Category Archives: Success

The Business of Life Chapter 33 – like snakes without the ladders

On the day we acquired the Metal Spinners group of companies (MSG)I drove the 100 miles to Newcastle to take control of our new acquisition after just two hours sleep.  Following months of tortuous negotiations that I swear would have sent a saint insane, we had completed the transaction at 4.00am that morning in our lawyers’ offices in Leeds.  Roger, Mark and I now owned (along with 3i, our equity partners) a specialist engineering business that had been formed in 1953.  Along with our nearest competitor, we were jointly the largest such firm in the UK.

Like snakes without the ladders

 Our business strategy, which had won us the backing of 3i & Allied Irish Bank, included not only growing the MSG business organically but buying up a number of our competitors, rationalising production and ultimately selling on the business.  However, that morning when we addressed the workforce in two mass meetings at our largest factories in Newcastle, we spoke only of our commitment to the business and of continuing investment.  Whilst Mark set about the process of ensuring that we had firm control of the company’s finances, Roger and I set off with Clifford (the previous owner) to meet some of the major customers.

 The meetings went well and Clifford was companionable and co-operative enough.  The following week I travelled with him again to meet more customers as Roger immersed himself in the production processes.  This time little inconsistencies began to emerge in Clifford’s accounts of a number of aspects of the business and it wasn’t long before Roger’s assessment on meeting him for the first time came back to me, “I wouldn’t trust him as far as I could throw him.”  Given Roger’s size advantage I was prepared to allow Clifford some latitude but doubts nagged at me when he became increasingly evasive over what should have been straightforward matters.  This evasive behaviour plus a word in Mark’s ear from the management accountant as he departed for a new life in Australia sent what had been merely niggling doubts into full blown alarm.

The more we dug into the company’s affairs the more our doubts rose until we had a dossier of concerns that we laid before our lawyers.  Their advice was that we had significant claims against the vendors plus a damaging potential problem with HMRC.  Warning letters from our lawyers were sent out that were initially ignored only eventually to result in a counter claim from the vendors.  Additionally, as the stakes rose and the acrimony mounted, towards the end of that first year Clifford demanded repayment of the loan notes he had issued as part of the sale and purchase agreement.  These loan notes (which gave Clifford the tax advantage of spreading part of the consideration over two years) had provided a large chunk of our working capital and were repayable on demand to Clifford.

Word was at the same time filtering back through the local business community that Clifford was claiming we had no idea how to run the company, would be forced into administration and he would buy the business back for a song.  Hearsay, yes.  But the demand for repayment of his loan notes could have been fatally damaging.  However, our business was performing extremely well and we had built something of a cash mountain by year end.  We repaid the first loan note, pushed on with the claims and over the next two years incurred huge legal bills in progressing our investigations and the claims.

The business was certainly performing well and Roger, Mark and I had settled into our respective roles.  Roger had his hands around his role of MD and his wealth of experience not only as an engineer but someone with immense knowledge of the steel and engineering sector worldwide was proving ever more valuable.  With complete agreement over strategy, I had immersed myself in two key tasks.  The first was ensuring we progressed our legal claims in the most effective manner.  The other was researching companies in our sector seeking out potential acquisition targets.  Other problems were growing though.

 “We need a word, “Roger said one day, closing my always open office door, “We’ve got a real problem with Mark.”  He then proceeded to spell out a litany of concerns he had over Mark’s ability and performance as financial director accompanied by hard-hitting evidence.  I was shocked.  I had seen Mark work tirelessly with me over the previous two years through one rejected bid after another.  I had been impressed with his understanding of corporate finance and his grasp of the wider aspects of business strategy.  I had seen Mark go through a particularly difficult period in the month prior to our acquisition when it looked increasingly like the transaction would be successfully completed.  His dilemma had been over timing of his resignation from his existing role as FD in a small Plc.  I had needed Mark full time from the very first day if we were successful and he would have to resign at least a month ahead of our scheduled competition.  In the event he had resigned but with a young family it had been a difficult decision to give up financial security.  I said I would speak with Mark.

 The process that took place over the next few weeks was far from easy.  I liked Mark, enjoyed his company, had been impressed by his financial judgement and knew his family well.  I felt committed to him for his support over the previous few years but the evidence that he was failing was overwhelming.  It was not a matter of experience, he certainly had that.  The problem appeared to be that he lacked many of the competencies required for the role.  I prepared for our meeting by reviewing the requirements for the role of finance director, covering every aspect of the role.  I shared our concerns with Mark and provided him with a copy of the list I had drawn up.  I suggested he took a week off to consider how he felt he matched the requirements of the role.  He agreed to do this.

A week later we met and I was saddened to hear from Mark that he accepted that he was deficient in most of the key competencies required for his role.  Nevertheless he felt he could improve.  What he was basically admitting was that he did not have the aptitude for the key aspects of his role.   Roger and I discussed the situation at length.  We were just a three man board.  Having recently acquired a large and demanding business, with a potentially crucial legal claim unresolved and with the tasks of reviewing and improving every aspect of the business, we could not afford to be carrying anyone.  With a vast amount of debt, external shareholders and financial backers, it was essential that the financial systems and processes and the man responsible were bombproof.  Quite apart from our considerable personal investments, we had to consider the wellbeing of over 150 employees, our customers and suppliers.

Parting company with Mark was another low point of my career.  But I believe that the process and timing of our approach enabled him to forge a career more suited to his undoubted skills and competencies before the situation degenerated into one infinitely more damaging to all concerned.  Certainly the relationship with our financial backers was going to be critical over the next few years and the role of FD would come under the spotlight on many occasions.  Luckily for all concerned, as a result of experience, our shareholders’ agreement made explicit provision for dealing with the transfer of equity in such circumstances.  Mark went on to forge a new career as a financial advisor, a role he was well equipped for.

Once more we were thrust into the task of finding a suitably skilled and experienced executive to join our team.  In the event the hunt was not a lengthy one and after a thorough process Malcolm joined us as FD and became a fellow shareholder.  Having worked with Roger in a previous business for many years, he was a known and able man who made a strong contribution to the business (although I do have to say he seemed to operate occasionally on a unique and personal time and priority system).  We were a team that would work well together.

Over the next year or so the process of updating both the fabric of the company, its systems, procedures and equipment gradually sorted out the able employees from the also-rans.  We were pleased to be able to support and enhance the roles of those who were skilled, loyal and committed but were not sorry to wave goodbye to a few who decided they couldn’t or wouldn’t change.

When we had acquired the company we had inherited well over 1,000 customers on our sales ledger.  Following a complete strategic review, including analysis of each and every one, we found the best margins were flowing from those customers for whom we produced the most demanding and technically difficult components.  These customers also had one other characteristic in common – they all produced a final product that absolutely must not fail during life.

This review enabled us to form a strategy of concentrating on identifying, reaching and influencing those potential customers in certain key industries with the most demanding needs.  This strategy led us into major investments in new plant, equipment and engineering techniques.   But it also gave us the security that when we converted such a critical and demanding customer to our process, there simply wasn’t another company that could replace us.  We were to suffer the agonies of our largest customer (a global giant) constantly trying to replace us as a way to drive prices down,  ultimately finding that no-one else in the world could do what we did.

As we were moving towards the end of our second year we had drawn a blank in trying to find a worthwhile competitor to acquire.  Exhaustive research and meetings with a number of the most promising firms had failed to reveal anything worth acquiring.  The picture was emerging of a sector of the engineering world that was continually fighting over the same narrow amount of business for components that were traditionally made using the process of spinning.  Furthermore, the only weapon in the armoury of these firms seemed to be price.  As a consequence almost none of them were making any worthwhile profits and they hadn’t been able to invest in new equipment or techniques.  In short, they were caught in a vicious downward spiral.

Our own newly confirmed strategy seemed to make more sense than ever.  Why fight the competitors in our own sector for commodity components where prices were terrible when there was business we could win from other processes?  Yes, it would be far harder but there had to be business out there we could take from other engineering processes where we could win on technical advantage.  The opportunities were global, the challenges were significant and Roger was itching to get stuck in.

 Meanwhile, events seemed to be conspiring against me once more.  Not only was Bridgestream looking decidedly sickly but another of my investments was beginning to show signs of terminal ill health.  And then an even worst piece of news struck just after that second Christmas that had appalling potential consequences.  Malcolm telephoned to let me know that Roger had been taken seriously ill.  Just how many problems could come at the same time?

Image courtesy of thinkbrigade.com

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The Business of Life Chapter 30 – trust and integrity

With two management buy-ins (MBI) completed plus appointment as non-executive chairman of two other firms, it could reasonably be argued that I was more than fully occupied.  However, the two MBIs were not deals that I had initiated and I had only a minority equity stake in each.  So, my goal remained that of acquiring a substantial engineering business as head of my own MBI team.  Things were looking up with a heads of agreement signed and a period of exclusivity guaranteed to acquire the Metal Spinners group (MSG) of companies based in Newcastle upon Tyne.The Business of Life - Trust & Integrity

Mark and I set about the process of refining our business plan for the acquisition.  We now had a complete team of advisors with Phil and Ian (one of his senior managers) at KPMG providing corporate finance advice and Jonathan a partner at Pinsent Curtis on the legal side.  Paul and Mark T at 3i were working with us to ensure we could complete this transaction (following our three previous failures where we had been heavily outbid) and add another investment to their portfolio.

The original MSG company in Newcastle had been formed in 1953 by Clifford’s father and had grown steadily, supported by continuous investment in equipment from the leading German manufacturer of the CNC spinning lathes the business used.  This continuous investment had enabled the business to constantly expand its range of capabilities.  With its low level of exports and the possibility of offering solutions to a range of different industries I was excited by the development possibilities MSG offered.  I made time to visit the various Metal Spinners companies in Newcastle, Manchester and Birmingham to carry out a detailed review of the facilities.  There were five factories spread over these locations with a total production area in excess of 150,000 sq ft.  Whilst the range of equipment was of high quality it was clear that all of these factories were old.

Clifford was a curious character; slight of build and height he may have been but he seemed to posses a vitality that spoke of commitment to the business he had inherited.  The only other working shareholder was Mike, the finance director who had been with the company for many years.  I felt that I had established a good relationship with Clifford and this impression was reinforced when I called on one occasion to confirm a further meeting when he invited me to stay at his house the evening before.  Following a very pleasant dinner at a local hotel we retired back to what I discovered was Clifford’s holiday house (some 35 miles north of Newcastle) where a bottle of fine cognac settled us into a conversation that lasted long into the night.  Clifford, perhaps lubricated by the cognac, talked at great length of his life and his family. The following day the meeting went well and I drove back to Yorkshire convinced that our relationship was stronger than ever and that the deal was really going to happen.

A day later Mark T called me, “What on earth went on at your meeting? he enquired. “Clifford just called me to say that he can’t trust you and the deal is off!”  I was stunned.  Going back in my mind over the entire period we had been together I could recall nothing that I had said or implied that could have given Clifford any cause for concern.  In fact, during the entire time we had spent over dinner and back at his house that evening I had merely been an attentive listener to Clifford pouring his heart out over many very personal issues.  It made no sense and I called Clifford who finally agreed to meet me.

Seated together in a hotel just off the A1 a few days later, I attempted to get Clifford to share whatever concerns he felt he had with me.  His demeanour had changed significantly and he was evasive and imprecise speaking only in the vaguest of terms concerning his new-found lack of trust in me.  “OK,” I responded ” then I will call the acquisition off.  If you have no trust in me, and I really don’t know why, then there is absolutely no basis for trying to complete what will be the biggest transaction either of us has ever entered into.  If you do wish to complete the deal then I must know that you have no reason to mistrust me.”  Clifford stared away in the distance for what seemed an age and I could almost see the mechanics of his brain working.  Finally he turned to me and said he would withdraw the comment; no further explanation was offered.

