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CEO's Diary: Hairy schedules
The CEO gets his way and sees his week go up in smoke
October 30 - My expectation was right. First thing this morning Newc was on the phone. I can speak to his staff.
The outcome is a fairly hairy schedule for today. I have to see our solicitor's employment people to make sure what I want to offer is legal (all of which will be additional cost). Then I've got to deal with the day's other issues (a new supplier, who looks interesting) and get a table of what I propose worked out for Newcs staff, and then arrange times - and this will mean travelling to see them.
All jolly fun designed to keep me from going home tonight no doubt. That's life. I wanted this job.
* * *
October 27 – The people I met with West last week are placing an order for ten trial sites. But they want reporting, so I’ve had to increase the speed on that project. Our IT person has been doing quite well on it – after all, it’s only Crystal report writing interrogation of the database and making it look like a nice short report, but we need it now and there is polishing to do. Which took much of yesterday. There’s nothing like selling something though to make you finish the development process.
And on our other issue – the first difficulty with Newc. He says he’s not sure I can meet his staff on a formal basis to agree terms after the deal, which will of course be TUPE compliant. I’ve given him the weekend to agree to my request or have told him it’s off. I want this deal but I don’t want unknown liabilities and non-standard pay scales which disrupt our relative harmony on this score here.
I think he’ll sweat about the threat more than I will. After all, I have other options. I believe this is his option right now. And I’m also going to be his boss after the deal. I have to win.
* * *
October 26 – Family still away. I’m back. Duty calls. The other side have got their comments in on the contract. The big issue seems to be staff. After all the questions I’d asked one or two things are creeping out of the woodwork: promised pay rises (but when were they promised?) and even a promotion, plus bonuses which appear habitual and really form part of pay, which is something we don’t do.
And vans have been used as cars, it’s now admitted.
Oh heck, these things are meant to try us. I think there’s only one solution. I’ve got to meet all his people and see how we can integrate them into our way of working.
* * *
October 24 – So much for holidays. There’s a wifi network here so I have of course been on line and kept in touch with emails. That and the phone, why do I bother?
Well, actually because I want to buy a company and I also want to be with my family and this way I can just about reconcile the two.
* * *
October 20 – Right now I have to remind myself that we have an ongoing business. It would be easy to be lost on other things. Late yesterday our lawyer managed to get stuff back to me and overnight I agreed to the contract going to the other side.
Today though West had me out and about again. His reason was simple. He’s been using the data our students produced over the summer and as a result of it has identified a large prospect who is the major customer of a small competitor. Our experience is that our current product offering and the chance to receive management reporting is of use to clients with quality management systems. It seems that by no means all our smaller competitors understand this.
And West reckons that on this stuff I have the gift of the gab (and a willingness to pout my neck on the line to suggest we can deliver relatively untested product). So we went prospecting together at this client today and it looks like another potential win of good value, assuming we can get the package right.
I never used to see the buzz of doing this. I do now. It’s a completely different sentiment from running a tightly controlled finance department, and I wouldn’t want to give that up entirely, but there’s no doubt that selling can be fun, especially when you’re brought in to help move towards closure.
A good end to the week, and I’m off the first half of next week. As a family we need a bit of time – and a chance to enjoy Olivia, who has just started to walk, worryingly early. Like all fathers I’m smitten by my daughter, and am just a little worried about what life will be like when she’s a teenager.
* * *
October 19 - The lawyers finally got me a draft of the contract. Newc has been pressing me hard for this. I think he's already beginning to have problems holding things together as the stress of the deal begins to get to him, and his people suffer the expectation of change which he has to manage. I feel sorry for him, but I got things done as fast as I could.
I confess that the contract was only OK. I supplied masses of information to them to ensure we got as good a draft as possible, but it still remained the case that the target company was incompletely specified (I'm baffled why it falls to me to put in the company number and registered address, for example, when they already have this) and the pattern was repeated elsewhere. It was probably better than many first drafts, if I'm honest, but it makes you wonder what lawyers do to earn their money in these cases. It always seems to be the case that accountants spend half their lives in this situation filling in the gaps the lawyers leave and translating the lawyer’s lack of reality into something that can be pragmatically achieved.
