CEO’s Diary: The deal is sealed

The CEO is now ready for his holiday

October 24 - Well, actually the AM and I met this morning, sealed the deal and she will join us in three weeks time. I think that's another key step forward we've taken.

It also means Newc can concentrate on other areas.

And now - I'm ready for holiday.

See you in November.

* * *

October 23 - The AM called me to say she had heard I had approached her firm to ask if I could offer her an employment. I had deliberately not told her: it might otherwise have appeared staged.

This had apparently worked, she had expressed complete lack of knowledge of my call to her partner when he advised her of it.

As a result she has told me that she has been given consent to join us, and she can waive her notice period if she wishes. But could she have a job offer please?

So, I called our audit partner, asked if what she had told me was correct, said with a little more annoyance than was perhaps necessary that it would have been nice for me to have been told first so I could have made an approach to her in a more appropriate fashion, but got their consent to do so none the less and then did two things.

The first was to write a job offer to AM. This wasn't hard.

The second was to write a note to the board on the need to appoint new auditors.

I'll see the AM this evening to finalise things.

* * *

October 22 - #1 engineered a call to the AM for me and as a result was told she will not be here to do our audit next year.

So I then made my 'official' enquiry of her as to where she is going.

And then I rang our audit partner and said I gathered the AM was leaving. We had learned today. I also gathered she had no other job to go to, because I had asked her.

Would he object if she joined our team? I wanted to offer her an opportunity to do so.

It caught him off guard. He said he'd come back to me. He hasn't.

But in the meantime I have set up a big project between East, my PA and me to scour ideas on how to upgrade our technology at lowest cost. East and I agree what we want to do. The question is, who is doing it in a related area where we can borrow the ideas?

* * *

October 21 - The AM tells me she has not just delivered her notice, but has already been asked for explanation and delivered blunt notice that she felt she had suffered the imposition of a glass ceiling in her firm which she was unlikely to ever crack.

She did, of course, avoid the word discrimination, she said. It is much too unwise to be so explicit. They did, however, apparently take note of the message. Indeed, she says the reaction has been one of horror. They've assured that such a situation would never arise. She assured them she felt it had. She tells me that it feels like she has let off a minor nuclear explosion in the office, the consequence of which is that she has apparently become invisible.

I sincerely hope she has not taken too great a risk. But I somehow doubt they will want to argue with her if she now decides to join us.

There is of course one further matter. We will be appointing new auditors, but after my doubts during the potential buyout I think that this was inevitably on the cards.

* * *

October 20 - I am aware for the first time for what sees like a very long time that I can make progress with less haste, and more aforethought. Care should be the watchword for the moment.

I have happy shareholders, management and staff, or so it would seem. External relationships seem good. We're still, despite paying a very large dividend strongly solvent and cashflow positive. I do not need to prejudice any of those positions.

So having rushed all year, I'm now aware that given the current environment I need to temper my desires with caution and always keep a weather eye open for risk. So although I was inclined to rush off hither and thither this week to begin the process of investing in new kit I've decided not to for two reasons.

One is I'm worn out (and I'm having next week off: advance notice that I will on this occasion really not be here when on holiday, and that this time I'm taking it). Second, I think it's more important than ever that we work out why we're doing this and get it right. This is not the time to make mistakes. So I'm going to be doing more research, in-house, with customers and with alternative suppliers before we rush into anything. Right now it would be embarrassing to reinvent the wheel.

* * *

October 17 - I met with the company owned by those with whom I had hoped to buy this operation and with whom I had been planning to undertake a joint venture to develop new technology for our business this morning.

I came away without any optimism. What is very clear is that the entire structure of their operation is built upon debt. They appear to have complete confidence in their day-to-day operations, but I got the decided impression that there is a complete lack of willing to take a risk on new investment right now.

If that is the case two things follow. First of all, my relief at pulling out of the deal increases again. Second, we are going to need to look at how to do this on our own. I am convinced that we cannot stand still in this market. What we have is good, but after more than two years regular use we all know it could be improved, that we could extend the services we offer, and that if we did so we could save cost. That help win new business, pay for acquiring new business, and move us into a stronger position within our market.

So, as both Newc and East were in this afternoon we spent some time brainstorming this issue to come up with a shopping list of desired improvements in technology. And the result? I've already put in a call to our UK supplier to see if we can get this on an agenda with them. I've also called our old Belgian supplier. They are still going despite the crisis that they had a while back. There's no harm in giving them another chance provided their finances look OK.
* * *

October 16 - Got back to the office today after a diversion to the north, which was overdue for a visit.

Three things that struck me: the first is that we have an incredibly good team of people here. The second is that they believe in what we do. The third is the degree of loyalty that I feel to them.