This was the second time in a few years that someone very important to me in business had poured out the most intimate details of their personal life to me only subsequently to turn on me without warning.  I could only assume that both Swaanen  and now Clifford had, upon reflection, felt that they had let their guard down, revealed too much, felt weakened and decided to get their defence in first.

It was increasingly clear that I needed to supplement our team with the addition of an experienced engineer who would be destined to become managing director upon completion.  I started a process of trawling through contacts offered by our various advisers and other contacts.  With the deal community in full flow in 1997 (and destined to reach a peak of buy-in / buyout activity in 1999) and the business world still shedding senior executives, there was no apparent shortage of candidates to join our MBI team.  But when I had completed my essential selection criteria the list got very much shorter.  Finally, following many fruitless meetings and interviews, as a result of a 3i introduction, I met a seemingly perfect candidate I’ll call Pete.   Mark and Mark T both agreed and our team was complete.

My business life had become increasingly frenetic but was still hugely enjoyable with every day bringing fresh challenges (that I shall return to later).  So, it was with a mixture of surprise and regret that I faced the fresh question from Mark T “How much time are you intending to spend on the MSG business if we succeed in this acquisition?”  Given that three of the roles I held were as a result of their introductions, I was a little annoyed at the inference that I wouldn’t be able to cope.  I reasoned to him that with our new team member in place as MD designate all would be well in future.  It was clear from his reaction, however, that all was not well now and something had to give to maintain their support for the MSG deal.

The previous year I had agreed to become non-executive chairman of Jerrard Bros.  Working closely together we had refocused the business and the management team and profits had increased.  However, Steve the major shareholder (and son of one of the founders) was becoming increasingly visible as the major problem.  Previously unhappy in his role of MD and wishing to be freed from the demands of people management he had expressed a strong desire to simply concentrate on product design.  So, we had reshuffled and recruited and once again events were proving Steve to be the problem; his one responsibility, a new product, was woefully behind schedule and he was blaming everyone else.  With 3i’s implicit message that something had to give ringing in my ears, and knowing that the company was 90% owned by Steve, it was his train set and I knew that I was flogging a dead horse.  I resigned at the next board meeting.

The next few months brought fresh frustrations and challenges not least of which was a growing concern over Pete.  Despite his qualifications and experience I was becoming concerned at how little he was contributing to the process.  Mark and I were working every conceivable hour to pull the ever increasing stream of due diligence information into our business plan and I called a meeting to review the latest iteration face to face.  Pete contributed nothing, instead spending the entire time attempting to massage a previously agreed package higher.  When he returned to ‘needing’ a Jaguar XJ6 once more, Mark and I looked at it each other and I decided it wasn’t going to work.  Pete was dropped.

Now some three weeks before a scheduled completion date, I had no managing director candidate on the team.  I had agreed with 3i that my role would be that of executive chairman spending a minimum of two weeks a month in the company but that was predicated on my having a full time MD in place.  Without an engineer as MD, it was simply not going to work.  I called Mark T and Phil and let them know what had happened in my best low key manner and assured them a replacement was no problem.   Except that it was a major one.  I saw more candidates but no-one was even close to being right.  Apart from the big company experience I wanted someone who would be at home in a hands-on role in a medium sized company.  No luck and time was running out.

The results of the KPMG financial due diligence were due and two weeks before scheduled completion I travelled to their Newcastle offices to receive the briefing.  All had gone well with their investigation and as I was leaving one of the local managers put his foot against the door of the lift to prevent it closing, “Are you still looking for an MD?” he enquired, “I played golf with a great guy yesterday whose also trying to do an MBI.”

When I met Roger two days later in the 3i offices in Leeds we found we had a very much aligned view of business.  A highly qualified and experienced engineer, his CV showed everything I was looking for and he was happy to join the team on what looked like a done deal.  After a brief meeting with Mark T, we shook hands on what we both hoped would be a mutually rewarding relationship.

The next couple of weeks flew by in a whirl of constant meetings to review the legal due diligence, environmental surveys, the latest version of our financial projections, obtain bank finance and to discuss the equity split with 3i.  This latter aspect gave rise to a ‘blood on the walls’ dispute with me fighting unsuccessfully for the team to retain more than 50%.  In the end I had no alternative but to settle for just less than this figure but I did manage to win some other very useful concessions.  In the last week there had also been a very frustrating meeting in the office of MSG’s lawyers in Newcastle.  Very late in the evening with a couple of key issues still to be resolved, the main partner stood and declared he was going home!

Finally, the morning of the day for the completion meeting found Roger, Mark and I gathered in the offices of Pinsent Curtis in Leeds.  Most of the day wore on with little happening initially.  Allied Irish, our debt funders, arrived during the day in  the company of a supercilious lawyer to agree the finer points of the banking agreement.  I won nothing from that negotiation.  Clifford and Mike arrived late afternoon and were shown into a separate room along the corridor.  It was only at this late hour that we got to see the disclosure letter they had brought, raising fresh queries over the warranties we required. The pace quickened with what seemed like a fair impression of shuttle diplomacy as lawyers from both sides hurried back and forth attempting to resolve one query or another.

Despite the seven months of painstaking work it had taken to get matters to this point fresh information seemed to be arising in a flood.  Newly discovered potential problems required perhaps a provision against the price we were paying with an amount held in escrow or a deduction in the price.  Each of these problems required a delicate negotiation with, by now, manifest mistrust between the parties. The evening wore on with a painfully slow resolution of one issue after another.  Then, at one o’clock in the morning, Clifford and Mike walked out and disappeared somewhere into night-time Leeds, pausing only to inform their lawyers that they had had enough and might be back or not.

Almost the last issue we had on the table at this point was our requirement for a deduction to cover repairs to the roof at the Manchester factory, something that had only come to light in the last day or so with a surveyors report.  The sum involved though relatively minor may well have been the last straw.  All we could do was sit and wait to see if they would return.  Time ticked by and then two extraordinary events took place, which to this day illustrate to me integrity and honesty and what happens when it is lacking.

Quietly sitting on my own in a corner of the maze-like, old building, trying to relax and remain positive while hoping that all these months of work for everyone had not been in vain, Jonathan the head of our legal team sat beside me.  “Look, don’t worry,” he said quietly and very precisely, “if there are any issues still remaining we can get these sorted out later.  The key thing is to get the agreement signed tonight.”  I couldn’t belief my ears.  I had gained enough experience to know that problems in legal agreements only got worse with time and involved huge additional fees.  I waved him away.

Some time later, Ian from KPMG, also sought me out, solicitously enquired how I was holding up and then counselled “Look, if everything isn’t right to your absolute satisfaction, walk away now.  They’ll be other deals but for God’s sake don’t sign an agreement you’ll live to regret.”  I looked up at him and could only nod and squeeze his shoulder.  KPMG in the shape of Phil, Ian and their whole corporate finance team had put a simply massive number of hours on the clock on my behalf and if this deal fell through they stood to wave goodbye to fees well into six figures (and probably very healthy personal bonuses).  Absolute integrity demonstrated.

Seeking out Roger and Mark I brought them up to date on the two conversations and asked their opinions.  The response was immediate and unanimous; get it right or we walk away.  Mark T was in agreement; he’d seen the results of too many bad agreements.  Shortly after Clifford and Mike reappeared and disappeared with their lawyers into their meeting room.

A few minutes later and the remaining issues were resolved (at least to our satisfaction).  We were then ushered into the main board room where a sea of documents was laid out for our signatures.  The formalities completed, champagne was poured, backs were slapped, thanks exchanged and words I cannot remember were uttered.  It was 4.00am on the morning of the 8th July 1997 and I had (with a simply huge amount of debt and VC finance) become the owner of a substantial engineering firm that was a leader in its sector.  I later learnt that our deal was one of only 54 MBI deals completed in the UK that year.  Not bad for a lad who’d left school at fifteen with no qualifications.

I crawled into bed at 5.00am, rose again two hours later and drove the 100 miles to Newcastle to take control of our business.  Life was about to get more complicated than I could ever have imagined.

The Business of Life Chapter 29 – and then three come along at once

The New Year of 1997 brought surprises that, for once, were something to celebrate.  Shortly after the world started work once more after the long Christmas break, I had one of my regular review meetings with Phil at KPMG’s offices in Leeds.  “We’ve had a positive response from the last batch of letters I sent out,” Phil informed me, “Metal Spinners up in Newcastle are prepared to meet you.  However, when I spoke with them they told me how much they wanted for the business and it’s more than a bit rich.”  I remembered the business well from the last batch we had discussed and when Phil let on the amount they wanted, I groaned inwardly.The business of life chapter 29

There are many ways of valuing a business but one of the simplest is that of a multiple of sustainable earnings.  Somewhere between 6 and 7 times profit before interest, tax, depreciation and amortisation would be a reasonable average for a privately owned manufacturing or engineering business at the time.  The problem was that the figure they had quoted Phil was way above that.  “Sod it,” I responded, “We haven’t had a nibble for a while and the pipeline is a bit depleted, I’ll go and see them.”  We fixed a date for a week or so later and Phil volunteered the services of Crevan, one of his managers, to accompany me.  Perhaps there was some reason not evident in the published accounts as to why they had such an apparently inflated view of the value of their business.  Time would tell.

Back in my office the phone rang a short time later and I had Mark T from 3i on the line.  “We’ve just concluded a management buy out (MBO) of an engineering business in Sheffield and we need a Chairman on the board.  No guarantees that they’ll pick you as we have provided them with the names of a few suitable candidates, but are you interested in having a talk with them?”  A few days later saw me seeking out the address on a small industrial estate on the south side of Sheffield.  The business was housed in old premises and specialised in the production of small batches of bespoke tungsten carbide components and was very profitable.  The business had been bought out by its management (the engineering director and finance director) who now shared the role of MD.  I was given a tour of the facilities and we then discussed the business plan they had used to support their bid.  The meeting seemed to go well and they said they’d let me know when the other candidates had been seen.

The next week Crevan and I made the journey up to Newcastle and met with Clifford the MD and Mike the finance director of Metal Spinners (Newcastle).  The business had been founded in 1953 by Clifford’s father and proved to be spread across numerous sites in Newcastle, Washington, Manchester and Birmingham.  The premises that we saw that first visit were old (like so many UK engineering firms I had seen over the last year or so) but there was something about them that gave off good vibes to me.  I liked the fact that their main process (metal spinning) was very much a niche one and that they had both a major blue chip industrial company as their main customer plus over a thousand others.  The incredibly welcome news was that the business was in fact a group of eight separate companies that were non-consolidated.  The combined turnover and profitability of the group was far higher than I had realised (having only seen one company’s accounts) and put the asking price right back in the realms of the feasible.

The other great news was that the business was not on the market and wouldn’t be if we could deliver a deal on their asking price.  Crevan and I came away with a complete set of books for the total company and pages of notes that we had made during our discussions.  Driving back to Yorkshire we summed up the opportunity; the shareholders seemed willing (although there was an absent shareholder and a family trust), the business was in a highly specialised niche, it was profitable, it had very limited exports and seemed to offer once more the opportunity to acquire smaller competitors and consolidate onto a smaller number of sites.  This was the best opportunity I had seen in a year and a half and it was exactly the type of company I had set out to buy.  Crevan and I agreed a split of the workload needed to assess the business and I headed back to my office to telephone Mark with a briefing on the day’s events.

