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CEO's Diary: Rumbled!
The CEO's audit manager has worked out who he is
November 30 - I had a great afternoon yesterday seeing a client. Really positive. I took West with me, as they're based in his patch and it remains the case that he is the one in my team with most need to be convinced of the merits of our corporate case. He performed though. This one was picked because they 1) needed a pre-Christmas visit 2) have some smaller properties. West pitched the new idea for those properties at them. He did it well, which gave me a chance to give Brownies points later. And they showed real interest if matched with quality control reporting.
So, that's a buzz. We're moving our product and service offering into spaces I don't think our competitors yet know about.
Then I got back and met the Chair to talk about Ops. He sat groaning for a while, partly because of my own indecision on this if truth be told. But I had to tell him it's going to be tough to turn on someone I saw as a bit of a mentor at one time. He just laughed and said if I could sack the shareholders, as I did long ago what the heck was I bleating about? Ops is not performing he said. Pull him into or give up the claim to be CEO was his blunt message to me. Ow! That hurt.
But the funniest bit of the day if truth be told was a call from a manager at our auditors. She told me she had something rather sensitive to ask. I was a little concerned! Then she said "Are you the CEO?". "Well, of course I am" I replied. "No" she went on, "not of the company. Are you the CEO on AccountingWEB".
I've been rumbled!
"Why do you think so?" I asked. "Well, you have just done a takeover" she said.
I swore her to silence and admitted the truth. I confess she laughed almost endlessly into the phone. "You mean Ops is X" she said, and "Does #3 know she's in a blog?" I had to assure AM (as I'll call her) that they were as she speculated, and that #3 at least did not know. As far as I could tell, nor did Ops although I'd mentioned I kept a diary to him in the past. When she'd recovered he composure she asked if she could use this diary for analytical review purposes. I strictly forbade it.
AM, this is between me and you.
* * *
November 29 - Some problems do not go away. Ops is one of them. We've gone back to not knowing what he is doing. I won't undermine him by phoning his team to ask, but I'm sorely tempted to do so. When I ring his mobile it's usually on a message service and when he calls back (if he calls back) he says he was driving or in a meeting, but I can neve find out who with.
This guy is an enormous cost on the business. He's clearly not handling the process of change well even though we've given him what he wanted.
What do I do? I have a feeling that I have to go more formal on the disciplinary process, suggesting he's not accounting for his time as required. But will that be enough to nail him? He's costing me money and not developing the market. It's a double whammy. And I'm not willing for this to continue through 2007.
Newc's enthusiasm, East's absolute reliability (he's doing a fantastic job at the moment, and will get a bonus next month to suit) and the support I get from Office and #3 shows that this is not a general problem. But it's wasting all our time. And grinding me down. I'm always reluctant to use the word cancer, but that's what it feels like.
I'll have to consult the Chair again.Maybe even the shareholders and lawyers. I have to get this right. But soon I'm going to be at the point where I want him out. What amazes me is that he still wants to be here.
* * *
November 28 - Newc is really firing on all cylinders. He sent me a memo yesterday on why we need to blog. And I sort of got it. There is a need for a 'news' updating service in this sector and there really is nothing like it.
But first of all I've told him to critically analyse our web site. I think that's more important, especially if we're going for smaller buildings. At present we spend quite a lot of time going out to look at premises before we quote. But if we're going to significantly increase the number of sites we service we need to re-think that as well.
Sometime ago I mentioned that we had introduced the idea of menu pricing (to some degree) to cover different levels of service support. That has worked quite well. There's no doubt that it's let us differentiate ourselves in the market, and let us pitch at different price points in one presentation without losing face. This has helped us win bids on several occasions which we would otherwise have lost. But I'm also now pretty sure that we could do an 'on line' quoting service for buildings below a certain size. This turns a blog into a lead generation service. Now that is worthwhile.
He's keen. And it's good to give him ownership of something really quickly. What is more, something I've wanted to do and know I'll never get time to deal with.
* * *
November 26 (Sunday) - I realised I didn't write on Friday this morning. Why didn't I write? Because I was too bogged down in organising a one year old's birthday party, that's why.