It's probably not trendy for a manager to say that people come before profits, and of course it is true that if there are no profits there can be no people, but I am sure that I will not be only manager who will over the coming months or years work very hard to make sure that the people who have contributed to their business get absolutely every opportunity that is possible to keep their job, even at cost to short-term profit.

* * *

October 15 - Meeting staff doesn't always create excitement. But right now I seem to be doing exactly the right thing. My message is simple: your job is safe, we're not taking risk, we will continue to manage it that way, because security is the key issue of the moment for us all.

You can't imagine how popular that is.

Sometime soon I might believe I'm Mr Nice Guy. My wife will remind me I'm not.

* * *

October 14 - Had a long chat with the AM last night. I have made her no formal offer as yet. But she has decided to quit and make that clear. Her reason is, she says, to tell them that she thinks they have blocked her promotion and that she feels she can no longer put up with this and will as a result be looking for another job. From what she told me last week I believe she really means that. But it has an advantage: if they object to her joining us then she has already got the basis of a complaint against them on record. Smart thinking, I thought.

* * *

October 13 - What a great weekend. OK, the world looks to be falling apart around us, but the weather was good, the children seemed in remarkably good form, watching their sporting prowess (the youngest apart) gave me real pleasure. The in-laws allowed my wife and I to go out for a meal. And I have to admit I still feel I made the right decision just three weeks ago to pull out of a debt-laden deal.

But now I have a plan for the company my focus must change. For as long as it seems I can now recall I have been focussed on external issues. I need to look inside the organisation again. So tomorrow I begin a tour of operations, meeting people on the ground, seeing some customers, reassuring people that things are looking good here, that we're on the lookout for opportunities for growth.

It's not going to create excitement, but it's needed.

* * *

October 10 - Had the meeting that puts this company back on an even keel.

Mrs ex-CEO did not turn up. Her lawyers handled the meeting for her. The ex-CEO was there, happy as could be at the prospect of getting his hands on cash at long last: indeed, I can say that by now he is significantly better off in cash terms as the first tranche of the dividend has already been paid. The Chair and I added the sober element.

The plan was accepted: the only thing I was quizzed on were the expansion plans. I gave as much information as I could, stressing this is a speculative approach to exploit the current stress in the economy for long-term advantage , but which I'll only pursue if the price is right. This was minuted and I was told I must notify all plans to the board as soon as I have any intention to negotiate. I think that's fair.

And when the meeting was done and the ex-CEO was gone (no doubt to a very boozy lunch with the girlfriend) the opportunity arose to ask the ex-Mrs CEO's lawyer why his client appeared to have changed her mind. He smiled, slightly mysteriously and suggested three reasons. First, her former spouse may not be alone in having a new relationship. Second, she had fallen out badly with her former accountant adviser: we would not be seeing him again. A hint of impropriety was offered. Third, he'd persuaded her that cash was best in her hands right now. The silver lining of the credit crunch is the value of the guarantee on personal bank deposits.

Such are the vagaries of life. I thanked him. I have a feeling he's going to be a fixture on this scene for a while.

And this weekend I'm going to take no work home. I might turn my phone off. We're going to have family time.

Fantastic!

* * *

October 9 - The ex-CEO has confirmed he will be guided by his ex-spouses lawyer on the dividend. He will attend a meeting, but is entirely satisfied with the sum recommended, and can wait for part if necessary.

This has been an easier ride that I expected.

So now I have done three things. First I've told the management team.

Second I've told the AM the cash is available. She's promised she'll get back to me very soon: it was not possible to answer from where she was.

Third, I've told those who would have been investors in us that I want to discuss a joint venture to develop technology. That's the only fly in the ointment: they're still having bank discussions. I'm getting the impression I was very wise to pull out. I now wonder if there's going to be enough there to invest in anything. I sincerely hope so: we can't afford to lose real jobs in the real economy right now, and that's what they're providing. Perhaps I'll be recruiting their people instead, although that would theoretically breach pre-contractual agreements. We'll have to wait and see.

* * *

October 8 - I needn't have been too worried about the shareholders by the look of it. I have a response from the ex-Mrs CEO's lawyer (who seems to have become their representative in this) saying that he has read the plan on her behalf and is acting in accordance with her instruction using a power of attorney (of which he has sent a copy) to say that he welcomes it, with one exception. He believes we should retain more cash in the company at present but diversify its location as fast as possible as a matter or pragmatism in face of the current uncertainty in the banking environment.

As for the dividend, he has already agreed it and supplied a list of banks to which she'll want payment made. In practice payment will be staggered anyway as we'll have to wait to get access to some of this money: we don't leave it all on overnight deposit.

He's still like to meet though, but says rather than leave uncertainty he wanted his opinion to be known in advance.

