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CEO's Diary: Managing the down side
The economic down turn has arrived
January 31 - I dragged myself in yesterday, and was told off on all fronts for doing so, but was mighty pleased I did. Yesterday was the day that the downturn in the economy really began to hit us.
A significant customer had called to ask for a meeting. East had seen them, covering for Promo who is now nearing his handover. Their message was simple. They need to cut costs. The message has come down from on high and has to be put into effect immediately. We're in the firing line as a result.
This is going to be a difficulty for us. We think our products and services add value. I can't explain how without giving the game away, but we also have the benefit of having some regulatory support for their use, although they're not the only way that the basic requirement of the law can be met. However, whilst smaller businesses may be able to get away without the sort of systematic approach to management of this issue that our products supply and the monitoring which our maintenance seeks to guarantee, in larger organisations with systems driven processes it is harder to see how that can be achieved.
That said, there are levels of assurance that someone can buy. We recognised this some time ago when we introduced what we called bronze, silver and gold levels of service. As a marketing idea that was poor and we dropped it. Customers don't like being told they're buying a third rate service, but internally it worked a treat. It meant we could tailor service level agreements for price points that the customer wanted us to meet by varying the support supplied. In effect, when the maintenance service is to some degree supplying assurance the customer has to decide what level of that they need. If they want to carry the risk, we'll cut the service level. Our job was to make sure we transferred the risk as a result.
Right now this is going to be critical for us. East and I spent yesterday re-designing this customer's package for them to save cost. We've done that, using thinking we have already done and can offer a new contract at lower cost with them paying for more support on an 'as needed' basis to ensure they continue to meet legal requirements. We know they can say this will cut costs. We keep the business, and we just have to be more reactive than proactive in the customer relationship - but with agreed response times that we can manage built in from the outset.
It's not ideal, but I am very, very pleased that we did this when things were going well. It may be a life saver right now. As it is, this customer can have the cost saving he wants, but I reckon we'll be little worse off. That suits us all.
But the message is clear. It's harder to manage in the downside.
* * *
January 29 - Well, whatever they've all got, they've given it to me.
I struggled for part of today and then Office and my PA ganged up on me (I notice growing confidence on the part of the latter already) and I got packed off home.
I've tried to work from here, but I give up. My wife is doing the sausages for the children tonight. I'm going to bed.
PS And I know I open myself to ridicule on the subject of man flu - on which I commented earlier this month. But I intend to be back in the morning.
* * *
January 28 - East wanted to talk. I wanted to talk to customers and I have some of the family ill in bed at home and need to get out of her bang on time to manage other children as my wife really cannot, and the child carer is on holiday (how can she do that to me, now?).
Customers first, I said. I think we're getting some serious new enquiries and I was able to politely deflect those who wanted me to others who can provide the detail they need.
East says he will go West - and has told me he and his wife have a Relate counsellor who is going to help them use this as a contructive process. I hope so. I want out of the marriage guidance business for now.
Newc has new people joining for our new business activity - that team is pretty much going now. I did the necessary intro sessions.
My PA has worked miracles on the government biddiong documents for Newc - and I'm now asking if I can have her back for a while, but am not optimistic.
And East's #2 has wind of what is happening and is pleased about it. Thankfully.
Now, what's for tea tonight? Sausages I expect. What more could they expect?
* * *
January 25 - Office discussed East with me. She was helpful.
I've now offered him a compromise. He can head the West until we appoint a new manager. Newc will cover the East, working with the existing #2, who will be paid an additional sum to help cover. East will get an allowance to cover the West so he can be on site part of the week. We'll advertise for a new manager. We will not be geographically specific in the advert. If one comes up who is located in the west I reserve the right to send East back to his own patch. But if one comes up in his patch he has the chance to decide then what to do. In the meantime I do get a better utilisation of operational managers. I can't complain at that, and East has time to really decide what he wants.
I hope.
Meantime the shareholders have agreed to either offer opinion on approve the budget by the end of next week. With luck a written resolution will see it passed. But I'm not holding my breath.
* * *
January 24 - The good and the bad news.