Which took much of yesterday, and still leaves Newc wondering what is happening as I have had to send all my changes back for approval by the lawyers before we release it to the other side.
I have a feeling that I too will have had enough of this by the time we have finished.
* * *
October 18 - I was reminded by #3 yesterday that I had been here for three years. It came up in a discussion we had following the management meeting which was deliberately free-form. Chair asked a simple question. It was 'what's the thing you're most proud of that you've achieved whilst being here?'. He'd told me this was not to necessarily discover anything specific; the intention was team building by learning more how each of us viewed the world.
It gave rise to a fascinating and worthwhile discussion, not least because of the range of issues that were brought up (most of us took the liberty to give more than one answer). I suggested mine was having suggested the change to our way of working and the use of the new kit that is now becoming widespread in the company. #3 suggested it was much more mundane in my case. She reckoned it was my getting the loos rebuilt soon after I arrived. Apparently she was not alone in going home on occasion before that happened because she could not face going to the loo here.
It's funny how perspectives differ. Which shows that Chair was right to put the question to us. I think he's really worth his fee.
* * *
October 17 - In the office. Management meeting day. Ops sent his apologies -and did provide reasons, but frankly setting up appointments to ensure he can't come is not on. This meeting is part of the company's systems. I've told him so and said it's a 3 line whip from now on.
I have to be candid and say the rest of the team are proving to be magnificent. Even West is beginning to toe the line. I think he sees that Ops is the wrong side of it right now.
I feel like my feet are hardly touching the ground at the moment. I'm almost grateful that the lawyers have not managed to get a draft contract out so far. It has let me leave that issue aside. But I did lead a discussion with the team on how we might integrate the business. This was not hard. East is really bullish about it.
The other issue was the accounts. As #3 pointed out, they really do show that the north is out of step at the moment. Sales in general are good, but Ops is slipping even there. And What was telling was looking at things in the new format of manager accountability. Then it's apparent that Ops has not got control over his costs either, and others have to a greater degree (indeed, East is underspending on some things I actually want him to spend on - such as training).
I spent some time on this. Partly because it's also important to support managers and to show I appreciate their work. But I realise as a result #3 is commanding her new brief. She has taken control of accounts. Her people are working for her. It's a marked contrast to Ops.
But it's encouraging that these people can keep day to day stuff going by and large whilst I deal with these other issues. This gives a real platform on which to build.
* * *
October 16 – Spent much of the weekend thinking about my visit to the North and had the chance to call the chairman and the ex-CEO, the latter because he knows Ops so well.
I know I’m really excited by buying a new business, but I’m at least as worried that Ops is beginning to run a semi-detached one, and that I have provided him the opportunity to do so. That has to change. I wanted to discuss this, so we agreed to have lunch today. To cover my own backside though I had to clear this with Mrs ex-CEO, because I can’t ask the ex-CEO in without asking her.
Curiously, she gave a good insight although she did not want to attend. She asked the simple question, is he planning to leave and should I wonder whether the semi-detached approach is indicative of this? It was a thought I had not addressed. He’s been here so long I just guessed what I was seeing was disenchantment with change.
The ex-CEO, the chairman and I had a remarkably amiable lunch, and it was good to be able to send Mrs ex-CEO’s cordial greetings. They obviously appreciated being called in. I spent time explaining my concerns. And both listened carefully (the chairman somewhat more than the ex-CEO, but I appreciated the chance to express my concerns out loud. This is so important).
So where did we get? Well, they both thought Mrs ex-CEOs observation interesting. And worth bearing in mind. They’ve asked me to take steps to ensure data protection in case Ops might be tempted to copy stuff. But they also fully supported the need to ensure that whilst Ops should have the freedom to roam the north for new business, the company’s systems must be in operation when that business is undertaken. So we decided that the best approach was to build on the discussions I had enjoyed with staff in the north and to get them really involved in training programmes at head office. There are two reasons: we want them to do business our way and we want them to know people down here better. That way they will question what Ops is doing and we will build capacity in case Ops is unstable in his intentions. And experience says that all people enjoy being trained. This might buy allegiance if troubled times are ahead.
