Bold Exec

Bold Exec by Tom Epley

My entire career was in fixing troubled companies. Enclosed is a compendium of the techniques I've used during my career, as well as dozens of examples applying these ideas to current events. Use the categories on the right hand column to search.

The Decision Matrix

The personnel decisions you make, or don’t make, will make or break your organization’s performance and your career. Nothing is more important. Personnel decision-making is an acquired art not a science. Through years of trial and error experience, some good, some bad, I developed a method which makes the process much more determinative, accurate, and fast.

Go Deep

CEOs must be broad in their approach: manage every functional area, integrate multifunctional decisions, and cover the waterfront. Even if done reasonably well, it’s insufficient. Relying on someone else’s (your management team) word isn’t good enough. To significantly amplify your impact in many ways, don’t just be horizontal; add a vertical dimension and: Go Deep.

Cut and Fill

A CEO who attacks an organization’s problems with the Cut and Fill approach is choosing the most difficult but also the most rewarding approach. This balancing act requires high levels of skill and wisdom. Once you’ve begun implementing this method, expect to take a lot of heat. But the objective is not to make the CEO happy today; it’s to make the CEO and the board and the shareholders happy a year from now. If reasonably good decisions are made, sustainable results will be enormous.

Power To and From the People

Weak management will firmly install a highly ineffective organizational culture. The culture will contribute little to, and rather significantly hinder, any progressive change. To significantly improve your chances of success, you must break through the barriers and enlist your employees in the cause.

A relatively simple fix is to deliver honest, meaningful and straightforward messages directly to all principal constituencies. Thoroughly communicating directly with all elements of the organization ensures that your message isn’t garbled.

Eliminating Waste

Eliminate waste; save a company! Quite often that’s enough. Although the benefits are finite, they can be significant if the elimination of waste is vigorously attacked. Over the next several weeks we’ll cover the waste waterfront, hitting on the big four.

The first, the waste of cash, is prevalent in almost every mis-managed company. A vigorous Priority objective can generate a significantly sized one-time lump of “free” cash in 90 days or so. Then on-going cash management is the next topic. Had anyone observing Enron, including the 100’s of employed auditors, checked into the relationship between ongoing corporate net cash balances and reported operating income, their fraud would have been uncovered much earlier. In order for me not to get fooled when I go into a new company, I developed a relatively simple but highly effective tool, which I named the Liquid Balance Sheet. It enables me to cut through all the vagaries and misleading possibilities inherent in accrual accounting, and see what’s really going on. Next week you’ll see how this works.  These next three categories will be covered in subsequent weeks.

Smart Data: Keep it Simple

When you set an objective of becoming data-based smart, keep it simple by picking the right horses to ride --these four categories of hard information related to the operation of the company and its competitors. Dont' lose focus, concentrate your efforts; keep it simple.You may want more later, but start here:

The first, actual cost information by product, must be accurate. The term actual is used here to emphasize that the data must be real; many if not most cost systems are not. Before relying on the information generated by your system, check it out in detail. Strip away all the history of overhead allocations; who knows the agenda of the  person making those decisions. If you take your cost accounting accuracy for granted, your decisions might turn out to be as effective as sprinkling fairy dust on your quarterly reports. Armed with accurate cost information you can attack clear targets, like low margin sku’s and slow moving sku’s; almost always many of these hang around in the product line and suck up working capital and administrative costs.

4th Generation

Management by objectives (MBO) permeates decades of management literature and practice. Determining specific objectives, managing by those objectives, identifying specific stated goals, and holding individuals responsible for and grading them on their performance toward those objectives is a great concept.  Managing any organization without written, specific and measurable objectives would be difficult. I doubt that it is done often; and when it is, I doubt it is done for long. While fundamentally correct, it is also well out of date.

First, the process has become so entrenched most everyone with any savvy knows how to play the game. Managers can structure objectives to optimize their own bonuses or payouts rather than the organization’s performance goals. 

Rubik's cube logic

Congress is considering significantly raising the cap (currently $75M), or completely removing it, for damages caused by oil spills. But some senators are against it saying that smaller oil companies wouldn't be able to compete. Is this a logic rubik's cube?

1. We want all drilling companies to make sure their wells are as safe as can be and that contingency plans are in place to handle mistakes (money doesn't assure attaining those conditions, but lack of money assures they're not). This takes a hunk of cash. Smaller drilling companies don't have a hunk of cash.

