I’m watching a company die. The name may carry on but all that made that company is dead. It may have carried on a little after its founder died but all that company once was is now buried with him.
I wrote this over 18 months ago. I just ran into one of the last survivors at this company and got a pretty complete update.
The company I wrote of is now dead. The name has been changed and all it once stood for is gone. It has moved into beautiful new offices, formalizing the change.
The new owners focus on image over substance and it shows. Sales are down substantially, to levels seen years ago.
The company’s founder would be horrified. His children walked away with a fortune but then they never really had to work. They really didn’t seem to care about the company or its employees. They could have made provisions for those employees if they did care.
Few of the employees that made the old company such a success remain and none of those hold any real power. Every Friday the staff sweats out the day, wondering if any more cuts are going to be made. Severance packages are getting slimmer and meaner. All of the original employees that remain have already had their salaries cut — substantially. Most of few remaining are there only to finish out their years until 65. Overall ‘morale’ is……. well, ‘ok’ for new hires but nonexistent for older employees — even those there for only a year. Those let go are universally glad to be gone — even if still unemployed. The place was making people sick — literally.
When privately held the company did not have to ‘make numbers’ and could weather slumps and invest money to boost sales. That’s how they first built that product. The old company suffered losses for two years before the brand caught on. No more. If sales are down you have to make up the money elsewhere. Cut another person. Cut expenses somewhere.
Absurdly though, the new owners are spending money in ways that make NO sense. An additional office location has been proposed that will bring with it huge tax liabilities in a new venue — tax costs that far exceed the cost of those offices.
The new CEO seems to be a bit nervous. With sales down, not even holding stady, he is unlikely to make the goals set in his contract. But then maybe he never expected to or cared. He is being well paid but his wife never moved here — he still has a house halfway across the country. Some people take on whatever jobs they can get at whatever salary they can get until the world realizes just how limited their skill set is. Chainsaw Al Dunlap comes to mind. Or maybe he was hired simply to cut to the bone before new talent was brought in when his contract expired.
The parent company — a European one — clearly does not understand the US market. They were told by the previous management that the concepts they were pushing had either been tried and failed or, given previous efforts and knowledge of the market, were unlikely to succeed. Expensively produced advertising has left many wondering ‘What is this supposed to mean?’ — having no link to the product’s past and no clear message. Attempting to redefine a product rarely succeeds — more often those moves destroy an existing customer base. But when a customer can’t even tell what message is being sent…...
The ultimate irony is that the previous company — under the founder and its old staff — MADE the brand in question. The product held a minor niche in a small market and frankly, didn’t leave much of an impression on anyone. The old company and original staff created a whole new niche for this brand and growth was explosive. They created a model and marketing approach used worldwide by the parent company. Their advertising campaigns were inexpensive but iconic and had made huge impacts. The old company introduced new and innovative marketing approaches using on site promotions and completely new ways of selling the product. They manufactured new equipment that expanded sales even further. The parent company copied all these efforts in other markets world wide — expanding sales in those markets.
But the parent company was greedy. They raised prices higher than their customer base was willing to pay — higher than upcoming competitors. Facing plateauing sales and increased competition, they did not listen to the advice given by those who created the market for this product.
So — to boost profits the parent company decided to ‘cut out the middleman’. They thought they could do better.
They haven’t.
Oh… and by the way……...an interesting postscript
The old company had represented a number of different products. They had only recently taken on a new one just before being bought out. Seeking to focus on their product alone — the new owner divested all other products in effect turning the old company into teh US subsidiary of the European parent.
This new product, on the market for only a short time had been growing rapidly and had enormous potential. They left reluctantly and decided that rather than find another representative, they would directly handle sales of their own brand — something they did not originally want to do, the very reason they sought out the old company. A few people from the old company went to work directly for this brand.
Less than 2 years later, that brand was just bought out by a far larger company — their small cadre of employees will be going with the brand. The price raised eyebrows in the industry -it was astounding.
Had the new owners kept that brand in house (with only a nominal cost as it was being handled by existing channels and personnel) they would have shared in those profits when the brand was sold. As is they simply ‘let it go’ for inventory costs and incurred expenses.
The new owners could have recouped a large proportion of their purchase price by sharing in the sale of this one brand. In effect the new European owners bought a bathtub holding a few babies. They got rid of the babies and kept the bathwater.
It turns out one of the babies was royalty and heir to a kingdom. This company deserves to be a business school case study in how NOT to do things.
The original posting:
Sadly the story is not unusual.
I’m talking a business founded and made by one man. He had others with him but he was the core of that business. He was not perfect, but he built a business, kept it going through lean times and died a wealthy man.