The following day I received a call from one of the joint MDs in Sheffield.  They had completed their interviewing and wanted to appoint me as chairman if we could agree terms.  A few days later I formally became the non-executive chairman of Hallamshire Hardmetal Products with a requirement to chair monthly board meetings and be on hand to guide strategy, oversee the delivery of the business plan and provide whatever assistance they might require.  The company was run on a relaxed basis but I was pleased that their accounting systems were rigorous and Trevor H and Trevor S (the joint MDs) were easy enough to work with but had an all consuming passion in keeping things simple.  There isn’t a great story to tell but over the next ten years or so we formed a great working relationship, evaluated several businesses, bought a smaller competitor and then staged a further buy out from 3i.  The business never failed to make profits in all these years and was finally sold to a buy-in candidate in 2008.  Sadly, Trevor H never lived to realise the fruits of his labours, dying a short time prior to the sale.

Meanwhile, I was still in the midst of evaluating the Metal Spinners business when Mark T came on the phone once more.  “We have a buy-in deal we’re trying to complete but have a problem with their choice of chairman and are not sure about the business.  Would you like to have a look at the business for us and let us know your views?  If it looks good, we’d like you as investing chairman to lead the team.” There’s a long and tumultuous tale to tell here but suffice for the moment to record that I did approve and complete the deal and became investing chairman of Rothmere Ltd in the first half of 1997.

Over this hectic period I was burning the midnight oil with Mark and KPMG to pull together a heads of agreement with the owners of Metal Spinners.  Earlier that year we had managed to get Clifford and Mike down into the 3i offices in Leeds to thrash out an outline deal.  The sum that they had put on the table had transpired to still be far too expensive once Mark and I had put together a full 5 year projection.  I had discovered Clifford to be volatile and I was concerned as to how the meeting would go.  After an hour or so we had reached what seemed to be a significant hurdle and were well over seven figures apart.  We were also surprised to learn that they had appointed neither lawyers nor accountants to advise them; proving to be both advantageous in the short term and a near disaster later on.  Paul called a breakout and very quickly came up with a plan.

That morning we had received the first set of up to date management accounts and learnt that the business was rapidly building a substantial pile of surplus cash.  Going back into the meeting Paul spelt out (in the absence of any advice of their own) the net proceeds they were likely to walk away with after tax if we delivered the price they were asking.  This wasn’t enough to keep Clifford and Mike happy.  He then asked them what they thought they would be happy receiving after tax.  Having established this figure, Paul then laid out a formula whereby they took a combination of pre-sale dividend of the cash they had build up and took a substantial slice of the proceeds in the form of loan notes spread over the two years following a sale.

This formula of deferred consideration would give us a hefty contribution to our working capital requirements and lessened the upfront investment.  These loan notes together with the pre-sale dividend (their own money) produced a substantially lower overall tax bill that just brought the net proceeds up to the level Clifford and Mike had agreed they wanted to achieve.  In effect they were financing part of the transaction to achieve a lower tax bill.  They agreed and by lunchtime we had a signed copy of heads of agreement on this basis.  As part of the agreement they were giving us a period of exclusivity to enable us to complete the deal during which they would neither approach another prospective purchaser nor would they enter into negotiations with any other party.  The deal was on and it seemed achievable but a vast amount of work needed to be done in terms of due diligence.  A phrase was then uttered by Paul that was to come back to me time and again over the years in every transaction I was a part of,  “The devil’s in the detail.” he cautioned.

A couple of weeks later Mark T called me to ask what my time commitments were like.  By this stage I was chairman of one 3i investment and had recently completed my first MBI as investing chairman of another.  In addition, over the last couple of years I had continued my work with Jerrard Bros Plc and had been appointed chairman the previous year.  I responded that I still had some spare time and asked what he had in mind.  By this time it had become clear to me that, even if I couldn’t pull off the one big acquisition I had set my sights on, I could achieve a very nice portfolio of non-executive roles combined with equity participation.  We agreed to meet the following day.

Sat once more in the 3i offices (where I was beginning to feel at home) I listened to Mark T describe the problem he had.  They had backed the growth plans of a small technology products distributor that had grown extremely rapidly (by around 35% each year) and  had expanded into the USA and Germany.  Profits had been sacrificed for growth but the latest year’s results had produced an unexpected loss of £1m (largely as a result of the US investment).  The shareholders equity was now ‘below water’ and the bank was making ominous noises.  Would I go and meet the two director shareholders and, if they agreed, join the board as a non-executive?  I was subsequently appointed to the board and another rollercoaster ride was about to start.

Over and above my due diligence work on Metal Spinners and maintaining the research and analysis to keep the MBI target pipeline full, I was now working for various periods each month in businesses based in Croydon, Hull, Heathrow and Sheffield with various additional activities in London, Bristol & Birmingham.  I stopped all efforts to win new consulting clients and knew that something would have to give in these activities if I managed to pull off the major acquisition I had been seeking.  I was burning the candle at both ends and in the middle but was enjoying life more than I had for many years.  And any concern about money had disappeared over the previous few months as my portfolio of activities had grown.

My new life as a non-executive & chairman seemed to be the role my career had been building towards.  I was responsible to 3i to ensure that their investments in the companies I had joined produced the results they had planned.  However, this role was legally (and in practice) overridden by my responsibility to all of the shareholders (and in my mind to all of the stakeholders) of these businesses.  My broad experience had provided me with an ability to see these businesses in a wider context than their other directors (whose deep functional & specialist experience certainly exceeded mine).  Freed of the responsibility to manage a day to day role I was able to concentrate on direction, strategy & people (including customers).  These key aspects could only be achieved as a result of the closest working relationships with my fellow directors and their teams.  I was finding my business life to be immensely fulfilling.  Unfortunately, I was also going to find out that it would shortly become vastly more challenging than I could ever have imagined.

Meanwhile, alongside my work and responsibilities with these four companies, I was ploughing every once of energy and expertise I could muster into completing the acquisition of the Metal Spinners group of companies.  I was increasingly confident that I could pull this off but completely unaware of the scale and scope of the problems that were about to emerge in three of the other companies.

Image courtesy of en.wikipedia.org

The Business of Life Chapter 28 – when it’s so much harder than you imagined

Unlike many MBI candidates I had met or heard of who merely waited for a referral from an accountant, lawyer or VC (usually whilst they continued to job hunt) my strategy was concentrated on researching the market to find the hidden opportunities,  those businesses that had yet to be put up for sale that I could convince to sell to me.  So, I was pleased and surprised when I received a referral from KPMG to a business that they knew was being put up for sale.  My months of hard work were beginning to pay off  and it meant that I was being taken seriously as a buy-in candidate.Staying-the-Course (The Business of LIfe)

The company concerned, a paper processor, was housed in an old Yorkshire mill (yet another one) and, as the name suggested, it processed large rolls of paper into toilet rolls, kitchen paper, napkins and the like.  It also had a small trade recycling old clothing into cleaning cloths for the engineering businesses that had once been plentiful in the area (destined to become the legendary oily rags). I can’t now recall the name of the paper processing side but the rags were sold under the trade name of Hyman Wipes, something that has stayed in my memory.  Can’t think why.

My heart sank as I toured the old premises filled with machinery and employees that looked for all the world as if they were from the same vintage.  The finances were not disastrous but the business would struggle to stay healthy and there was no way that it would be able to repay the debt I would have to take on to buy the business, let alone any investment in new equipment.  However, if I could buy not just this business but one or more of its competitors then there would be considerable scope for rationalisation into a small group of businesses in the same sector (with increased profits flowing in due course).

After writing up the notes of my visit and sending these off to Phil, I set about researching competitors that would be likely targets.  I soon had a meeting organised with the owner of another paper processor that seemed a likely target.  He was wary and would not agree to my visiting his premises but instead met me at a nearby hotel.  We played cat and mouse for an hour or so but it became clear that there was not going to be a meeting of minds.  Back in my office I spent more time analysing the sector.  It was clear that the smaller companies in the paper processing industry were under attack from far larger players who would be completely out of my league as acquisition targets being mostly owned in turn by yet larger companies.  I met with Phil, took him through my findings and we agreed this was an area best left alone.

Shortly after I got a call from a partner at Grant Thornton inviting me to an event they were staging at their offices in Northampton.  The evening centred around presentations from a number of experienced representatives from corporate finance lawyers and banks.  This included some useful additional information.  But the real value of the evening was the opportunity to meet other MBI ‘wannabees’.  Many private businesses that came onto the market were retirement sales and it was not uncommon for two or more shareholding directors to be attempting to exit at the same time.  It was impossible at that stage to guess all of the possible functional skills I was going to need in a future business but it was almost certainly going to include a finance director.  So, I was delighted to meet Mark over a coffee during the mid evening break.

Mark was employed as a finance director and wished to become part of a successful MBI team.  He quickly impressed me both with his commitment and enthusiasm for our common goal and with his knowledge of corporate finance.  Some ten years my junior and with a young family, we formed an immediate bond.  With an accounting qualification and PLC experience, Mark seemed to have a good grasp of the challenges of running businesses.  Following a further meeting at which we explored each others values and beliefs in more detail we agreed to team up for the task ahead.  We were also realistic enough to agree that if either of us came across an opportunity that didn’t include the other then we would go our separate ways with no hard feelings.

Despite being based some 150 miles apart we soon fell into a productive working routine.  I continued my processes of identifying likely targets and an initial financial analysis and would send a batch of information to Mark who would challenge my assumptions and verify  (and correct, where necessary) my findings.  I was also heartened to find that Mark was able to offer pertinent comment and ask searching questions across the wider business spectrum.  Together I was convinced that we would make the core of a credible buy-in team.

Meanwhile, I had been having further meetings with 3i and formed an initial relationship and agreed a working methodology with Paul, an investment director and Mark T one of his managers.  The understanding was that I would continue my work in identifying likely targets and would bring to them a short investment proposal on short listed businesses we were intending to approach.  In this way we would know, in principle, if 3i were likely to back a serious bid.  There was a danger in this approach that had been put to me by other successful buy-in managers.  This was that there was a risk that 3i could take the opportunity and go with another (preferred) buy-in candidate leaving me empty handed. I put this possibility to one side, reasoning that I had to build a relationship with 3i that demonstrated my professionalism and commitment to them.  If I demonstrated I didn’t trust them (by floating potential deals around a selection of VCs in an effort to find the best deal as others had advised) how could I expect loyal backing from them?

Having been working on the basis that I would have to do all my own work in identifying targets, I was surprised when I received a call from Mark T.  Would I be interested in taking a look at a business (Halifax Fan) they knew was on the market?  There would be no commitment that they would either support a bid or that they would go with me in the event that they did.  We agreed to meet.  I had previously advised Mark T that, amongst a few other industries, I was specifically targeting the engineering sector.  It had already become apparent to me that many medium sized engineering companies lacked modern sales and marketing skills, often resulting in no or limited export markets.  My believe was that I would be able to bring these skills to such a business.  I was pleased to find that the company in question was an engineering business and it was based in Yorkshire.

We met at the premises of Halifax Fan for an introduction and an exploratory look at the business.  It was an interesting company that specialised in the design and manufacture of fans for a variety of industrial uses often employing unique designs for challenging applications.  It was profitable but what was really interesting was that the owner (who wished to retire) had deliberately constrained the growth of the company as he didn’t wish to have the bother of additional employees.  I could immediately see growth potential plus it also had the ability to grow via acquisition.  Having come away with a great deal of financial information I arranged a further visit to progress matters in a couple of weeks.  Meanwhile, Mark and I started work on our analysis of the financial situation and into the specialist market for industrial fans.  A further meeting with 3i soon followed where I presented our initial findings and plans and got a green light to submit a comprehensive business plan.  Following further adjustments our plan was accepted and we waited anxiously as it went to the investment committee for approval.  A week later I learned that approval had been gained and 3i submitted our joint bid to Halifax Fan.