The good news is that I've been talking with the senior managers on East's suggestion that he switch job roles. #1 said she was too new to comment. Wise of her. Newc was happy - it's easier for him to cover the East than West. North was not worried and thought a process of rotation might appeal to others to prevent a silo approach that once in a location you can't switch divisions. That was good thinking. Office was more concerned. She's known East longest. She asked for the chance to have a heart to heart with him. I said she was welcome to try so long as she remained objective at the end of it. I made clear, East knew I was asking. I also made clear I do not need to know the feedback.
That's the good bit. Office delivered the bad bit too. She wants a big budget for IT training - bigger than we can really expect within the resources allocated for this task under her control. She's responsible for IT budgets, although I do poke my nose in (no, don't say anything). She also sees more of the stuff that some people prepare than I do and is really worried at how low some people's skills are, despite persistent use of IT.
Basic things like tables in Word, formulas in Excel and the most basic of formatting tasks seem beyond some people and so with the best will in the world we're wasting time and effort.
We're going to look at this, but what is the answer? Specific courses, the Computer Driving Licence course I know has been around for a while, or one to one? We're not sure. She's going to ask the Chair, but in a year when we need productivity gains badly I think she's right to target this. The current state of play may not be good enough: I agree with her that we need to move people out of the comfort zone of doing the few things they know so that they are more adventurous on what they try to do, and that they try to do it well.
That will make her popular with some people! It also means my budget is knowingly wrong already. But not by much.
* * *
January 23 - Glad to get out of the office today. With people and the budget I had had enough of the environment around my desk.
So I've been seeing one of my major customers. This company accounts for close to 10% of our turnover. I wanted a feel for how they see the year going. It's vital to my feel for the budget. I did nothing else, I just went for a contract review meeting. But having that eyeball contact is key on occasion. It's as vital as talking to your own people on the ground.
Their opinion? It's batten down the hatches time. They think they'll get through the year OK. But the capacity for taking risk is low. The chance of change is low. The desire for cost saving will be high. If we can deliver change that achieves that they will switch more work to us. Value added is key.
There's the challenge for the year in a nutshell.
We've just got to do it.
Overall, I think this means thinking seriously about our marketing of the product offering again to manage margins. I want to work on this. No one else has quite the same analytical feel as me. Newc gets the same result - but purely by instinct. East also gets there - but by long division. North works within the parameters we agree. That's OK though. Better than being outside them. We came close to disaster once when that happened, and curiously with the customer I saw today. I didn't tell them.
* * *
January 22 - In between putting the budget to bed, and circulating it to all for final comment I have spoken to the Chair about East.
He says go for it.
My instinct is to go for it.
We both think we have best chance of keeping him if we give him what he wants.
So I've told him we will take it seriously if he says he still wants it at the end of the week and assuming no other senior manager here objects. And I asked for his permission to ask them. I am not risking riding shot gun again.
Of course, it does not change much - we're still recruiting a senior manager, but for somewhere else and the risk is if anyone from Promo's team wanted to apply they may now be alienated. Having said which, I know there is no one in that team who could do the job. I do know East's #2 could cover for him for a while - and that is a plus.
As for the budget - it's in the style we pioneered last year. It is not in micro detail. Those who budget for the number of photocopies they will make (and I have seen it) miss the point that this is a planning tool. The good thing is I think all plans stated by managers, and all plans for discretionary spends (marketing, IT, fixed assets, training, etc., where timing is not fixed by day to day need) can be covered subject to the sales targets working. And, we will again see improved efficiency as we focus on fixing problems and let automatic systems do more of the routine monitoring of our kit. But as proprty prices head down I think we're wise to assume lower new sales.
As such I think all managers will buy in without problem - largely because none of this is news to them. But will the shareholders? This has to go them as soon as possible and as it is a shareholder agreement issue it is always an event that can give rise to objection and veto.
Mind you, they're still being paid good money not to come to work. Would you object? Actually, I withdraw that question. It was rational, and they aren't.
* * *
January 21 - I swear that it would be easier to be a counsellor than run this place on occasion.
