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Archive by topic: Distressed companies

The Turnaround Pope

December 30th, 2015

When I read the BusinessWeek article, Amid Scandal, the Pope Sticks With Reforms, it occurred to me that Pope Francis is leading an incredibly challenging turnaround.  As we all know, the Catholic Church has been faced with both sexual and financial wrongdoing, and Francis seems intent on bringing an end to both.  In addition, he is urging a more welcoming and compassionate approach while also expressing his views on global issues.

Any turnaround requires significant change and involves

  1. Identifying what change is needed
  2. Defining and implementing specific actions to be taken to achieve that change
  3. Persuading key stakeholders, at every step of the way, to accept and support the change

Stakeholder persuasion is often the most challenging aspect. It has been said, “If you want to make enemies, try to change something.”  Although Francis enjoys broad support both within and outside of the Church, he also faces an entrenched bureaucracy and opposition from “conservatives.”  At least some members of those factions, threatened by or disagreeing with his actions, are surely trying to thwart his efforts.

Beneath his kind, gentle-but-strong public presence, Pope Francis must have a spine of steel.



Client’s 150th birthday!

September 13th, 2015

In 2003, I worked as a consultant to R.M. Wade & Co., a 5th-generation family-owned business.

This year—2015—the company is celebrating its 150th anniversary with an absolutely fascinating website, which I urge you to visit. The website includes actual documents and photos from the company’s history, film footage from old ads, newsreels about farm equipment, and—my personal favorite—a poem written by R.M. Wade, himself, about his wagon train journey to Oregon in 1850.

The story behind the company’s success has been described in this Portland Business Journal article and will also be featured in Family Business Magazine.

As you know, it is extremely unusual for family-owned businesses to last this long. Wade’s longevity is a tribute to the family—their intellect, their willingness to change, and, most important, their focus on maintaining strong family relationships.



A heart-warming family business story…..

September 7th, 2014

In January 1987, just 5 months into my career, I received my first turnaround referral from the Special Assets (troubled loan) department of a bank.  The client?  Pesznecker Brothers.  At that time, the company was a 2nd generation family business.  There were two banks involved and serious doubt about whether the company could survive.  Six months later, after instituting a variety of critical changes and successfully implementing an out-of-court Chapter 11 through which all creditors were ultimately paid in full, the company returned to profitability.

Fast forward to September 5, 2014:   Pesznecker Brothers is now a third-generation family business, and the Portland Business Journal just ran a story ( Pesznecker Brothers Business Journal Article ) about a new product developed by the company in partnership with Portland’s Central City Concern, a win-win for both.

These were/are really good people.  Turnarounds can be gut wrenching.  Owners are asked to make dramatic, sometimes painful changes, and it can take a while to for them to recover.  In this case, a year after I left, Dick Pesznecker and Don Ford, the owners at that time, invited me to lunch to thank me.

Since 1987, I have had clients almost 100 times the 1987 size of Pesznecker, but this turnaround remains one of my favorites.  Making money is nice, but seeing the lasting fruits of my labor and being appreciated have value beyond measure.

I still display in my home a beautiful copper box, handcrafted by Leo Pesznecker, one of the original founders, and presented to me as a thank you.  My photography is not great, but here are two photos:  One of the box, itself; the other, Leo’s inscription from the bottom.

 

Box crafted by Leo Pesznecker

Leo Pesznecker signature

If you want to know more about Pesznecker from inception to today, visit About Us on the company’s website.



Oregonian cut-backs, changes, and ……

June 30th, 2013

I suspect that almost everyone hopes that those news publications that provide accurate, thoughtful reporting will continue to thrive in the digital age.

For those of us who live in Portland, Oregon, therefore, it has been difficult to watch the struggles of The Oregonian, long our leading newspaper.  In June, The Oregonian announced that  it is shifting to four-day-a-week home delivery.  Personally, although I do, occasionally, prefer to read “hard copies,” mostly, I love having digital access and, for example, read only the digital versions of The New York Times and The Wall Street Journal.

It is time for The Oregonian  to enter the 21st century:

Most urgent: It is way past time for The Oregonian to require  readers to pay for access to its on-line content.  Much smaller communities figured this out long ago: e.g., the Medford Mail Tribune–a publication in less populous southern Oregon–for more than two years has required payment after a reader has clicked on 10 articles in one month. 

People will pay for content that is valuable to themThe question now is:  What content will The Oregonian decide to provide in order to attract readers?



