Published On: Thu, Jul 12th, 2018

Black Friday

Black Friday

This is the story of Black Friday at the paper company. Some years ago, I was hired to do a turnaround of a paper manufacturer. The company manufactured one product, hanging file folders. The business was over 90 years old. The management team purchased the company two years before I started the engagement. The CFO and nine other senior managers each invested $500,000. They borrowed $5,000,000 from the bank and bought the business from the family for $10,000,000 who owned the company for nine decades.

The company’s sales and profits for the prior five years were very consistent until the most recent three years. The year the management team purchased the company, the business made a profit of $2,000,000. The next year the company broke even, and the year I was hired, the business was trending towards losing $2,000,000 on $90,000,000 sales revenue.

Before I accepted the engagement, I researched the company and the paper manufacturing industry. I did a year by year comparison of the last three years financial statements. Sales were flat, the cost of sales and gross profit were pretty consistent for the three years. The whole problem with the negative trending results for the prior two years was all due to operating expenses, mostly payroll.

I accepted the engagement, and the first thing that I planned to do was interview the management team.

I asked the President if he had a formal chart of organization. He handed me a sheet of paper that listed him on top with eleven “C” level managers reporting to him. I could not believe my eyes.

Over the next week, I spent most of my time meeting and interviewing the eleven senior managers and their direct reports. I am a firm believer in a “flat” chart of organization. That means a single level of the management team reporting to the President.

This company had a:

  1. Vice President of Sales,
  2. VP of Manufacturing,
  3. Vice President of Engineering and Safety,
  4. VP of Technical and Quality,
  5. VP of Finance,
  6. CFO,
  7. Corporate Controller,
  8. VP of Information Systems,
  9. Vice President of Research and Development,
  10. VP of Legal Administration, and
  11. Vice President of Procurement.

There were too many “Chiefs” in this company with big salaries and not enough Indians. During the third week of the engagement on a Friday, I terminated 9 of the 11 senior executives. We called the day “Black Friday!” Payroll was reduced by $1,600,000. I revised the chart of organization to have three executives reporting to the President: the CFO, VP of Manufacturing and VP of Sales. I eliminated all the positions of the individuals terminated. We did not hire anyone replacing any after Black Friday. There were only director level positions reporting to the three Vice Presidents in the future.

The year of the turnaround, the company reversed the trend of losing $2,000,000 and instead made a profit of $900,000. The following year, the company earned $2,500,000, the largest annual profit in the history of the business.

I learned a lesson from this turnaround. A small, flat organization management team is much better than employing the “dirty dozen” like this company! It is less expensive and easier to manage.

Please read some of my other articles on how to improve your business: Employees, Your Company’s Greatest Asset and Keep Your Friends Close and Your … Banker, Closer!

Robert “Bob” Curry has turned around more than 70 businesses, both large corporations, and small businesses. He comes to your place of business or the site of your choice. The first consultation, of course, is at no charge. Bob Curry has a stellar track record of professional success and excellent formal education, including Masters Degrees in Taxation.

Bob published his first book “From Red to Black – A Business Turnaround – The Matter of ABC Shutters” that is on sale at Amazon.com.

Please read all my blogs at Fortlauderdaleceo.com.

See the website Redtoblackbooks.com.

If you would like to comment on this article, my email address is Bob@ceorsc.com.

About the Author

- Robert S. Curry is an author, seasoned business coach, and successful turnaround specialist. Earlier in his career, he served as President and CEO of three different companies, the largest with annual sales of more than $1 billion dollars - all which experienced successful turnarounds under his management. In the late 1990s, he started his turnaround consulting firm, and for the past twenty years, he has turned around more than seventy distressed companies in many different industries helping each to establish a strong management team and become profitable. He published his first book: From Red to Black – A Business Turnaround – The Matter of ABC Shutters. He resides in Fort Lauderdale, Florida, with his wife, Esther.

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