We knew that other interested parties might be bidding and Mark and I waited anxiously once more following weeks of work.  A phone call another week later dashed our hopes.  We had been significantly outbid.  I was disappointed but I was also heartened that we had been taken seriously by 3i who took the bad news with a shrug and the question, “What else are you looking at?”  Mark and I pushed on with our list of prospects.

I had given up on the lighting industry following many unproductive approaches over the previous months but a chance conversation with an old colleague reawakened my interest.  “Do you know Neville is dying?” was the question that took me by surprise.  Neville had been a customer of mine for many years,  running a well respected lighting distribution business.  I also knew Neville well as I had taken him on a study tour of a selection of US & Canadian electrical distributors some years previously.  Notwithstanding the sensitivity of the situation, I called Neville, conveyed my sorrow at his illness and best wishes and after a brief conversation said I would like to buy his business.  My approach was referred to his chairman who I met some days later and learnt that the business had already been put discretely on the market.  My pitch of venture capital backing, knowledge of the business and personal credentials succeeded in gaining me an acceptance into the process.

Over the next few weeks I met with the management team, collected information,  visited the retail operations they had and burned the midnight oil with Mark carrying out detailed analysis and pulling together our basic financial projections.  We then applied various sensitivity exercises to stress test the model before I wrote up a very detailed business plan which I submitted to 3i.  We agreed an offer, the plan went off to the investment committee and, once approved, our bid was submitted.  I knew that our price was realistic and our plans (including selling off the retail side and acquiring other distributors) were rational.  I had even found time to approach and have initial discussions with our first post acquisition target.  However, a few weeks later our hopes were dashed once more as we received the news that a trade competitor had outbid us by 100%!

During this period (mid 1996) I was still processing large numbers of potential acquisition targets through my financial and strategic appraisal model.  Following this latest setback, I stepped up the pace, extending my networking and research activities.  Over the next six months we worked on dozens more potential targets, analysing them and their markets and got down to the shortlist with several others only to miss out to trade buyers who, once more, heavily outbid us.  It was clear that although many trade buyers had no magic dust to sprinkle on a business they did have the ability to carry out immediate rationalisation and effect synergies with their existing operations.  I was confident that my development plans for our targets were sound and we also had a ‘Buy & Build’ post acquisition strategy to acquire other competitors.  The problem was that we couldn’t (and 3i weren’t prepared to support) pricing the benefits of a potential subsequent acquisition into our initial bid.  I knew this made sense as it would have raised the risk factor sky high.

As 1996 drew to a close I realised I had spent 18 months working to buy a substantial business using venture capital.  I had spent months in the most intensive efforts to locate and analysis targets, reviewing hundreds of businesses in the process.  I had become increasingly more creative in my approaches to extend my networking and increasingly more professional in my research, analysis techniques and business planning.  I had been almost to the altar on three occasions only to be heavily outbid.  Attempting to buy businesses from larger companies was also not working as, once more, competitors were willing and able to pay far higher prices.

So, at the end of my first full calendar year there had been no result.  Instead I was beginning to experience growing tension between the work necessary to bring a suitable target deal to completion & the mundane task of earning money.  To put matters in perspective I was earning at a rate that was acceptable but I knew I could be very much more successful at the role of consultant if I didn’t have to spend time chasing acquisition targets.  On the other hand, buying a business was my unwavering goal but I couldn’t spend the time at it that I needed because of the need to earn money.  This tension was made all the worse by my practice of doing whatever I attempted to the best of my ability.

Before Christmas closed the business world down for the holidays, I put together a detailed presentation for Paul at 3i laying out everything I had done with a detailed appraisal of what was working and what wasn’t and reconfirmation of my goal of acquiring an engineering business.  When we met I shared with him the frustration I had in being diverted from the task by needing to earn money but ended with a commitment to bring them a deal we could complete together in 1997.

The Christmas holiday was a welcome break with the family but it proved just too tempting to continue working as my goal was constantly at the front of my mind.  I couldn’t remember wanting anything in business as much as I wanted this.  I knew I could succeed as a consultant but, although I enjoyed the work and gave it everything I had in the time available, it really wasn’t what I wanted to do long term.  It was becoming brutally clear that I had entered a marathon not a quick sprint.  Could I stay the course in the year ahead?  Or was I chasing rainbows?

 Image courtesy of thebridgemaker.com

The Business of Life Chapter 26 – casting off the chains

On my first morning at Selmar Industries I arrived early.  After a quick word with the few managers and office staff who were in at that time, I went on a tour of inspection.  The company was housed in an old textile mill on the outskirts of Brighouse in West Yorkshire almost at the end of a tightly wooded valley.  The buildings were a veritable rabbit warren with both offices and production facilities spread across different levels connected by tight and twisting passageways.  A new warehouse had been added to the rear of the site some years before and the yard outside appeared to be a dumping ground for disused HGV trailers.The Business of LIfe Chpater 26

Following a brief session with the management I held a series of meetings for both office and production staff.  After laying out the realities of the present situation, I went on to share my personal values and inform them that we would be working together to turn around the fortunes of the company.  I then held a series of individual meetings with all of the board and management team.  The highlights of my new team were Jeff and Neil (not my group MD), sales & finance directors respectively, professionally capable, enthusiastic, committed and nice guys.  They also proved to be extremely loyal.

The rest of the board and management were way below the level of competence I had been used to and, to be honest, made my heart sink.  They offered a veneer of support but it was barely masking an underlying denial of the dire situation the company was in and any personal responsibility for their role in it.  To say that I sensed a potential resistance to change would be a vast understatement.  Quite the saddest situation I found I had inherited was that of the administration director (who I’ll call ‘P’).  How he ever came to be promoted to this level was a mystery.  It would transpire that whatever hour I arrived in the office or left, he was always there.  Though supportive and loyal, I found that he was way out of his depth and was working 18 hour days in an effort to survive.  Knowing the urgent task I had on my hands to stem the haemorrhaging of cash, I decided to make no immediate personnel changes, there would be time later.  I knew ‘P’ was out of his depth and tried to protect him as best I could but he ultimately resigned.  A couple of years later I discovered from an HR consultant that my predecessor had engaged her to carry out an assessment of the board.  She had found ‘P’ to be so far below average intelligence, she simply didn’t know how he could even hold down a clerical role.  Nothing had been done.

The product ranges of the three companies in my group included domestic and commercial battery chargers, cable reels and power cords.  The business also produced small transformers on a sub-contract basis for another company in the wider group.  The battery charger business had been a market leader (and perhaps still was) but it suffered from a number of problems that were at the heart of the group’s problems.  Sales were highly seasonal with winter producing a demand at least five times that of the rest of the year (more in an exceptionally cold year – and one of those was about to strike).  Production had to run flat out throughout the remainder of the year to build stock as it was impossible to produce sufficient to meet demand as it occurred.  Thus this major division of the business consumed cash for nine months of an average year.  Selling through high street multiples and producing own brand for some of the major retailers it was subject to intense price pressures.  With its many export markets it also had significant foreign exchange risk.  These problems were serious enough but they proved to be compounded by sheer internal incompetence as I was to find out.  The other two companies demand patterns were not as seasonal but were also subject to severe price competition especially the cable business.

Having been intrigued by the trailers in the yard I requested that they be opened for my inspection.  This revealed a horror story of incompetence and connivance.  Each trailer (and there were five or six) was crammed to capacity with components and the largest single category was injection moulded casings for battery chargers.  These casings were either for obsolete lines or had retailers’ own brands moulded into them.  The own brand versions were for current production models but we had lost the business and they could not be used because of the branding.  This was in addition to the warehouse that was also stocked to the rafters with raw materials.  Upon further investigation I found that this stock was sitting in the balance sheet at full value!  This meant the true losses of the company (£3m in the previous financial year) were even higher than the accounts showed.

Horrified, I summoned the members of the management team who were connected directly or indirectly to forecasting or ordering stock to the yard and asked for explanations.  Unsurprisingly, the excuses flowed with much finger pointing but mostly in the direction of my predecessor.  When I raised the subject with Neil (my boss), stating that we had to write these off he growled, “Make some profits first to write them off against!”  After continued investigation the causes became clear with system disconnects and plain incompetence at the root of most.  Many issues could be rectified without delay but others took much longer to uncover and put right.

If the stock situation was bad then the production processes were at least the equal and arguably much worse.  The main production floor housed five production lines for battery chargers, transformers and cable reels.  Two separate facilities existed on different levels for cables and commercial battery chargers.  The first impression of the main production floor was of a state of chaos with people, components and finished goods everywhere.

As an example the cable reel line had fifteen people who seemed merely to be getting in each other’s way.  Finding that one member of the technical department was a trained production engineer I took him down to the production floor and showed him the line.  His response was to tell me that he had done the original line balancing and that it called for only eight operatives.  When I asked him what had happened he claimed that my predecessor, when output needed to be raised, had simply thrown people at the line.  This time the excuse sounded true and I agreed to strip the line down to its original eight members.  The very next shift the slimmed down team increased output and kept it rising over the following weeks.  We started work on the other lines.

I turned my attention to the cable line that produced relatively simple standard products with moulded plugs and sockets at each end.  The process had a history of problems and never seemed to run to plan.  The production supervisor was Marion, a lady who seemed to carry the problems of the world, not least of which were related to her personal life.  I asked her to join me in her small office and asked her what she felt could be done to improve quality and output.  She looked wordlessly at me with world-weary eyes that were deep set, spoke of little sleep and many problems and shrugged.  It was clear that she had once been if not beautiful then perhaps at least pretty.  But a broken nose, black ringed eyes and poor skin had long since robbed her of any claim to looks.  I asked her again. She stared at me with those dark eyes showing a mixture of  suspicion and confusion and murmured, “I dunno.”  It was Friday and I suggested she had a think over the weekend and if anything came to mind to let me know the following week.  She walked off back to the line.  I went home that night despairing.

Arriving shortly after 7.30 the following Monday morning I found Marion waiting outside my office.  “You serious what you said on Friday?” she blurted out, “You really want to know what I think?”  We went into my office and I sat her down and assured her that I was, indeed, really interested in any views she might have to improve the line’s performance.  “No-one’s ever asked my opinion of anything, ” was her response, “but I’ve been thinking all over the weekend and this is what I think.” What followed was a succession of ideas that sounded sensible and easy to implement.  “Go ahead then.” I replied.  Her eyes came alive, “What?  Can I?”  Improvements followed quite quickly and were maintained.

An intractable problem was the night shift that was required to meet demand for the sub-contract transformer work.  Due to uncertainty concerning its future my predecessor had made a not unreasonable decision to use contract labour.  A contract had been signed with a local firm who recruited and bussed in the required labour from neighbouring towns each night.  The assembly tasks were relatively straightforward and the day shift was reasonable in its output and quality.  But the calibre of the people we were getting to work the night shift was dire.  I arrived in one morning to find that an entire night’s production had been lost to ‘an incident’.  It transpired that two of the crew assembled the previous night had been rival drug pushers who had decided to set about each other with machetes!

Output and cost of production slowly improved and the end of the financial year showed a reduction in the losses.  However, as soon as one problem was solved continued investigatory work revealed yet more.  We were by then winning more distribution but price competition was eroding any benefits gained from the lower production costs we were then achieving.  Component quality problems continued to be a problem especially the injection moulded components that came from another company in the wider group.  Attempting to resolve these problems always led to counter allegations of constantly changing demand, which I would invariably find had some substance.