Office Depot/Office Max

March 6th, 2013

As you may recall, one of Renee’s Rules™ is “Two sick companies do not make a healthy one.”  

Based on my in-store and on-line customer service experiences with both Office Depot and Office Max, I predict that my rule will prove true for their upcoming merger UNLESS–and this is important–they hire a new, capable CEO for the combined entity. Although it is true that some of their troubles are attributable to the changing environment, the bigger problems is that these two companies simply are not well managed.

I rarely visited the Office Depot store in downtown Portland.  Store layout was horrid.  It simply took too long to find anything.  (Apparently, others felt the same.  The store is a ghost of its former self.)  The last time I tried to do business with Office Depot, I tried to use a coupon I received in the mail to make an on-line purchase.  The website would not recognize the coupon, so I tried calling.  When the customer service rep was unable to solve the problem after 15 minutes, I said, “Thank you very much” and have never bought anything from them again.  I really do “vote with my feet and/or my fingers.”

Office Max seems slightly better, but when I recently returned home from buying supplies at Office Max, I found a coupon that had started that day.  Really?

In the big picture, I am a teeny customer, but the examples above are symptoms of the kinds of problems that affect larger customers, too.

These companies–like too many others (ToysRUs comes to mind.)–simply do not pay adequate attention to operations and to detail.  They do not think about what it is like to be their customer.   The merger will extend life but is unlikely to produce a healthy entity.

 

 

 



Yahoo’s new CEO

July 17th, 2012

In a Wall Street Journal article, Is Yahoo’s New Female CEO Headed for the ‘Glass Cliff’?, Christopher Shea asks whether Marissa Mayer’s appointment  is a case of of a woman being hired for “mission impossible” so that a man won’t have to risk his reputation in such a role.

I have no idea whether that is the case, but I do know that this is a job I would not want and would not accept.  For that reason, I am hoping that Ms. Mayer sees possibilities for Yahoo that I do not.

 



A picture’s worth a thousand words……

June 13th, 2011

It’s no wonder Sears is in trouble.  Their personnel training and software systems need help.

The situation:  A repair person came to perform annual preventive maintenance on my Kenmore washer and dryer.  When I showed the person that I could not get the lint screen clean, he offered to send me a new one because a clogged screen slows down the drying process and uses more electricity.

He ordered a replacement screen.  Sears sent the wrong screen.   It would not fit into the slot.

I called Sears to order a replacement for the replacement and carefully explained what had happened, including that the problem was  that the screen, itself, had lint that could not be removed by the repair person or by me.

Again, Sears sent the wrong part–but a different wrong part.  In the photo below, the original part is on the top; the second replacement part, on the bottom.  As you can see, there is no “screen” on the second part.

Original  and  replacement "screen"

Original and Replacement "Screen"

Here’s the worst part:  After getting the second wrong part, I tried cleaning the screen with a soft-scrubbing sponge–guess what?  It worked!  If the repair person had only been properly trained……

Sears’ cost:  Time for the repair person and the operators who took both the first and second orders + shipping for two parts + an unhappy customer.

 

 

 

 



Harry and David Update

March 23rd, 2011

There’s a very tight lid on communications from Harry and David. I don’t know what’s going on inside, but here are some things I do know:

1.    According to media reports, two lawsuits have been filed against Harry and David.

  • The first was filed by Drew Reifenberger, Executive Vice President and Chief Customer Officer, who was fired by then-CEO Steven Heyer in January. The basis of the lawsuit? Termination without cause and lack of contractually required payments.
  • The second suit, claiming almost $10 million, was filed last week by Convergys Customer Management Group (CCMG).  According to the suit, Harry and David and CCMG signed a 2-year contract which required CCMG to provide call center services and to hire an additional 25 full-time personnel during that period.  CCMG is requesting payments due under the contract.

2.    On February 18th, Harry and David announced the hiring of Kay Hong as “Chief Restructuring Officer and CEO.”

3.    Harry and David is hiring.  Careerbuilder.com shows 14 jobs that have been posted since Kay Hong was hired.  Positions advertised include store managers, Controller, Director of Online Marketing, Director of Market Research, and Manager of Website User Insights.  Nothing in the ads indicates that this is a “turnaround” situation.

What is the significance of all of the above?

With regard to the lawsuits

1.    When the contract was signed with CCMG in August, did Harry and David’s CEO and upper management realize that Harry and David’s situation was precarious?  If so, was it ethical to enter into an agreement it might never be able to honor?  Was it wise? If Harry and David’s CEO and board did NOT realize that the situation was precarious, they certainly should have.  Any competent turnaround CEO would have known that, but, of course, Wasserstein hired Heyer, who was not, in fact, a turnaround expert.