OK, it wasn't her birthday on Saturday, but she didn't know. In fact she took almost no interest in the event at all except to show off her new found ability to walk and say MaMa.
But what the heck? I need to remember there's a life outside here sometimes, and that I do this job, at least in part, to bring home the bacon.
I also need to recall sometimes that I will need to do so for a long time to come. That's really useful thing to keep in mind. It makes me think long term when it would be easy to forget the need to do so.
* * *
November 23 - The first of the 'out and about' days. This one, in part, a deliberate exercise to introduce Newc to the sort of client we're servicing and to spend time with him now he's in our team.
I like him. He challenged why I am doing this. I think I have four reasons. The first is to cement relationships. The second, which is I guess linked, is to retain the business we have. The third is to see whether we're on target with the service we're supplying. The fourth (and it is the last, I think) is to win more work.
He says, having seen me today that I'm confusing people. I'm listening well. That's parts 1 to 3. But actually I'm not giving them enough back. They want to know more from us. Not necessarily directly about what we are offering, but about why we're offering it. In other words, what is happening out there. What are people doing in this sector generally. What are the reasons for change. What are the appropriate responses and what can be ignored. To put it simply, he thinks I might be as opinionated as can be when it comes to managing the company, but I'm not selling that as a reason for us being different from the rest of the world.
I'm curious now. The people we met today are good. They are at the more proactive end of the market place. They want to get things right. So maybe they did want me to offer more. I wonder if that's true of everyone.
But, on the way back we bounced this around and I really enjoyed it. It's refreshing to simply be appraised in that way by someone who does know the sector. And perhaps (and I know we've touched on this before) we should be more proactive ourselves.
He wants to blog. I have a feeling that this time I'm going to say yes, so long as we can link any blog to customer needs. That might be the challenge.
* * *
November 22 - Sometimes you have to repeat things. I've learned that.
I tried hard yesterday to emphasise that whilst I'm keen to sell to smaller premises in the future I'm not keen to sell to lots of small businesses. There are two reasons.
First of all, we know how to sell to larger companies and are comfortable with it. We just now want to sell to companies who run chains of premises. But the selling technique will be similar. We don't want to change too much at once. That's not a known recipe for success.
Second, very small businesses have a higher bad debt risk and I don't know how to manage it. That's our experience anyway, and I've edged us away from it.
But, #3 thought I'd suggested she'd have a lot more accounts to manage and came in worried about that today. I managed to reassure her, but sent a rapid mail to all the others in the team as well to reiterate the point. I don't want this new policy to be misinterpreted from the start.
* * *
November 21 - Well, if yesterday I wanted to start the rest of my life, today I feel like I have.
We had our special management meeting. One reason was to introduce Newc to this way of working, formally. The other, much more pragmatic reason was to get next year's budget under way (we have an end Feb year end for reasons no one has ever explained to me, but which I see no reason to change). Ideally this would have happened somewhat earlier, but I've been somewhat distracted and frankly I see little point in budgeting when the company structure is not known, as was the case here until last week.
There was another very god reason as well. This is that I have had a bee in my bonnet that we really need to drive into new markets. As is, I guess, fairly apparent we supply services to buildings (which still leaves a massive range of options for those with idle time to muse). What may have been less apparent is that most of our customers to date have been locations where there is an active user of our service on site such as a hands on facilities manager. They may be employed, or run a serviced site. Either way, one hopes they are proactive rather than reactive managers (although I have to admit the word hope is sometimes a statement of desire, not fact).
But Newc, although he did not realise this was his attraction to me, has been selling to smaller sites. And our new technology which allows significant remote access has transformed the economics of what we do. Coupled with that, if we can automatically report findings by database driven email, or the like, then we can service much smaller sites which may themselves be managed remotely. This brings much smaller premises within the target range for us. Things like pubs and a lot of retail premises which have previously been of little interest are suddenly in our market.
At least, I think they are, and I told the management team today that this is the big change that I want to see within the company in the next year. Newc is to help me create a strategy for this market and develop a product offering, for which he has the right experience. We're close to technical viability on it. All I wanted was some enthusiasm. And to be candid I got it from all corners bar one. You guessed it. Ops thought it was a waste of time. But after he'd had his say everyone ignored him. And we got on with the job of divvying up the necessary tasks to build this into our thinking and get on with some fairly rapid planning to add onto the other jobs in hand.