East came to see me this morning. He reckons that if he is realistic his marriage is over. He says it's not because of what happened in December, that was just a symptom. As he put it, he married at a young age a girl he'd known from school. Now their children are leaving home, neither he nor his wife seem to have anything left in common and no desire to do anything with each other, and well, it's just fizzled out. So, I sat and listened and tried not to offer advice, but just a friendly ear.
Then there was the sting in the tale (or was that tail?). He thinks that if the marriage is over it's time to make a break, but he doesn't want to leave here. But what he would like is to run our Western division. He wants a sideways move to replace Promo which gives him the excuse to relocate. He thinks this will be the reason he can say he's leaving his wife - by saying that they can't agree about it, and he can make a break, help the company, keep his job and rebuild his life elsewhere.
I was candid. I asked if #1 was any part of this. He assured me that she was not.
I asked for time to muse on it. I feel a call to the Chair is needed on this one.
* * *
January 18 - Being in the West was draining - and maybe overdue. I saw a lot of our people, some briefly, several on site visits, which required a lot of miles from me.
It was worth it. They're happy about the situation. Promo was popular, but they knew they had not got an East - and knew that was being reflected in their performance and bonuses. They want strong leadership. It was reassuring to hear. And, candidly, will influence the job spec.
It was also good to see what they're doing without trying to do much in the way of pitching. Being aware of just what happens on the ground in your own organisation is hard to do, and never entirely possible (because I'm sure some things are filtered because of my presence) but still worth having a go at.
I've often wondered how people run a company from which they are very remote. It would not be my style.
* * *
January 16 - Newc is landing orders for our new type of work.
My PA is going great guns in helping the bid for public sector work of this sort.
East's team are functioning well - and the order book from them is better than forecast for January as a whole so far. Which is against all expectation.
And I'm in the West seeing as many people there as possible to tell them what we'll be doing about recruiting a new manager. It's a necessary hand holding job when these things happen. People hate uncertainty and change. That's life.
Which also necessitates an overnight to see some of them. Which has not made me popular at home. Call the CEO's household old fashioned if you wish, but I really like being in my own bed at night.
* * *
January 15 - Management meeting day as we try to do these on the third Tuesday of the month - and this is as early as it falls in any period.
Promo came, but to give his apologies. He has just one role left now, which is to manage a handover. Newc will be the, inevitable, interim manager.
#1 presented her first management accounts. After the possible tension there still could have been about this it went well. Let me be candid: she is good at what she does, she does have charisma and style, and can she can handle questions, including candid admission when she does not know something. I like that! I think she will make it here, rocky start or not. And, candidly, I need her to.
We should have nailed a budget down at this meeting. We did not. It has not been possible with all that has happened and the change of accounting incumbent, so we're going to have another meeting to deal with that, and I have more to do still. Promo's leaving does solve one problem though: the plan will be for the West to perform as well as I think it capable of doing now, and it has not been doing so of late and it would have been hard to be as optimistic as I wish with him there.
Instead we focussed on the year end. There's still the chance to change this. Thankfully this is entirely in our discretion. We can meet the shareholder's need for cash without difficulty. I am therefore asking people to get the result in to the best of their ability, and to also show a strong cash position. Just for a few days we might therefore let our normal very prompt payment system slip to being 'prompt' and we will try to recover cash hard as February progresses. As we use our accounts as part of our business pitch, given that we are usually bidding to much bigger companies than we are, and given that I think the next year will be tough I want to have as good a result and as robust a balance sheet as we can. This also gives us best chance of buying competitors out if we need to. The objective was accepted by all.
As was the plan to recruit externally for a new manager for the Western division.
And we all agreed (and this took the longest part of the meeting) that sale of cash flow products (called maintenance services in our case) is key if we are to have a good 2008/09. How to achieve this was the focus of the discussion. The agreement was clear: our sales incentives do not help achieve this, and we are going to change them.
And we're going to ignore all issues of pay constraint. We have agreed an overall above average pay rise (with a few exceptions) of an above avergae rate. The reason is clear. productivity is rising, and people know it. They need their share of the reward for that, and for the increased skill they are showing in managing that situation. The exceptions will be those who have not risen to the challenge.
Good work, I thought.