2.    Who signed the contract with CCMG?  Was it Heyer, or was it Reifenberger?  If it was Heyer, it raises questions about his experience, wisdom, and ethics.  If it was Reifenberger, is that part of the reason his employment was terminated?  Again, however, responsibility lies with Heyer and the board.  One of the first groundrules established by an experienced turnaround CEO is that material contracts require his/her sign off.

3.    Is the company not paying CCMG and Reifenberger because it is conserving cash so it can successfully navigate a planned Chapter 11?

With regard to “Chief Restructuring Officer and CEO”
—In my experience the title CRO is used primarily in a bankruptcy situation, so the title suggests that the company expected to file Chapter 11 at the time Hong was hired.

Hiring: If you follow my blog, you know that my assessment is that poor quality control coupled with poor customer service have contributed to the problems facing the company, so I am happy to see that they MAY finally  be focusing on the customer experience.  One caveat, however:  when I advertise for positions in turnaround situation, I usually try to let applicants know right away about the situation facing the company.  Some people love a challenge.  Those are the people I am looking for.  I have met many people, however, who have been recruited into troubled situations in which the executives have failed to disclose the company’s situation.  Shame on the companies!

On a different note:  Perhaps the recruiting is a signal that management believes that Harry and David can, in fact, survive.



Harry and David – Interview, Northwest Public Radio

March 8th, 2011

I was interviewed by Northwest Public Radio (an affiliate of NPR) about the situation at Harry and David.   Click here to listen to the podcast (3 minutes).



Ingredients for a successful turnaround

March 8th, 2011

I just responded to  someone writing a research paper on turnarounds who asked, among other questions, “What are the key ingredients for a successful turnaround?”  Here is my answer:

1.      Management willing to make needed changes

2.      Market for the company’s goods and services

3.      Enough cash to get through the crisis

4.      Turnaround team with a skill set that is a match for the issues facing the company



Borders’ loyalty programs

February 28th, 2011

I just read an on-line article dismissing the value of Borders’ loyalty programs.

Can loyalty programs resuscitate the ailing chain?  Alone?  No….but they can help.  The primary value of Borders’ loyalty programs is that they provide digital mailing lists which can potentially be used to prompt customer purchases.

So far, however, Borders has not used those digital mailing lists effectively.  They appear to present a hodge-podge of offers rather than a targeted list.  If I were Borders (or any other bookseller), I would send two distinct kinds of emails:  one set that touted digital books that could be read on digital readers; another set that promoted printed books.

Can anything save Borders?  Too soon to tell, but my guess is that every serious reader is hoping that the chain will survive.



What does a turnaround expert DO?

February 21st, 2011

I have recently been asked by reporters, “What would you do at Harry and David?”

I responded with a description of the turnaround steps described below.  Those steps are always the same, but the specifics vary from project to project.  (When I spoke with reporters, I also discussed some of the situation-specific actions I would initiate.)

My S.O.P. (Standard operating procedure)

  1. Get total control of cash
  2. Prepare short-term cash forecast
  3. Select Turnaround Team from key, existing management team members
  4. Convene the team; go through financial statements line by line–first, looking for ways to improve short-term cash situation, second, identifying ways to increase revenues (and/or margins) and decrease costs — (note: understanding the financial statements inside and out is critical!)
  5. The result is a written plan that includes a list of who is responsible for achieving what results by which dates and financial projections, which are the numeric representation of the plan.
  6. Then, it’s time for the team to implement!
  7. Design and begin  implementation of a sound management control system if one does not exist
  8. In the meantime, there are generally crises to contend with and negotiations with a wide range of stakeholders.

In addition to the above, I also send a web-based confidential survey to all employees.  The employees know what’s wrong, what needs to be fixed, and often see things that people at “corporate” miss.  Surveys to vendors and customers can be equally enlightening.

The above steps make it sound like the turnaround process is an orderly one, but it’s not.  Leading a turnaround is like being a general on the battlefield.  It’s messy and fraught with peril.   You have a plan, but unexpected crises are constantly arising.  I always tell prospective clients that it will feel like the opening scene from Saving Private Ryan.  One of my favorite owner/clients used to stop by my office occasionally and say, “I’m having a ‘Saving Private Ryan’ day.”



