- Email: [email protected]
Knowing when to fold
sherwood onmanagement Knowing When to Fold Lessons learned from hard times: The end of one chapter can usher in the beginning of another. (Editor's note: This article is the last in a multipart series that began in the June 2008 issueof Metal Finishing.)
O
ur success in growing from a pioneering electroless nickel (EN) job shop to a contract and proprietary manufacturer did not satisfy the needs of the stockbroker who made the market in our publicly owned stock. Specifically, he had sold our stock at unjustified high prices with promises of huge growth for his customers. Later, in trying to appease his complaining customers, he tried, unsuccessfully, to pressure me into unnecessary and useless stock splits and overly optimistic reports to our shareholders. In a further reluctant response to his pressure, I tried, unsuccessfully, to make quantum leaps in growth by acquiring other companies. We even had a full-time employee working on the acquisition and merger attempts. Unfortunately, it didn't work. The hype proceeded unchecked until it became ludicrous. At one time there was even an individual acting, without my authorization, as our public relations representative. It was like a funny British movie. The PR rep had an Englishaccented captain overseeing a big yacht in the marina to which he would invite potential stock buyers. After driving the victims to the yacht in his rented Rolls Royce, he would entertain prospective buyers in the attempt to sell them Chemplate stock. The next part of his sales campaign was to sail from Los Angeles vvww.metalfinishing.com
to San Francisco where he would have an intense stock sales campaign. I, of course, refused to authorize or support any of these actions, but they persisted for some time-resulting in sales that produced more unhappy shareholders for me to cope with. SOMETHING IS ROTTEN IN THE STATE OF CALIFORNIA
The stockbroker's efforts to build the stock price then focused on a particular member of the company board, who then joined with the stockbroker in not re-electing me president, and further dismissing me as an employee of the company. The broker had convinced the board member in question that he could improve the stock price and make more money by getting rid of my conservative attitudes. Moreover, this board member's ego was flattered by all of the attention and dreams that he could increase the company's stock price under his management. As the stockbroker and his shareholders soon learned, to their dismay, this board member was never a manager, just a salesman-type, with most of their stereotypical inability to organize and manage. I will never forget one particular statement at the board meeting in which I learned the shocking news of my dismissal. When asked what role I would play in the company's future, someone said: "None. I hope you starve and wind up in the street." This was shocking coming from a person who, over the years, had never stopped complimenting
me for taking care of their family financially through the company and outside investments. Basic business truth was that I knew my internal "Judas" should have been fired for incompetence many times (a sentiment that was confirmed by an outside consultant), but I resisted this temptation out of a feeling ofloyalty. A new president was elected by the board. The new board included an outside shareholder loyal to the stockbroker and carrying the proxy vote of many shareholders. One of the board's first actions, supported by lawyers who were brought in to enforce its edicts, was to give me 24 hours to get my stuff out. I was shocked and overwhelmed by all of this and packed everything I could into my car that night, while under surveillance of a company employee who was instructed to not leave me until I vacated the premises. This company employee, who was loyal to me, cried as I left. It became obvious to me that this was a palace revolt, one that had been secretly planned well in advance. LAST GASPS BEFORE DEATH
Although the largest shareholder (39%) in the company, I was in a minority voting position on the board. I stayed on the board until things were being run so terribly that I didn't want to be associated with the imminent destruction. Unfortunately for the shareholders, including myself, the new president could not manage the company, and within a year it went into bankruptcy. December 2008 I metalfinishing I 47
sherwoodonmanagement Ironically, the same stockbroker who was instrumental in causing the destruction of the company later asked me to come back as president in attempt to save it. I refused because the company debt had become overwhelming during my absence, and I was advised by tax counsel that I might be held personally liable for it. ENTER THE LAWYERS
The company hired a big law firm to defend the lawsuit I was forced to initiate when attempting to obtain money owed me from my vested account in the company retirement fund. They churned the suit with unjust attacks on my character, forcing my lawyer to respond. The company probably spent more money in defending the suit than I received in obtaining the full amount claimed. This apparent waste of effort became so burdensome that the trial judge admonished all four lawyers for spending too much time on their unnecessary claims and my lawyer's mandatory responses. Finally, I was awarded the full amount of my claim based on the fact that the board had previously approved it while I was still president. The ultimate in ridiculous legal costs came when the opposing lawyer was invited to a lunch/conference at an expensive restaurant which, as it turned out, was owned by my lawyer. More humor that contributes to the many jokes about lawyers: I received a bill for the lunch plus my lawyer's fees at his regular hourly rate. Much like some scene from a theatrical comedy, the company lawyer would attend the board meeting and sneak around in an attempt to peer over my shoulder and look at my notes. He stopped only after I became angry and protested that he, and the company, were infringing on my privacy. Despite this, the company's lawyers persisted in treating me, the company's largest