Like anyone at this stage of a project, I have no idea if this is really the right thing to do. But I have a hunch it is. If so, this is a new direction. I'm excited by that. And I wouldn't have got to this point without having bought Newc's company. This is my plan for making the purchase work.
I just hope I'm right. But at least in my case I'm going to put some effort behind the hope.
* * *
November 20 - There's a horrible temptation to believe that this is the first day of the rest of my life, and that things can get back to normal now.
There are two reasons why that is not true. For now we own a business that is not integrated into our systems. #3 and East are going to be hard pushed on that one. As if Office to some extent. Thankfully, they're the 'A' team. But East in particular worries me. He might need more assistance. I have a pressing reason to worry about our 'next' tier of management. Ops is not sparking (that's about as nicely as I can put it). West is OK, but his #2 really drives things, but I can't relocate him. I know, I've asked or I'd send him north to give Ops a kick. East has an OK assistant, but no more. I'm hoping Newc's team might deliver someone else for him as he could easily manage more good people - he's good at it. And #3's team is OK, but she has no-one to really bounce ideas with downwards it seems. So she's bouncing a lot off me (metaphorically). This needs sorting next year.
In the meantime though, and until Christmas I'm on a charm offensive with a lot of customers, eating and drinking for the company wherever possible. It's a tough life.
But the most pressing need is to turn the investment in Newc's company back into cash. That starts tomorrow. We have a special management meeting. And there's a three line whip. I just wish I didn't have to wonder whether Ops will arrive despite that.
* * *
November 17 – The last day of the ‘phoney war’ I hope. Newc was in bright and early, and I set him up to meet the team on a one-to-one basis that has not really been possible before.
Then he had to be sent in to help #3 with a pile of accounting issues that come out of this (not all pf which are straightforward). And East is settling a schedule on how he’s going to meet the key customers of Newc’s business next week as we want East to assume responsibility for them all over time. Newc is to concentrate on new stuff.
It’s that I’m really keen on. Talking of which, our IT chap has also been doing really good work on database driven reporting which can work on each workstation in the company. It’s good stuff, all being driven in a browser and easy to format and use. I like it. This is going to help us.
I also have to admit though I am looking forward to the weekend. As the saying goes, I'm cream-crackered.
* * *
November 16 – It’s done. None of this silly staying into the night stuff that seems to be a part of M & A life. At our end of the market it was matter of Newc and I plus his wife as company secretary going to the lawyers, signing everything, shaking hands and telling our chap to make sure Newc got the first instalment of cash. It felt really anti-climatic. I do think the lawyer should have brought out the bubbly, even for a deal of this size and even if it had been Cava. He didn’t, so I did the decent thing and took Newc and his wife out to lunch to celebrate.
And then I assured him I’d see him in the office in the morning. He’s going to have to get used to commuting in. That’s part of the deal for him, for at least part of the week.
In the meantime, the office assured me that the envelope sealing operation was complete and the franking machine was in good order, so all the notification letters got out, one way or another.
So I’ve done my first takeover. It feels good. It will be better when it pays back. And Newc is a big part of that. But what’s been really encouraging is that at no time in doing this have I lost faith in him. He’s straight, straightforward, and likeable. He’s also created a good business. Now I want him to help ours grow. I hope this is a new era. In one way it really does feel like that. Ops is moving ever more steadily towards the side-lines.
I’m taking my wife out to celebrate on Saturday. Like a lot of parents with young children we don’t get as much time together as we’d always like. I think I owe her a big thank you for her support whilst I’ve fretted through this one.
* * *
November 15 – A long day, getting to Newc’s place and then doing what I wanted plus reassuring people things will be OK. The one casualty of the takeover had also to be placated. That’s the ‘freelance’ book-keeper. We really won’t need her. But I have agreed to pay a contract termination fee.
No other funnies found, thankfully. So now back to get it signed.
* * *
November 14 – Customers and suppliers having been dealt with (I hope) today I’m making sure that we’re giving all the employees correct new contracts for Friday. East and I are checking them one by one, and independently based on our notes and discussions. We can’t get this wrong.
