Hiatus Ends – Ass Not Saved

Our Arts & Crafts Show Tent. I shared a booth with my wife and sister-in-law. My stuff is in the right rear corner and on the back and right side walls. I spent a lot of time standing inside detracting from the general appearance and scaring potential customers away. 

So I am returned from my first arts and crafts show, Fiesta in the Park, at Lake Eola in Orlando, FL. My last post said I was going on hiatus to prepare for the show. I claimed that 'hiatus' was from the Latin for 'saving my ass' since that is what I hoped the show would do...from an economic viewpoint anyway. In other words, I hoped I would make some money selling photographs to the unsuspecting public. The unsuspecting public was not nearly as indiscriminate as I had hoped.

A close-up of my table. I thought the card assortments on the right side would sell like hotcakes. They did not. The hand cleaner and enormous cafe latte from Panera Bread Co. were not for sale. Neither did I include them in my expenses, although I probably should have.

Here is an accounting in round numbers and estimates. It is too depressing to report with any accuracy. I spent well over a thousand dollars on the show. This includes over $300 for a vendor tent with some optional side walls and sand bags, a little less than $200 for gasoline for two cars, $72 to kennel the dogs, $100 in fees, $136 in ink, $200 in paper and card stock, and an easy $100 in display paraphernalia. It adds up way faster after the fact than it seems to be when you are spending the money.

Admittedly, a lot of the total went into things that I will be able to use again like the tent, display items, and inventory of prints that I made. It's not like I didn't get some lasting utility for my money, but it is sunk cost that I'll have to get back out of future sales.

This is the disturbing part. Future sales are usually predicted from past sales. My grand total of sales of sales of all items from this show: $2.00. Yes you read that right. Two measly dollars return on a thousand dollar investment! In spite of this dismal fiscal failure, I don't count the show as a total loss. I had some fun, made new friends among the neighboring vendors, and saw a ton of pretty girls. All these reside comfortably in the plus column for someone who has only been outdoors in the past few months to walk the dogs and take out the trash.

Still, any fool in his right mind would cut his losses and try something else. Not me though. I want to try again - ever the optimist, in spite of years of evidence to the contrary. I feel like I learned a lot from this show about what to do to improve the results next time...and what not to do to avoid the seemingly inevitable downward spiral into living in a refrigerator box under a bridge somewhere. Fortunately I have plenty of inventory left over for repeated attempts. I'll run out of spirit way before I run out of inventory.

Day 94 - Crash and Burn

          There are ten days until Christmas, and I am not in the holiday spirit. One of my good friends at Albatross was the IT director. He was (and still is) a smart, sensible, and unassuming fellow full of good humor and grace. He used to wear a different Christmas themed tie to work every day from the Monday after Thanksgiving until the Christmas break. I thought this was a wonderful tradition and worthy of emulation so I started doing it too. I continued to do it at my new job. I won’t be doing it this year, but I do stare wistfully at those ties every morning when I’m in my closet picking out a t-shirt to wear with the shorts that I have worn every day for the past two months.

*****

          The boat division at Albatross was not the only division for which Richard Hardin had grand designs. He also intended to create a commercial seating division. The idea was to leverage our capacity and expertise in school based applications to create both individual and stadium seating solutions for non-school applications. These would be more up-scale, comfortable, and expensive than the school products and would both broaden our markets and improve our profit margins.

          Development projects had been launched and project managers put in place. A new head engineer was brought on board so that the old head engineer could take over the commercial division. A new controller was hired for the commercial division. Things were popping. There was a lot of excitement in the air. We were spending money like water on new product launches including new office furniture suites, new stadium seating packages, a new classroom suite aimed at private schools and universities, and two new boats. It wasn’t very long before every project was over budget and in trouble.

          At the outset I wouldn’t have thought it possible for a company like Albatross to burn through $600 million in such a short period of time. The failures were legion and the timing even worse. Every project went over budget and every new product went over its target unit cost. This was a huge problem because they all had to compete on price in the marketplace. The markets had all gone to hell for a variety of reasons—not the least of which were the tragic events of September 11, 2001.

          It seemed we couldn’t get traction with anything we were trying to do, and what products we did manage to sell were sold on such skinny margins they made hardly a dent in their astronomical development costs. To make matters worse almost everything we sold came back with serious warranty issues.

          Bad as things were for the commercial fixture and boat divisions, almost everyone at Albatross remained calm and composed, secure in the knowledge that we could always depend on the school product sales to keep us afloat while we sorted out our problems. This or course was precisely the time that the bottom fell out of the school fixtures division.

          The problems at the North Alabama plant had continued unabated and largely unnoticed. Everything imploded in one catastrophic day when our largest school system customer rejected a huge shipment of furnishings destined for a dozen or so new schools being built in a high growth population center. This was the inventory that had been stacked in the warehouse in North Alabama—the stuff that wasn’t shipped because it wasn’t finished. When DeLeon couldn’t delay shipment any longer he sent the stuff out late and incomplete. It was so far below standard that the school system refused the whole lot out of hand, and cancelled all their pending orders.

This presented a number of immediate compounding problems. First and foremost was the immediate loss of about $60 million in revenues, revenues that were not going to be recovered easily. The second problem was that the returned items were going to have to be fixed.

They couldn’t be fixed in North Alabama because they obviously didn’t know how. North Alabama had its own problems to address. That would be the third problem, but the second was more immediate and more critical because we needed to turn that inventory into cash as soon as possible. The solution ended up being to load it all into trucks and haul it to the Mid Alabama plant to be reworked. When we started doing this we found that the number of hours required to fix the items was nearly the same as the hours it took to build them in the first place. Thus ended the fatal Albatross complacency—the belief that the school business would keep the rest of the company afloat.