December 2008 I metalfinishing I 48
shareholder, as an enemy agent. POST BANKRUPTCY
The company emerged from the Chapter 11 bankruptcy with a new name and new owners. It is hard for me to accurately detail the new company that emerged, but I was informed that the shareholders, myself included, and most of the creditors, received nothing. There remained large debts to the IRS and the bank. As it turned out, the new owners had pledged partial payment to the secured creditors with property they didn't own. MY LAST LOOK
I had finally suppressed most of my anger and hatred toward the entire episode when one of the new owners asked me, as a consultant, to visit the site of a subsequent fire at the new company (suspected to be arson) to determine what was salvageable and part of his assets. The visit for me was overwhelmingly depressing, like visiting a loved one at the cemetery. But, on the positive side, it was truly closure. Chemplate and its Truckmate Division were finally gone. RETIREMENT COMES AND GOES
After my lawsuit against the company was settled and thoughts about the company disappeared from my life, (well, almost) I decided to retire. It was supposed to be easy, since I had a comfortable retirement fund as a result of earnings from the company and investments in real estate initiated and managed by my wife, Joan, a grade-school teacher, law school graduate, real estate broker, and a creative risk taker. She was a real pro and did well for us financially. Joan's very much appreciated support of me during this personal business disaster has played a role of utmost importance in my life. LOOKING TOWARD THE FUTURE
My plan was for my time to be spent
playing my saxophone, sculpting, traveling, and writing professionally. I had been continuously writing for the trade journals and association newsletters for many years on management and technology subjects. The thought was to take that experience and become a professional writer. Enrollment at a local community college was easy, inexpensive, and fruitful. My writing improved and I starting sending out articles on broad management subjects, such as solving family business problems. I had become experienced in this area. WRITiNG PROFESSiONALLY
Well, the world wasn't ready for me. Every manuscript sent in was rejected by publishers on the basis that my work "wasn't in their marketing plan." After many rejections and lots of tedious writing, it occurred to me that to become a successful professional writer you had to, guess what, write every day. This was boring and lonely. I needed something else and it wasn't to clean out the garage, do home maintenance, or watch television. Then there was an epiphany. One of my former fellow company owner/managers called up and said, "Bert, why don't you come and train my young son to manage the company? I am a production man, but I have seen that you are a skilled and successful manager with the ability to teach." BECOMING A CONSULTANT
My initial retirement plan had been eliminated, and I started a new, exciting career as a full-time consultant to owners and managers in surface finishing, finance, and manufacturing. In addition, I became a trainer for key employees desiring to become supervisors. It was a whole new world for which I was naturally suited. Joining the Institute of Management Consultants was exhilarating and informative. The members were helpful and some of the brightest, best educated, articulate, and
www.metalfinishing.com
sherwoodonmanagement knowledgeable people I had ever met-in any field. Just being with them at the meetings was inspiring and very educational. Starting the consulting business was easy. I had become well known because I had written continuously in publications and made speeches on those subjects at trade meetings. Then, all it took was unsolicited referrals from some of my initial clients that had hired me after just one phone call. They knew I had founded and built one of the most successful companies in the business. In virtually every assignment clients were pleased with the results. It was interesting to find out that the most difficult aspect ofbecoming a successful consultancy was that of building a client base. In contrast to most novice consultants, it was a snap for me.
THE END OF MY STORY IS STill PENDING For 24 years I have been an ethically driven technical, business, and management consultant to more than 95 companies in surface finishing, manufacturing, retail, and distribution. My clients have varied in size from the smallest one with one-and-a-halfemployees to one of the
largest multi-national Japanese companies, which required assistance in locating and meeting the environmental and municipal regulations needed for a research laboratory. I've helped a lot of companies and people. And, with rare exceptions, I've enjoyed the people and the work. I made a few bucks and a lot of friends. There isn't much else needed when my business life is combined with a great wife, two great kids, a great grandchild, and a large extended family. Thanks to all my clients and readers for all the opportunities to serve and, most importantly, please keep reading my contributions to Metal Finishing!
BIO Bert]. Sherwood, M.S. in Ch.E. is a consultant who hasprovided business and technical counsel to surface finishingand manufacturing companies for more than 20years. He can be reached at sherwoodbj@aol.