And I’ve checked the final contracts. I have the power to sign for the Board. They seem fine to me.
Tomorrow I am going to check that Newc is managing his staff’s payroll correctly for Thursday (we’re paying people mid-month and again at the end of the month and I really don’t want anything wrong). I’m also running through his stock check preparations for the move and although he doesn’t know it I also want to make sure he’s not pulling profit forward. I don’t want him billing what should be ours, so a WIP review is on the cards.
All jolly good fun (I jest). And I’m really looking forward to some normality.
* * *
November 13 – Being a bit of a wordsmith helps when you’re a CEO. Toady’s been a matter of writing letters to customers and suppliers who will be affected by the takeover of Newc’s company so that once the deal is done we can get things integrated here ASAP. Since the reality is that we’re buying the assets that means that people have to know on Friday morning.
So whilst I have been scribing careful words of welcome seeking to allay fears, offering assurance that all will continue as before and that people must pay (customers) or will be paid (suppliers) (we’re managing both as agent in the end) it’s been head down Office and our IT chap as well as they get mail merges both for print and email ready.
Thank heavens for the ability to dump customer information out of small accounting systems is all I can say. Without that this would be nightmarish. With it, it’s manageable. Well, except for the fact that there do seem to be quite a lot of envelopes to deal with on Thursday night.
* * *
November 10 (again) - They said yes. Well, actually the shareholders did. No one knows where Ops is, which makes me very angry. But only the shareholders count on this one.
Next Thursday should be completion day.
Phew.
* * *
November 10 – Once I got back to the office yesterday I spoke to our lawyers. We have a virtual green light now. I spoke to Newc. He reckons he’s ready to go. I finished my costings. There are a few unknowns e.g. stock on the day of the deal (but the liability is capped). That apart the numbers are known. So I sent out the minute by email that has to be approved by the board to let us complete.
It now irks me that Ops gets this when I don’t really think he’s pulling for the business any more. I realise I am getting to the point where I would rather he was gone. Frankly though it doesn’t matter. It’s the shareholders who say yes or no to this one. I’ve asked them for answers by email and fax by lunch time – we’ll do this by written resolution. Then it’s a matter of working like stink to do press releases, letters to clients and suppliers and all that paraphernalia. Let alone getting Newc’s people onto our payroll.
When this is over I’ll have to ask serious questions about whether the diversion of effort has been worthwhile. I could have done quite a lot of client development in the time this has taken.
* * *
November 9 - I’ve read some of the comments, below, on how I use my time. I mused on them last night (having read them courtesy of wi-fi, about which I say don’t ask questions, just get on with it).
I agree that a CEO’s job is to look outward. I think that’s the massive difference I’m finding between what I do now and being the FD. But, I have two other roles, as I see them. The first is to understand what is happening in the business. The second is to mentor my management team.
I trust #3. She’s good. We’ve worked together for a long time now. But, she’s new in her role as well. And she was worried about what the accounts were saying. She thought she’d covered all the angles. And she hadn’t got the answer she expected. So she wanted to talk to me about it.
Let’s be honest. I think that's fair. In fact – I’d much rather she did this than just dump a number in accruals and hope. That’s good communication. But it also shows her limits right now. She is an accountant. She’s not an FD, candidly. They are different. One gets the numbers right and keeps a good control system in operation. The other thinks about what the numbers mean. I’m not sure she’s there yet.
I spent time with her to show her how I would look at this issue. That’s the mentoring bit. And frankly I was baffled by it. That’s the understanding what’s going on in the business issue. It made me think hard. And ask questions. Isn’t that what accounts are about?
Since then I have discussed the issue with both East and West. We’re all looking out for causes, including the possibility that we really are using less because we’re becoming more efficient. That’s putting accounts to use.
I can’t see what’s wrong with using my time in that way? Or am I missing something? Seriously, I’m open to suggestions. But what I really don’t think is that this is as a waste of time. Any more than spending time on tenders is, if after a go or two West is better at it than now. After all, how else do I transfer skills I have if I don’s spend time with the people who need to learn them?
