FD'S DIARY: Goodbye status quo

Goodbye status quo

June 1 - Realised first thing this morning that the audit starts next week. We're already a bit late. Discussed with #3 if she'll handle it for me. She's agreed so long as I can be called on. Fine, I said, and I'll leave her to it. If I don't do that sort of thing I'll be swamped by this job.

Most frustrated not to have been able to talk to the guy we want as chairman this week. It is half term ' but it would have been good to talk.

Long sessions today with Ops' #2 and Sales. Both think they're carrying on. I gave them no reason to think that. In fact I told them I want to think about how we can integrate their departments more fully. You should have heard the bluster! Sales in particular was having none of it. He'd have it that no one but a salesman can sell, not that any of them have any qualifications in the field that I can identify. And 'closing' a deal is a very special thing (which is, maybe, why they aren't always that good at it). Plus sales people have to be treated very specially and you have to understand their sensitivities, especially to cash.

Yes, I interjected after a while. But do you realise, I asked, that you're nothing without the rest of us? I'm not sure he agrees. He's built in that proverbial mould of selling his granny if he can, except when he's in front of a customer, when rather like my dog he rolls over and seems to want his tummy tickled.

Ops#2 is the exact reverse. His people have got enough on their plates. Just tell us what to do and we'll do it guv'nor is the attitude, but don't ask us to think about it.

Which when compared with the attitudes of Office, #3 and Stock seems to suggest to me where the problems are. These guys are, I hate to say it, in the Ops mould.

So I took a different tack and asked them how they thought we should organise things. I said I couldn't see how more than six people could effectively report to me. How many did they have report to them? Sales creeps in with six. Ops#2 has more than half the company if Ops is taken out of the scene, at least notionally. So I shoved Sales aside for a minute and worked with Ops#2 and asked how that could be effective. If I wanted no more than six reporting to me how could he have (if he got the head of operations role) three divisional heads and a pile of people from our home countries team (the largest, and which he's really been responsible for to date) all reporting to him in future? I couldn't see it. He could. No problem he said. So we scenario played and it was pretty clear what he meant was he'd ignore most issues. Put simply, he let people get on with it.

Now that's OK ' but then systems break down, and things go missing and targets aren't met and people claim they don't know where they meant to be and mileage goes up, and waste increases and on and on. I want to target all of those things. In other words, I might not want to micro manage, but I want some people who will when it's needed. I put it to him, how will you do that?

He didn't know. So left him to think about it for the night.

* * *

May 31 - I've seen all but one manager now. He's on holiday.

It's interesting the reactions I've had. #3 is 100% happy ' and I've promised her a new team member to build up her complement again. Anyway, I know and trust the accounts team. AJ after her stresses is also fine now. And her plans have changed. She's made clear she's not going abroad later in the year with her 'man'. I think the miscarriage exposed weaknesses in the relationship which suggest it might have been a blessing in disguise (even if a pretty tough one ' before anyone shouts at me). It's good to know they're under control.

The new stock controller is good. And despite not being here for long is getting on top of things. Being a recent appointment he's easy to make into my person. And it's actually quite an important role. Stock might sound mundane but we handle quite a bit and that department also refurbishes a lot of kit and is, in effect our small but effective in-house assembly unit as well as being a stock holding department. They've always been treated as having a low status in operations. I'm not sure I agree. They're a vital cog, and I reckon stock ordering should not be operations job, but there's as well. I identify in Stock (as I'll call him) a person there who is rising in the world, soon.

Office (as I'm calling her) could be invaluable. And this place needs someone with a bucket-load of common sense to manage a pile of issues that have been largely allowed to run themselves to date. I mean things like facilities management (in all its diverse forms) which has fallen between accounts and other odd people, health and safety issues and making sure inspections and training take place, and keeping admin and phones and heaven knows what else going. There's also the issue of IT that needs a line manager because we still have an IT chap ' but he needs constant kicking by someone who is monitoring what he's doing. Office doesn't know it yet, but I think she's getting this lot and a new admin assistant to help.

Now that means I have three key posts filled ' accounts, production and keeping the office going. So, how many people can I have working for me? Directly I mean? Ops had any number since anyone and everyone wandered in and out of his office without him complaining often without a clue as to line management responsibility. But I don't want to micro manage, that's other people's job. So, how do I deal with this?