I want to meet him too. Most of all I want to know why she's so heavily backed off under his influence right now. That's a big mystery I need resolving. I'm sure he's not her new toy boy (the though makes me shudder) but there has to be some explanation for this change of heart. Knowing it will help me no end.

* * *

October 7 - It's weird. I think that I should be in the dog house right now. After all, I led a failed bid to buy this company. It's quite clear though that the staff think otherwise: they think I did the right thing by them and as such I can do no wrong.

In the circumstances there was remarkably little concern about my plan for the next stage in our development, even though I predict things will be tougher than of late. That's all that they expected. The fact that they think we'll survive is enough.

I've travelled far enough in my thinking over the last few weeks to take nothing for granted. Even good companies are going to fail for the most bizarre reasons over the coming months: bad debt is the thing that will kill most. Under capitalisation will account for the rest. That and management who will be unable to change their ways. But I'm hoping we're not in any of those categories.

Right now we have a plan. The management buy it. They love the idea I have not given up on growth, so long as the price is right. Like me they're praying the shareholders accept it.

They've now got it. It's fingers crossed until Friday.

* * *

October 6 - Frantic activity. I've been finalising the new business plan. I am presenting it to the shareholders on Friday. I want the management team to accept it tomorrow. Getting it all up on the intranet for everyone to read has been something of a challenge.

Getting the shareholders to buy in will also be a challenge. We can release an enormous pile of cash. So much so that I hope they know where they are going to put it in these somewhat stressed times. But I am not planning to release all the cash. They told me to be risk averse, and I'm being so. But I also want some cash of that expansion programme. I think we can pick up business very cheaply if we have cash available over the next couple of years. Justifying the amount has been the hard bit. I hope I've got it right.

Justifying some of the down side strategies will also be hard to the team. We have, for example, always had a reluctance to sell what we describe as 'call out only maintenance' where there is no regular support. This though will, I think, be a more important part of our future sales programme. This will be a culture change for many. But it's one I think we will have to embrace. Pricing ourselves into work will have to be part of our agenda. I'd rather be a chooser than a beggar, and this is my choice.

* * *

October 3 - AM said 'Let's see'.

She admitted she was flattered by the offer. And then she was practical. I was completely open with her (she is the auditor right now, after all). And she raised real issues. Like, what happens if the shareholders want more cash than I propose giving to them? And had I considered whether she might want maternity leave one day? And could I meet her expectation of earnings as a partner (about which she then smiled: she made clear she has no more intention of being one than I ever had).

But what she really needed were three things. The first was my confirmation that my plan for cash distribution had been approved. The second was time to think about it. The third would be time to work out her notice. I think that last was pretty clear indication that she expects to say yes, but she wants to play a little hard to get.

I can live with that.

* * *

October 2 - It is time to have a conversation with my one desired new person today.

Actually, their identity has been known for a while, here. I want to recruit the Audit Manager (AM) from our auditors to head our acquisitions and integration programme.

There is risk in this. First it may alienate #1, but this seems unlikely. For a start they have now established a good relationship. Second, it seems clear their skill sets are in many ways quite different. AM might head audits for her firm but has also, based on what I've seen and heard over the last few years, developed quite strong commercial skills, some good negotiating ability and team leadership qualities. Frankly, she's more use to us than the partners who employ her, but who seem to undervalue her (funnily enough, the firm has no female partners I noted, a while ago).

I'd want her here to do three things. The first is act as deputy to Newc in running the new activity, and eventually take it over. He's not suited to day to day tasks like that. She has the eye for detail that working with the public sector requires. Second to find expansion opportunities by acquisition and to develop strategies on how to deliver them. Third to actually manage acquisitions with me. Fourth, to then help integrate them.

It's a biggish job, quite a lot of challenge, involving new skills for us, and a real opportunity for her.

It was always in my plan for post-MBO. It still is, I've decided. So tonight she's having a meeting with me, although she's not full acquainted with the agenda yet. I'm hoping it's of interest.

* * *

October 1 - It was time to get some good news.

Whilst I've been bogged down in the bid Hitchin and East took the lead on a bid for a quite large retail chain. Its premises have what might be politely called an assortment of antiquated systems for the service we supply. They've had regulatory issues as a result. More than 100 were put out to tender. The winner would have the chance to bid for quite a lot more as preferred supplier.

The chain is not owned in Iceland. Its share price is not good, but whose is? Members of my family rate it and use it. It's not a bad test.

We went for it at a sensible price, and won, because we were willing to spread the up-front cost over a three year contract. I don't think others did.

It's good in terms of timing. We needed to have a biggish win. We needed to be reminded why we can win work by having cash available to us, which is good reason for retaining it. And it's great PR right now.

It all helps.

It's also good to see the managers winning this with little more than a sign off from me on the tender. I like that.

* * *

For previous installments of the CEO's Diary, see:

September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
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October 2003