* * *
November 8 – It was a long day. So long I won’t be back home tonight, and East and I have had dinner whilst talking over the new people.
Suffice to say, one apart they seem a good crowd. They know their stuff. They seem keen on the change. East impressed them ( he did more than half the talking). Once we’d explained what we propose and that it doesn’t change their overall incomes, and might increase it they’re OK with it. The van issue is not an issue once they realise the tax implications. They’ll buy into our scheme of things to avoid a charge.
The exception clearly wants to be awkward. He was withdrawn, sullen, non-negotiable and downright perverse. I called Newc about him and asked what the heck was going on. Apparently he’s just also announced he’s going through a divorce. It was reassuring to know it wasn’t us. But he may be a problem.
For the rest, I think we’ll be OK.
Another obstacle down. Now I want to get this done.
* * *
November 7 – Finally, we’re back on track with the deal. Lawyers seem to have made good process (Newc never stopped his man working) and we’re close to getting to a reasonable state on that side.
Tomorrow East and I go interviewing.
But the realities of life continue to invade my day. We’ve had one of our weird blips in GP ratios on the October accounts. #3 and I spent ages on this today and nothing jumped out at the end of the day (at least in East and West divisions, and it has to be there). Curiously we appear to have too much stock, which is always odd, and no obvious cut off issue to explain the reason. So in the end we’ve just decided to increase spot checks and accrue the reasonable difference for now and see if it falls out in the wash.
There is just a possibility that we now have so much new kit out there our usage in repairs and so on is falling. I’d like to think that’s the case. But I’m not sure. I’d rather be cautious and take the credit later.
Amazing how much time it can take to get to that decision though. I can’t be alone in wondering what the heck happens to the day on occasion.
* * *
November 6 – I’ve left East to organise staff meetings with Newc’s people. I’ve simply agreed to turn up. I had other issues to worry about.
Some readers might recall that awhile ago Ops made a complete hash of a tender for a contract, and we paid the price for it. West has a big one going on, and I no longer let this happen without my giving them the once over. And that’s taken all day.
I hate having to submit tender documents. They appear the ultimate tyranny of group purchasing arrangements, designed to suck any life out of business, the personal relationships and undertakings that actually make things happen whatever the service agreement says, and they are generally the most boring things to produce I can imagine.
So I’ve really enjoyed today. And all this to keep work we already have and where we believe we have no serious competitor on the tender, but entirely because the customers ‘quality system’ (some joke) says all contracts over a certain value must be re-tendered every three years.
Please someone save me from bureaucracy, from wherever it arrives.
* * *
November 3 - Newc has caved in. He's agreed terms and I can meet his team next week. Actually, I'll do it with East. He will manage them after all. And now I can complete my memorandum to the board to get them to approve the revised budgets including these costs, which is vital under the shareholder's agreement.
I think this is really it. I think it's now 98% sure this will go through.
I hope so. I'd like some time off this weekend.
* * *
November 2 - No news from Newc. It looks like he and I will just have to sweat this out. Why can't deals be straightforward?
More developments with Ops. I called him. I had two reasons. His October sales figures are poor and I had the customer complaint to deal with. He fed me his usual lines. In the end I decided I have two options. I can either extend the rope and hope he hangs himself, or I can act as I would with another manager who was out of line and shorten it. I went for consistency. So I shortened the rope. I asked for a daily summary of what he's been doing. I made clear that I knew that this was not the way I wanted to treat a senior manager, but I had little choice given the current lack of performance he was offering to the company without explanation.
I could tell he was angry. So I confirmed the request with reasons in writing. I've had enough of this.
In the meantime I realise just how much I'm relying on East, Office and #3. Right now they are carrying the company. West is doing his job OK, but no more. But East in particular is carrying a great deal on the product side.
And I desperately want time with the team to look at accounts developments, the new reports (which still aren't right) and to just keep people happy. It's amazing how much one person playing up can upset the equilibrium of life.
* * *
November 1 – I thought the week was going to be busy, but this is ridiculous.
