Leadership the hard way: Part 3

When chickens come home to roost

In 1995/96 I had a front row seat as a vibrant, successful, multi-award winning company of over 400 employees imploded with terrifying speed since it lacked solid foundations including ethical leadership. It changed me forever.

Leadership the hard Way: Part 2 described the ups and downs of my first 3-4 years as a young expatriate running a North American sales and service business in Charlotte, North Carolina. I explained the challenges of working with Mike, CEO of the UK parent company, and my American sales colleague, Ken, 25 years my senior. I learned that he had received illegal payments for 2 years in return for regular orders with a supplier he knew well. When presented with the evidence, Mike gave him an ultimatum to repay the money over an ‘agreed’ time period. It drove Ken to start sharing key information secretly with our main competitor. This was just the start of a catastrophic sequence of events.

From 1991 to 1994 our US business grew from $6 million to $20 million. We were in the right place at the right time with a radical new technology, but we were almost unknown and had to prove ourselves to cautious customers in a traditional, deep-rooted industry. Often this entailed running machinery trials, typically for 6 months, against one or both well-entrenched competitors, Swiss giant Nichtschwäche and German family firm Obenkopf.  

Our technical team in the US became skilled at these trials and we won more than we lost. Orders started to flow and order size increased. This brought new challenges. I had to recruit people; new field technicians, someone to run the stores, and a bookkeeper. The UK factory faced huge growth in demand, not just from the States but from Italy, Turkey and the Far East in particular, which it struggled to meet. As the machinery was relatively new in design and ran at higher speeds and temperatures we encountered manufacturing and operating problems. US customers were very demanding; they expected us to respond immediately to their needs. In many cases our machinery ran round the clock 5-7 days a week. In their minds it must run at the advertised speeds, it must not stop or break down, and it must not produce faults in the woven fabric.

I had people, technical and customer service problems to manage, plus my role as a salesman, and I was responsible for day-to-day aspects of the US business including cash position and financial performance. I had no training or preparation for any of this, and my nearest support was almost 4,000 miles away, though I was lucky to have great relationships back at the parent company where colleagues were supportive in getting problems solved.

My US office manager, Shania, had been with us for several years before I arrived. She was relatively young (late-20s) and thus inexperienced in handling tensions in working relationships. She was committed, driven, well-organised and extremely popular with customers, with whom she flirted (not inappropriately) and had plenty of laughs. She was also insecure, a bit of a control freak and not everyone’s cup of tea. Employees of our Swiss ‘parent’ company GBH, whose building we shared, thought she was overconfident and disliked her. On two occasions a key was scraped along the side of her car in the car park. I liked and respected her and felt she did a good job. However, I constantly had to defend her when Mike came over because he would have 1-1 chats with the Swiss CEO of GBH USA down the corridor and hear all this negative backbiting stuff about Shania. For 3-4 years he wanted me to get rid of her, but I resisted. Eventually I reluctantly agreed to do so because we now needed a more experienced person and a qualified accountant. In late-1995 I replaced her with an excellent lady who remained with the company in the US for several years after it was sold to a Dutch company, Echtding. More of that to come….

Mike did not rate our English technical manager in the US either – Andy. He had moved out to the States before me, taking his family for a new life there. He too was relatively young – early-thirties - had his idiosyncrasies, could also be a control freak, but was extremely popular with customers.

Customers valued our US business culture. It felt like a business family to them – they said so. There was lots of humour. It was deceptively laid back – we worked hard and played hard. This was part of the Southern US culture. However, Mike thought we were unprofessional, too familiar with customers and not commercially aggressive enough. His constant mantra was that I was too trusting of my staff. Ironically the one person he never criticised me for trusting too much, because I didn’t – Ken – turned out to be the NFL Hall of ‘Fame’ superstar for untrustworthiness.

Whilst I fought a rearguard action with Mike over my direct reports Andy and I were in a constant battle to get machines installed on time and running properly, and firefighting customer service problems. These were not just the typical stuff – getting a new part shipped on time, sometimes from the UK if we did not have it in stock in Charlotte, training new people on the shop floor, etc. We also had to carry out large refit programmes in the customer’s textile mill. To do this we either had to use our own technicians in the US or fly people out from the factory in England.