And what sort of management team do I create? Ops' team had everyone who was paid more than a certain amount on it. Which meant Stock and Office were not, for example, on it. But that was a crazy structure. Pay is not a management structure ' it's a measure of market worth. I want an effective decision making arrangement.

My guess is that means I can't have more than six people report to me, ideally. I'm already allowing for #3 for accounts, Stock, because I think we need to integrate this and they need to know what's happening, and Office to run the infrastructure. Ops has to be on, I think. That leaves two more.

Logically that's Ops' replacement and Sales. But I'm not so sure.

* * *

May 30 ' Ops has taken the week off to go north and look at houses. They've really bitten the bullet on this.

So I have a new office ' his. And I'll be candid. That also means I need new office furniture ' his has not seen sunlight under piles of papers for 15 years and was out of date and worn out before that.

It might be a small issue ' but it's also a big one. This place is dowdy, starting from this office and spreading on out. That's got to change. You can't work smart in a bad place. My first job when I got here was to deal with the loos (which were grim). My first job as CEO is to think about the work environment.

So, time to introduce a new vital member of my team. Her real name, well, as you know, I don't share those. So let's call her Office for short. She was the CEO's secretary. Then she tried to run Ops. And in the meantime she knows everything about everything that we in accounts don't know. And she's been here for years.

I think she's key to my new thinking. She's been treated as part of the furniture, but is worth her weight in gold (a bit like #3 ' in fact I see them as a potential power axis). So I had her in this morning and asked for to do three things before I really move out of accounts.

The first was to clear up Ops stuff. The second was to organise that the office be decorated. The third was to look at new furniture. Nothing extravagant. But I want as few filing cabinets as possible in here, and room for smallish meetings and an effective desk / workstation, not something held together by the weight of the burden it bears. She looked for precise instructions. I made clear, I'm delegating things. Any colour but magnolia is OK, and green or yellow might do nicely. As for furniture, work out a plan and a cost and show it to me.

She was a bit shocked. Was I sure I could leave this to her? I asked what she did at home when they were planning to redecorate? Could she decide and then (maybe) consult her husband? Yes, she said. Well, I'm guessing you can do the same here I said. I'll trust you, in fact, I added.

She looked well pleased. One convert down.

* * *

May 29 ' Yes, I know, it's a bank holiday. I got a quiet weekend without calls so I'm thinking today. What else do you expect from a new CEO?

Time to share my strategy. This place is a managerial mess. Sales does whatever sales does (and I'm not being rude here, but they are a rule unto themselves); Operations works in the dark about what Sales thinks they should be doing, and Accounts (I was going to say 'we in accounts', but that's no longer true) pick up the pieces. At least, that's the way it has felt.

This does not work. Having separate sales and operations functions who don't communicate with each other is of absolutely no benefit to us. My vision for change is simple. We sell to buildings (candidly). At the moment we have a team of people who're pretty expert about the buildings that need our services who are out on the road all day. They're called operations. And we have a team of people who know little about what we do who wander out sometimes to sell to people when they're not sure what they're doing. They're called sales.

Now I might be simplifying things, but it seems fairly obvious to me that the best people to sell our services are the guys on the road who know exactly what they're talking about, which is our operations people. Our new kit means these people have more time available. They're all self starters because they have to work on their own. They all have to relate to people, because their job requires it. They can all spot what a site needs from a mile off.

So I want to pay them to sell and install. And I want sales to do marketing (which we've never done very well) or quit or retrain as sales support people (sending out contracts, etc.) But it's the operations teams who are going to lead this.

This completely changes the focus here. I need to think this through over the next week or so. No one announces a new strategy on their first day if they're wise. But a negotiated new business plan is vital to shifting the culture of this place.

My mind is racing.

* * *

May 26 ' Another frantic day.

I had a meeting with #3 first thing. She was shocked, and then really pleased for me. I asked her straight away if she wanted to be finance manager on the new senior management team I want to create. There was not a moment's hesitation. I'd made my first appointment.