One thing I can say. It’s not dull here.
* * *
October 13 – Day two of the trip north has given me little more reason for hope. I borrowed a van to go out to meet some people, rather than have Ops drive me round. We don’t have many people up here, and I saw more than half, spread over two venues.
As usual, I like our people. To be any good and work for us people have to be willing to get on with things because they’re managing their own time when on the road. And I get on with people like that. But what I did learn was that these people are not being given the encouragement to sell that East and West are really trying to build into their teams, and they also lack much knowledge of what we’re really looking for. I guess this is an insight into what this company was like when it was fairly small and Ops and the ex-CEO ruled the roost. All cards were kept close to their chests and staff were in the dark in those days.
I had to be careful. It’s not my job to undermine Ops (whinging downwards is, in my opinion, just about the most damaging thing a senior manager can do) but equally I had to reassure people that I thought we needed to improve how things are. These people aren’t daft. They know people elsewhere in the company. They know things are changing. And they are asking why it isn’t for them.
It’s time to talk this through with the chairman, and maybe (I hate to say it) the ex-CEO. Things are amiss. I know Ops has not been up here long. But there’s no sign that he’s in control. And that’s what’s worrying.
* * *
October 12 – I had to do it. I got up very early indeed and went north to meet Ops. He picked me up from the station (I hate long distance driving if a train is available) and that gave me the chance to talk to him at greater length. I wanted to do two things on this trip. First I wanted to meet his people, alone. Second I wanted to find out what Ops is planning.
The first day concentrated on his plans. I’m sorry to say he really doesn’t seem to have any. I know he’s always been reactionary, but when we worked together on a daily basis I was able to convince myself that there was some logic to what we were trying to do in the sales function. In other words, I thought we had a plan as to what type of business we were trying to get and who the likely prospects were. I’ve been encouraging this strongly with East and West since I’ve taken charge. But I now come to the conclusion that they’d always been the people who gave Ops the veneer that this was happening in their former roles as his assistant and sales manager. Because as we talked things through it became apparent that his sales strategy is now entirely reactionary. I almost think he might drive around, see a building and go in if it looks like a possibility. It’s not a way to win. And that’s already beginning to show. He did score one early good success soon after moving north. But I really can’t see where the next is coming from.
I’m worried. I know that in sales nothing is guaranteed, but planning increases the chances. He could deliver, by luck. But equally, his scatter gun, random fire approach might hit nothing. And I think that at least as likely.
Our changed relationship was also apparent at the end of the day. I had wondered whether he might put me up. He didn’t offer to. He even had a social engagement he had to go to in the evening he said he could not cancel. So I spent the evening alone in a hotel. I just love that.
* * *
October 11 – I’ve noted comments on here about the problems of asset sales for tax. As a result I was not too surprised when Newc (MD of our target company, and soon I hope to be working for me) asked if we’d take over the debtors of the company. I’d previously said I wouldn’t, but had discussions with both our accountants and lawyers.
It’s clear Newc is planning to liquidate his company as soon as possible after the transaction to get tax relief. I can see the logic of that. And delaying to collect debt won’t help him. On reflection it won’t help me either. First of all he’ll be distracted, recovering debt. Second, we expect him to pay some of that to us, as some will be money for service contracts invoiced in advance where we’ll be doing the work and an apportionment will be needed, and I’ll have problems asking him for our share if he gets none of it. Third, the customer will be really confused if two people chase for one service.
So I bashed this through with accountants and lawyers and we agreed we’d collect his debt as an agent. In other words, the bad debt risk is still his, but we’ll use reasonable (not best) endeavours to collect it, and he can help, but whilst working for us. I think this will work, and might even make the due diligence on the split of revenue easier at the end of the day.
Having agreed that, I think it’s over to lawyers now. I need a break from this and must do something real.