There were some funny stories despite the pressures. For instance, a UK-based technician, Dave from Bradford, strong Yorkshire accent and mentality, spent 8 weeks installing machines down in Southern Alabama in a town called Opp. The joke was that the town was originally called Opportunity, but not enough went on there so they shortened it to Opp. Dave became a local celebrity – like E.T.. Whilst he was there the town held its annual ‘Rattlesnake Rodeo’ – people were permitted to hunt rattlesnakes and shoot them to keep the population down, and of course it was an excuse for much merriment and drinking.  Dave was the guest of honour and officially opened the Rodeo - it was front page news in the local newspaper!

We had two large clients in the town of Abbeville, South Carolina, near the Georgia state line. The year I arrived in the US (1991) the psychological thriller film Sleeping with the Enemy came out, starring Julia Roberts. It was filmed in Abbeville, which was suitably atmospheric – the sort of sleepy American town miles from anywhere in which a woman on the run from an abusive husband would think she could hide safely in obscurity.

The Operations Director at one of our customers in Abbeville, Marty, and I got to know each other well as it was one of the places where we had to replace 1,000s of parts on the machines. The pressure to get this done was intense and our technicians from the US and UK worked round the clock. Marty and I had regular ‘Come to Jesus’ discussions – he wanted me to know that he was counting on me. These high-pressure conversations created a lot of mutual respect – he knew I was busting a gut on his behalf and so was everyone else in our team.

One evening when I was down in Abbeville, 2½ hours from home base in Charlotte, Marty invited me for dinner. The beer flowed, and he told me about his time in the US Navy Seals in the Vietnam War. I will never forget his lurid reenactment of sneaking up on Communist rebels from behind and slitting their throats - I was glad that by then the machinery refitting programme was proceeding well at last….! 

In Part 2 of these memoirs I wrote that our biggest competitor Nichtschwäche decided to try to drive us out of business. One way they did this was to attack us on price, because they had very deep pockets. However, their knockout punch as it eventually transpired was to file a law suit in all key markets, including the US, for infringement of a patent they held on the key mechanical, rather than electronic, aspects of the machine design.

At the heart of our machine was a beautifully simple patented electronic selection mechanism which operated at very high speeds with excellent reliability. This required that mechanical parts of the machine could work reliably for long periods at unprecedented speeds and loads. To solve this problem our designers had come up with a simple mechanical design years earlier. Unfortunately, it proved to be an Achilles heel.

Despite Mike’s assurances we lost the patent case and were compelled to rapidly change the mechanical design of the machines to a much less simple, unproven variant, which had to be retrofitted to all the machines we had sold in the US and elsewhere. This was a nightmare scenario, and to compound it there was a recession in the textile industry.

It became a perfect storm. Suddenly we were struggling for cash on top of everything else. I was convinced the US business would go under on my watch. It was extremely stressful.

Some relief came with the appointment of my friend Ben to replace me. He was Head of Customer Service in the UK – a practical guy committed to fixing problems for customers, with a wonderful sense of humour. He arrived in the US in mid-1995 for a 6 month handover period. Born and bred in North East England, where the local accent is thick, he gave an hilarious description of his efforts to arrange an apartment in Charlotte to live in. The attractive, bejewelled Southern blonde young woman on reception clearly struggled to understand him. In a deep Southern drawl, she said “Now we’re gonna need three sets of references for yer, and they're gonna have to be in English – will that be a problem for yer?” After a few moments in which Ben stared at her in incredulity she said sheepishly “Gee, was that a dumb question?”

Despite Ben’s arrival I was suffering. I’d had over 4 years of sniping from Mike and precious little support, encouragement or recognition. I was still only 32 and this was my first management role. The pressures were huge. It was now increasingly apparent that there was little prospect of a role for me back in the UK due to the company’s desperate situation. I was drained, and fearful about the future of the US business. It felt like a personal failure, even though it was nothing of the sort. Mike began to impress on me the need for cost savings. It was clear that he meant job losses in the US. I had built a handpicked team which had grown from 6 to over 20 people as the company grew. It was agonising telling people I had carefully recruited that there was no job for them anymore. Breaking up my team. One of the most unpleasant experiences of my life.

In October 1995 Mike confirmed there was no job for me back in the UK. His ‘advice’ was that I seek another job in the US. He had recruited Ben to come out from the UK to replace me because he wanted someone to live permanently in the US. This was now bitterly ironic since the future of the business was in jeopardy. My wife and I had a house we loved in North Carolina, great friends, and an enjoyable lifestyle, but our intention was to return to the UK and 10 months after it was decided we were now committed to it. There was to be no financial or other support from the UK company – we were on our own. It took 4 years to sell the house in the US after we moved back to the UK. The costs of all of this were extensive.