He believed that you got rich by letting others get rich with you. He believed that you let others make more dealing with you than they’d get in dealing with someone else. Sharing profits and opportunities built business. This company made its owner wealthy beyond a level most could ever anticipate. Much of that wealth was given away. Some of that largesse was shared with its employees while the owner was alive. He thought that employees made a company a success or failure — he demanded much of those he employed but rewarded them for their efforts. When times were lean he sold off personal assets to make payroll instead of cutting staff. And when times were flush, he shared the company’s success with his employees — earning loyalty and dedication rarely seen in any company. His employees felt secure in their jobs. The owner was never going to sell the company and structured things for the company to survive and prosper after his death. He intended that the company he founded would serve as his memorial.
The founder expected that his company would live on and the employees there would have jobs for as long as they wished to stay. Most expected to end their working careers there. Few ever left willingly and it took major transgressions for you to be let go. The owner even employed a few old friends who had helped him in the past, who’d fallen on hard times when other companies let them go.
His employees were well paid — and didn’t have to face ‘caps’ on salary simply because they’d been there ‘too long’ or were now ‘above their pay grade’. This was one of the few places I’ve seen where salaries actually seemed to keep up with (and even exceed) the REAL rate of inflation. If you did good work, you were compensated appropriately (better than you would have been elsewhere). But make no mistake — you earned what you were paid. All worked hard and willingly. It was not unusual to see cars in the parking lot well into the evening at certain times of the year when the workload was heaviest. Nobody ‘coasted’ along believing they had some type of sinecure (all too common an attitude in some corporate and most government jobs — been there, seen that first hand).
The owner took risks and gave people jobs whose resume may have lacked the required ‘expertise’ but he was a shrewd judge of talent. Rarely did any of his choices disappoint him. Most performed far beyond expectations. People may have been paid well but more work was done with fewer people. The company benefited. He profited.
The founder never expected his company to be sold and believed that he had provided for his employees by making sure his company survived his death. He could not foresee of any circumstances that would compel any sale — though apparently, he was wrong. I expect that he is (as the phrase goes) turning in his grave. His company was his legacy. He would not want his name on what remains.
The model in play is all too common. Those that inherited the company (who never had to work a day in their lives) found it easier to sell a company than run it. Even the meager demands of being board members took too much of their time (their employees ran the company on a day to day basis as they had before the founder died). His heirs felt no obligation to continue what their father started — though he intended his company to be a ‘living memorial’ and went to great lengths to insure its continued operation.
This is not unusual. It is happening all over to many companies. In most sales where a larger company buys a smaller one, this is the norm. A small company built by a driven founder and motivated employees grows and prospers. The founder dies — or sells out — and new owners cut costs and everything changes. Corporate buy-outs and industry ‘consolidations’ are not unusual. Former management is booted, the number of employees is reduced and the remaining staff squeezed to ‘work harder.’ ‘Economies of scale’ drive many such acquisitions. But those ‘economies’ always come from come from cutting staff and increasing workloads.
In high tech, this is common. Companies are built with the express intent of being sold. At least there the key employees are sure to be taken care of. They share in the proceeds.
His heirs sold the company saying that it would be the best way for the company to survive. They say they had no choice. They say they thought they were ‘protecting employees’ when the company was sold — that they expected that all working there would remain employed.
Many long term employees — with 30-40 years of service — are finding themselves out of work. They were ‘overpaid’ despite handling more than most in similar positions and despite working most of their lives to build this company. The lucky ones retired. A few went elsewhere when parts of the business were spun off by the new owners. But not all were so lucky. Some of those that helped build this company — some of the key people in this company now find themselves unemployed. They are being joined by more and more people as time passes. New owners are cutting staff — before even understanding how the company functions. Those who worked so hard for the founder are being told they are overpaid and to expect salary reductions. All are having to take on more responsibilities and work to cover for those let go. Given how hard everyone worked before, it’s not clear just how people can take on even more work.
The irony is that the new owners talk of buying this company for its talent. They specifically stated that they would NOT be letting staff go. They claimed that they wanted a company with motivated employees that care. The new owners claimed that they WANTED the experience that was in place.
They bought a company that was all they claimed they wanted but killed it. This was a company people would give their lives for. They worked hard and were proud of what they accomplished. Now those that are left just want to find a way out.
The founder never anticipated that his company would be sold — indeed his stated intent was for it to remain in place for its clients and employees and he structured things to make sure of that. Not foreseeing any future sale, he made no provisions to protect those who helped him build the company. He thought his employees would have jobs for as long as there was a company, and HIS company wasn’t going anywhere. He was wrong.
A bloodbath has ensued.