* * *
January 14 - The rumour that Promo might go was true. He resigned this morning. I'm not sorry. I did, of course, wish him well, and ask all the right questions about what he will be doing, but I have to admit, he was a mistake.
As yet he has given little feedback. He is going to what might be called a competitor. For that reason I am not going to make him work his full notice. I see no point in him now having more information than he need have. He says the reason for leaving i simple: he wants to work for a smaller company in a more hands on managerial role. I believe him. He's really looking for his old role as a deputy, which he can recreate in a smaller company. I don't blame him.
But immediate discussion with East and Newc has been interesting. Our last two internal promotions (#3 and Promo) have not really worked. #1 will, I think, work, but there is a slight doubt about whether we should have gone externally or not. Office, the other long term manager has a view on this - which she also offered. It's time to go outside for new blood. It's true, we have got some good people internally, and East's deputy is good, but shouldn't we be advertising openly, but with internal candidates being encouraged?
There's pretty broad consensus on this. What we really need now is to expose ourselves to another new character who has won the job on proven merit. I think there's slight criticism of me in this decision. I can live with this. Maybe the other appointments were reflection of my own desire to have a time I knew when establishing myself as CEO. Now I am more confident. We need to be more confident.
I see this as an opportunity.
* * *
January 11 - #1, again.
She said she'd reflected on the meeting with AM. She's not impressed, she says. She's used to bigger auditors, less focus on transactions and more on analytical review and is surprised there was so little mention of what she calls 'value added' - telling us what others are doing well.
I'm already sensing that #1 thinks our systems are creaking a bit and we need to move our software and databases on (which makes my heart sink) and was looking for an ally in the auditors. I suspect AM is quite happy with a system she knows and which works and that's the real difference.
But right now #1 is on trial and I want value out of her whilst deciding if she's right for the job, so I asked her to put her feelings and recommendations in writing.
I like doing this, and most people here don't like me asking them to do it as it seems to me that the vast majority of people do not like writing anything if they can avoid it. But nothing makes you clarify your thinking more than having to write it down in some form or other.
I'll see what she comes up with.
* * *
January 10 - Yesterday just ran away with me.
Spent most of it with #1. It's amazing how long it takes to work out how somebody else does things. I know our numbers well, and our systems pretty well still (after all, I created a lot of them) but even so following on from #3 took time - and I wanted to explain a lot to #1 so this was a massive training session.
And despite the blip that has occurred, I remain convinced #1 is good. She's a stronger accountant, and a more commercial one than #3 without doubt. So, I know she's not perfect. But neither am I.
During all this she mentioned an issue I have forgotten to address - the auditors. So, I invited AM (our audit manager) in for a quick meeting this morning so that they can form a relationship and leave me out of this process as much as possible.
It was fun to sit in. You could see them sizing each other up and assessing who was likely to win on what. My money's on an each way bet. I like the AM. She's no fool. That's good. But #1 won't give way without good reason. But, as I made clear, we don't play audit games. Our aim is a true and fair result. How old fashioned is that?
* * *
January 8 - East has let me know that no problems arose working with #1.
#1 is telling me she doesn't think I will get management accounts on time this month, which is to be expected I guess.
I have made very clear what controls I expect to be signed off each month as part of the close down procedure.
I think she's a bit surprised I take so much interest. It's dawning on her that she's working for an accountant. She has not done so for a long time.
I don't mind being tough on controls. They're there for a purpose. And I've made tomorrow avilable to her if she needs it.
I'm expecting her to say I am needed. I would be worried if she thought she could do this the first time without some guidance.
But I may just want to feel important - so I'll see.
* * *
January 7 (on January 8) - Newc was right. My PA could do a great job helping him assemble the information we need to bid for public sector work. Having a reason to ask people how things work and where data is must be the best way to learn. And I want her to be a manager in her own right - not just an assistant. She's on the job.
No sooner was that under way than East wanted my attention. He has two concerns. One is that he believes Promo has not been ill. He's heard rumour he's applied for a job. An 'indsutry source' we both know suggests he's going for a job in a smaller company. I'm delighted. East thought that after recent change I might not be, but this is good news. I'll polish the reference right now. I also told East that he should try to address it with Promo if possible and encourage him. If someone decides it's time to go and solves a problem for us at the same time then I'm all for it.
