Sometime back we were called in to assist a company that had completed what appeared to be a successful Succession Plan. The owner, founder and president was the father of two adult offspring, a son who did not want to be actively involved in the family’s precision small- parts machining business, and a bright industrious married daughter with 2 young children who did. The father, (We’ll call him George) discussed with his family the concept of his wish to step back from the business, in order to re-marry after his wife’s tragic death to a younger gal who had a hankering for horses and Colorado. The Daughter, Sarah agreed to step up from a lesser position in the company, even though her own husband was a successful salesman, and she had a nice life raising their children. She agreed to take on the president position for the company as George would not be able to keep up with the day-to-day operating decisions of the business from the ranch in Colorado.
Six months after assuming her father’s role in the business and much discussion with her husband Frank who had left his previous position, Sarah appointed him Vice President of Sales. Within a span of 18 months, the company’s sales had increased from their previous best year of $2.5 Million to just under $6Million, helped significantly by several solid new contracts that Frank had secured including one with a major airplane engine manufacturer.
It was shortly after the previous year end reports were completed for tax filings etc. that, in order to increase the size of their modest house; sorely needed due to the birth of their third child, Sarah decided to pay herself and Frank an additional bonus of $78,000.
Two months later after the foundation for the extension had just been poured, as George is looking over his regular quarterly financial report, he discovers the off-balance sheet amount of $78K. Through a quick call to his old accountant who still works for the Company and some arm twisting, George learns where the money went. He blows a gasket, hops a plane back East and walks into Sarah’s office on a Monday morning. Without any warning or much more than hello, he summarily fires both Sarah, and Frank. Since neither of them had asked for contractual documentation, and George had not actually, properly resigned, they had little legal recourse. George had taken a hotel room on monthly terms nearby and as he put it to his horse-loving bride, planned, “to get things back on track, within a month’s time”. He hires a friend he knew to be an excellent salesman in the Precision Tooling business to be the company’s new President, and George gives this new president the authority to find, “an even better salesman” to replace Frank.
Within less than the span of another 18 months the company loses three of their largest company contracts for several CRM mistakes including lack of attention and fumbles in design change needs which should normally have been properly managed by both the Sales VP and the President of the tooling company.
While George had returned to Colorado slightly longer than one month after his firing and hiring sprees, his vantage point is indeed far too distant to catch wind of “The Executive” spending and partying spree his two new hires are engaged in. The company is on what we call: “The Slippery Slope”.
Meanwhile Sarah and Frank struggle to find new financial footing and significant enough employment to keep their family on track. Sarah is feeling “too hurt and proud” to contact George and ask that they have a heart-to-heart. It was Frank, through his Accountant who finally requests some outside help.
There is a happy ending in this case:
After nearly 2 months of intermittent meetings and phone calls, agreements have been struck, paperwork has been properly prepared with all terms and conditions on what can and cannot be done are in place. Sarah and Frank have been properly “restored” to their previous positions at the company; and the president George had hired has been dismissed. He insisted on and received a negotiated severance package in exchange for his effectively dealing with the dismissal of his friend the Sales VP he had hired. The company continues to struggle to regain the position they had. While the sales numbers are below the $6Million high, they have recently gained some new business and forecast sales of $5MM by year-end 2011. With the dynamic duo of Sarah and Frank back in the game we are pretty bullish on their exceeding that number.
As of this writing, George is recovering from a broken ankle after a fall from his horse while riding at the ranch and staying as much out of touch as possible with, “things back East”.
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