* * *
October 10 – Well, Monday came and went. I spent far too long at the doctors, but am now officially better so long as I continue to take a potion, which will apparently stop a recurrence subject to one condition. The Quack said I have to cut down on my stress.
I look at him and asked if he had cut his own stress. No, he replied. Knowing what’s best to do and actually doing it are quite different things, he said.
I agreed with him, and decided to ignore his advice and to follow his practice instead.
* * *
October 9 – Thankfully, I feel a lot better. So much so that I feel like a fraud seeing a doctor again today, but my wife tells me I’ll cancel it over her dead body. She muttered (as far as I could tell) various things along the lines of I don’t know quite what a misery I am when I feel below par. I have a feeling I’d better obey orders on this one.
And I even feel OK after Friday’s disciplinary hearing. The case was pretty straightforward really. Our people aren’t allowed to do any private miles in their vans. This is easy to control in most cases because the vans come back to base at night for security reasons. But this is clearly not possible for those who work some distance from base. For them we agree with insurers that the vans may be based at home. But we agree that this is on condition that no private miles are driven. We prove this in two ways. First of all we make their homes their place of work, and record this in their contracts, and by paying for a business and broadband line for business use there. Second we require a log of miles to show that private mileage is not being driven. We also have tracking devices in most vans now, which makes sense for insurance anyway.
But someone has, of course, to take the Mickey and the chap before me on Friday was the case in point. His mileage records don’t stack, and tracking shows the van has quite clearly been driven in the evenings and at weekends when there is no work record.
He’d denied this when the case was put to him by West and continued to do so at a disciplinary hearing. West found against him, and he appealed. He came along to see me with a friend to represent him. I have to say the ‘friend’ seemed to know what he was doing.
I ran through all the evidence. I repeated what had been said at the previous hearing (I’ve drummed the need for record keeping on these things into everyone as company secretary and West had done an OK job). And I didn’t ask him to say a word. I just said that there was emphatic electronic evidence of persistent use of the van outside work hours and that try as I might I could not make his miles stack.
So I looked at the friend and said before the chap appearing before me said anything I wanted him to think very hard. He could do one of three things. He could deny it all, but I could not ignore the evidence. He could explain what he’d been doing for work at these times and how the records stacked, and that would be great. Or he could apologise and accept a penalty. But I was not sure what other options there were, but was open to hearing them. And then I asked whether before he said a word would they like to withdraw and discuss matters, without me present.
They did withdraw. And they came back. And I asked them what he or they wanted to say to us (Office being my witness). The friend spoke. He said on reflection our employee realised he had been mistaken in his previous claims and must have driven his van out of habit outside work hours. The evidence that it had been driven was clear. He could not explain a work use so he, he claimed, it must have been habit to get into it rather than his car.
I wanted to laugh! It was ingenious and so obviously untrue. But I asked for clarification instead (reckoning I could play poker on the basis of my performance). What I wanted to know was whether he was therefore admitting that he must have used the van for private mileage? Yes, was the reply, but by mistake.
I asked them to retire. Office’s choice of words was classic – and rather more robust than I am used to from her. But I had a choice. The guy had admitted he was a twit, and that he hadn’t told the truth, but equally he’s good at his job, had no previous disciplinary issues and seems good with customers. So I decided I’d play it along. I called him back in and delivered my verdict.
I said that it seemed that the charge that he had abused the conditions of the use of his van was true. He had driven private miles in it. But I recognised this was a ‘mistake’. So in the circumstances I would do three things. First I’d report the benefit in kind to the Revenue and he could pay the tax on it. Second, he had to pay us the full cost at our official mileage rates for all unaccounted for miles, deducted in two instalments from successive months pay, and third if he did it again he’d be sacked instantly. One mile would be enough.
He looked like a man reprieved. He was, come to that. He knew he’d got away with it but only just. He thanked me profusely – which is not always the outcome in these things. He clearly wants this job. I told him to thank his friend.
But I think we’ll win as well. The word will go out, and I think people will realise there’s little chance another time. Which is what I want.