Harry and David: leadership requirements

February 20th, 2011

After I published the post below, it occurred to me that you might be interested in a prior post about what leadership qualities are required in turnaround  situations.  Here is a link.



Harry and David: Interim CEO named

February 20th, 2011

Someone submitted a comment about my February 16th post in which he pointed out that Kay Hong has been appointed Interim CEO of Harry and David and asked whether I know her and whether her appointment is a good thing.

I haven’t met Kay, but I do know that Harry and David is at a crossroads that definitely requires someone with experience in distressed situations and someone who is strong not only financially but also operationally.

Some comments  submitted in response to the Harry and David story in  the Oregonian today confirmed my suspicions about what is going on operationally at the company; e.g., complaints about poor product, poor customer service, poor internal systems, and lack of adequate inventory control.  All of those will need attention if the company is to prosper.

Most people here in Oregon are partial to our home-grown companies and are pulling for Harry and David to survive.  Many jobs and the welfare of the area will be affected by the outcome.



Did e-readers kill Borders?

February 18th, 2011

It’s easy to blame e-readers and associated technological changes for Borders’ predicament, but they are merely the symptoms and not the disease.

When companies face the double whammy of game-changing technology and a sagging economy, they simply must have a sound strategy and consistent, capable, visionary leadership. Since 2005, however, Borders has had 4 different CEO’s.  How could the company possibly develop or effectively execute a company-saving strategy while there was a revolving door at the entrance to the executive suite?



Harry and David: From my interview this morning….

February 16th, 2011

This morning, I was a guest on Bill  Meyer’s radio talk show.  The topic?  Harry and David and the problems facing the company.  You can download the podcast here.

Bill asked some interesting questions, some of which I’ll be addressing in future posts; e.g., why would a distressed company prefer to avoid bankruptcy when in bankruptcy they can shed leases and have other protection? How can you have higher profits with lower revenues?

In the meantime:  During the show, I promised to post some key financial  statistics for Harry and David from 2006 through 2010.  (Their fiscal year-end is approximately the end of June.)  Here they are:

Year Revenue Net Income
2006 $524,384,000 ($9,713,000)
2007 $561,017,000 $32,001,000
2008 $545,064,000 $4,608,000
2009 $489,596,000 ($20,179,000)
2010 $426,774,000 ($39,228,000)



Harry and David

February 12th, 2011

You may be interested in what I had to say about Harry and David in these articles from the Portland Business Journal and the Medford, Oregon-based Mail Tribune over the last two days.

I’ll have more to say on this topic later….but from feedback I’ve been getting, it appears that the problems I saw were only the tip of the iceberg.



Distressed Investing + Leadership

January 25th, 2011

Wednesday, I am leaving for the Distressed Investing Conference of the Turnaround Management Association and am eager to see whether presenters spend much time discussing  leadership considerations.

Many investments in distressed companies  fail because the investors (most of them private equity firms) pay too little attention to selecting and managing company leadership, but the last time I attended this conference, 2009, there was only one session (really, it was only one panelist) who highlighted this very important issue.

Mike Heisley discussed the fact that distressed companies require a leader with traits that are very different from those required to lead  a “healthy” company.  He was exactly right.  Click here to view my post from that event.



A retail story fit to print….

January 16th, 2011

Well… after I wrote last night about my frustration with news media reporting only part of a story, my local paper, The Oregonian, ran a wonderful story today by Laura Gunderson describing the success of a local retailer, Kitchen Kaboodle.

According to the story, someone (unnamed in the story) in the company had the idea of being open only on days that are traditionally profitable. Changing the days open plus lowering prices, according to the story, has allowed Kitchen Kaboodle to return to profitability.

The story about Kitchen Kaboodle is one of those unusual circumstances in which the entire story can be told–well, in which the company actually wants to share both the revenue and profit side of the story. Their problems are widely known locally, so it’s helpful for them to share all.

Besides, everyone likes a good turnaround story.



I’m on THESTREET.COM

October 18th, 2010

Today, TheStreet.com published an article by me, “5 Biggest Business Mistakes.” You can read it by clicking here.

I sent an email to some of my business contacts with a link to the article, and an amazing number responded with either similar views or their own tales of horror.

If you have time, I’d love to see your comments, too.



Leadership and Nokia

October 14th, 2010

In the 9/20-9/26 edition of Bloomberg BusinessWeek, Matthew Lynn (and the photo that accompanied the article) implied that Stephen Elop, who became CEO of Nokia on 9/21, is not the best person to lead the turnaround because Elop is not a “phone expert.”

