Bold Exec

BK Lite

 GM, Chrysler, Citi, BofA, AIG--each faced three and only three clear choices; bankruptcy Chapter 7 (liquidation of assets--meaning shutting the company), bankruptcy Chapter 11 (reorganization--a laborious legal process in which all constituencies lose something on the prospect that the company can survive), or Government rescue. Most in the public and apparently many in government don't understand the difference between 7 and 11, believing that a company going into bankruptcy is kaput! As a result there was very little governmental will to have allowed an 11 bankruptcy. Instead, the third option, Government rescue, was applied without any regard--it seems--for the meaningful and useful provisions inherent in an 11 bankruptcy. Today i'll describe why BK Lite would have been a breakthrough for the government/auto industry, and next week the same for the government/financial industry.

Puh-leeze

Son; "Dad i need $1000." Dad; "Your gambling addiction has ruined your savings, I won't add to your problem." Son; "I've seen the light, please Dad." Dad; "Okay."

Next day--Dad; "I see that you were out gambling last night and lost $1000." Son; "Yes Dad but not the $1000 you gave me, it was the $1000 I had set aside to make my car payment."

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GM, JPMorgan, assorted others in the BailoutCrowd (i'll call them BC); "U.S.,I need $10B." U.S., "Your gambling addiction and profligate spending has ruined your company and threatens our country, I won't add to your problem." BC; "I've seen the light, please U.S." U.S.; "Okay here's some TARP funds."

Next day--U.S.; "I see that you're still at it, spending huge amounts on new jets, guaranteed bonuses, and non-negotiated payments to 3rd parties." BC; "But it's not from TARP funds."

Decisions, Decisions, Decisions

                         A frequent comment to me-- "I suppose that when you go into a new assignment you find lots of bad decisions have been made!"

No that's typically not the case; rather previous management didn't make any decisions--there was a backlog. An organization suffers more from the lack of decisions than from bad decisions. Why?

With bad decisions at least you learn; you get feedback; you have a frame of reference; the middle managers in the organization at least have a direction. With no decisions little is learned; you get no feedback; you have no frame of reference; and middle managers have no idea what to do.

In your first 100 days in a new assignment, make sure you clearly identify the key decisions that must be made, make them, and communicate those decisions clearly and continuously to your managers. Sometimes they're tough and you're tortured; how do you deal with that?

From The Other Side of the Looking Glass

     When a previously successful business gets in trouble, the skill set required to save it-as I described it in my last entry-is radically different than that required to have previously built it. Not many can make the transformation; typically it takes a new CEO not emotionally tied to the assets, programs, products and people. Here's an example of the mind-set change required.

Say your family's finances have become really difficult and every dollar is meaningful. You think "I wish i hadn't just recently spent $500 on my new suit and had that money back." "I could sell it for $100 but I like that suit, I spent a lot of time finding it and getting fitted, that would be $400 lost and I'll eventually have to pay $500 for another new one." "So no way."

Now you're about to lose your home and your brother comes in to help. First thing he says is "we'll sell this suit and get $100 which we can use to help pay the mortgage." That's the idea--clearly an approach that is From The Other Side of the Looking Glass.

Cash Entrepreneurs

Talented and successful entrepreneurs make a business grow. They create new products, markets and customers, increase market share, revenues and operating profits, encourage their employees to new accomplishments, and take pride in their accomplishments. Then, as is inevitable, circumstances change as we are now experiencing. All these entrepreneurial skills are of limited use when all the business indicators are going down--when the accumulation and preservation of cash becomes paramount. Cash entrepreneurialism becomes the operative skill-set.

Many entrepreneurially-managed companies fail as the CEO cannot completely change his skin from leopard spots to tiger stripes, to change from being a wide receiver to a defensive lineman. Shedding a manufacturing facility that took energy, effort, and years of work to create; reducing salaries or laying off employees that previously took so much time to recruit; selling off slow-moving inventories of the newest pet product at below cost: these actions are excruciating to the classic entrepreneur whose whole soul was invested in the creation process.