By this stage I was burnt out. I had given my all for the US company and was clinically depressed. The second half of 1995 was frightening, disorientating and grim. My wife and I returned to the UK at Christmas and I did not return to the job in the US. Two months later I was made redundant. I felt a massive sense of relief, though my future was uncertain.

The company's rapid decline continued and it was eventually sold to Dutch company Echtding. All manufacturing was transferred from the UK to Holland. Around 400 people in the UK lost their jobs. Ben became General Manager of Echtding USA and is still in that role over 21 years later. Mike moved to Switzerland with his new life partner, an attractive female engineer 25 years his junior from the company’s design department.

For 10-12 years Mike had been a respected business leader in North East England. Both he and the company won numerous awards. To the outside world this guy was a captain of industry. The reality was different. He got many things right, but he got crucial things wrong, and in my judgement that boiled down to his lack of healthy values and ethics, and his consequent attitudes and behaviours towards others.

Mike was born during the Second World War when his father was away on active service. For the first two years of his life he had his mother’s undivided attention.  He told my wife that his father resented him when he returned from the war, so I guess he mistreated him. Mike grew up without siblings and could be socially awkward as a grown man. Perhaps he was autistic in some respects – Asperger’s Syndrome, maybe, since it is often associated with peculiar brilliance? He was certainly sociopathic. Having an adopted son for the last 18 years has given me new insights into the complexities of what may have been going on in his psyche.

I had some good times with Mike. When he was relaxed and in the right mood he could be convivial for short periods. The problem was that you never knew where you stood – he was volatile and unpredictable. Also, he could simply not understand my values. Even if he disagreed with them he could have shown more respect, but he was dismissive. To him, life was all about conquests – business, sporting or sexual – and money. He was intensely competitive and for him the ends justified any means. There was a softer, vulnerable side to him, but he was only ever willing to let women see it. With men he was generally hard as nails, ruthless, and often fearsome.

15 years later, when I first encountered Jim Collins’ research study How The Mighty Fall into catastrophic organisational failure, the five-stage voyage to oblivion which he uncovers resonated acutely:

• Stage One: Hubris Born of Success. Collins uses a definition of the Ancient Greek word hubris from one of his favourite Classics professors: Outrageous arrogance which inflicts suffering on the innocent. Mike suffered relatively little – reputationally perhaps, if that even bothered him, and presumably his accumulated wealth is somewhat less than it would otherwise have been. Meantime close to 400 people lost their livelihoods and a wonderful company was almost entirely destroyed.
• Stage Two: The Undisciplined Pursuit of More. For folk like Mike, no amount of ‘success’ is ever enough. They are oblivious to the impact of their actions on others, they crave ever more, and are irresponsibly drawn to it like moths to a flame.
• Stage Three: Denial of Risk and Peril. These people think they can buck the system. Their level of self-belief and/or drive is such that they fail to heed warnings, accelerating towards the cliff edge. When things start to go seriously wrong they do not pause, take stock and change direction. Those who have backed them, in this case the Swiss firm GBH, fail to recognise or accept the dangers, and therefore don’t act until it is too late.
• Stage Four: Grasping for Salvation. Deep in trouble, these leaders and organisations panic and/or clutch at straws. I well remember Mike reassuring all of us that our lawyers were absolutely certain we would defeat the Nichtschwäche patent action against us. No such luck, sadly.
• Stage Five: Capitulation to Irrelevance or Death. The sale to Echtding. Reflecting on it now, I’ve always assumed that Mike initiated this, but I wonder if it was actually GBH who decided to staunch the financial bleeding and cut their losses, forcing the decision on him. His personality was such that he was more likely to have insisted he could still dig himself and the company out of the trench in which they were now buried.

What happened still lives with me over 20 years later. It convinced me there must be a better way. The quest to find it has been challenging, to say the least, but in the last few years there are signs that I and those on the boat with me are sailing into more interesting waters. There IS a better way, and it is gradually breaking out in all sorts of places. I find there is much to learn from others who are pioneering it, and I keep coming across encouraging examples.

In Part 4 of Leadership the Hard Way I will describe how I started to put the pieces together again after the shattering events of 1995, and how I embarked on what turned into an 8-year odyssey with a UK-based consulting firm which was eventually destined to come to blows in not dissimilar fashion to my relationship with Mike, for not dissimilar reasons. For me business is not worth doing unless it is being done for greater (motivating) purposes, with authentic, uncompromising values and a commitment to striving for excellence. I cannot help it - it's how I am wired. In many ways it has proven to be a curse for me and a threat or source of derision to those who think the purpose of business is purely to make money else.

The quest continues.