At 10 we assembled all staff that were in the office and Ops spoke first. He told them he'd decided his day in charge of Ops was over and the company was to have a new CEO. You should have seen the faces! Then he said he'd like to introduce their new CEO ' and passed straight over to me.

I have to admit that the relief on being offered a spontaneous round of applause was quite considerable. I thanked them and immediately told them about Ops new role ' and stressed he remained a part of the team but would be heading up north within months at most.

And I gave them a vision of growth and opportunity. I did not take about job changes bar one ' that number 3 had been promoted that morning.

We kept it fairly brief and said there would be more briefing soon. And then we hit the phones to tell people out in the field.

By 11.30 ops had been phoned by the ex-CEO. He wanted to change his mind about yesterday. Too late, Ops told him, we've told the staff. The ex-CEO put the phone down on him.

At 2pm I got a call from the customer who wanted us to rent kit. They wanted me to send technical people back to discuss some details. They're looking at a purchase deal again.

And then I had to talk to key managers. My next job is obvious. This place needs a reshuffle.

* * *

May 25 ' A brief visit to the office this morning to brief people about changes in the deal I discussed yesterday and then to the hotel where (I think wisely) we'd agreed to hold the board meeting. If there were going to be fights or tears it's better they're done out of sight.

I admit to having something of a dislike of hotel meeting rooms. Most are bland to the point where anonymity has become an art form in its own absence. The few exceptions are quirky ' which usually means they're also bad. This was one of the former and seemed such an inconsequential stage for something which seemed so important.

I was first to the meeting. OK, that's my habit, but it may also have reflected some nerves. Mrs CEO arrived with 'her man' (the accountant who acts as her mouthpiece on these occasions, given her dislike of addressing any words at all to her ex-husband). We had to make meaningless conversation so I tried to engage the accountant on the question of accounting for lease financing. I got the unhelpful impression that he had no more of a clue on the subject than me, but that he could bluster for England.

Ops arrived next, and an awkward silence fell as no one wanted to ask Ops about whether he would definitely quit or not and so we waited for the ex-CEO. He arrived half an hour late, claiming traffic problems, but to be candid, I could swear I smelt whisky on his breath at 11am. He has many weaknesses. As far as I know alcohol has not been one of them, so I assumed he was in need of Dutch courage. I took this as a possible good sign.

The ex-CEO chaired the meeting. He began by asking Ops to say why he wished to resign. Ops began by saying he didn't! Now this got everyone worried. But in fact what he said was he wanted a different role. He realised he was out of steam in the current role, needed and new challenge, that the company needed some new direction at its centre and that he'd be better used opening up new territory which was where his skill had always worked best for the company.

The ex-CEO looked like he'd fume. First of all he disputed Ops had ever opened up territory. Mrs CEO looked like she could kill him and virtually (maybe actually) kicked her man who asked if dispute on this point was of benefit at this moment?

Then he accused Ops of bringing us together on false pretences. The ex-CEO claimed that Ops had resigned and that we had therefore come together to agree the way in which a new general manager (he'll never use another title) was to be appointed. At this stage I had to say that Ops had in fact put nothing in writing and had only been discussing options for future management, and nothing more. In that process he had suggested his own position might be available for review, which was quite different from having offered his resignation.

Again, the ex-CEO fumed. It was clear he sensed a stitch-up.

Mrs CEO's man asked for details of what we proposed. This shut up the ex-CEO.

Ops explained what he wanted. You know that by now.

Then they turned to me. It was, in effect an interview. I made clear three things. We needed a new management mentality which required a change of people. We'd been running into problems which showed existing systems and the drive behind them was tired. This supported Ops view that he needed new challenges. Secondly this would open the possibility of a more radical review of the way we were going and I outlined ideas for major re-organisation. Thirdly I suggested we needed new corporate strategy. This was for growth in new areas, in which Ops could play a key part, and for new products, where we'd begun but had a long way to go. This would require new skills and the structure in which we could recruit them. This was my threefold vision.

Ops' plan had been accepted quietly. Mine was challenged. The upside was of little interest. The downside was whether it would impact on cash flow. The subtext was clear. Could we still afford the shareholders? I made clear this was a constraint in which I would work at all times.

The discussion lasted 75 minutes. The inevitable sandwiches were served.