Quite apart from the challenges of solving the cash drain problems of the battery charger business, we also had an unacceptably high level of product returns for damaged and faulty goods.  Carrying out a detailed inspection of our product packaging I found that the quality of the board used had been reduced to something that was totally inadequate for such a heavy product and many products were arriving at retailers damaged.  I then decided to test a number of our products myself taking a different model home each evening and attempting to follow the instructions.  My experience quickly proved that the instructions (even in English) were simply ambiguous at best.  God only knows what the myriad additional translations had turned them into but an unacceptable quantity was being returned as faulty purely because the instructions were unintelligible. .

 Into the second financial year it was becoming clear that with increased competition and the power of major retailers driving prices ever lower our efforts to improve UK production efficiency were never going to be sufficient.  With the greatest of reluctance I decided that the only future for the brand was to outsource production to the Far East.   Having made contact with several potential manufacturers, I headed out to Hong Kong with Jeff our technical director.  During that trip we visited many factories in mainland China, all were dispiriting places and, which combined with the fledgling infrastructure and teeming population, produced a hellish vision of a dystopian future.  Yes, it seemed we could achieve lower invoiced prices but quality and the lengthy supply line troubled me.  By the time we returned to the office the decision had made itself.  We had already received, via another route, a leaflet from an unknown Chinese manufacturer offering their products to us.  ‘Their’ products shown on their full colour leaflet were the samples we had left in China with our brand names carefully concealed!  It was just too risky to take the chance but events overtook me anyway.

By this time we had managed to pull the losses back to a break even position but added to the pressures within my business, our parent company was struggling to survive.  Neil my boss, with whom I had established a super working relationship, arrived early one Monday morning a few weeks later with bad news.  The group had decided, without reference to me and despite our elimination of £3m of losses, to close our operation in Yorkshire and merge with another group company.  I was informed I was to be made redundant but first had to oversee the sale of our cable business, again something that had been arranged by the main board.

For the next month or so I worked with the accountants sent in by the purchaser in the due diligence information gathering process they were conducting.  The sale concluded Neil informed me that I would have to work out the remainder of my contract (in some capacity) but ‘could take reasonable time off to seek other employment’.  The conversation turned into one of those blood on the walls events as I fought to achieve a clean financial settlement instead of working for another 10  months in some spurious role.  Not being able to reverse what was clearly a decision forced upon Neil by a cash-strapped main board, I engaged the services of a law firm specialising in employment matters.  A few weeks later I walked away with a cheque having compromised on a slightly lower sum.

This time there was neither rage nor sadness but simply the realisation that I needed to take stock afresh.  I had proved once more that I could achieve what required but to no avail.  Seeing the writing on the wall over the previous few months I had been quietly testing the market once more and had got to offer stage with a small US corporation.  However, my research on the company told me that I might well be going from frying pan to fire.  I was now 49 and had begun to feel that my corporate days were over and it might be better to draw a line than suffer the same fate again in a few years time.  My mind went back to Norman and his CVC backed purchase of GTE Sylvania and the decision wasn’t hard to make.  Reviewing my knowledge and experience I decided I could achieve a management buy-in (MBI) and I would.  I phoned the Americans and informed them I was withdrawing.  I then called all of my head hunter contacts to let them know that my time as an employee had come to an end.

I had barred and shuttered the route back into employment and, with my mind clear of distractions, I could concentrate on achieving this major new goal.  Could I do it though?  Could I really convince the venture capital community to back me with the millions it would take?

 Image courtesy of businesspundit.com

The Business of Life Chapter 25 – when it’s time to pick yourself up

The flight back from Geneva that evening gave me some time and space to get my thoughts together.  There was none of the rage I had felt when I had been fired from Akai 13 years previously.  Instead, what I felt was a mix of great relief and sadness.  The sense of relief had been something I expected, as working for Norman and Eddie would have filled me with horror.  This feeling was vindicated later that same year when a friendly head hunter shared his experience of dealing with Norman  But more of that in due course.

The sadness was an unexpected sensation.  I had spent all those years working for a company in roles that had provided me with enormous challenges, to which I had usually been able to rise.  The company had given me a superb business education, which I have since come to realise was peerless.  It had also provided me with rich and complex problems on which to apply my new found knowledge.  I still count some of the solutions I arrived at to be amongst the greatest successes of my career.  It was sad that middle management had not always been able to step back from their personal positions and embrace a new reality.  Strategic thinking had been subordinated to the protection of personal gain in many cases.  Nevertheless, I knew I was going to miss the company, the challenges it had provided and the people; even the ones who had frustrated the hell out of me.

One worry luckily I didn’t have was financial.  At least I was confident that I would find the next position before money became a problem.  With the savings I had accumulated and the severance pay I had received life wouldn’t be too bad.  I was under no illusions though as the UK was still recovering from a nasty recession.  For the moment I put that from my mind as I had more immediate matters to deal with.  I had an apartment in Geneva with more stuff accumulated over the previous year than would fit into a suitcase and I had to get it back home.  I made plans to drive over in a few days.  Speaking to a couple of my old team I discovered that they had already had a farewell lunch together but on hearing I was returning for a couple of days they decided to do it all over again – with me.

So, after a few days catching up on my sleep and delighting in being back home with Denise, I headed back over the Channel and through France to Geneva for the last time.  The lunch was bitter-sweet.  I was touched that they were all prepared to give up their time to meet with me once more.  It was apparent though that a number felt a lot less philosophical about the situation than me and it was clear that at least a couple were going to find it very tough to get another position as good as the one they had lost.  One saving grace for them was that Swiss welfare payments were a whole lot more generous than the UK but only for a time.  When the hugs and kisses were over we went our individual ways and I began the long drive back.

Back home in Yorkshire my first priority was to shake off the excesses of too many meals and probably too much to drink.  So, Tilly our Rottweiler joined me for long jogs across the moors around our home and gradually I began to feel good both physically and mentally.  Without a break I started work full time on the hunt for the next position.  In the following 6 months I travelled 20,000 miles attending interviews, networking and researching the market.  Contacts I had made were unstinting with their time and advice and the many head hunters I either approached afresh or renewed acquaintance with were generally extremely helpful.  Together with the advice I had previously received from Max, I was becoming more focussed and more professional in my approach.

Discussing the very exact profile a client had drawn up for a position I was reviewing with an extremely helpful recruitment consultant he suddenly enquired, “It was the same Norman that had run FKI that bought your old company, wasn’t it?”  When I nodded he went on, “God you had a lucky escape!  I had a brush with him a few years back.  He contacted me and said he was looking for half a dozen MDs.  Well”, he went on, “I thought Christmas had come early, so I asked Norman to let me have candidate profiles and I’d get back to him with a plan and an invoice for the amount we charge upfront.”  It seems Norman had responded, “Don’t waste my time with stuff like that, just get me the candidates and I’ll see if I like any of them.”

Things were certainly a lot tougher than they had been the last time I was ‘between positions’.  I was that much older, that much more senior and the number of openings higher up the greasy pole were that much fewer.  It became clear quite quickly that, despite my extensive contacts, I wasn’t going to walk into a senior role in the industry I had just left.  I think I was known as someone with strong views and a different perspective on things and that didn’t appeal to many.  In any case longevity in position was a hallmark of the industry I had been in and there was no game of musical chairs to join in.  Moving industries once again looked the most likely route back into gainful employment.  This bothered me not one jot as I had already worked in 6 diverse sectors and had found problems were invariably generic.

Drawing on the experiences I had accrued in my role in Geneva I reflected on the behavioural skill set that my role had really needed.  When I compared this with the psychometric feedback I had received over the previous few years, I realised that I had really been a square peg trying to fit a round whole.  Whilst the experience and knowledge I possessed had been more than sufficient for the role, my behavioural profile lacked the key political skills required.  I had the influencing skill alright but I clearly lacked what Phil Thurston at Harvard had referred to as ‘rat like cunning’.  My first approach to a problem or resistance was usually to summon the power of logic and rationality.  If that didn’t work I rarely shied away from a full blown, full frontal attack.  I could build and receive the loyalty and support of a team, I could understand the biggest of pictures and what was required to solve the underlying problems.  Yes, there was much I could learn of politics but, as I saw things, I was far more suited to leading than being led.

But my mind was beginning to move in a different direction.  During the final months in Geneva I had started to think of working alone as a consultant and had sounded out a few people I knew who had created successful careers in this way.  The advice had been to specialise rather than risk being known as a jack of all trades.  The obvious specialism was marketing strategy and I was pondering the prospect of setting up and promoting my own business when, in one of those amazingly serendipitous moments, my phone rang.

The call was from Gerard, the finance director of an old customer I had known for many years whilst with SylvaniaUK.  He explained that they had a problem he felt I might be able to assist with.  Was I interested in meeting to discuss the situation?  A few days later I travelled down to Croydon to meet Gerard and Steve, the MD of Jerrard Bros PLC.  The company had been founded by Steve’s father and uncle, had done well for many years but now required a new supplier of a key product.  Would I help them?  I said I would let them have a proposal.  During the visit it became clear that the company had reached a plateau over the previous few years and I probed for reasons.  I said I would also let them have some thoughts on working with them to address this issue also.  A couple of weeks later and after some good natured negotiation we had a business relationship based on two projects.

Almost straightaway I received two more approaches for significant projects and following discussions, proposals and more negotiations I found myself engaged to complete both.  One was a feasibility study for a foreign manufacturer looking to enter the UK market and the other was assisting a company looking to acquire one of my old, major competitors.  Very quickly I became extremely busy and drew a halt to any idea of seeking a new employed role.  I revelled in the freedom of working on projects that interested me at my own pace (although to agreed deadlines).   By now it was summer and I fell into a routine that, when I wasn’t travelling, I often cycled long distances in the Dales.  I would start early and return by midday and then work through until mid evening.  I had always found cycling conducive to thought and now I could actually keep fit whilst doing something I really enjoyed and apply my mind to various problems at the same time.

During my job hunting process I had followed a highly targeted approach seeking opportunities that had not even been advertised.  Each day I would scour the business press looking for news items concerning major companies that were either contemplating or had made major investments or acquisitions.  Whenever I came across a situation where I felt I could add value I would write to the chairman or chief executive (often to their home address so my letter wouldn’t be screened by a secretary).  I would either compliment them on their success or wish them luck with their plans and then spell a short but precisely targeted couple of sentences laying out how my experience could assist.  I would follow these letters up with a call aiming to achieve a meeting.  Several of these approaches got me in front of senior people.  I hadn’t succeeded in getting a new job from this approach but I decided I could use the experience to win new clients.

Another opportunity for creativity had arisen when I lost out after being down to the final two for a position running a national chain of builders’ merchants.  Having invested the time to carry out a great deal of background research on the firm and its competitors I thought it would be foolish to waste it.  I called the new MD, introduced myself as the guy who came second, congratulated him and suggested we meet as I had a proposition.  He was sufficiently intrigued to agree to meet me.  When we met I made the suggestion that as he was busy getting to grips with a big new role there was a way I could help.  He listened very carefully to what I had to say about the industry, the position of his company and the issues I had identified.  He considered for what seemed an age and then said he would be pleased to receive a proposal.  I went away and submitted a detailed proposal for a very focussed consultancy project.  He accepted but not before something else got in the way.