As you can probably imagine, this debacle caused quite a shake up in executive management. Richard Hardin was forced to step down in the UK. Not surprisingly he had made some other costly missteps in the European operations. The Albatross problem was the final straw. Personally I think it was his arrogant management style that was his undoing, but no one is listening to me.

Robert Lester, the U.S. president of Albatross had to step down as well, although he didn’t really go anywhere. The directors brought in a new president, one who had recently presided over the dismantling of a crane company, and Robert moved over to the boat division to become the sales manager. He moved at the same salary he had been making as president, which probably rankled a few souls. I know it rankled me.

While Robert’s duties and responsibilities had shrunk considerably, he was making north of $350 thousand a year. Meanwhile my duties and responsibilities had more than doubled in scope, but adjusted for inflation, I was making less than when I started. To make matters worse Robert came to my office every day to get my advice and opinion on every decision he had to make in his new reduced capacity.

Now I have to say that I actually liked Robert. He was an engaging and personable fellow, and he certainly tried hard. It’s just that when it came to actually moving the company forward, Robert was just taking up space. He once said to me in the course of a rambling philosophical soliloquy, “You know, as long as I live I don’t think I’ll ever understand what went wrong at North Alabama.” That’s too bad really because almost everyone else did know, and almost every one of them blamed Robert for being asleep at the switch.

I guess it should go without saying that DeLeon was forced out. The only surprising thing about it was that he was allowed to leave under his own steam—that is to say, still walking. He stopped me in the hallway to say goodbye. He told me he’d given it a good run, but it was time for him to move on and try something different.

I asked him what he had lined up, and he said nothing definite. He was just beginning to explore his options. I personally thought that one of his options ought to have been scrubbing the restrooms at Albatross while the production employees took turns kicking and insulting him, but apparently you get better treatment than that when you cost a company millions of dollars. The bigger the screw-up the more likely it is that you will be allowed to walk around with your dignity intact.

A few weeks later I read in the paper that DeLeon was teaching a course in industrial management at one of the local community colleges. Knowing that he was passing his special brand of production know-how on to the next generation of plant managers gave me a sick feeling in the pit of my stomach.

Day 91 - The Forest and the Trees

          This was another day without anything of interest in the job search, although I did get a call from Gina, the HR manager who had to witness my termination. She got canned too, several weeks after my last day. She called to make sure that I had applied for unemployment benefits. I have not. I never have. I never thought I would, and it wouldn’t have occurred to me in any event that I could apply for unemployment while I was still getting severance. Not so, according to Gina. Severance, apparently, is not earned wages for unemployment purposes. Severance is not owed compensation for work performed. Severance is largesse. It is a gift, although I never would have characterized it as such. I might call it hush money, a bribe not to try to do the right thing, but never a gift.

          What unemployment benefits I receive will, of course, be charged against my former employer’s experience rate. Knowing this I have decided to apply. I qualify to receive $275 per week, a paltry sum compared to my former earnings and my severance, but decidedly better than the zero I will be getting after January. It won’t prevent me from having to move, and it won’t even cover my expenses after I move, but it will keep me in groceries and gas money while I continue to look for work. It is surely best to get it in place now before I really need it.

When and if we have to move, there is another place to live besides Brian’s house in Lakeland. That is with Madeline’s dad, Nelson. Nelson lives on Florida’s east coast near one of Madeline’s sisters. He has some fairly serious health issues and he is nearly 90 years old. He doesn’t want to go into a home or an assisted living facility because he doesn’t want to be surrounded by ‘old’ people. If Madeline and I were to move in with him, we could help with his care, run his errands, and otherwise ensure that he is able to stay in the home where he is comfortable and where he can still exert a certain amount of independence and control over his life.

*****

          The practice of mislabeling inventories set Albatross on the path to its first of several reorganizations while I was there. DeLeon acted in concert with his lieutenants, one of whom was the production manager at my division. He was the guy being made to look bad by Ben’s premature completion of parts. What was actually happening was that the cabinetry and other parts for the boats were made in the main plant on one side of the street, then brought to our side of the street to be installed in the hulls. These parts were being shipped incomplete. The boat division was absorbing all the rework hours to complete parts that had been shipped to us in an unfinished state by the furniture division.

          The furniture division looked good. The boat division looked bad. DeLeon had shifted his problem to a place where, if he couldn’t make it go away, at least he could make it someone else’s fault. The boat production manager was complicit in all this. As a reward for fading the heat he was put in charge of a larger plant in the north end of the state, and the boat division got a new general manager. Let’s call him Jim Poole.

          I was actually consulted on this change, although for what reason I have not a clue. The HR director called me one day to ask if I knew anyone who had the experience to head our division. It turned out that I did know a fellow who had impressed me with his background and abilities in production management at Quilnutz. I gave his name to the HR director and then promptly called him myself to alert him to the opportunity. He was interested.

          After a week or so of dithering on DeLeon’s part we hired someone with no boat experience. I had to wonder why. The HR guy indicated to me that DeLeon had never seriously considered the fellow I had suggested. In fact he had already decided on Poole before anyone bothered to ask me if I knew a qualified candidate. I can only assume that DeLeon wanted another name in the hopper to make it look like he had chosen Poole from among a number of qualified candidates.