I’m reminded of ‘The Godfather’ —
‘It’s just business. Nothing personal.’
Well, to most, losing your job after 30 or 40 years, after working hard to build a company, IS ‘personal’.
A lucky few could retire. some executives and staff went elsewhere when parts of the business were sold off by the new owners.
The executives that remained were told that the new owners wanted their knowledge and expertise, that they were valued. They were told that they ‘would always have a job’. That lasted a few months — long enough I expect for the new owners to feel comfortable with their acquisition.
Now, no members of the management team that built that company remain. The real irony is that the new owners are making mistakes that would have been avoided had the old management been retained. Some lessons were learned the hard way years back but other mistakes being made are out of sheer hubris — thinking you know more than those that have done something for years.
Without replacements on hand for those who are now gone, work is not being done. It matters little that the new owners really had no idea of how the current systems worked — all was to be new. They know better than those that were so successful for 40 years.
Previously proactive with a focus for getting work done, employees now make sure to get approval from above. ‘CYA’ mode is in place. But too often they didn’t know just WHO was ‘above’. The new owners have shifted departments and responsibilities and nobody is quite sure who does what. The new owners wanted new senior executives but have not filled all of those slots yet (and even if they had, those executives would be in for a steep learning curve with no predecessor to guide them).
The new CEO brought in has an interesting history — meteoric rises and then unexplained departures. One has to wonder about the latter aspect of his career. But then he’s in a difficult spot. He’s expected to ‘improve’ things on a very short time line. Perhaps that explains HIS career. Look good in the immediate short term but as time progresses, the ‘short cuts’ taken begin to show…..
It’s easy to show short term ‘improvements’ by slashing costs. You can eliminating ‘highly paid’ positions and hire cheaper — albeit inexperienced — new staff. You can increase sales short term with ‘channel stuffing’ via promotions and other gimmicks. But such short term ‘improvements’ only hurt a company in the long run.
There are plenty of examples. But somehow those that play such games end up getting hired over and over again — continuing the same pattern. I’ve seen that first hand too.
Of course the best — those that CAN leave in such a situation, do so as soon as they can. And the first to leave are often those a company most depends on. Those that remain feel they too will be let go, no matter what, so they begin to change their habits. They too focus on finding a new job — first and foremost.
Those now out of work are now paying a high price for their loyalty.
One company? …... For 30 years?
A 50 year will not have an easy time in this market. Ironically those spending 30 years in one company fare WORSE. People who change jobs regularly have more experience doing so — but are ironically seen as more capable and competent. After all, they COULD change jobs. Never mind that those who put in those 30 years worked their way up the ladder, most filling a range of positions and possessing a wide range of skills. That is one of he reasons the company was so successful.
Sadly, a company that people once loved to work for is disappearing, its employees thrown adrift directly against the wishes of their founder. A company that someone worked so hard to build exists now in name only, with all its values and the things that made it so special gone.
Those who sold the company did not found it or build it. They feel no compulsion or responsibility for the people that did. The heirs that inherited have more money than any person could rationally spend in a lifetime and received even MORE money for the sale, while those that actually worked to build that company have been cast off.
The founder — if forced to sell — would have shared the proceeds (at least in part) with those he employed. Nobody would be worrying. Those nearing retirement would have been taken care of instead of having to look for employment late in life. Those who were younger would have had enough of a cushion to make sure they had enough time to find another job. But instead a few — who were already wealthy, who had nothing to worry about and who never will have to worry about finances - have gotten even richer while those that helped make them wealthy are worried about their futures.
But… It’s just business. Dollars and cents.
’Business’ has no legal or (it would seem) moral obligations. It’s all about the ‘bottom line’ and how to make MORE money. And the focus is all on the short term — at the expense of the future. That is another aspect of all this that is counter to the founder’s philosophy. He built for the LONG TERM and invested for the future. He avoided short term gimmicks.
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A disclaimer. I do not work for this company and never have. But I know many of its employees — some quite well. I’ve dealt with many for decades. They are among the most talented people I’ve ever met. Many of those people are now unemployed. It’s unlikely they will get another job at the same compensation level — a fact they accept. But it may prove difficult for some to find ANY job in this quickly sinking economy where whole industries are contracting and putting more employees on the street instead of adding to staff. They deserved better but then they are not alone. I know employees at one of the TBTF banks who are training their replacements from India right now. I guess that’s how the CEO manages a 50% salary increase. Truth is that NOBODY I know feels safe and secure anymore. And THAT is the simplest explanation for a ‘stagnant’ economy. You cannot FORCE people to spend money they don’t have. No matter how much you lie about employment numbers the truth is that close to 1 in 4 people are unemployed and many of those that are working are earning far less than they once did.