Towards the end of my period of applying for jobs I met a head hunter with whom I had established a good relationship.  Out of the blue he called me months later to say he had an assignment he felt was well suited to my experience.  We met and I listened to the facts he laid before me.  His client was Ross Group a small UK PLC with a number of businesses in electrical products.  They were seeking an MD for one of the group companies, Selmar Industries, itself a group of three businesses manufacturing in West Yorkshire.  The previous MD had departed after running up losses of £3.0m.  Smelling a dead horse, I declined to take matters further.  However, a couple of weeks later he was back on the phone pushing me to meet the Group MD at the company’s factory, “It’s just down the road from you, I’m sure you’ll get on famously with Neil and if you still decide it’s till not for you, well fine.”

The following week I duly arrived at Selmar’s factory, which was housed in old mill premises in a tight, wooded valley on the outskirts of Brighouse.  My heart sank; it looked a tip.  However, my head hunter chum was right about Neil with whom I quickly established a rapport.  He had also worked in major corporations and there was a basic understanding between us over how businesses should be run.  Nevertheless, after several hours of discussions I politely declined to take matters any further.  A week later Neil came on the phone to chat and pressed me to meet the chairman, “Nothing to lose, see what he has to say, eh?”  A long trip down to Basingstoke the following week produced a firm offer, which I rejected.  They responded with an improvement and promises.  By this stage, I have to admit, it had become something of a game, so I pushed on and won more concessions.  Finally I accepted but not before I had negotiated approval to continue my work with Jerrard Bros.

I was back running a group of businesses and was confident that I could improve them.  Would it work out?  Or had my pugnacious nature set me up for trouble again?

 Image courtesy of Eliasbadi.com

The Business of Life Chapter 22 – Saved by the Bell

Some years earlier our European finance group decided to implement a new IT system, which like most such schemes, was late and over budget.  Finally the UK was selected to be the first to implement the new systems.  An external team was parachuted in to attempt to do in a few short months what should have taken a year or more.  It was obvious that the system hadn’t been fully developed and the implementation process was horrendous and continued to be subject to endless fixes, that unknown to all, would leave gaping holes.

Another decision that was taken under heavy pressure from Europe was the appointment of a new Financial Director for the UK (who shall be nameless).  Recruited in Brian’s time, Nameless came with glowing recommendations from his previous (internal audit) role. He initially appeared to be competent but over time I began to realise that his interpersonal and management skills were severely lacking and had brought this to the attention of Claude the VP Finance in Geneva.  What I didn’t realise (until it was too late) was that he also lacked key functional skills that I might have spotted had I been more experienced.  Whilst preoccupied with the pricing & margin scenarios that were playing out at the time I discovered that we had suffered a stock loss that Nameless had not revealed to me.  The loss was not huge in relation to our business but large enough (at $250k) and the brown stuff hit the fan.  Suddenly, everyone in head office was an IT and an accounting expert and making known opinions on the UK situation.  An accounting hit man was put in to get to the bottom of it.  The process rumbled on for months with the interim result that Nameless was fired and I would make a big mistake.

By this time the stock loss had become a cause celebre within the company and it was being used to settle scores.  In the middle of all this Gregg had made one of his lightning lunchtime raids on me and demanded to know if I had known about the stock loss prior to it becoming public knowledge.  My mind was in turmoil.  If I admitted that I had known nothing of it, I would demonstrate that I didn’t have my hands around the accounting and IT functions in the UK (which was true enough).  On the other hand if I said I was aware of it but hadn’t blown the whistle, I could stand accused of being complicit (which I wasn’t).  In a snap decision that haunts me still, I lied and claimed I had been aware of the situation earlier.  Ultimately, it became known that the loss was a paper one and stock had never physically disappeared.  The issue had been faulty IT and accounting systems that couldn’t reconcile all the components of a transaction with the physical stock.  The head office IT and Accounts people were in full CYA mode and Claude never forgave me for making known that his appointment (Nameless) was a very poor manager.  He was also ‘retired’ a short time later but I came out of this episode badly.

Early in 1992 Gregg met me for what transpired to be the most open conversation we ever had.  He shared with me his view that I was a very bright strategic thinker and a loyal manager.  He went on to say that he felt I’d had a terrible set of problems to deal with but was too much of a nice guy who did not fight enough, “Nice guys come last!”  It was clear from other comments he made that a fairly comprehensive image destruction job had been carried out on me by others in the head office team.  He went on to share with me the news that he intended to integrate my company with another in the group (Linolite) and that I was not being given the role of heading up this new structure.  I put up a spirited defence but to no avail.  Gregg said that his view was that I had done a fantastic job in the past but that I might have been out of my depth with all the problems I’d had to deal with, “Anyone might have been.” he said and then added,  “but I don’t want to lose you from the organisation.”   I had worked tirelessly (and yes, in difficult circumstances) and could not have spent more time with either our customers or my people or had more support from them.  I was deflated.

I was duly served with notice of redundancy but simultaneously what I considered a non-job was created for me.  I had to sit on the sidelines, in a shiny new office, as my company was merged with Linolite by Gregg’s new protégé.  The only factor the two businesses had in common was that they both sold via the distribution channel and I could only disagree with the manner in which the businesses were merged.  My non-job was boring in an extreme and I took full advantage of the outplacement programme that was also offered to me.

My consultant, Max Eggert, was the most fascinating character who had the most profound and beneficial effect on me.  Max put me through a battery of psychometric tests and the words he used to describe me from the results were, “tough, strong leader, stable, assertive, competitive, change agent, highly creative, socially strong, relaxed, self-assured, secure, open, self-sufficient, warm, enthusiastic”.  These were very similar to results that I had been given some years earlier by a Professor of Psychology at Yale (Vic Vroom) describing me as,  “a strong leader, visionary, with a participative and informal style and a transformational leader”.  I felt somewhat vindicated, that I had been in the right role and decided that I would use my severance package to take a full time MBA and start afresh.  I applied and was accepted for the programme at Bradford Business School to start in the October of that year.  However, events soon took an unexpected turn that led me to decline the offer.

Soon after it was announced that our parent company GTE was putting the $2bn global Sylvania lighting business up for sale.  Whether my analysis of the industry and presentation to the President had played any part in this, I have no idea.  But I had clearly been correct in my analysis of the situation.  Another decision was announced soon after; that Gregg was retiring.  His replacement was Don, another American, and an accountant by profession from elsewhere in the organisation.  The European business limped on hindered by a hiring and firing freeze with rumours and uncertainties rampant.  I couldn’t have done too badly in my new non-job as my records show that Don awarded me a bonus for that year!  As my redundancy was effectively placed on hold and my salary was still being paid I continued to fill my days as best I could.  I ignored as many of the duties of my non-job that I could as they were futile.  However, events overtook me and a life changing event took place that demonstrated to me that I hadn’t learnt all the lessons from my psychometric testing that I might have done.

Early in 1992 I took a call from Alain, the European VP for HR.  I was asked if I would take on the role of European Product Manager for a group of our products and be based in the Factory in Belgium.  My heart sunk as this was a role that filled me with horror.  It had no line authority over the subsidiaries, their pricing or their activities but carried responsibility for the results.  It was also the product group that I knew to be struggling the most (and has subsequently been killed off by EU regulations).  I was never normally one to fail to respond when a challenge was put to me but I decided that this was a dead horse that would not respond to flogging.  I entered into a delicate process of negotiation, claiming that I wanted to assist the company but that the details had to be right for both parties.  I managed to drag the negotiations out for weeks whilst I did my research on life as an ex-pat in Belgium.  I pushed and wrangled, had meetings and more meetings and continued to delay until I had got to the point where I could procrastinate no longer.  Then, miraculously, at a minute to midnight, I was saved.

Alain came on the phone on the day I had committed to make a decision and said to forget Belgium.  Louis was leaving his role as VP Marketing in Geneva to run the operation in France.  This was the role I had wanted many years ago and I knew it would look good on my CV if things took a turn for the worse following a sale of the business (if indeed it ever happened).  I started to negotiate but it soon became clear that, given the circumstances, they were desperate to fill the role and I was the only one in the frame.  By the time we had finished I had on the table a salary in Swiss Francs that had doubled, a company flat with cleaner and all bills paid, a company car in Switzerland, the retention of my company car in the UK, business class travel to and from Geneva each week (or for Denise if she wished to join me in Geneva) and the guarantee of a severance package based on all this if I was made redundant from Switzerland (plus repatriation to the UK).  Delaying only for a discussion with Denise I accepted.

Would it work out?  Or had I gone from the frying pan into the fire?

Image courtesy of c&maccounting.co.uk

The business of life (Chapter 20 – from a dark place)

Although I was no stranger to the death of loved ones, having already lost both my sister and my father and other close relatives, nothing had prepared me for the loss of my wife.  Yes, I had mentally rehearsed the situation over and over in my mind in the preceding months as her health continued to deteriorate, trying to imagine how I would cope. At the same time I had been desperately hoping that somehow she could survive and return to her former self.  But the reality of her death, the awful, aching sense of loss, was something horrifyingly new.  Without Jean and with the certainty that she would never return the house seemed emptier than ever.

Work seemed an irrelevance and I stayed away for several weeks, never phoning or attempting to keep up to date with what was happening.  There was a human side to Gregg after all and he made it known he wouldn’t push me to return before I was ready.  With my son away at school and my daughter often out doing the sort of things that teenage girls do, life seemed hollow.  I prowled the empty house in the evenings half expecting to receive some sign from the heavens that I was not alone but all that remained were reminders of the life we had shared.  One morning, sometime in October, I awoke to find the sun was shining and I set out on a new bike I had bought not long before in an effort to distract myself.  It was one of those magical, calm days when the sun shone as it only seems to do in autumn and I cycled deep into the Dales, soaking up the beauty around me.  The world was carrying on and I had to join in.  The next morning I returned to the office.

A welcome distraction came in the form of an invitation to run a session at a pan-European meeting of our HR directors in Geneva.  I decided to take a few days holiday, took my son out of school and together we drove to Switzerland.  Already a skiing enthusiast at the age of fifteen he cajoled a visit to a ski resort from me and a new ski outfit.  Following my session we drove to Les Diablerets only to find that the snows had yet to arrive and the sun was shining brightly.  “No problem,” beamed Alex, “there’s a glacier that’s open all year round.”  The following morning, subjugating my fear of heights, I joined him on the cable car that took us to 3,200 metres.  Alex quickly disappeared on a set of hired skis while I was content to sit on a terrace in the warm sun.  Surrounded by high peaks set against a deep blue sky, I read an old copy of Women in Love for the second time and felt at peace.

When I became Managing Director I had joined the industry trade association (the Lighting Industry Federation) sitting on the governing council (comprising some 16 CEOs of the largest members).  I had been a little over-awed initially, not only as the youngest member on council, but being the only one who had not spent his entire career in that same industry.  I felt I had been talked down to and treated very much as the junior.  So, having kept a low profile for the first couple of years was then astonished to be asked to take up the role of president.  At first I couldn’t work out what had raised my profile to warrant the appointment.  But by the time I made my acceptance speech and took the chain of office in one ofLondon’s oldest clubs overlooking The Mall and with a Government Minister as my guest, I had worked out what lay behind it.

Long held, polarised and explosive views were held across the membership on a range of partisan issues.  The association (which set technical standards for the whole industry and ran a highly effective parliamentary lobby group) was facing a particularly critical issue at the time that threatened to pull the association apart.   I perceived that none of my largest competitors wished to be seen to preside over an issue that could be a PR disaster for them.  Ranged against them were a large number of members (of smaller firms) in the association holding the opposing view.  Had I been elected as a scapegoat?  Was I being set up to fail?