          As it turned out Poole’s principal qualification was that he was even more ignorant than DeLeon, a happenstance that I’m sure gave DeLeon a comfortable assurance that he wouldn’t have any difficulty getting Poole to buy into his harebrained schemes.

          Poole turned out to be a change agent. It’s hard to believe, looking back on it, that someone so gloriously inept could exercise enough influence to change the course of an entire company, but he did, and not for the better either. That’s another story, though.

          The most momentous thing that happened next had to do with the production manager that Poole replaced—the one who was sent to the North Alabama plant to preside over a doubling of capacity there—the one who along with Ben DeLeon managed to tank the company for the first time.

          The school fixtures business was Albatross’s bread and butter. School desks, lockers, and bleacher sets were the core products and the reason for Albatross’s success and longevity. While Richard Hardin had everybody from the board of directors to the janitorial staff committed to expanding into the commercial fixtures business and doubling the boat business, school fixtures would remain Albatross’s most important segment.

Everyone knew this. Everyone believed in the school business as the bedrock on which Albatross was built. Everyone expected the school business to remain stable, viable and strong. This faith was so deep and abiding that in effect everyone believed that we could royally screw up the commercial fixtures and boat segments, and no matter how bad things got there, the school segment would always be there generating the cash and profits to keep us not just afloat, but healthy. Everyone underestimated Ben DeLeon’s capacity to bring the 75 year old company to its knees.

          The plan was to move production of the largest, most complicated, and highest volume stadium bleachers to the north Alabama plant in order to make room at the main plant for the new commercial fixtures lines. This was to reassert Albatross’ competitiveness in its usual markets, which had been eroded somewhat by the recent entry of two new companies into the school fixtures business.

Moving production to North Alabama presented a raft of problems that it would seem, in retrospect, were not adequately considered beforehand. The North Alabama facility was a sleepy little backwater by comparison to the main plant. It had never produced a bleacher set, let alone anything as complicated as the one we were moving there. It had only ever made our simplest and lowest volume school desks. It had never produced anything in the volume it would now be expected to produce.

If anyone had thought about it at all, they would have realized that they were going to exhaust the available local labor supply to get to the production volume we wanted, and would then have to go in search of production employees at the local rehab facilities, half-way houses, and homes for the mentally challenged. To compound the staffing problem, there were no clearly documented work instructions detailing the processes required to assemble the bleachers.

          To sum up, we were going to double production of a product at a facility that had never built that product before, a facility with inadequate access to staffing resources, with little or no training resources, and with inadequate documentation of assembly processes. This effort was going to be overseen by a manager who had already demonstrated that he was unable to recover from manufacturing bungles and snarls foisted on him by his boss, Ben DeLeon.

          It seems obvious, when you state the problems that succinctly, that this was a disaster in the making. You might be tempted to excuse those in charge for failing to recognize this before the fact because hindsight is always so much clearer and easier than foresight, but the fact is that many people knew this was going to be a serious problem and tried to sound the alarm before the whole thing went off the rails.

          One fellow in particular, the Alabama controller who had hired me and had, prior to assuming that job, been the controller of the North Alabama plant, circulated a memo stating clearly what was likely to happen and why. He was not just ignored; he was roundly spanked by the powers that were.

          No one wanted to hear about failure. Mention of failure was politically incorrect. Probably everyone in a position to do anything about it was afraid to bring the subject up to Richard Hardin because they already understood that the result would be another of his blistering counseling sessions. Eventually the Alabama controller was fired for not being a team player. Talk about irony.

          Like anything huge, this disaster took a long time and a lot of money to build. All the while it was tended lovingly by DeLeon and his new plant manager. There were some sign posts along the way, but they were largely ignored. There were some rumors and rumblings heard occasionally from long term employees in North Alabama who could see what was going on, but who had also seen what happened to the Alabama controller for daring to mention his reservations.

          The biggest, the most glaring, of these sign posts was the huge build up of undelivered inventory at the North Alabama plant. It couldn’t be delivered because it wasn’t finished. It was classified as finished on the balance sheet of course, but it wasn’t—DeLeon’s favorite trick come to roost in a new place.

No one in the corporate finance management group saw this alarming build-up because they were too busy chasing accounting minutia for the UK management group. The UK boys liked a robust analysis. They liked a lot of detail. They liked their charts and graphs and trend lines and a whole raft of other analytical esoterica. It was a classic case of not being able to see the forest for the freaking trees.

Day 90 - It Ain't Finished Inventory Until the Fat Lady Sings

          It was another dry day on the job boards. After several days of elevated spirits because of the two idiot recruiters, I am once again resigned to a bleaker reality. My wife and I discussed where we might go to live when we move out of here. The most viable option right now seems to be for us to move in with our youngest son. He has a little house near Tampa, which is about an hour and a half from here.

He has a live-in girlfriend with two teenage daughters. The relationship is not working out for him. The girlfriend is mean, petty, and argumentative. She either can’t or won’t discipline her girls, so their behavior is becoming increasingly problematic. He has told her that they have no future together, and asked her to move out. So far she has not. Our son thinks that if his mother and I decide to move in with him, the girlfriend will be more motivated to finally leave. It is comforting to know that, after these several months of unemployment and purposelessness, I will once again be useful for something to someone.

*****

          Richard Hardin wasn’t the only author of bone-headed decision making at Albatross. He was the head boy to be sure, but he was supported by a cast of minions eager to take up the challenge when he went back to the U.K. to direct the wreck of our once proud company from afar. Chief among these minions at the time was the Director of Operations. Let’s call him Ben DeLeon.