And then Mrs CEO's man asked Ops and me if we might leave for a while whilst the shareholders had a discussion.

We did. I'd have loved to have been in there. But we stayed well away, having tea, not whisky and talking little.

After 25 minutes they asked us back. They'd agree they said. But there was a condition. They were monthly board meetings with the ex-CEO and Mrs CEO's man. She would reign as a director and let him take her place. They made clear. Their aim was to monitor my progress.

I asked for time to discuss this with Ops. After all, he'd still be a director. He had to live with it too.

We went back and said the idea was good. But, we didn't want to pay for Mrs CEO's man. That seemed an unreasonable extra cost on the CEO. What we would want though was an independent chair. If the board was to function properly it needed someone to guide it through the stress that we'd seen today. We couldn't have meetings run as a series of conclaves.

They asked is we had a candidate in mind. I had. It was the chap who facilitated for us a while ago. He showed real ability to run a team. That's what we'd need in this circumstance, but I stressed I had not spoken to him. I had not anticipated the need.

They had a huddle.

Amazingly, it was agreed.

It took 5 hours in all.

We then asked for confirmation of a title for Ops and me. I'm now CEO. Ops is Development Director. And I'm to brief lawyers on necessary change to the shareholder agreement.

Mrs CEO looked fairly happy and smiled her sickeningly sweet smile.

The ex-CEO looked in need of a bottle of whisky (although he could not have got much redder than he did at various points in the day).

Ops and I shook hands, and he said 'OK, boss, fancy a quick one?' And we went and had a coffee to discuss how to tell the staff.

We agreed, they're told tomorrow morning. Let's not hang around. I'm the CEO.

* * *

May 24 ' very late. Ops called me. The ex-CEO has told him not to presume Ops and I can dictate terms tomorrow. Apparently the ex-CEO thinks the job should be advertised.

Ops, to his credit has told the ex-CEO that if that's the case he's not resigning (and in fairness, he hasn't ' a point someone has, I think reminded me of on here).

Now that's brave of Ops. Candidly, he doesn't really have a good track record for standing up to the ex-CEO when on his own. But more than that, he told me he'd told him it was a case of 'take it or leave it'. Ops wanted me as CEO and himself in the new role we'd negotiated for him, or he wasn't quitting.

It looks like I have Ops on side at the very least.

But it's clear we're not on for a home run (as I think the Americans call it) as yet.

* * *

May 24 ' Just as a distraction had to spend much of today in meetings with the customer who wants us to rent equipment to them.

The good news is that they were willing to invest so much time with me. It's clear they would not do this is they did not Want our kit. If they did not they could just have said no.

The bad news is that I had to tell them we were not in position to rent the kit to them. They seemed not to believe this message the first time I reported it to them. And the trouble was we'd shifted this financial aspect of the deal to our finance team (otherwise called me) but they were persisting in keeping it with their purchasing team.

So I sat and patiently explained why we couldn't finance the deal because we weren't geared to be a finance company. Secondly I explained why even if we were they would in effect have to guarantee the entire payment due under the terms of the rental agreement even if they wanted to terminate early because the kit had such small residual value for us once installed on their premises. Thirdly I explained that this was precisely why we weren't getting third party financiers excited about partnering us in the deal. They might be willing to finance the customer to buy the kit, they weren't willing to finance us to supply the kit leaving us one stage removed from financial security over it. I have to say that this was an excellent test of my patience (and therefore might be good preparation for tomorrow).

The breakthrough came when after well over two hours of discussion I finally persuaded them to get a finance person in. So we started again. But he was senior enough to realise what I was saying. As a result he told their purchasing people to make up their minds on the kit alone. If they wanted ours, he'd find a way to fund it. If they didn't, well, he'd happily get on with other things. As a result of which I warmed to him. I couldn't have put it better myself.

They've agreed to come back to me, but I did improve the price, just a little bit.

* * *

May 23 - I wrote a piece for here and it's got lost. I can't even remember what I said now - things have moved so fast.

But basically Ops bought into moving north.

* * *

May 22 - My wife is happy for me to go for CEO but she's suggesting there's a condition - that we have some time back at the weekend.