I do not know a great deal about Elop except that he was recently “the Canadian head of Microsoft’s business unit” and that he has software experience and a reputation for “shaking up” businesses, but I do know that Lynn’s apparent assumption—that “industry experience” is central to a turnaround—is just plain flawed.

One needs to look no further than Alex Mandel’s leadership of Teligent in the late ‘90’s to see that “industry experience” does not guarantee success. Mandel had been president and COO of AT&T, but Teligent failed spectacularly under his leadership. Although the failure was blamed on “the downturn and overcapacity,” the underlying issue was that on the ground and in the trenches, Teligent was simply unable to provide the reliable wireless services it promised. The lesson: The leadership skills required to launch a technology start-up with no existing infrastructure are very different from those required to lead a long-established company.

In a turnaround, where time truly is “of the essence,” the most valuable commodity is effective leadership, not industry expertise. I’ve had 34 clients. Of those, 3 were in one industry; 2 were in another; the rest were all “one-off.” Based on that experience, it is clear to me that industry experience is not, by any means, the determining factor.

The most important skills needed in leading a turnaround are

· The “power of the glance;” i.e., the ability to see quickly what needs to be done
· Common sense
· Ability to establish the right priorities
· Clarity of vision and the ability to convey that vision
· Decisiveness
· Ability to mobilize the troops to provide ideas and support the effort

Is having industry expertise a plus? Yes. But it is no substitute for having the right leadership skills. No matter what the industry, it is relatively easy to find someone with industry expertise. It is much more difficult to find someone who has the right leadership skills.

I’m rooting for Stephen Elop and hope he proves Mr. Lynn wrong!



Blockbuster/Meyer update

July 20th, 2010

Well, Gregory Meyer was, in fact, added to the board of Blockbuster.

The questions now are:

  1. Is it too late, anyway?
  2. Will he be able to have any real impact, or will he be marginalized?  After all, the CEO and board strongly opposed to his serving.



5 Signs Your Company’s in Distress

July 18th, 2010

Blockbuster saga continues

June 18th, 2010

Can’t help it–I am fascinated with Gregory Meyer’s challenge to the Blockbuster board. For all I know, Meyer is a total flake, but why would anyone have confidence in the CURRENT board of directors who, by the way, are strongly fighting Meyer’s bid?

Click here for details from my earlier post.

For latest news: Click here.

The board meeting is June 24th… am eager to see whether Meyer gets elected.



Renee’s Rule™: You can’t have two captains on the same ship.

June 6th, 2010

One of the headlines today in the New York Times reads, “In Gulf, It Was Unclear Who Was in Charge of Oil Rig.”

If “who was in charge” was, in fact, unclear, it is scary, but, in my experience, too often the case.

Example one: Several years ago, in the process of considering whether to accept a family-owned business client, I interviewed 7 family members, most of whom were in the upper echelons of the business.  Because the company had no organization chart, I asked each person to draw one for me.  No two charts were the same.  The mother-in-law thought the son-in-law was running the company; the son-in-law thought the mother-in-law was running the company.  No wonder the company was on the brink of bankruptcy.

Example two: A 25-year-old, FDA-regulated company with operations in both the US and Canada had been cited for FDA infractions before my arrival.  Unlike the company in example one, this company had a detailed organization chart and job descriptions for every position, so when I met with the Director of Government Compliance and the Director of Quality Assurance,  I asked which one was in charge of ensuring FDA compliance.  The two looked at each other. Neither could answer.

You will not be surprised to learn that I solved the non-compliance problem by simply designating one person who had both the responsibility and authority for compliance. As a result, during the first FDA inspection following my departure, the company received  its first-ever absolutely “clean” bill of health.

The lesson: Imagine a ship with two captains, each issuing different orders—a symphony, in which the conductor is “conducting,” while the concertmaster is directing the strings.  No one would ever consider creating either of those scenarios.  That’s  Management 101.  Why, then, do companies, from small to gigantic, allow that to happen?

Renee’s Rule:  You can’t have two captains on the same ship.



Technology can be a game changer.

June 1st, 2010

Last week, The Deal quoted me as saying that technology just might give Borders a second lease on life.  Links to the article are available only to The Deal subscribers, so let me explain.

As you may know, financier Bennett LeBow recently invested $25 million in Borders and became its Chairman. That $25 million infusion will buy Borders some time, and a combination of savvy marketing and the savvy use of technology may dramatically improve the company’s prospects.