When I got the plant tour during my interview, the Alabama controller told me that Albatross had been planning to build another plant in the area to add capacity, but that Ben had done such a fantastic job of reorganizing their production lines and freeing up space on the plant floor they no longer needed to build another facility.

It was a wonderful story that I tried to take to heart, but when I looked around at the endless stacks of parts queued up in front of and behind every machine in the place I had to wonder how bad things had been before Ben got there.

Then I met Ben and spent twenty minutes or so with him in a conference room while he asked me questions about my background and tried to explain his vision for the future at Albatross. I realized in the first five minutes that I was talking to a complete idiot.

I honestly don’t have any idea how guys that stupid manage to rise to positions of relative power and influence. I wish now that I could remember some of the things he said so that I could prove that I wasn’t letting my imagination run off the reservation, but the stuff he asked and the things he said were so gloriously incompetent that I put them immediately out of my mind. There’s only a finite amount of space in my brain, and I don’t like to allocate any of it to the remembrance of stupid things.

          Like many incompetents, Ben was a great one for fudging the numbers when he could get away with it. The numbers that mattered most to Ben as a production guy were units started and units completed. Ben liked to call inventory completed according to when it was scheduled to be completed, whether or not it was actually finished.

The effect of Ben’s fudging the completion numbers was that Ben looked like he had everything under control—that production was running smoothly and according to the master production schedule. The first thing I noticed when I started accumulating costs on production was that there were an awful lot of hours being booked to hulls in process to complete parts and fixtures that were built for us by the furniture division and that were supposed to have been brought to the boat facility in a completed state. These parts had already had their costs finalized in the system, and been transferred at completed cost to the boat division.

The boat production staff was charging hours to rework and finish the parts when all they should have had to do was install them. This made the furniture division look as if it was building inventory to the budget standard, but the boat division looked as if it were busting the budget on every unit. Lots of people at Albatross were aware of this little charade, but no on had had the temerity to complain about it—at least not until I arrived. If you have begun to see a pattern emerging from my recounting of my work history, you will now surmise, and correctly, that this didn’t go so well for me either. I may as well have been playing to the grass.

Day 67 - Different Lyrics, Same Tune

          It was another slow Monday on the job boards. It occurs to me that things are going to continue to slow down anyway as we get closer to the holidays. It’s likely to be January before I see any significant pick-up in listings—not even then if the economy stays in this death spiral. Maybe I ought to be stocking up on canned goods and camping supplies.

          We took Bud to the vet today. The tumor on his shoulder is noticeably larger. It’s only been a few weeks so there’s no question that the cancer is progressing rapidly. Bud seems to like hanging out with me more and more. He will stand next to me while I watch television and rest his head in my lap. Somehow this seems to give him comfort. I hope so anyway. It is sad to see him failing when he has so much heart left for living.

*****

          I was losing heart at an accelerating pace at Quilnutz. Every success, every overcoming of an obstacle was answered by a new challenge. Nothing came easy, and every difficult thing was made even more so by the chicanery, bullying, and bone-headed decisions of corporate management.

          When I thought I had the Fische/Alicia conspiracy contained, Ivan started giving me fits. He decided at one point that we had overvalued our used trade-in inventory in the sale. He assigned new values to the remaining stock, and told me to adjust the units on the books accordingly. I knew they had been fairly appraised at the time of the sale, but I also realized that they had declined in value somewhat since the sale. I knew that Ivan wasn’t going to have any of that. Logic was not a path to appeasement for Ivan. I took the adjustment—another significant loss to be charged against the earn-out and against the possibility of my ever cashing out. It was like being mugged in slow motion. There was nothing I could do about it but watch. Ivan was holding the gun, and anything I said would just get me shot.

          The boat that I took the biggest adjustment on, some $40,000 write down in value, Ivan moved to Florida. He sold it there several weeks later and made an $80,000 gross profit on it. I guess our original appraisal values weren’t so far off the mark after all. The rat bastard never agreed to let me reverse the adjustment against the earn-out. He knew what he was doing from the start, and he was not ashamed to flash his avarice in my face and line his pockets at my expense. I guess it was ‘just bidness’. Different lyrics. Same tune.

Day 41 - Sport Negotiating

          Gary called today with a question about the inventory—a simple matter that we disposed of quickly. He asked after my health and I told him about the pain, the fever, and the Cipro. He said that in his experience Cipro takes a minimum of a week and as much as two to begin to work. Once it begins, apparently, it works pretty fast, but I’d have a long wait for any relief. I don’t know if this is true or not. It seems irresponsible on the part of the doctor to prescribe a slow-acting antibiotic for a kidney infection that had the potential at least to become virulent and even life threatening, but what do I know? I’ve got a lot of nerve second guessing a board certified urologist when I can’t even hold a simple job in accounting.

          If you were paying attention during those last two sentences you will realize that self doubt has begun to take root right next to the bacteria ravaging my plumbing. I expect that in this circumstance the hydrocodone is both my best friend and my worst enemy. I’m taking them two at a time now even though the pain has abated to the point of mild discomfort when I urinate. I convince myself that they help with the fever and they help me sleep, although that last is not really true. They don’t help me sleep at all, but they do help me not to care that I am awake.

*****

          Henry was never troubled by self doubt. No feeling of inadequacy, sense of guilt, or pang of conscience ever clouded his mind that I know of. Henry kept his own counsel. By Henry’s reckoning he was the smartest sumbitch in the valley, and while he might pay for good advice that did not mean that he had to take it when it went contrary to his own wisdom. Everyone else’s intelligence was measured by the yardstick of Henry’s own notions, so that the more you agreed with him the more brilliant you became.