East then raised his second issue - which is that he believes a big contract that would suit us ideally is coming up for grabs and he really wants the time to go for it. It's maintenance, but right now that's what we really want to keep cash flow generation going when I think times will be tight. I had a sneaking suspicion he wanted my PA to assist as well. I think that would be overdoing it. And this one is very much a costing exercise. That means it's #1 who needs to help.
The penny then dropped. He has concern about asking her. So I did. I simply dragged her in, there and then and said we had an issue to discuss. You should have seen the relief on her face when I said it was a contract bid! 90 minutes later I sent them off to deal with it. They're going to have to learn how to deal with each other now.
And late in the day I realised the other subtext from East. I should always assume that when someone projects a problem onto me (as East did by assuming I'd be worried about Promo leaving, potentially) what they're actually doing is revealing their own concern. In this case it occurs to me that if Promo goes Newc is the now obvious heir apparent, so long as he has a very strong #2 to cover day to day issues. That person, I suspect, is available and is East's #2 now - who needs promotion and who we might be able to persuade to relocate with the right package. But if Newc gets the Western division and the new work does that leave East feeling vulnerable in a way that he does not to either Promo or North? I have a feeling that's what he's really saying here.
Why, of why, is so much of this game about double guessing people?
* * *
January 4 - On the road with Newc, who's getting the coffee right now.
He has a driving ambition for us. He's sure we should be bidding for some major public sector work, which is an area we have not really touched before.
His logic is simple. It's available. It suits our new product, well, and there is continuing demand for it. We have the people available to do a lot of this with relatively limited retraining and we're not convinced there will be as much private sector demand for them this year. And because of that our marginal costs will be relatively low and the overall contribution high.
He has, of course, a project in mind and wants to get into the whole process of becoming an approved bidder asap. This is hassle, but he's been showing me the possibilities this morning.
I have a feeling he's going to keep me here until I say yes - and loan my new PA to assist with assembling the paperwork.
He's got a cheek, but I love his enthusiasm.
But I will need to check his numbers. They're always of that 'back of an envelope' style that is based more on hunch than anything else. But like a barrow boy, his hunches are good.
Must go.
* * *
January 3 - #1 has apologised for the "incident". She seems genuine. She admitted an error of judgment.
I have a policy when someone offers me an apology. I accept it. And I assume it is genuine unless events prove otherwise. I made it clear that this was my approach. I suggested that we now assume the issue closed on the basis of that apology and go forward.
I want to.
I think the team do.
But right now we're in that horrible dead period at the benginning of January where nothing happens.
Only Newc seems to think otherwise. He's getting me out tomorrow to see a big site for the new product about which he's excited. As it's in Promo's patch it will let him combine roles for the minute.
Promo is not back. Others are in spluttering. That worries me. It sounds like he has a simple dose of man flu. It's not a condition I recognise in managers.
If East and #1 are stable now (and I hope so) then it's Promo needing tackling next - and a new marketing role to free Newc up.
Mind you, even as I type this I wonder if my new PA could assist me with covering marketing? After all, isn't that really within my remit in a company this size?
I like that idea. I'll go and muse on it. Coffee time, I think.
* * *
January 2 - Thank goodness for a good Christmas. It was fun, sociable, relaxing and it seemed like an eternity that I was away from this place. Until last Saturday, when East called me to say he'd had a miserable Christmas.
He'd told his wife of his indiscretion as he could not live with it. Understandably this had not helped the spirit of goodwill that might have existed in his household but his call was actually a positive one: he knows he can come back and face things as he has been honest at home and apparently he and his wife recognise they have other issues to address as well which require counselling assistance. He seems to believe that this will actually improve things in the long term. I hope he's right. There's nothing like a crisis to make people tackle a festering issue. Maybe this is true in their case.
That still left me with the problem of #1. This I addressed by calling the Chair who admitted he would be only too happy to meet on Monday to address this and other issues - indeed he wanted my advice on a couple of issues for another business he is involved in.