Log on to www.metalfinishing.com/asktheexpert today and give the feature a test drive for yourself!
www.metalfinishing.com
December 2008 I metalfinishing I 49
O
ur success in growing from a pioneering electroless nickel (EN) job shop to a contract and proprietary manufacturer did not satisfy the needs of the stockbroker who made the market in our publicly owned stock. Specifically, he had sold our stock at unjustified high prices with promises of huge growth for his customers. Later, in trying to appease his complaining customers, he tried, unsuccessfully, to pressure me into unnecessary and useless stock splits and overly optimistic reports to our shareholders. In a further reluctant response to his pressure, I tried, unsuccessfully, to make quantum leaps in growth by acquiring other companies. We even had a full-time employee working on the acquisition and merger attempts. Unfortunately, it didn't work. The hype proceeded unchecked until it became ludicrous. At one time there was even an individual acting, without my authorization, as our public relations representative. It was like a funny British movie. The PR rep had an Englishaccented captain overseeing a big yacht in the marina to which he would invite potential stock buyers. After driving the victims to the yacht in his rented Rolls Royce, he would entertain prospective buyers in the attempt to sell them Chemplate stock. The next part of his sales campaign was to sail from Los Angeles vvww.metalfinishing.com
to San Francisco where he would have an intense stock sales campaign. I, of course, refused to authorize or support any of these actions, but they persisted for some time-resulting in sales that produced more unhappy shareholders for me to cope with. SOMETHING IS ROTTEN IN THE STATE OF CALIFORNIA
The stockbroker's efforts to build the stock price then focused on a particular member of the company board, who then joined with the stockbroker in not re-electing me president, and further dismissing me as an employee of the company. The broker had convinced the board member in question that he could improve the stock price and make more money by getting rid of my conservative attitudes. Moreover, this board member's ego was flattered by all of the attention and dreams that he could increase the company's stock price under his management. As the stockbroker and his shareholders soon learned, to their dismay, this board member was never a manager, just a salesman-type, with most of their stereotypical inability to organize and manage. I will never forget one particular statement at the board meeting in which I learned the shocking news of my dismissal. When asked what role I would play in the company's future, someone said: "None. I hope you starve and wind up in the street." This was shocking coming from a person who, over the years, had never stopped complimenting
me for taking care of their family financially through the company and outside investments. Basic business truth was that I knew my internal "Judas" should have been fired for incompetence many times (a sentiment that was confirmed by an outside consultant), but I resisted this temptation out of a feeling ofloyalty. A new president was elected by the board. The new board included an outside shareholder loyal to the stockbroker and carrying the proxy vote of many shareholders. One of the board's first actions, supported by lawyers who were brought in to enforce its edicts, was to give me 24 hours to get my stuff out. I was shocked and overwhelmed by all of this and packed everything I could into my car that night, while under surveillance of a company employee who was instructed to not leave me until I vacated the premises. This company employee, who was loyal to me, cried as I left. It became obvious to me that this was a palace revolt, one that had been secretly planned well in advance. LAST GASPS BEFORE DEATH
Although the largest shareholder (39%) in the company, I was in a minority voting position on the board. I stayed on the board until things were being run so terribly that I didn't want to be associated with the imminent destruction. Unfortunately for the shareholders, including myself, the new president could not manage the company, and within a year it went into bankruptcy. December 2008 I metalfinishing I 47
sherwoodonmanagement Ironically, the same stockbroker who was instrumental in causing the destruction of the company later asked me to come back as president in attempt to save it. I refused because the company debt had become overwhelming during my absence, and I was advised by tax counsel that I might be held personally liable for it. ENTER THE LAWYERS
The company hired a big law firm to defend the lawsuit I was forced to initiate when attempting to obtain money owed me from my vested account in the company retirement fund. They churned the suit with unjust attacks on my character, forcing my lawyer to respond. The company probably spent more money in defending the suit than I received in obtaining the full amount claimed. This apparent waste of effort became so burdensome that the trial judge admonished all four lawyers for spending too much time on their unnecessary claims and my lawyer's mandatory responses. Finally, I was awarded the full amount of my claim based on the fact that the board had previously approved it while I was still president. The ultimate in ridiculous legal costs came when the opposing lawyer was invited to a lunch/conference at an expensive restaurant which, as it turned out, was owned by my lawyer. More humor that contributes to the many jokes about lawyers: I received a bill for the lunch plus my lawyer's fees at his regular hourly rate. Much like some scene from a theatrical comedy, the company lawyer would attend the board meeting and sneak around in an attempt to peer over my shoulder and look at my notes. He stopped only after I became angry and protested that he, and the company, were infringing on my privacy. Despite this, the company's lawyers persisted in treating me, the company's largest