          Much of what Henry did seemed to me not just counterintuitive, but downright stupid. And yet he was not, despite his behavior, a stupid person. I began to believe over several years that he made stupid business decisions intentionally just to prove that he could. Just like hitting on bizarre and unattainable women—to prove that he could. He had to constantly reinforce the notion he had of himself that he was above having to listen to anyone else or do anything that anyone else would do in the same or similar circumstances. He would cheat and fudge and screw up wherever and whenever he chose, and because by doing so he gave the impression that he was crazy no one ever called him on it. There were almost never permanent consequences for him. Sure he might have to buy a truck or pay a settlement, but his life, his homestead, his business, his circle of influence remained virtually intact. I wondered sometimes if he’d made a pact with the devil.

          The lowest I’ve ever seen him was shortly after I’d gone to work for him, about a year after he’d run afoul of the IRS, and while we were in the process of moving our whole operation to Arkansas. We got caught out of trust by our floor plan lender. A floor plan is a wholesale line of credit secured by our inventory. As soon as we sold a boat we had to pay it off. Being out of trust meant we hadn’t paid off sold inventory on a timely basis. We weren’t out of trust just a little bit. We were out of trust about $6 million.

          I had walked into this situation without knowing what I was getting myself into. Henry had been pulling the wool over my eyes as the CPA in charge of his tax work and annual review in the same way he was fooling the lender. When I left the CPA firm to go to work for him, I was suddenly in the thick of the very accounting subterfuge he had been using against me. I knew that sooner or later we were going to get caught. I also knew that as soon as the lender found out we were out of trust they would shut us down and padlock the doors.

Henry had been able to hide his out of trust condition because the lender was at best lackadaisical about checking our inventory. They let us know in advance when they were coming. Henry would get on the phone to his customers, and have them bring their boats back to the dealership on some pretext, usually service work. If that didn’t work he would just tell the lender’s agents that the boats they were looking for were out on a demonstration cruise or at a show. Sooner or later the unit would make its way back to the lot, he’d call the lender, they’d come out to look at it, and everybody would be happy until the next inspection. Then the whole process would start all over again. To keep things interesting Henry kept paying units off and ordering new ones from the manufacturers to keep his float alive.

          The internal financial statements he was providing to the lender every month were a joke. The $6 million he was out of trust was being carried as customer deposits. That is he had sold the boats and collected the money, including taking a unit in trade usually, but he hadn’t recorded the sale. The money was be credited to customer deposits rather than recorded as sales revenue. I knew I had to get things honest and I had to do it in a hurry, but I also knew that if I did it all at once the whole sorry mess would come tumbling down on our heads. We were actually making significant progress toward clean books until Henry decided he needed to buy a factory and move his operations to Arkansas.

          I ran the numbers on that too. It wasn’t such a bad deal. We bought a bankrupt manufacturing operation for 10 cents on the dollar. The trouble was coming up with the cash to fuel operations until we started getting production off the line. I told Henry it would take $3.2 million to do properly. Henry raised $1.5 million and pulled the trigger on the deal. We were a million seven short, and Henry made up the difference with out of trust floor plan proceeds. Instead of us getting back into trust and being able to breathe a collective sigh of relief, he plunged us deeper into the hole.

          It all came crashing down when I published the next set of quarterly financials. I made them honest. I knew I had to. It was one thing to fudge on the monthly internal financials, but I just wasn’t about to lie on the published quarterlies. It would go against everything I stood for. I dug in my heels. Disaster was the result.

When the lender realized that Henry was actually losing money they became unbelievably skittish about the whole arrangement. They descended on us unannounced with twice the usual number of grunts to check our inventory. Naturally they couldn’t find a lot of it. Instead of letting Henry waltz them around with a lot of B.S. like they used to do they started asking really hard questions. When Henry told them a unit was at a show they wanted to get on the phone and talk to someone at the show that could go look at the unit and capture its serial numbers. It got really ugly really fast. Henry was sweating bullets. Tension crackled across the property like downed power lines. After two days of trying to salvage the unsalvageable Henry came clean and threw himself on their mercy. That’s when things began to get really interesting.

          The lender didn’t shut us down as I had thought they would. The reason they didn’t shut us down is that they wanted to keep the whole matter as quiet as possible. They had already been caught unawares by another out of trust dealer to the extent of $104 million. That number made our paltry sum seem insignificant. It had also made a big splash in the financial press and caused the lender’s stock price to take a substantial dip. They couldn’t afford any more bad press, and they couldn’t afford any more losses. If they shut us down they would get both. The fiasco would make the papers, and they’d have to liquidate our inventory at a significant discount. They’d be lucky to get out with half what we owed them.

          The far better course for the lender was to throw us into a workout. They made Henry sign everything he owned over to them. He was three days just signing papers that gave them first security rights in virtually everything of value we had except the property itself, which was of course mortgaged. Then they parked two agents in our offices to approve every deal we made. All the cash we collected went directly to them every day. We would submit payment requests to them for all our expenses including payroll. Whatever we spent had to be documented and approved by them before they would release the funds. Everything else they kept. They came with us to Arkansas. It was burdensome and unnerving. It left us scant room to operate and no way to capitalize on any opportunities that might come our way. The lender ran the business, and they ran it with an iron hand. Still we were open for business, working our way out of the mess, and Henry wasn’t in jail.