  • Technology has transformed the marketing battlefield.
  • Although Borders is late to the digital distribution game, the company has a key, not-to-be-discounted asset made valuable through the wonders of current technology: The list of 30-million email addresses they have accumulated through their “free” Borders’ Rewards program.
  • That list is a springboard that will allow Borders to promote its new digital offerings rapidly to a massive, already existing database of customers.
  • Current technology will allow them not only to reach those customers but also to know the book-buying  preferences of those customers.  In addition, Borders will be able to send personalize emailed “pitches” to the 30 million—right away—without delay and at a relatively low cost per customer.
  • As a result, Borders will likely attract digital book buyers quickly at a low cost-per-customer and per-purchase.

I, personally, would not invest in Borders now, but it’s premature to count them out.



Blockbuster

May 8th, 2010

I am not a Blockbuster expert and don’t know any of the players personally, but the situation has caught my attention.

First, Gregory Meyer, who is challenging the incumbent board member, points to stock performance during the reign of the current CEO and the board member Meyer opposes. (Background: According to reputable news sources, Meyer wrote a letter to the board in 2005 urging them to focus on distribution through kiosks; no one from Blockbuster responded, and, as we all know, they also did not follow his advice. In addition, Meyer owns more stock than his opponent.)

Since Jim Keyes became CEO and Board Chair in July 2007, Blockbuster’s stock has plummeted from approximately $4.00 per share to $ .37.

Keyes publicly opposes Meyer’s board bid. Is this appropriate? I think not.

Particularly in a publicly-held company, a key responsibility of the board is to hold the CEO accountable. Although it is common practice that the CEO and Chair are one and the same, that situation creates inherent conflicts of interest.

It is noteworthy—and inappropriate, in my view—that Blockbuster’s CEO is taking a position on who should be elected to the board; i.e., to whom he should report.



I am back + Blockbuster

May 6th, 2010

After three back-to-back turnaround gigs which started last July and kept me beyond busy, I now have some time to return to blogging. I have a backlog of topics, so…….brace yourself…..

In the meantime, if you aren’t already aware of what is happening at Blockbuster, you may want to start following the story.  (An unhappy shareholder is challenging the board and getting lots of press in the process; e.g., this from Slate.) Maria Woehr, a reporter for The Deal, quotes me in her story today. If you want to contact Maria, her Twitter handle is @newsgirlmw.

More later……



Renee’s Rule™: Two sick companies don’t make a healthy one.

August 4th, 2009

When revenues decline, and profits are non-existent, companies often believe that if they buy or merge with another company, the increased revenues will solve their profitability problems.  In my experience, however, these “solutions” often exacerbate the problems.

To be successful, all companies need the essentials:

  • A capable leader
  • A carefully conceived plan
  • A system for ensuring accountability

When these pieces are missing, a joining of two financially and operationally troubled companies is destined to fail.

An example from one of my clients:

  • Company A was in an FDA-regulated industry
  • The industry was experiencing both intense pricing pressure and consolidation.
  • Company A, with multiple manufacturing and distribution facilities, was not only losing money but was also experiencing both product contamination and delivery problems.
  • Company A, which was bleeding cash, bought Company B, which was also bleeding cash.
  • Neither company had any of the three essentials listed above.
  • After the acquisition, the expected “economies of scale” did not materialize; costs for the combined entity actually increased as a percent of revenues.
  • The already stressed delivery system was now even more stressed.
  • Expected  revenues did not materialize because frustrated customers switched to other suppliers.
  • Chaos ensued.

We were able to save the company, but it was a close call…..a very close call…..

Two wrongs don’t make a right, and two sick companies do not make a healthy one.



Renee’s Rule™: Make my life E-A-S-Y!

July 27th, 2009

Recently, I sent an email to key business contacts letting them know my turnaround client needed a new CFO.  I received approximately 160 resumes.

The quality of the  emails most candidates sent was appalling.  Based upon what arrived in my inbox, here is my advice to those looking for work:

  1. Read the job announcement. If you send a lengthy email in response to an ad that includes the word “turnaround”, you should  assume you will not be considered.  Turnaround experts are looking for people who can cut to the chase and won’t waste their time.
  2. Use bullets not paragraphs. Time is money. Cash is king.  Make my life E-A-S-Y.  I am getting hundreds of emails a day.  Which emails do you think I am likely to read? Those with 5 lengthy paragraphs or those with 5 concise bullets?
  3. Make sure that the file name of your resume includes your name. If your resume does not have your name in the file name, you are out-of-the-running with me because I have to take time–my time–to change the file name before I save it.  Please, make my life E-A-S-Y.
  4. Don’t be a pest. If the job announcement says “send email to,” please don’t call.  If you do, it appears that you have no respect for my time.