Deciding on a policy of diplomacy for my year of office, I felt I had to ensure that all views on the subject were heard and taken into account before a decision was made.  I had clear views of my own as to which route the association should take but reasoned that making these views known was only going to make my task harder.  And anyway, I calculated that my own company could exist equally well under whatever regime emerged.  Attempting to force my views on council was not going to work given my image as an outsider who was believed to know less of the industry than anyone else around the table.  Therefore I decided that the process should take priority, be seen to be inclusive and fair and should lead to whatever the membership ultimately decided.

I ran my council meetings in the classic chairman’s style, ensuring that all views were fully explored but never revealing a viewpoint of my own.  I found that by a policy of correct process, questioning and ensuring everyone’s opinions were sought, all relevant opinions and options could be uncovered.  I carried this process through to the wider membership, travelling to regional meetings up and down the country.  At these meetings, where I again chaired the sessions to ensure that every aspect of the subject was explored, I also never revealed an opinion.  I also held one-to-one meetings with the holders of the most entrenched views (large and small companies), always travelling to meet them in their own offices.  At the end of the year when the time came for a decision, the vote was almost unanimous, with everyone feeling their view had been heard and considered with the right decision made.

One surprising and pleasing outcome for me was that several of those who had held some of the most rigid views at the outset felt able to cross over to the opposing side without losing face.  Additionally, the few members who voted against the final decision, came to me later and said that although disappointed they felt that the process had been fair and the decision was one they could support.

By this time I had found love and companionship again and had married Denise.  A hilarious and old fashioned event took place some months before our marriage that showed yet another face to Gregg.  Having taken Denise with me to an industry function in London, I had duly filled out my monthly expenses sheet and sent it off to Gregg for authorisation with receipts attached (why MPs and civil servants can’t go through the same simple procedure still eludes me). A few days later I got one of my lunchtime calls from Gregg, who proceeded to pose questions about the industry event and my accommodation arrangements in more delicate terms than his usual style.  After a lot of beating about the bush, and in a decidedly embarrassed manner, he shared with me his concern that taking a woman who was not my lawfully married wife to a hotel for an industry function would damage my reputation!  Even when I shared the date for our impending marriage he expressed his delight but wouldn’t budge from his ‘grave concerns’ in the interim!

I was happy at the good fortune that life had once more bestowed upon me. However, I began to recognise some fairly profound changes in myself that seemed to have occurred since Jean’s death.  My entire being had previously been focussed upon achievement of my business goals.  I was always clear and focussed upon what needed to be done and prided myself on logical and rational decision making.  The exception had always been my immediate family but looking back I realised that even with them I seemed to have been somewhat removed from a real understanding of their feelings and emotions.  I understood anger and rage well enough, having always been quick to be roused but as far as others outside my close family circle were concerned, nothing had ever really touched me. People must have felt me to be cold and lacking empathy in my decision making when they themselves felt understanding and compassion was called for.

Now, since Jean’s death, I found myself crying for the first time whilst watching films.  I remember sitting sobbing uncontrollably through Truly, Madly, Deeply.  Even music began to touch me on a deeper level than ever before.  Knowing my love of Bach Denise bought me a CD of the Brandenburg Concertos.  As I listened to the opening allegro of the 6th for the first time, tears flowed down my face at the sheer joie de vivre the music conveyed. It touched me in a way that I had never experienced before.  On these occasions it was as if a veil had been lifted from my senses and I was experiencing the colours, sounds and sensations of raw emotion for the first time.  I knew it was connected with Jean’s death but it was some ten years later before I could finally begin to understand what had happened.

In an effort to improve selection of candidates for key roles in the businesses I was then running, I started a process of qualification for a range of psychometric instruments.  In the qualification process for one, the Myers Briggs Type Indicator, I was assessed as an ENTJ (Extraverted Thinking with Introverted Intuition).  Without going into a lengthy explanation, I found that there was a ‘shadow’ or hidden side to my behaviour.  As it was the fourth and least preferred of my four key behavioural functions, my preference for ‘Feeling’ in decision making was underdeveloped.  Whilst someone who has ‘Feeling’ as a preferred function for decision making would be sympathetic, tender hearted, assessing impact on others, compassionate, guided by personal values and be striving for harmony, these were not behavioural qualities I had ever used.  These underdeveloped aspects of behaviour (which differ from person to person) are referred to as the ‘shadow side’ of behavioural preference, usually only being revealed at times of great stress or under the influence of drink or drugs as behaviour completely unnatural to the individual.  Being unfamiliar in using this side of my personality it was manifesting itself in almost childlike ways.  I can still cry at films that reveal emotion but over time I have also learnt to understand others in ways that would never have occurred to me previously.  Life is richer as a consequence but sometimes much more complicated now I can see more than one perspective!

When Martyn left I hadn’t replaced him feeling at the time that none of his team (good as they were) was ready for the role he had carried out and I didn’t wish to bring an outsider into the company.  I already knew the majority of our medium and large customers well and built on these relationships with regular visits.  I maintained a regular schedule of visits to major customers by accompanying our regional managers or sales people on their visits.  In this way I was able to demonstrate my commitment to customers and sales force and, importantly, ensure I was hearing directly from both on their views concerning our strategies and service compared to competition.

One of the strangest situations I ever had to manage was that with our largest customer.  The owners (tax exiles) worked initially from beautiful offices overlooking the lake a few kilometres outside Geneva and then moved to Monaco where the tax regime was even kinder.  They had built one of the largest electrical distribution businesses in the UK and were spreading across Europe but had the strangest (and possibly the most Machiavellian) management structure and systems I had come across before or since.  There was no one person in charge of the UK and buying was spread between four regional general managers.  The buying process (designed to drive price down) was in fact so fragmented that, despite their size and potential clout, they were paying prices considerably above anyone else of their size (and many smaller firms).  Whilst I enjoyed the profits that flowed, at times their purchasing was so out of line on price I had to feed the senior management with a series of hints that would then lead them to ‘put the squeeze’ on me.  I just couldn’t run the risk that they would find out how terrible their prices actually had become!

I was now totally immersed in and enjoying every aspect of my role.  But whilst I was widening and deepening an understanding of my colleagues, our customers and the industry and steadily improving results, events were quietly and inexorably moving towards the most challenging set of circumstances I had ever had to deal with.

The business of life (chapter 19 – the end of a dream)

With my wife recuperating from her major operation and my business life far from stable, I had to develop a strategy that would allow the greatest chance of keeping everything together.  Once again I cancelled business trips and kept close to home until Jean could achieve what she considered was sufficient strength to resume some semblance of daily life.  Work was now out of the question for her and with it the dream of a degree that she had tasted all too briefly. I found strength for myself in a process of compartmentalisation.  By dividing my life into discrete segments I tried to preserve time for the things that were important in my life; time for Jean, for the children, for work and lastly for myself (cycling and playing trumpet in a terrible but enthusiastic band).

By the time Brian had moved on leaving the role of managing director of GTE Sylvania vacant, I felt I was holding the constituent parts of my life together.  Jean had encouraged me to apply for the job and I was awaiting news of the procedure.  My probing had revealed that there were at least 4 other candidates from within the global company but evidence of a selection process appeared non-existent.  Finally, I got a call to advise me that Gregg, the European President was coming to the UK, would interview me and then join the rest of the senior UK team for dinner.

I collected Gregg from the airport and drove him to The Devonshire Arms, a beautiful country hotel in the Yorkshire Dales that he enjoyed.  I had known him for approximately 6 years, although not closely.  I was aware he was a lifelong employee of the company, possessed of a mercurial attitude to the business (you never knew where he was going next) and a volcanic temper.  Seated in the elegant lounge with our coffee, Gregg got around to what passed for an interview and demonstrated that, whatever other skills he possessed, interviewing was not one of them.  It was like playing a game against a competitor who had no real experience or skill and didn’t want to be on the court.  Frustration (and more than a little doubt) was beginning to rise in me when we were interrupted by a call for Gregg and he excused himself to take it in his room.

What seemed an eternity passed while Gregg was on the phone and it gave ample opportunity for my fears and doubts to surface.  By this time I had spent 6 years with the company and had achieved significant success but had not returned to a full general management role. I was also 41 and one year behind the schedule I had set myself of attaining an MD’s role.  The thought of working under any of the other candidates filled me with gloom and I realised that I was going to have to leave if this appointment went against me.  Gregg then returned and shared with me that one of his oldest friends had died suddenly.  “Ah hell, you just never know what life is going to throw at you.” he said shaking his head and then, slowly looking at me with tears in his eyes, “Look, I’m going to give you the job.”  The evening went by in a blur shared with my colleagues at least two of whom had emerged unsuccessful.  Celebration at home later that evening was a quiet and emotional hug.

Margaret Thatcher was elected to a third term and Ronald Reagan was challenging Mikhail Gorbachev to tear down the Berlin wall when I took up my new appointment.  One of my first duties was to sign a flurry of papers legally registering my appointment.  I don’t know if it was an error or a quirk of the corporate structure but I realised before I got to the bottom of the pile that I had also been appointed as MD of the ultimate UK holding company encompassing the complex web of businesses we then owned.  Technically I was now Brian’s boss.  I did a quick mental exercise and realised that, despite this, there were still ten layers of management between me and the president of GTE!  Flat management we did not have.

Life working for Gregg was never easy.  As he was based in our European headquarters in Geneva, I might go for several months without a meeting with him.  When we did meet either on one of his UK visits or at a pan-European meeting he always wanted a formal presentation.  He always travelled with one of his team and he would simply never sit and discuss subjects with you.  His style was that you either submitted to an inquisition on a subject of his choosing or, if you went to him with a proposal he would either attack it or ensure that you made a decision and not him.    He had a combative style, which may have been associated with his lack of height (around 5′ 5″) and, given he had one glass eye, you never knew if you had his attention or not.  The only time you ever got an easy ride was when he fell asleep in a meeting after lunch.

The time I loathed most was the day following one of Gregg’s board meetings in Italy.   We had a joint venture with Thorn in a manufacturing company there and Hamish, the Thorn MD, would usually succeed in winding Gregg up with a pack of half-truths or downright lies about our UK business.  I would then get a call the following day that interrupted my lunch in the staff canteen and would have to suffer Gregg for the next half hour bellowing down the phone at me on some issue that had been fed to him.

Being promoted ahead of my colleagues within the company I had worked within for years was a new situation.  All of my peers knew me well but not as their boss and I realised that, even putting the situation with Martyn to one side, they may not have welcomed my appointment.  I decided that this was irrelevant as my new role required a fresh start.  I had admired Brian and worked hard for him but I had to pursue my own style.  The first change I made was in not moving into Brian’s old corner office suite but staying put in my own.  Our margins were under pressure at this stage and it provided me with an excuse to not replace my previous position of Marketing Director.  The format of our management and board meetings I changed and was scrupulous in playing the role of chairman / facilitator.  I found that, with a combination of ensuring everyone’s full contribution and a variety of problem solving tools, we could resolve previously difficult issues with the team invariably making a unanimous decision without me having to reveal an opinion.

Worried about morale within the company, I instigated a company wide climate survey.  Results showed that the number one issue was a distrust of management, with a widely held belief that employees were not being consulted or informed on key issues.  Following discussion amongst my senior team, we agreed that I should speak to the entire company, share the survey results and ask for volunteers to join teams, to address each of the key issues (they had all recently been trained in problem solving techniques).  On the day of the meeting I made the assembled employees a number of promises.  Firstly, I would only hear the findings or recommendations at the same time they did.  I would also agree to any recommendation the teams made so long as the cost did not exceed our local country budget level, or contravene international corporate policy (if a recommendation did, I undertook to sell it to our company president).