          At first Henry seemed a broken man. He lost his color. He quit combing his hair or taking any care with his appearance. His attempts at philandering were listless and half-hearted. Gradually though he came out of it. It was another instance of Henry escaping his own stupidity unscathed by more or less blind luck. Were it not for the lender’s previous troubles they probably would have locked our doors and filed charges against Henry. As it was, to all outward appearances they left him doing what he’d always done with the one exception that everything was now totally above board and honest. That part probably made Henry crazy, but he made the best of it and within a few weeks seemed his old self. I guess he had to keep his larcenous spirits up by perfecting the use of his ‘foot wedge’ on the golf course. To his credit, and to my everlasting surprise, the one thing he did not do was hold me responsible for the mess. I knew that somewhere in the dark recesses of him mind he had to be thinking that if I hadn’t insisted on being honest he would have been enjoying ‘bidness’ as usual with impunity.

          One interesting thing happened to me in the course of all the turmoil. The lender sent an auditor from Detroit to look at our books. I’d already made significant strides getting them into shape, and I went out of my way to be as forthcoming and helpful as possible when he showed up. I guess he appreciated that because we developed a kind of cautious rapport that I would not have thought possible under the circumstances. Maybe the controllers he usually dealt with were still trying to cover up their bookkeeping misdeeds. I didn’t. There wouldn’t have been any point. We were already caught out. Keeping the books honest at that point just made everything work better. The more they knew about the reality of our situation the less likely they were to have unreasonable expectations. All I know is that eventually he came to trust me, and I made sure that his trust was not misplaced.

          Now Henry had earmarked a crummy little internal office in the Arkansas facility for my use. The furnishings were awful. The desk and credenza were pressed wood by-products covered in cracked and stained Formica. My chair listed about 5 degrees to port. There were no windows. It shared an air conditioning and heating zone with the windowed offices across the hall that also housed the thermostat. The result was that my office was a good ten degrees cooler than the rest of the building in the winter and that much warmer in the summer. I hated it and so did the lender’s auditor.

          One day the auditor went to Henry and told him he needed to give me a bigger office. He told him that he wouldn’t even have a business were it not for me, and he had no business consigning me to a slum tenement of an office when there was so much prime space available right across the hall. He told him I needed more space, more comfort, and more respect, and that he wasn’t going to be happy until I was moved into quarters commensurate with my importance to the company. That little speech got me moved into Henry’s office. Henry moved down the hall and built himself another, but I inherited all his office real estate and all his furniture. I’ve never had as fine a place to work since.

          The thing was huge. It was the equivalent of three regular sized offices. The entire West wall was floor to ceiling window. The South wall was one huge custom built floor to ceiling cabinet that housed an entertainment center, a clothes closet, file drawers, and a wet bar. The custom made desk was just shy of two acres. There was a matching credenza, and respectable artwork on the walls. The carpet was plush with a hand inlaid design. There was a sofa, two barrel chairs, two end tables, a round conference table and 6 matching custom upholstered directors’ chairs. My new chair was a high backed leather executive chair with padded arms. It did not list to port or starboard. It was so comfortable that I had to eventually get rid of it and replace it with something more conducive to work. I had the Taj Mahal of Middle American office space, and I enjoyed it every day for 7 years before some dirt bag from the company we finally sold out to took it away from me. But that’s a whole other story.

          Eventually we slipped the lender’s shackles. They stayed with us for two years, collecting every dime and scrutinizing every payment. It got to be a huge pain in the ass, and it really stymied all our efforts to succeed and grow the company. The lender hardly cared what happened to us. They only wanted to get their money back, plus interest if possible. In fact they probably hoped that we would eventually fail. I’m sure they thought we had it coming to us. They just didn’t want it to happen until we had got them paid off. We were still a long way away from having done that when we found a private lender who was willing to buy out their position. Of course the new lender wanted a substantial discount, and we wanted to make sure that he got it.

This was my first indoctrination into the world of hard-nosed negotiation. I thought we could probably talk the lender into taking 75 cents on the dollar. I thought that was reasonable, and that they would be happy to get it if they could get out quickly and with cash. The longer they stayed in the workout the more likely it was that we were going to fail anyway. They kept such tight reins on us that we weren’t able to invest in improving our production efficiencies or upgrading our product offerings. We were languishing in mediocrity, and our lackluster sales were telling a story of significant risk for the lender. They would be happy to get any reasonable deal.

I figured we could offer them 66 cents and settle out at 75. Henry and his VP thought we could do way better than that. We offered them 40. I was sure they would balk, but they didn’t. They hollered. They made a lot of noise, but they kept talking. In the end we convinced them that we were going to walk away and let them have the keys. In fact Henry jumped up at one of our meetings with them and threw his keys on the table. It was his car keys, but the gesture wasn’t lost on the lender’s executives who suddenly saw their careers flash before their eyes. They couldn’t afford to take the kind of hit that our abandonment of the enterprise would give them. They were still in too deep, and the memories of their other losses too fresh. Besides, Henry’s demonstrably lunatic behavior over the two years they had been camped out in our back pockets convinced them he was just crazy enough to stick them with the whole mess. They settled for half what we owed them and ran for the exits.

We had a new lease on our future with a new and entirely more accommodating lender. The new lender was an individual. He’d built a huge agricultural operation in the East and sold out to a corporate food processor for a mountain of cash and stock. He was sitting on $150 million, and he was bored. He liked us. He owned one of our boats. He thought we deserved a chance at success. He was just as crazy as Henry but a lot nicer and there was not a larcenous bone in his body. At first he was reluctant to get involved. The risk was considerable. We’d gotten enough of a discount on the deal that his security interest in our inventory was going to be very attractive, but he was still fronting a lot of cash and anything could go wrong. The economy wasn’t that good. Sales were lagging. The VP and I went to his house, stayed with him two whole days talking into the night. We gave him our personal word that we would keep open channels of communication with him and watch his back at every turn. Finally he bought the deal, and we closed out the other lender. He was our savior, and I vowed that I would never let Henry take advantage of him. I never did either—no matter how hard the bastard tried.

