As you may have noticed, my entries are getting shorter–Working 80 hours a week will do that to you….

My thought for this week:  Every time I read in the business news that “Revenues are up,” I ask myself, what about profits?  Are they up or down?

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!

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.

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.

Every manager knows the axiom “What gets measured is what gets done,” but too often managers overlook key measurements.

An example: When cash is tight, and profits are lagging, managers, boards of directors and lenders often focus on reducing inventories.  Measuring dollar value of inventory and inventory turns can certainly be useful; however, if  there is no report that shows the AGE of the inventory (how old the inventory is and whether or not it is obsolete) and no report that measures stockouts, inventory reductions may produce undesirable, unintended consequences.

When a company holds old or obsolete items and reduces the size of its inventory, the dollars tied up in inventory do decline, but the % of  “bad”  inventory  increases, and the entity may find itself without  materials needed to deliver orders on time and/ or to stock its shelves with the products that customers want.

In addition, if a company does not write down old or write off obsolete inventory (and, yes, this still happens!), the company is inflating its bottom line.  Since financial statements are the scorecard of the business, if financial statements are not accurate, then management’s decisions are based upon misleading information.

Renee’s Rule™: What gets measured matters.

I’ve seen some pretty scary hiring mistakes.  Here is an example in which “The Emperor Had No Clothes.”

In the 1990’s, I became  Interim CEO of a  company that was experiencing the worst production problems I had ever seen.  The company had hired a new Director of Materials Management.  He had been referred by a management team member who had worked with him elsewhere, and his references from former employers were excellent.  Everyone told me–and seemed to believe–that this guy was a genius.  During meetings, he typed on his own notebook computer (fairly unusual at that time), looked impressive,  and made “pronouncements.”

I, however, couldn’t understand a thing the guy was saying (plus, of course, materials management  was still totally out-of-control.).  I said to myself, “I have an MBA, am pretty darned bright, and  have run more than 10  companies.  If I can’t understand him, maybe he isn’t saying anything.  Something is wrong.”

HR had checked his references, but I asked them to contact the universities listed on his resume to verify his degrees.  Surprise, surprise:  this fellow had lied on his resume and had no college degree.   Needless to say, that was the end of his employment with the company.  (The company, by the way, was successfully turned around.)

The question in my mind remains:  Why in the world hadn’t someone else called his bluff?  (A question to be explored in a future blog..)

At least three of Renee’s Rules™ apply:

• If you can’t understand what someone is saying, he may not be saying anything.
• Too often, people are afraid to speak out when they think something is wrong.
• Check references thoroughly.

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.
  

Not long ago, I attended a meeting of the local APICS chapter at which managers from a manufacturer of dental equipment described the process they used to obtain outstanding cost savings by  implementing  “lean manufacturing” techniques.

Shortly thereafter, during a visit to my dentist–who had recently purchased new equipment from that company–I discovered that there was a major flaw in their new dental chair– absolutely no ability to adjust part of the chair for people of varying heights–a rather major oversight, the hygienist observed.

So….implementing “lean” techniques may have reduced production cost, but it failed to meet the needs of the customer.

Clearly, my dentist purchased the piece of equipment anyway, but, surely, the next time, he will be more careful to check to see that basic necessary features are in place.  In the meantime, he may tell his colleagues who may be contemplating equipment purchases about the design defect…

So..”lean” is not a panacea.  There is still no substitute for common sense.

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?