I seemed to hold my breath for the next month, staying away from any of the team meetings and did not quiz any of my direct reports as to progress.  We assembled in the staff canteen on the day the results were due and the atmosphere I can only describe as electric.  Would the employees pressure for unrealistic changes?  Would my team leaders have handled the process democratically?  One by one each of the four teams presented their analysis and their recommendations.  I need not have worried.  The changes requested were surprisingly modest and reasonable and after asking further questions I was delighted to say, “OK, go ahead and implement everything and you will all receive regular feedback on progress.”  I learnt that together we could build a much more decentralised style of management, enabling us to make significant progress.  It also taught me a lot about trust and it taught me to empathise more with the feelings and views of the entire company.

We made rapid progress and my first year as MD ended strongly and over budget.  The new structure within the sale team seemed to be working better and emphasis on refining the customer groups we worked with was producing improved margins.  However, despite this and the more harmonious climate amongst the management team, I was sad to receive Martyn’s resignation.  He had received a good offer and had made up his mind to go; all I could do was to wish him well.  I missed him but it was almost fifteen years before we met again and resumed our friendship but that’s another tale.  Sad as I was to see Martyn depart another event proved shattering and changed me forever.

Despite battling on and regaining some semblance of normality following her operation for a brain tumour, Jean had entered a slow decline.  One Sunday morning driving herself back from church just half a mile down the road she lost control of her car, hit the kerb and came back complaining of severe pain in her neck.  Urgent investigation showed that the cancer had spread to multiple sections of her spine, which then severely restricted her ability to be mobile.  We made enquiries and managed to move Jean into a Marie Curie hospice a short distance from our house where she spent the remainder of that summer.  The staff were angels, caring for her constantly but her decline was relentless and one night in late September whilst I was by her side she passed away.

We had been married for twenty years and neither my two children nor I knew how we were going to face life without her.

The business of life (chapter18 – Influence versus Power)

My wife had cancer and our world changed, the effects of which are still with my family today.  The immediate results of her illness were two major operations, radiotherapy and lengthy recuperation.  My wife was a nurse and well placed to understand her illness and the prognosis.  Despite her medical training she also took support and advice from the Bristol Cancer Help Centre (including a diet so heavy in carrots that her skin turned orange).  But she drew on of levels of courage and determination I never knew she possessed and gradually life went back to an appearance of normality.

Following this period, when I cancelled all travel to ensure that I was at home or close by, my focus returned once more to the challenges I knew we still faced as a company.  Our major competitors were heavily involved in the manufacture and sale of lighting fittings and this was important for a number of reasons.  By working with architects, electrical consulting firms, Local Authorities and large clients, competition ensured that their fittings were specified (usually ensuring the sale of their light sources within the fittings).  This power of specification ensured a large degree of leverage and influence over the electrical wholesale channel when it came to the supply of light sources and effectively inhibited the sale of our own.

The addition of a range of mainstream light fittings seemed to be a logical and essential extension to our activities.  Our European head office had already launched a small number of sophisticated (and expensive) fittings that were way ahead of competition in performance.  Unfortunately, these were niche solutions that were extremely difficult to persuade architects to specify or distributors to stock whilst we lacked mainstream products and an image as a competent supplier.  The logical next step was to introduce our own range of popular fittings with which we could attempt to establish our brand in this vital sector and overcome the barriers competition had created.

Having agreed this shift in strategy with my colleagues, I pressed ahead with further research into the market for lighting fittings.  Despite our own huge factory in West Yorkshire it made sense to outsource production, at least until we could justify investment in our own facilities.  After an extensive search across Europe, I located a manufacturer of the required quality in Eire who not only had spare capacity but who didn’t compete with us. Working with an industrial design group we produced and refined prototypes, which I tested using focus groups of architects, specifiers and electrical contractors.  Following a national launch supported by heavy trade advertising we achieved our initial sales targets.

Meanwhile, Brian had remained true to his word that he would support my career development.  An early demonstration of support was his engagement of a personal French tutor to start the process of preparing me for a career move into our European businesses.  This was followed by my enrolment in a management training programme that took place on both sides of the Atlantic.  GTE (our parent in its pre-Verizon days) had recently invested in its own ‘university’ spending $50m (30 years ago) building a magnificent redbrick management training school in Norwalk CT.  Spread over acres of prime real estate the objective was to provide a world-class business education.  Not only were the physical facilities superb but I studied under the best professors that Harvard, Yale, MIT,Dartmouth and Columbia could provide.

Eager to learn and with 20 years of business experience already under my belt, I soaked up everything I could that was at the cutting edge of business strategy and technique. Between programmes I found I could directly apply what I was learning to the challenges of my role.  However, the more I learnt the clearer it became to me that senior management, whilst supporting the concept of advanced management training, simply wanted a ‘business as usual’ life and would resist any moves that threatened change.  The scene was set for great future frustration on my part and friction with those to whom I reported.

One moment of levity at this time came from a delightful character, Phil Thurston, at the time Professor of Business Administration at Harvard Business School. At the end of one programme Phil gathered us around and said, in his slow, hesitant drawl reminiscent of the actor Jimmy Stewart, “Well, guys I’ve taught you what I know about the subject and you’re well prepared.  But there is one additional quality you’re going to need in that world out there that I just can’t teach you – rat like cunning!”  Oh how right he was and how I wished I had found a way to acquire this vital quality.

Whilst our initial launch of lighting fittings had gone well the situation we were now finding was that the stock was not selling out of the wholesalers as planned.  Our sales force was now of high quality.  Having worked closely with Martyn on profiling, recruitment & training, my research now showed that we had moved from the worst image in the trade to the best.  Something else was wrong.  The sales force were supposed to start calling on electrical contractors, the critical group who actually bought the fittings from the wholesaler and installed them.  The problem was simple; the sales team weren’t making the contractor calls but the remedy was far from easy.

Whilst we had got good acceptance of our new product amongst our wholesale customers, and despite our advertising, they were finding it difficult to sell to the contracting trade.  We were an unknown quantity in a very traditional sector.  The solution was to split the sales force into two parts; one group continuing to sell into distribution and the second trained to enable them to design lighting schemes, obtain specification and to influence contractors.  I also started an intense period of public relations activity with the Electrical Contractors Association, building relationships with some of the key people in that sector.

During this same time I stepped up activity with our core customer group, the wholesalers, taking a number of those most loyal ones across the Atlantic to visit their major counterparts in the USA & Canada.  In this way we were able to demonstrate that whilst we might have been new to the UK, we were a company with a long and deep history of support to the distribution channel.  Another venture, in conjunction with a leading trade publication, was in forming of group we identified as the leaders of tomorrow and in creating training and development events for them (with appropriate publicity).  My latest research showed we were viewed by the trade as #1 for our sales force, service and trade support.

Despite these improvements in customer perception and growing share in the market for light sources, our progress in the new area of lighting fittings remained very slow.  Realising that gaining a foothold in this tightly controlled sector of the market was going to be difficult, I commenced a search for a suitable acquisition candidate.  Alongside this new strategy I continued to look closely at the performance of our sales team.  The technical sales team were small in number and it was clear that their progress was going to be slow against long established competition.  The main sales team however appeared to be neglecting the tasks set to them to support the new range and it seemed to me that they were staying within their comfort zone.  I repeatedly raised this issue with Martyn but little seemed to change.

During the time I had been working closely with Brian (and supporting him in every way I could) I had also been taking every opportunity to remind him of my general management experience and the unused competencies that I possessed.  I was constantly pushing for a wider role in the business either in the UK or inEurope. Additionally, I had also used external opportunities to demonstrate I was a saleable property (which did no harm to my salary but achieved nothing else tangible). As the fittings growth stalled my representations to Brian increased and I was actively lobbying him to put sales under my control.  Instead, in a surprise move displaying the judgement of Solomon Brian, appointed both Martyn and I to the board!

With a new stripe on my sleeve my CV improved but nothing else had changed and the problem of little or no growth in our fledgling fittings business was causing me great concern.  The strategy I had constructed and implemented with the support of all in the UK andEurope included the vital component of achieving a shift in the image of the company from a light source company to a comprehensive lighting company.  In practice this would enable us to break a stranglehold competition had on sales via the wholesale channel (the vast majority of the market).  Our pitch to major distributors had been predicated on our commitment to displace competition in a sizeable share of the fittings market that would lower the wholesalers’ risk in moving more light source purchases to us. The power of competition came from the constant threat to route specification business away from wholesalers if they reduced their light source purchases.  Failure to establish our fittings range was jeopardising our means of breaking this tactic.

The relationships I had with the management team within our European headquarters were also a source of frustration for all parties.  With many of the team I had an extremely close and productive relationship.  However, the European strategy (such as it was) brought me into constant conflict with both senior management and the various holders of the role of European Product Manager for our incandescent light sources (ordinary household light bulbs).  There was constant pressure for me to target the retail sector in the UK (several of our other major subsidiaries were present in this sector and achieved reasonable volumes).  All of my considerable experience in the retail sector showed me that we could never make any profits from such a move and I resisted strongly whenever the subject was raised. Information gained some years later shed a fascinating new insight into this issue.

Armed with a great deal of knowledge concerning the UK retail sector, how it operated and differed from its European counterparts together with a great deal of personal experience, overcoming these representations was like shooting fish in a barrel.  It earned me enemies though.  Instead, Martyn and I sidestepped the main problems of trying to establish our own brand by winning considerable private brand orders that for a while boosted our volumes.

Over the next few months a number of shifts took place that saddened and frustrated me but finally gave me some hope.  Over the previous few years life at home had returned to normal and, despite the residual effects of her illness almost 5 years previously, my wife seemed well and had returned to working in the health service.  A real boost to her self-confidence came when the local authority offered to sponsor Jean through a degree course.  She was elated.  The joy was short lived as a week or so later my phone rang and I heard the news that she had collapsed with what appeared to be a seizure.  More fits followed in the next few weeks as we waited anxiously for the test results.  It was with horror, fear and sadness that we heard the results; a large tumour in her brain.  An operation was quickly carried out but the outcome was that the tumour had been in an advanced state and the prognosis was terrible.  We battled on.

The disagreements with Martyn remained and I continued to plough on using a full frontal assault to achieve the changes I thought we required.  The result became an open rift and little progress.  What had been an incredibly successful working partnership (recognised across the industry) was no more.  It also cost me a friendship. At the time I heaped all of the blame upon Martyn and it took me many years to realise and accept that, had I modified my approach, we might have been able to reach an accommodation, preserve our relationship and make better progress.  I continued my hunt for a suitable acquisition target but became frustrated when it was made clear to me by our European management that I should desist in my efforts.  This frustration with senior management had not been enhanced by ourUS parent’s failure to pursue acquisition of our majorUK competitor (Thorn Lighting) in 1985 when theUS$ almost reached parity with the Pound (at £0.95).  An unbelievable opportunity missed.

All became clear a little while later when our European management proudly announced the acquisition of Rotaflex.  ThisUK business was focussed upon the design, manufacture, specification and sale of high end architectural light fittings via the Concord brand.  The group also included Linolite, a smaller company manufacturing and distributing ranges of niche, low value commercial fittings.  Neither of these companies would assist in achievement of the strategy that I had constructed and that had been accepted.  All of my difficulties remained.

A form of hope came when it was announced that Brian was to move to run the newly acquired Rotaflex group.  The opportunity for me to replace Brian was obvious but it soon became clear that I would have competition.  The overall growth we had achieved since I joined the company spoke for itself.  But had I acquired more enemies than friends?  Could I convince our irascible European president? I tossed my hat into the ring.

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