Day 31 - Toiling Away, but Adding no Value

          Today was like yesterday only more so. Gary waxed eloquent about how much he appreciated my coming in to help him wade through the closing process. It’s not like anything he’s ever seen before. I knew it wouldn’t be. It’s not like anything anyone’s ever seen before. What we deal with, what I had to deal with, is a joke among accounting systems. IT sales people used to call me up several times a month to try to sell me a new system. All those software and systems decisions were made at our corporate headquarters in Kentucky, but I always liked to talk to the sales people to see what was available and dream about how nice it would be if I could actually buy it and if it actually worked as advertized. They would always ask what apps we were using. When I would tell them, they had never heard of it. That tells you something about how antiquated and obscure our systems were.

Everything we had and everything we did related to our accounting systems was the direct result of someone trying to get by as cheaply as possible. I’ve seen a lot of this over the course of 30 years. Everybody wants to get by on the cheap when it comes to functions that are seen as non-essential or non value added. Accounting often gets short changed…and systems as well. It wasn’t until some smart software developers figured out a way to bundle the sales function into enterprise software that companies started really parting with huge money for their IT solutions. When it was just accounting they couldn’t care less. The systems lag brought on by cheapness really gets telling when companies with suddenly heightened expectations like ours start trying to get 21^st century results out of 20^th century software. I had just got out of this situation—although not by choice. Gary was now in the thick of the struggle.

Henry, my old boss, the one I would’a, could’a, should’a killed, was like that too when it came to accounting and accountants. He even thought the engineers were a useless lot. He once said to me, “Engineers and accountants—all they ever do is fiddlefrick around.” He was building custom, luxury watercraft that sold from $400,000 to over a million dollars apiece, and he tried to skimp on the engineering. Then he was surprised when his boats kept catching on fire.

I’m still feeling awful, but not getting any worse. I should probably go to the doctor, but I’ve got stuff to do and, like I said, I’m not getting any worse. Three more days and we’ll have the closing in the bag. I’ll be done with work for a while. I can quit thinking about and worrying about the place that cut me adrift because they needed someone to blame for their own inadequacies. I wonder if anyone even cares that I’m doing the honorable thing here by staying around to make sure Gary doesn’t miss a beat taking over my job. Probably not—certainly not Fritz who’s probably busy congratulating himself that Gary didn’t bolt like the other guy. I wonder if he knows how pissed off Gary is about having to do a physical inventory at the end of the month. Apparently Fritz forgot to tell Gary that fascinating little detail about his new job. It turns out that Gary hates inventories almost as much as I do. 

Day 27 - Conference Call: a meeting with eye rolling

          Technically, yesterday was my last day at work. My benefits have terminated, although the severance payments will now begin and continue through the end of January. I haven’t done a closing with Gary yet, and I missed some days because of the lithotripsy, so I am going to continue to work through the end of the closing process. Gary seemed happy to hear this. Now that I am dealing with him I don’t talk to Bill very much anymore. That suits me fine.

          We began today pulling dated reports from the subsidiary records to support the closing balances. Once this is done, there is not much else to do closing wise until Helen and the accounts receivable girl finish up the sales reports. This sometimes takes a week because they have to drag sales information out of the field reps to properly record the vehicles delivered. There are things to do but they’re not burdensome. I’ll let Gary do them and help him out if he gets lost. That’s the way I like to learn. It seems to suit Gary as well.

The difference between a meeting and a conference call. 

Of course video-conferencing just ruins all the fun! 

          There was one interesting development today. When I say interesting I mean the kind of thing that had me muttering profanities under my breath, and yelling them at the top of my lungs after I got into my car and started driving home.

          Bill invited me to a meeting to discuss the status of the perpetual inventory project, specifically the progress or lack thereof that has been made in implementing a sound, viable cycle count program. Some history is in order.

          One of New Ron’s projects was supposed to be orchestrating a company wide implementation of a perpetual inventory system. Fritz wanted to make it a priority because first, the auditors had suggested it would be a good idea, and second, it was a good idea. Fritz wanted to start with my division because ostensibly we had the least robust inventory system as evidenced by repeated significant write downs following our periodic physical inventories. New Ron contracted with a consulting group to come in, review our systems, and give us a conversion plan. The consulting firm left us with a report that contained a list of steps we needed to take in the approximate order that we needed to take them.

          New Ron sat on the report for weeks. Fritz kept calling him asking for a timeline for completion. New Ron kept telling me Fritz wanted a timeline, but there was no way to give him one. I suggested that all he needed to do was take the consultants’ report, assign the listed steps to appropriate individuals, and put dates next to the items. Still he didn’t do it.

          “Fritz is going to fire me if I don’t give him a timeline,” he said to me one day.

          “Give him a timeline,” I said.

          “I can’t give him a timeline.”

          “Sure you can. Just do like I told you. Take the consultants’ list. Assign names and dates.”

          “I don’t know,” he said. “I already told Fritz that this ought to come from Bill.”