Renee’s Rule™: Think before you respond. If you were in my shoes, what would you want to know?

  • What has the applicant DONE?
  • What is he/she LIKE?
    • Will he/she be able to work in a highly charged, fast-paced environment?
    • Will he/she be the kind of employee who anticipates what his/her supervisor needs?  who will make my life E-A-S-Y?

Renee’s Rule™: Make my life E-A-S-Y!



Renee’s Rule™: Know what you don’t know.

July 19th, 2009

Over the years, I have had the pleasure of working with many wonderful CPA’s who truly put their clients’ interests ahead of their own.  They ask the key questions.  They know what they don’t know.

I have also, however, seen some CPA’s do some really appalling things; e.g.,

  • Providing inappropriate advice  ( When I arrived at my very first client, the company was on credit hold or COD with all vendors, bleeding cash, and faced with a threatened shut-down by the IRS.  The CPA, blissfully unaware of the severity of the problems, was billing the customer for business planning assistance.)
  • Being unwilling to recommend a change of CFO when that CFO was clearly unqualified  (I’ve seen this multiple times and don’t know whether this happened because the CPAs did not realize the failings of the CFOs or because the CPAs did not want to risk losing their clients.)
  • Recommending consultants based on industry or turnaround “experience” rather than on RESULTS   (For the dangers related to this, please visit my post, THE EXPERIENCE FALLACY.)
  • Giving false assurances  (Several years ago, I had as a  client a third-generation family-owned business.  The company had experienced increasing losses for three years straight.  The CPA had told the elderly majority shareholders, “Everything will be all right.”  When I arrived, however, the company was at Death’s Door.   The company survived, but it was  an extremely difficult situation.  We had to implement an out-of-court Chapter 11.)
  • Preparing unrealistic financial projections because the CPA did not understand the business

It is really important that CPA’s–and other professional advisors–know what they don’t know.



Renee’s Rules™ for the Recession

July 3rd, 2009

Both national and regional bankers have told me recently that they expect a second wave of troubled companies…..For those companies that may be at risk, here are my key recommendations:

  1. Renee’s Rule™: Don’t sell to customers who won’t pay.
  2. Prepare worst-cast cash projections for each of the coming 6 months; if necessary, take action now to prevent a meltdown.
  3. Solicit ideas from employees and advisors; implement those that will have the greatest impact in the shortest time.
  4. Implement changes to company processes that will lower costs and improve customer service.
  5. Renee’s Rule™:  If you think you may need help, you probably do.
  6. Renee’s Rule™: The sooner, the better.


Are You Guilty of These Bad Business Habits?

June 9th, 2009

The “headline” of my post today is the headline of the June 9th post on the VC Task Force Blog.  The post features some of the high points of Kristin Jones’ recent interview of me.

If you are not familiar with VC Task Force, it is a Bay Area-based organization designed to assist all stakeholders in the venture community.  Take a peek–Lots of heavy hitters are involved.



Renee’s Rule™: “Bigger” may not be “safer.”

May 17th, 2009

When is it “safer” to hire a “big” professional firm rather than a smaller one?  This is a topic I’ll be exploring in several different posts.  For the moment, here is an instructional story. (The names and some details have been withheld to protect the guilty.)

Some time ago, a principal from PE (private equity) Firm A, with investments across the country, called me to take the place of the CFO they had hired because he was a consultant with a national (“big”) consulting firm.  Why was the PE firm replacing him?  When the portfolio company’s lender conducted its audit, guess what they found?  The “F” word: Fraud.  (I did not accept this engagement for a variety of reasons I’ll discuss in a later post.)

Several months later, PE Firm B interviewed me for a turnaround in an industry in which I had successfully turned around more than one company.  Did they hire me? No.  Why did they pick someone else?

  • He’s from a national firm, so that’s “safer.”
  • He has industry “experience.”
  • We know him.

Here is what I know about this person:

  • He IS a consultant with a national firm.
  • He was involved with a company but definitely did not lead a successful turnaround in the “industry.”
  • He was the person who was removed by PE Firm A because bank fraud occurred while he was CFO.  (Evidently, PE Firm B didn’t really “know” him.)