The lawyers told me I have no choice but offer what the staff of the target company are on now. But they agreed I can offer them alternatives, if I want. The difficulty of that is that they seem to get bonuses on no set criteria – they’re just an annual dollop of cash. Which as far as I’m concerned might as well be part of basic pay. Candidly, if it is they won’t be too far out of line with similar people here. I’m going to offer it and then add in some of the new incentive arrangements we’re using which are performance related.
On their use of vans though at least the lawyer agreed that whilst I can’t take this benefit away I can make clear what the tax rules are. I think this might achieve the result I want.
All this though then had to be fed back into my costing for this whole operation – and as a result I’ve told Newc that I’m not happy that bonuses have been offered now which have no obvious logic except to make the sale of his business easier. I’ve told him that’s a cost he’s paying. I’m not. He’s not happy now. So meetings with his staff are off until he can decide whether he will accept.
Finally, we’ve now had a complaint about Ops. A customer wasn’t happy about a visit he made to them and asked to speak to me. He couldn’t be specific about his unease, unfortunately. He just felt Ops was wasting his time, and wasn’t happy about it. When I asked why he could only say he’d been presented with a range of options we offer but than had been led to believe they really weren’t worth buying.
I admit I’m really getting a little bored with both these issues now. I want Newc and his company, but I won’t be played around. I won’t be played around by Ops and I’m no longer sure I want his company. I guess I’m hard to please at the moment.
In October the CEO's life was dominated by the takeover he's doing and concerns about Ops. November looks as if it might be much the same.
For previous installments of the CEO's Diary, see:
September
August
July
June
May
April
March
February
January
December
November
October
September
August
July
June
May
April
March
February
January
December
November
October
September
August
July
June
May
April
March
February
January
December
November
October
Number of comments: 13
AccountingWEB.co.uk 30-Nov-2006
Categories: Business Features, CEO's Diary
Times read: 15885
by 13 user(s)
It is unfortunate that you have been rumbled but this is the most interesting thing on AccountingWeb. Do stay on. I do not personally need to know who you are or the company. The topics you bring up are interesting. I do agree with Chair are you Attila the Hun or the Nun when it comes to Ops. The auditor would not be doing her job if she did not guess who you were from reading the blog. So at least you are paying them for a service they are performing diligently. Stay on for as long as possible. If AM cannot keep a secret then she will have let a lot of people down on this site. Maybe she should move off your audit? Conflict of interest matter.
You'll have to be careful now when complaining in this diary about the auditors. No more poaching of AJ's from them either, I expect.
I'm sure AM will be thrilled to be another player in the soap opera that is the FD/ CEO's diary!
I posted back in October (I think) that Ops had to go. Also it seemd that he was engineering a situation where you pay him to go. Have you asked him?
it might be giving away who CEO is
Surely not!
That'd be competition!! ;-)
Of course, you will put a link to Newc's blog on this site, won't you?
Has he surfaced yet, or is he regarded now as dispensable & therefore not mentioned?
Are you sure the van issue will disappear now they know they are going to have to pay tax unless they adopt 'your way' (which is...?). I assume they have also been getting the fuel free, and you said they were using them like cars, so they obviously don't feel embaraased about the fact that they are driving round in vans rather than cars.
If so, how is the tax going to put them off? Until 5.4.08 they are going to pay tax on £500 - a charge of £110 for a basic rate taxpayer. That's about three tanks of petrol for the car if they're lucky. Why wouldn't they just go on using the vans?
Mike Truman
is important, but so is looking after the infrastructure, and both can be time consuming and diversionary. I would suspect the questions should be more about how rather than why, along with how you maintain the balance, particularly with uplanned opportunity.
the golden rule is work on the business not in the business.
any chance you can deterrmine which division is causing a blip in your GP
Yes, it does make sense, but it seems from the outside that you're taking a lot on yourself as you feel you can't wholly trust your senior management team. Is that fair?
To that end, does #3 need a number 2 so that you don't have to spend all day looking at GP ratios? Would you accept her answers if she'd spent all day looking at it with her team?
Cheers
Matt
I review at the moment because this is a teaching / learning process.
When I think the lessons are learned, I'll delegate. Does that make sense?
Morning, couple of questions.
1) If you don't think you'll lose the tender, why are you spending all day reviewing it?
2) Who are you going to delegate this to in future?
Cheers
Matt