2. But we like competition; so let's cap the liability and at a low number, allowing smaller drilling companies to drill (but maybe with not enough cash to fund the highest and most costly safety procedures and capitalized contingency plans).

3. Now even the large well-capitalized companies, doing their economic trade-off calculations, therefore find an incentive to shave a bit on safety and contingency plans.

4. So now we've increased the probability of further environmental/economic disasters, from both small and large drilling companies.

5. And now the resulting more probable and huge resulting environmental/economic costs are borne almost exclusively by  various governments and tax-payers.

If i just spin this logic rubik's cube central plane one more time, surely the colors will all line up.

IT DOESN'T TAKE HINDSIGHT

Here's a short business test. Try it, it's not difficult. Suppose you have an extremely large revenue and profit project:; I mean extremely large. It's success will be of overwhelming importance to your company.  It utilizes really complicated technology in an extremely harsh environment, but others have done it and had no failures. Failure is seen to be of extremely, extremely low probability. However, a failure would be unprecedented in scope, and not only create a problem which threatens your entire company but the lives and fortunes of thousands of others as well. And you have no idea how to cope with such a failure. You face three choices (sorry, you'll have to click through to see those choices):

Unions and Government: Oil and Water

We must decide that organizing government employees is illegal, and that public labor unions must be abolished. Why? Because balance of power, or balance of will, does not exist. In a corporation, if management gives in too often over an extended period and resulting work rules, wages, pensions, and benefits choke the company, there are several potential outcomes to adjust and correct. Management, recognizing the company's financial limits, convinces the union that there have to be changes and an accord is reached to keep all entities alive. Or a bankruptcy court mandates a diminishment of some provisions of the labor contracts, as well as hacking into the rights of secured debt, unsecured debt, and equity holders. Or the company fails and everyone loses.

Au Contraire Newsweek Part I

 The cover page headline onthe Feb 15 edition of Newsweek was "LAYOFFS ARE BAD FOR BUSINESS"; the downside of downsizing. I'm sure, as in all things in life, some (layoffs) are bad, some are necessary, some are good; it depends. However this article, authored by someone who should know better, a professor of organizational behavior at Stanford University's Graduate School of Business, is an amateurish and wrong-headed treatise and draws erroneous and just plain silly conclusions. The author makes the point that all layoffs are bad for the company, for the economy (as laid off people don't spend as much--quite a revelation), and for the individual (another startling finding). Hard to dispute these latter two but I don't believe they meet the test of the ink and paper used. Regarding the first conclucion, there's much to dispute just using common sense: in my dispute process I'll also insert some experience and reality based study, and over the next four weeks pick off their most absurd conclusions.

Top Heavy

  AMF, several years ago, was ripe for a hostile takeover. The company had (a) many self-sustaining and viable operating divisions (AMF bowling, Rossignol skis, etc.), (b) serious financial problems (never a single quarter of positive operating profit), (c) Taj-Mahal-like corporate headquarters, and (d) a corporate staff of 293. The division presidents stated that the large corporate staff burdened them with constant information requests, report requirements, etc., adding to their costs. So we executed a hostile takeover (day 1 of new AMF): on day 2 the corporate staff was reduced from 293 to 3! The divisions flourished; to my knowledge all or most have done well...........Hmmm, let's see if I can draw any current parallels to the State of California.

Pavlov's Dog

  Pavlov's experiments related a single event, a stimuli, to a dog's reactions. The ringing bell, when implemented during feeding events, eventually was of itself sufficient to initiate the dog's salivary reactions.

Humans are a little more complex and can process multiple incentives, multiple stimuli, and multiple reactions. But sometimes we're not more intelligent. I hate to keep picking on yesterday's General Motors: I wouldn't if their atrocious management practices were isolated rather than just being more-publicized examples of broad practice.

Letting Go

Every organization has one, or several, or lots. People who just can't pull their weight. Maybe they don't have the skills, or maybe not the drive, or maybe they're misplaced. You can be certain that either: (a) they know they're not doing the job and are miserable each day or (b) they don't care. In the latter cae; who cares? In the former case, it's always a good idea to demote the person to a job he or she can do and then you'll have a great employee. But there's not always an available landing spot. So what do you do?