I'm not sure how many times I spoke to Ops this weekend but the more I did the more my attitude hardened. I realised two things. First I really do want to be in charge, and that it's likely that if I don't get the job here it will only be a matter of time before I'm looking elsewhere. Having realised that, and having in effect given myself an exit route, it was then easier to negotiate with Ops.

Second, I made clear that if he quit that was a resignation. Sure, if I took over I'd like to offer him something else, but it would be on my terms and would most certainly not be on the same pay and conditions as now. He seemed really shocked by this. I honestly think he thought he could give up his responsibility and have me take it but otherwise he'd have the salary, the car and so on and I'd be happy with that.

I made it clear this was not the case. I'm not going to run a company with something like the Office of the Deputy Prime Minister (whatever that was) hanging around my neck, created as a favour to allow someone a title which carried little meaning but a lot of benefits. In fact, what I also made clear was that if I took over there might not be an Ops job for him at all. I'm not inclined to become CEO to run things as they are. Again he seemed shocked, but I might as well get this job on my own terms now or I'll forever regret it.

My ace was the idea of giving him a job up north. He might have been angry with me, but his wife is from Yorkshire and I'm not being regionalist here (if such a thing exists) but Yorkshire attracts Yorkshire in my experience and apparently she really likes the idea.

By Sunday night I had no idea which way he'd jump but we have cleared a space for a board meeting on Thursday. The ex-CEO is on for it and Mrs CEO says either she or her representative accountant will be there. So whatever happens we're on a pattern of change, for better for worse, for richer for poorer.

Which is not the first time I've thought about the work relationship as being a bit like a marriage, with all its ups and downs.

* * *

May 19 ' Of course I want the job of CEO. I realise I've probably wanted it for some time.

But I'm not sure I can do it with Ops in the office. He would undermine what I could achieve if he was here.

I don't want him to lose a job though. He's at an age where an alternative would be hard to find, especially given the time he's been here.

There is an alternative. He originally hailed from what I call 'the north'. We've never been well represented there and Scotland is another planet as far as we're concerned. What is he went to be director of Northern operations with the job of opening up the market and in the process began a move that way for retirement (sometime in the future ' like when he's 75 given current probabilities).

It's Friday, so we're having lunch. I'm going to float it.

* * *

May 18 ' Not going well so far today.

The customer who wants to rent kit doesn't think a phased payment is the same thing. I've set up another meeting with them.

More importantly, Ops has told me he wants to be Ops again. What I mean is, he only wants to do Ops. In other words, he wants to give up being the effective CEO, which he has been since the ex-CEO went (under a cloud) some time ago. And he tells me he's already told the ex-CEO that this is the case. He hasn't told Mrs CEO (who for the uninitiated, isn't married to the ex-CEO anymore, but does hold the half of the shares the ex-CEO does not own and did, as the name implies, once share the ex-CEO's bed ' which explains her current ill disguised loathing of him).

This creates big problems. The management structure here is fragile. It has (pretty much) worked since the shareholders went into near retirement. But it's difficult to see how the dynamic will survive Ops standing down. The four of us co-exist, just about, with little love shown for me, at least by the shareholders, since it was I who eased them out in a movement of bravery which still leaves me wondering how I had the nerve to do it.

So, I have spent ages with Ops. He's adamant. He's not up to the job, and says we all know it. He even says he thinks I should do it, but says he hasn't expressed that opinion. And he says he'd be happy with that so long as he can go back to where he was.

But could we survive a change in his role? Would he really want to work for me? Will the shareholders want to come back in? Does that mean my days are numbered? I really don't fancy a job hunt at the moment.

All I could suggest was that Ops has to tell Mrs CEO and advise her of his desire. I think he has to. And I think we need a board meeting. And I think I'll need a long discussion at home tonight.

Frankly, I think I'll generate an urgent meeting as a reason for leaving early to get out of here to have a quiet think.

I'm not sure I like this.

* * *

May 16 ' Ops is hanging on, and I've had to deal with the customer who wants to rent kit.

I agree with the commentator on this site who says if we do this it will look like a lease and this will be an accounting nightmare.

I spoke to our auditors. They weren't excited. I'll also be honest ' I don't think they know much about the issue but I can't blame them. It looks horrible.