I also know that the company was not, in fact, successfully turned around.

Let me be clear:  There are some times that a bigger firm really IS safer; nonetheless, there are many lessons to be drawn from the above story.  Stay tuned for further posts.

In the meantime, remember these Renee’s Rules™:

  • When hiring, RESULTS are more important than “experience.”
  • Always check references.
  • There is no substitute for common sense.


Renee’s Rule™: Don’t sell to customers who won’t pay.

May 10th, 2009

I have been shocked by the number of companies I’ve met recently that have been placed on COD or credit hold by their vendors but have not put any of their own, troubled customers on COD or credit hold.

Whether you are the CEO of a company, a law firm, or an accounting firm: Stop selling to customers who can’t or won’t be able to pay.  There is no way to overemphasize this point.  When a company is faced with declining revenues and profits, uncollectible accounts receivable make the situation worse and—in extreme cases—can be the tipping point that causes the company’s demise.

Today, it is absolutely not safe to assume that customers who have always paid on time will be able to pay on time—or, for that matter, at all, so review your credit policies and procedures and define carefully

  1. Who can have credit?
  2. Who can authorize credit, and what are the guidelines?
  3. How does the company verify current credit worthiness of customers?
  4. Who is responsible for monitoring timeliness of accounts receivable collections?
  5. What are the company’s collections policies; e.g.,
    • What steps does the company take when payments are late?
    • At what point is a customer put on COD or credit hold?

I will provide additional information about sound credit policies in a future blog post.  In the meantime, another Renee’s Rule™ applies: “The sooner, the better.”



Renee’s Rule™: The sooner, the better.

March 22nd, 2009

Recently, I visited a potential client.  The company was at Death’s Door.  Their bank had not required any financial statements from them since September 30, 2008.  Their bank had not suggested they get any outside assistance–even now.

Over and over again, I am seeing companies whose lenders have waited entirely too long to get timely financial statements from their customers and to take action to help the companies.  Given the economy today, 3-6 months is entirely too long to wait to see how a company is doing.

In the case of the company above, I declined the engagement because these people were going to commit bank fraud because they saw no other way out.

There are some companies that can be saved–even with declining sales–but they need help at the earliest possible moment.



Renee’s Rule™- There is no subsitute for common sense

March 4th, 2009

It seems like every minute a new book with the “latest” business “secrets” hits the market.  In reality, however, running a business profitably and well boils down to taking care of the basics; i.e., having a well-conceived plan, having a capable leader, and implementing a carefully crafted management control system.  It is astounding to me that so many companies lack these basics—not just family-owned, but also publicly and private equity-owned (You know some of their names.)

Much of the information in this blog may sometimes sound like nothing more than common sense, but common sense and an attention to the basics are too often missing-in-action.

An example from my personal experience: In 2007, a private equity firm interviewed me for a turnaround project.  The company had been losing money for three years; there was no business plan; the president was clearly not qualified; and there was no effective management control system in place.  After I mentioned that the company needed these basics, the managing director said, “We know that.” (As in, “do you think we are idiots?”)  So…if they knew all of that, then where had they been, and what had they been doing for the past three years?  And these were people with MBA’s from prestigious institutions, who, presumably, have a fiduciary duty to their investors and definitely know better.

Find a way to step back from your business, to take a cold, hard look at where you are and what your real prospects are…Are you making money or losing money?



Renee’s Rule™ — It never hurts to ask.

February 26th, 2009

Approximately 20 years ago, I began compiling Renee’s Rules, which I will share from time to time on this blog.  (My son Jason created a great “talking” set of the original Renee’s Rules™.   If you would like a copy of the executable file, please contact me.)

Rule #1:  It never hurts to ask.

This true story illustrates the point:

Shortly after I began working as Interim CEO of a manufacturing company, it became apparent that the company was going to lose  its proverbial shirt on a large job.  The selling price was approximately half the direct cost of the job.  The company had not yet started the job.

We scheduled a meeting with the customer, explained the problem honestly, and told him that we could complete the job only if we doubled the price.

Instead of pulling the job, he agreed to the new price.

In these troubled times, cash-strapped companies simply cannot afford to sell below their direct costs.  They need to be better off–not worse off-on cash.  Period.

CEO’s of deeply distressed companies need to find a way either to reject cash-losing jobs or to increase the prices so that the company is better off on cash after the job than it was before.

It never hurts to ask.  For many companies, doing so may spell the difference between survival and liquidation.