional $20 a game.

It’s that creative thinking that is often called into play in my work as a turnaround authority. It’s not that I’m the smartest guy in the room. It’s that I bring a level of experience at rescuing failing companies — there’s that 10,000-hour rule — and I bring a fresh perspective that is conducive to a creative approach.

Here’s just one story I tell in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

On one of my assignments we had a big problem with theft from a warehouse. Lots of merchandise was disappearing and I didn’t have the time or money to install a security system.

But I could install a dummy camera, wire and blinking red light. No guts or recording equipment, but it worked! Theft was reduced and with the savings I could buy a real security system.

There are plenty more examples where the combination of hard work and creative thinking by a team challenged with saving a failing company was able to succeed.

That’s what I do as a turnaround authority. And fortunately, I don’t work for peanuts any more.

 

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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.

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The High Cost of Fraud and How to Prevent It

More than a trillion dollars. That’s how much fraud is costing companies in the US each year.

The Computer Evidence Specialists LLC released the “2011 Report on the Cost of Fraud in the United States” earlier this year. The goal was to put a figure on the total cost of fraud in the United States from six industries: corporate, securities, financial, mortgage, healthcare and insurance.

Here was their conclusion: “Through our research, compiled from the most recent data available on the subject, we conservatively estimate that fraud annually costs victims $1.32 trillion.”

The figure is conservative, as a lot of fraud is underreported by victims or not reported at all.

Shocking, isn’t it? The truth is that no company is immune to the cost of fraud and you need to be vigilant in your efforts to prevent it.

The Woodruff Arts Center this week learned that a former employee embezzled $1.48 million over the course of five years.

The Woodruff Arts Center this week learned that a former employee embezzled $1.48 million over the course of five years.

The arts community in Atlanta was saddened this week to learn that $1.48 million was embezzled from the Woodruff Arts Center, the largest cultural institution in Atlanta.

Seems a mid-level administrator, who wasn’t even in a finance-related job, figured out a way to set up a fake company. Over a period of five years, the man regularly submitted invoices from the fake company and raked in big bucks. He wasn’t caught until after he left, for unrelated reasons, and someone took note of suspicious invoices.

A simple set of checks and balances would have caught the thief before he collected his first check.

Here are some key things to remember when considering your own system of checks and balances. Remember that any place money or goods exist or move is a place where theft or fraud could occur.

• Remember that anyone can commit fraud. Family member, long-time employee, revered CFO. Don’t consider anyone above suspicion. I worked with a company once where the son was stealing from the family business after his dad died. He felt he wasn’t being paid enough and stealing was his way of claiming his inheritance.

• Always poke around your books. No matter how large your company gets, take some time to peruse the checkbook or QuickBooks. Ask where the money is going. In the case of the Woodruff Arts Center, the fake company was one of only 13 that were regularly paid. How long would it have taken to do a Google search on the fake company or question someone about the services supposedly being rendered?

• Monitor and review monetary trends. Determine what types of numbers are most meaningful to your company—the cost of goods or services, employee expenses for example—and determine the acceptable range for those numbers. Graph the data for those numbers and pay attention if any numbers fall outside of that range.

• Change the standard by which you review transactions. For example, if your company only reviews expense reimbursement requests that are above $1,000, regularly review those at around the 80 percent level. I’ve found that seems to be a favorite spot for thieves. The Woodruff Arts Center thief got away with his fraud for so long because even though the amounts that were paid to the fake company increased over time, they remained under the limit that may have drawn attention.

• Trust your instincts. If something in your company seems a little off, investigate further. Don’t feel guilty about asking questions. You’re in charge.

Don’t let fraud cost money at your company. Tighten up those checks and balances.

Read more about fraud prevention in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.” The book will be available on Amazon in early 2013.