* * *
October 6 – I could bore on my health right now. I won’t. Suffice to say that my planned trip to see Ops on Monday has had to be cancelled. I’ve got another hospital appointment. And all for an infected ear!
But I got back to work as well yesterday. I’ve had enough of this and decided that if I take enough painkillers I can get on with things. Like signing cheques. It’s amazing how much necessary paper floats over my desk which accumulates if I’m out for a few days. So I spent a miserable day either side of a visit to out-patients dealing with routine. It made the previous days at home seem like a holiday.
But I won’t complain too much about yesterday. Today I’ve got a disciplinary hearing. It’s an appeal from one West has already done. And I hate this sort of thing. Whoever trained me to be judge, jury and executioner (well, metaphorically)? No one did. But I have to do it based upon viewing Rumpole and Judge John Deed and both of them seem to think knowledge of the law a somewhat secondary issue. That may be alright when you know it; I’m never sure I do.
* * *
October 5 – Off to the hospital today. My GP doesn’t like my ear. Neither do I. And this is really bad for getting things done.
And it’s also been really good. The camp seems to have been pretty much OK without me (although we’re still not getting all the cash we want, which is worrying) and sales orders seem to be coming through OK based on all reports I am getting (and I can see these every day, on line, and do as I think it’s pretty key data).
I did spend ages on the contract yesterday (which I might not otherwise have done) and bashed through some details with the target (I really should give him a name for these purposes – NewC seems right as he’s going to be New Co and New Chap) and seem to have got his agreement now that we’re really not going to buy the company, but that as a result his legal costs will be smaller. I’ve also had him talk to our accountants about how it is possible for him to preserve a low CGT rate if he takes prompt action.
He even assures me his accountants are getting into action. I’m hoping I will be tomorrow. But right now I just want the pain to go away!
* * *
October 4 – Still laid low by this bug. I think I might be back at the GP’s this morning.
But the due diligence is going well. I worked through piles of papers – contracts, sales data, employment guff and also had the advantage of having an Excel dump of the last two year’s nominal ledger from Sage (inevitably, I guess) to work on.
I haven’t finished yet, but the evidence suggests that everything he has told me is true. Even his data extraction seems entirely accurate. Sure, I’ve found a couple of what I think are minor VAT points, and a couple of the sub-contractors do seem to be rather regular in their working habits (which we do not allow) but we’re not taking on that risk anyway. I really am impressed.
So is East. He debriefed me on the site visits he’d done. The fixed asset kit is all there and in good nick. Likewise for the stock, although we have to be realistic and recognise we wouldn’t use some of it. The people he’s met are good. And the site visits he’s done so far suggest the kit is well installed. But we will have to bite the bullet and change some of it to our new stuff, which is a cost.
He’s visiting some more sites, but so far this is encouraging. In which case I’m beginning to look at that pro-forma for a contract the lawyers gave me today.
And our target will continue to ask his accountant to send me the year end accounts working papers so I can understand what adjustments they made to the accounts, because they haven’t been posted to the nominal ledger as yet. So far they’re the only people not coming out of this very well, simply because they don’t seem too bothered about a client they look to be losing. It’s not a good attitude.
* * *
October 3 - I did have to visit the GP. All I have is a really annoying ear infection, but it's so painful I daren't even drive.
Which is perhaps the bext excuse I can think of to do a pile of reading of all the due diligence paperwork at home. In between whatever pain killr I can take next.
Of course my wife said I should prhaps heed the message and actually stop for a day. I have a suspiscion she's right, but I'm afraid I'm going to ignore her.
* * *
October 2 - I'm way below par. I spent the weekend with a cold. Today I have an ear that's thumping and think I might have to make one of my exceptionally rare visits to a GP. My wife made me sleep on the spare bed (which is darned uncomfortable, and in need of replacement as I only ever recall when I have to use it). And I'm generally being a typical man with a minor ailment (I know - you don't have to tell me).
But I don't like it. And that's enough for now before I move into the grumpy old men's corner.