The Chair is both pragmatic and a person with a real understanding of the frailty of human beings. He reckoned East had done all he needed to redress the situation with us although the Chair and I agreed that we may be seeing him through a divorce this year even so. As he is key to a lot of what we do we will need to be supportive. I can live with that.
#1 is more complex. She's caused a crisis during her first month. No one can call it a good start, although on all other grounds she remains a popular choice, with me and I think others.
We've agreed she did nothing wrong, as such. But on the other hand we do have a policy on work place relationships, and it's clear and well publicised. They can be a cause of problems, and have been amongst more junior staff. This is the first time we've had the issue at more senior level. But the Chair agreed that as East has effectively admitted the issue and how he will deal with it we can take the opportunity to remind #1 of the policy and say that in view of her status and need to command respect throughout the company we do not expect a recurrence since it would undermine a fundamental control if the head of finance was to be in a relationship with another manager in the company.
On reflection, the Chair decided he wished to handle this because he has known her for some time, had introduced her, and wanted to make clear that he was personally disappointed. Since we both cannot do so to allow for an appeal, he is doing so today. I can't say I'm sorry.
But that leaves me with the good news - my PA started today. Like #1 she's a breath of fresh air and we've already had a constructive session on how to work together before Office took over other parts of her introduction. I just hope she does not prove quite as explosive as #1 though. I'd really like to worry about business, not the team.
Talking of which Promo's begun the year sick. Newc is covering. For him and Office, as I think I've said before, I offer my grateful thanks.
Now let's go and make some money.
* * *
For previous installments of the CEO's Diary, see:
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003
AccountingWEB.co.uk 31-Jan-2008
Categories: Business Features, CEO's Diary
Times read: 22680
Of course if you are in on the 30th reading this you are already doing it! Work from home until you are definitely through the infectious phase. Otherwise you will reduce the company's productivity by making other people ill. Forget about views on "Man-flu" and start thinking about basic infection control.
"So, I don't like East's way of managing his recent marital and extra-marital relationships. So long as these do not re-impact on work is that my business?"
Seems to me that you have made them your business over the last few weeks.
And it seems to me that as you are now 4-5 years into the FD / CEO diary, there must be people in and around your organisation who know who you are (aside from the Audit Manager who we already know about) - so you've probably made them a lot of other people's buiness, too ....!
Consequently the whole East / #1 affair (no pun intended) has left me feeling slightly uncomfortable - publishing this stuff on a national website takes the concept of gossipping in the pub to a whole new level ....
Candidly (sorry) my dilemma is simple.
I can either have East unhappy at home and thinking I'm denying him a chance to start again at work.
Or I can just have him unhappy in a new home but happy in a new role.
Or I can lose him.
I can't afford to lose two managers at once.
I don't think it's my job to interfere in his home life.
I do think a change would rejuvenate the team in the West who have not been well managed for a while.
I do think the East team has a good #2 who will help a new team leader into the role.
So, I don't like East's way of managing his recent marital and extra-marital relationships. So long as these do not re-impact on work is that my business?
Any thoughts?
He wants to manufacture a disagreement with his wife so he can divorce her because she won't relocate with him, rather than sit down with her and have an honest talk about how the marriage isn't working, and THEN saying that he plans to relocate and start a new life separately from her, which would at least be honest. And he wants you to help him. I hope you don't.
Frankly, in confidence, and just between ourselves, I found myself irritated by the CEO's repeated use of the word "candidly". However I am being too harsh on the chap, he did only use it twice (and on different days). Perhaps he has more important things to worry about than hunting for synonyms!
Have a good weekend!
David
.... the AM will have been looking at #1 thinking 'I know what you did at the Xmas party'.
perhaps you should have that conversation direct with East rather than speculating on it in a blog.
you are still finding it difficult to let go of your sanctimoniousness you either forgive or you dont i think this is a problem you have.- there is also a problem of human rights here
also when it comes to man or any other type of flu - tho you seem to dispute that it is such - the advice is not to come into work the nononvirus is extremely contagious and widespread surely, given your previous comments, you are happier that employees act with caution and dont infect the whole population.