They did suggest some lease financiers they know to discuss this. None of them are keen. Basically they all say lease finance is great if the kit's either got a residual value (e.g. a car) or they're sure the rental will be paid throughout the term e.g. a three year IT lease with a good quality company where they can also continue to see and identify what they've supplied if need be. But our kit has not residual value and once on customer premises just about impossible to recover, with low likelihood (for them) of recovering any cancellation charge in the event of the customer leaving the premises, changing layouts and other possibilities that render it surplus to our customer's requirements. So if they do it we'll have to guarantee the payments to them, which is no good at all.

We could of course borrow for it from the bank, which has none of the specific asset based risks, but I really can't see the shareholders buying that.

So I've been back to the customer and explained that we have real technical problems in supplying the kit on the basis they'd like. Candidly, I've blamed the accounting for it. But I did suggest a compromise. I've said we'll install for 50% upfront and 50% from months 3 to 12 in instalments if they'll also agree that the service contract is billed quarterly in advance rather than quarterly in arrears. This change would provide a major cash flow boost over the life of the contract to help things along, and the upfront on the kit would cover quite a lot of the cost of installing leaving a relatively small cash flow burden to cover.

It's got to be worth a try to win the business.

* * *

May 15 ' If weekends carry on being as busy as this I'll need a day off in the week.

This weekend apart from shuffling children between the seemingly endless procession of parties and other events with which they seem to pass their time I also had to deal with Ops.

The ex-CEO hit him really hard on Friday. He doubts his ability to do the job now and is wondering whether to quit.

It doesn't help that deep down I also doubt his ability to do the job of effective CEO, which he has been for the last couple of years. The fact is that he's good at Ops, but as a leader, strategist and sales lead he's not up to scratch.

But we need him to run Ops. So I had to reassure him.

This has helped. He's in this morning, but he's not firing on all cylinders. I'm going to monitor him closely, but I do wonder whether he needs to cut his role back to the one he always undertook.

But that leaves a vacancy, and I can't help but muse on the situation'.

* * *

May 12 ' Saw the ex CEO for lunch.

It wasn't a lot of fun. Let's be honest, it's hard to have a relaxed relationship with a man you sacked from his own company, which in effect I did to him.

But I guess Ops enjoyed it less. The ex-CEO had rumbled that a disaster near-miss had happened (and I think it's only right he knew ' he does own half the company after all) and he wanted to know more.

He wasn't complimentary about the fact that I hadn't taken the steps to avert the problem before it happened by asking appropriate questions. He was much less complimentary about the fact that Ops had not sought my advice when quoting the job.

And he was complimentary about the fact that I'd tried to pull things round. And wasn't too complimentary about the fact that Ops had not played a key role in that process.

I didn't enjoy a dressing down (show me someone who does and I'll show you either a liar or a fool), but candidly Ops had a tough time of it. He lives in awe of this man and he got little support. I found myself trying to pick him up afterwards. I do think Ops made more mistakes than me but the Alan Sugar treatment (all bar 'you're fired') really is not good management by the ex-CEO.

I'd like to have an active third participant on the Board. I wouldn't want it to be the ex-CEO. Purely negative management gets you nowhere. I hope Ops recovers over the weekend.

* * *

May 11 ' Well, you can prepare as much as you like and still be left with the unexpected.

Our sales manager and I met our customer yesterday. He's right they are keen to have new kit. But they want us to pay for it.

Or rather, they don't want to buy it. They want to rent it. But we've never offered that option. It's always been a matter of pay for the kit up front and then we'll offer a maintenance contract. The reasons are, I guess apparent. Most of our customers are bigger than us (by a long way). Most can raise money more easily than us. And most have more capital then us. So we've never seen the reason to offer an implicit finance agreement. After all, they should be able to borrow more cheaply than us.

There's another good reason that I can see. The simple fact is that once our kit is on site it rarely has much residual value. Taking it out again often leaves us needing to recondition it. It's true, we do that, and successfully, but that's a cost we incur and which we recover. For the customer the value is negligible. So if we rent the kit and the customer cancels the contract we're left with kit which we have to recondition at our cost, having probably failed to recover the initial installation price. I know we can have minimum term contracts and the like, but when the customer no longer wants the service getting money out of them is nigh on impossible, so that's