December 2008 I metalfinishing I 48
shareholder, as an enemy agent. POST BANKRUPTCY
The company emerged from the Chapter 11 bankruptcy with a new name and new owners. It is hard for me to accurately detail the new company that emerged, but I was informed that the shareholders, myself included, and most of the creditors, received nothing. There remained large debts to the IRS and the bank. As it turned out, the new owners had pledged partial payment to the secured creditors with property they didn't own. MY LAST LOOK
I had finally suppressed most of my anger and hatred toward the entire episode when one of the new owners asked me, as a consultant, to visit the site of a subsequent fire at the new company (suspected to be arson) to determine what was salvageable and part of his assets. The visit for me was overwhelmingly depressing, like visiting a loved one at the cemetery. But, on the positive side, it was truly closure. Chemplate and its Truckmate Division were finally gone. RETIREMENT COMES AND GOES
After my lawsuit against the company was settled and thoughts about the company disappeared from my life, (well, almost) I decided to retire. It was supposed to be easy, since I had a comfortable retirement fund as a result of earnings from the company and investments in real estate initiated and managed by my wife, Joan, a grade-school teacher, law school graduate, real estate broker, and a creative risk taker. She was a real pro and did well for us financially. Joan's very much appreciated support of me during this personal business disaster has played a role of utmost importance in my life. LOOKING TOWARD THE FUTURE
My plan was for my time to be spent
playing my saxophone, sculpting, traveling, and writing professionally. I had been continuously writing for the trade journals and association newsletters for many years on management and technology subjects. The thought was to take that experience and become a professional writer. Enrollment at a local community college was easy, inexpensive, and fruitful. My writing improved and I starting sending out articles on broad management subjects, such as solving family business problems. I had become experienced in this area. WRITiNG PROFESSiONALLY
Well, the world wasn't ready for me. Every manuscript sent in was rejected by publishers on the basis that my work "wasn't in their marketing plan." After many rejections and lots of tedious writing, it occurred to me that to become a successful professional writer you had to, guess what, write every day. This was boring and lonely. I needed something else and it wasn't to clean out the garage, do home maintenance, or watch television. Then there was an epiphany. One of my former fellow company owner/managers called up and said, "Bert, why don't you come and train my young son to manage the company? I am a production man, but I have seen that you are a skilled and successful manager with the ability to teach." BECOMING A CONSULTANT
My initial retirement plan had been eliminated, and I started a new, exciting career as a full-time consultant to owners and managers in surface finishing, finance, and manufacturing. In addition, I became a trainer for key employees desiring to become supervisors. It was a whole new world for which I was naturally suited. Joining the Institute of Management Consultants was exhilarating and informative. The members were helpful and some of the brightest, best educated, articulate, and
www.metalfinishing.com
sherwoodonmanagement knowledgeable people I had ever met-in any field. Just being with them at the meetings was inspiring and very educational. Starting the consulting business was easy. I had become well known because I had written continuously in publications and made speeches on those subjects at trade meetings. Then, all it took was unsolicited referrals from some of my initial clients that had hired me after just one phone call. They knew I had founded and built one of the most successful companies in the business. In virtually every assignment clients were pleased with the results. It was interesting to find out that the most difficult aspect ofbecoming a successful consultancy was that of building a client base. In contrast to most novice consultants, it was a snap for me.
THE END OF MY STORY IS STill PENDING For 24 years I have been an ethically driven technical, business, and management consultant to more than 95 companies in surface finishing, manufacturing, retail, and distribution. My clients have varied in size from the smallest one with one-and-a-halfemployees to one of the
largest multi-national Japanese companies, which required assistance in locating and meeting the environmental and municipal regulations needed for a research laboratory. I've helped a lot of companies and people. And, with rare exceptions, I've enjoyed the people and the work. I made a few bucks and a lot of friends. There isn't much else needed when my business life is combined with a great wife, two great kids, a great grandchild, and a large extended family. Thanks to all my clients and readers for all the opportunities to serve and, most importantly, please keep reading my contributions to Metal Finishing!
BIO Bert]. Sherwood, M.S. in Ch.E. is a consultant who hasprovided business and technical counsel to surface finishingand manufacturing companies for more than 20years. He can be reached at sherwoodbj@aol.
Log on to www.metalfinishing.com/asktheexpert today and give the feature a test drive for yourself!
www.metalfinishing.com
December 2008 I metalfinishing I 49