In September the CEO began a takeover
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Number of comments: 7
AccountingWEB.co.uk 30-Oct-2006
Categories: Business News, CEO's Diary, Strategy
Times read: 30356
strike 1 to you to got a fixed fee deal, but watch out for additions i will be surprised if they dont try it on.
Lawyers / solicitors are perhaps the leading example of why time based costs should be made illegal in certian circumstances.
recently 3 clients have had to resort to legal action, despite my telling them not too, and on each occasion the case has been badly handled cost over 3 times the estimate, and in one case 10 times. at the end of it all they wash their hands of it all and come down hard for their fees, irrespectove of the result or their own professional actions, for which there is improper systems of address.
the police have an independent complaints sysytem so why dont lawyers. please dont mention those idiots at the law society .....
even if yo go to what was taxation the closed dhop is still in operation.
what the busines comminity needs is a complete overhaul of commercial law so that they at least have an idea of the palying field.
I've watched the dramas of CEO with great interest recently, and must admit I'd assumed throughout the process of change that Ops was somehow trying to find a way out.
It seems to me that Ops is not necessarily planning to leave nor actively seeking another job. Rather that an opportunity to escape to the north, in his own patch, some distance from the central offices appears to be an attempt to stick his head in the sand and pretend that the new approach to the business doesn't affect him.
I may have this wrong, but the impression I get is that ops may be a little older than CEO? Because the behaviour is fairly consistent of somebody who only has to put a couple more years in before retirement is possible.
Irrespective of the above, I do think that CEO now has to accept that his relationship with Ops has changed irreversibly - Ops is now on a par with East and West, and should be treated in exactly the same manner. I have no doubt that if either east or West were behaving as Ops is, then CEO would fall on them heavily - Ops should be treated no differently. He is there to achieve sales and increase business - if he doesn't achieve that, is there any value in employing him? I do think that a level of consistency needs to be applied, in terms of conduct (including timely reporting) and achievement (with consistent KPIs for all employees).
Sorry this post has been a little disjointed, I think the point I'm really getting to is - Ops was very important in the past- the question is, is he important to your future?
There will presumably be employer NI to pay on the car benefit, which you may not have arranged to recover from the errant employee. It would therefore perhaps be in both your interests to see that the taxable benefit is time-apportioned only to the actual period when private miles were incurred.
I think your GP is 'talking empty' here and doesn't quite understand you. From all we've read you strike me as being a somewhat stressy and itchily active person. If you don't have something to worry about or resolve, you'll go off and find something else to stress about and try to resolve. I don't see you as someone to say everything's up to date, I'll go off for a round of golf!
Some people are like that and to remove stress from such people is just as irritating as stress is to laid-back people. In some ways this blog (and the chats with Chair) are an antidote to the stress, because you get to exorcise your stresses here or at least put them in context. Most people have to internalise such things.
If you need anything, I would have thought it was a hobby that will enable you to divert your mind and energy from work-related things. Of course having a toddler is a pretty good source of non-work activity.
The best hope for the vendor is to persuade the purchaser to pay a higher price for the goodwill on the grounds that the purchaser can write off the cost for tax.
Prompt action is needed because, on sale of the business, the vendor ceases to trade. The company needs to be put into liquidation quickly and at least a good chunk of the cash paid out. Every day's delay means that the rate of taper relief on his shares diminishes as the shares no longer qualify as business assets for taper relief.
The practical difficulty can be that immediate liquidation is impossible because otherwise debtors would feel that they do not have to pay.
A possible way round this, depending on the numbers and how long before debtors can be collected, is to transfer the shares into a settlor interested trust triggering the capital gain with maximum taper relief
From what I can see an assets and trade deal out of a company with plenty of goodwill is a bit of a pain from a CGT point of view.
If I remember correctly companies don't get taper just indexation and goodwill often has no base cost. So the vendor is likly to have a full CT charge on the sale value of the goodwill.
So I am interested to know what the prompt action is.
Mega pension contribution?
Some kind of roll over?
maybe