          I thought that New Ron was right—not that the timeline ought to come from Bill, but that he was going to get fired. This was especially true if he was going to try to hand the whole thing off to Bill. Fritz had made it obvious that he wanted New Ron to do it. Next thing I knew Fritz had got onto Bill about it. Bill didn’t let any grass grow under his feet. About five minutes after Fritz talked to him he had called a meeting. He invited all the department heads to discuss the project. At the meeting Bill said that we had to get this perpetual inventory system going as soon as possible, but he didn’t know how to do it. Neither did he think that anyone else knew how to do it. He said that everybody needed to come back the next day with some ideas.

I already had an idea so I ran with it. I took the consultants’ list from their report, entered it into a spreadsheet, put a name and a date next to each item, and printed it out. It took about half an hour. I showed up at Bill’s meeting with stapled and collated timelines to distribute. Bill was ecstatic. He called Fritz from the meeting. He told Fritz that we had this timeline complete with task assignments and dates and that we would have the perpetual system implemented in 6 months. Fritz was ecstatic as well.

After the meeting Bill told me he had originally thought that the inventory implementation was going to be a bust because no one knew what to do, but now that I had come up with the fabulous timeline he was suddenly feeling really good about this project. He was feeling especially good because now Fritz was feeling good. Everything was good. Well maybe New Ron was not so good, but I had given him plenty of opportunity to be a hero. He wouldn’t listen to good advice.

We started having meetings once a week to track our progress against the timeline. We hired the consultants to come back and help with the software changes and data conversions we needed in order to make the system work. Bill ran the first couple of meetings, but gradually I took over. New Ron came to the meetings, but he didn’t have a lot to contribute. In a couple of months Fritz let him go—told him they had decided to go in another direction. My star seemed to be ascending. Ascending that is until we got to the cycle count process.

Cycle counts are critical to a perpetual inventory system. In a periodic inventory system (the opposite of a perpetual system) you take a complete physical inventory—wall-to-wall—at least once a year, and adjust the inventory balance in the financial records to the amount that you counted. In a perpetual inventory system you count everything at least once a year, but you do it piecemeal. You count the high value and critical items more than once a year. You do a few items every day. Every day you compare the counts of those items to the balance in your inventory records. If the amounts are different you investigate to find out why. Usually it is that you are using more or less of that item than your bills of material say you are supposed to use. If this is the case you then need to determine whether the operators are using the wrong amounts or the bills are specifying the wrong amounts. Either could be the case. You either fix the bills or retrain the operators depending. If you don’t do this, and do it effectively, you might as well not have a perpetual system because it’s not giving you any more accurate results than you would get with a periodic system.

The problem is that doing cycle counts requires dedicated resources. That is you have to have people permanently assigned to do cycle counts, and they have to be smart enough to do the investigative work and fix the problems on an ongoing basis. The trade off in terms of costs is that while you are paying a few people throughout the year to do cycle counts, you don’t have to shut the whole plant down for the day or two that it takes to do a complete physical count and pay everyone to count rather than to build the product that makes you money. That and you have better control over your inventory spending throughout the year. A perpetual inventory system is a good thing—a better thing than a periodic inventory system—but it does cost money to implement. It does add to cost at the outset, and some of the eventual savings are not immediately quantifiable.

This became my problem. Management was all for a perpetual inventory system until they found out we were going to have to hire some cycle counters. That little tidbit threw a monkey wrench into the works. My star stopped ascending. My star had the brakes put on. I wasn’t anybody’s fair haired boy anymore. Suddenly I was that dumb ‘sumbitch’ that wanted to hire more indirect overhead. This just reinforced something I already knew, but had neither the time nor the energy to put into practice in the circumstances at hand. It’s not enough to do your job and manage an extra project. Your also have to manage management’s expectations along the way. You cannot depend on them to know what needs to be done, or why, on their own. If you don’t do this you will be tossed overboard at the first sign of trouble. Think of it as the first rule of seamanship—keep one hand for the ship, and one hand for yourself. If you don’t make an effort to protect yourself, you’re not going to be of any use to the ship.

I had to fight for every cycle counter I got, and that turned out to be too few and some of them not bright enough to do the job. We launched the new system without a viable cycle count process in place, and as a direct result the system effectively crashed and burned. Guess who had to fade the heat? That is correct. New Don got fired for not doing the inventory project. I got blamed for doing it badly. It wasn’t the proximal cause of my dismissal, but it had to figure heavily.

That brings me back to the present day and the meeting that Bill asked me to attend. I had already been fired. I had washed my hands of the inventory fiasco. I had enough stuff to worry about without agonizing over the inventory. That was someone else’s problem now. Still Bill wanted me to contribute as I saw fit. He must have thought I might know something useful.

All the current cycle counters at the meeting as well as the remnant of the implementation team. The IT guys were on the line via conference call as was Fritz who as it turned out was running the meeting. Apparently Fritz didn’t know that I was there because about the first thing he said was we wouldn’t be in this terrible fix if only we’d had a strong individual in charge of the project. Then he chuckled at his own insight. The sound he made was an embarrassed choke. It was the kind of sound a pimply sophomore might make just after he has called someone ‘gay’ only to realize that they are not insulted by the term.

I looked across the table at the head of the engineering department. He rolled his eyes because he knew what an affront to good sense and sensibility Fritz’s observation had been. He could see how offended I was. I thought of all the clever things I could have said to Fritz just then, but the thing I really wanted to do defied the laws of physics. What I most wanted to do was stick my hand through the phone all the way to Kentucky, grab Fritz by the throat, and drag him back out at my end. I wanted to see the look on his face. I wanted to rearrange the look on his face…a lot. I did not see fit to make any contributions to the discussion. When the meeting was over I got in my car and drove home.