knowing when to fold

sherwoodonmanagement

Knowing When to FoldLessons learned from hard times: The end ofone chapter

can usher in the beginning ofanother.

(Editor's note: This article is the last in amultipart series that began in the June2008 issueofMetal Finishing.)

Our success in growing from apioneering electroless nickel

(EN) job shop to a contract and pro­prietary manufacturer did not satisfythe needs of the stockbroker whomade the market in our publiclyowned stock. Specifically, he hadsold our stock at unjustified highprices with promises of huge growthfor his customers.

Later, in trying to appease hiscomplaining customers, he tried,unsuccessfully, to pressure me intounnecessary and useless stock splitsand overly optimistic reports to ourshareholders. In a further reluctantresponse to his pressure, I tried,unsuccessfully, to make quantumleaps in growth by acquiring othercompanies. We even had a full-timeemployee working on the acquisi­tion and merger attempts.Unfortunately, it didn't work.

The hype proceeded uncheckeduntil it became ludicrous. At onetime there was even an individualacting, without my authorization,as our public relations representa­tive. It was like a funny Britishmovie. The PR rep had an English­accented captain overseeing a bigyacht in the marina to which hewould invite potential stock buyers.After driving the victims to theyacht in his rented Rolls Royce, hewould entertain prospective buyersin the attempt to sell themChemplate stock.

The next part of his sales cam­paign was to sail from Los Angeles

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to San Francisco where he wouldhave an intense stock sales cam­paign. I, of course, refused toauthorize or support any of theseactions, but they persisted for sometime-resulting in sales that pro­duced more unhappy shareholdersfor me to cope with.

SOMETHING IS ROTTEN IN THESTATE OF CALIFORNIAThe stockbroker's efforts to buildthe stock price then focused on aparticular member of the companyboard, who then joined with thestockbroker in not re-electing mepresident, and further dismissingme as an employee of the company.The broker had convinced theboard member in question that hecould improve the stock price andmake more money by getting rid ofmy conservative attitudes.Moreover, this board member's egowas flattered by all of the attentionand dreams that he could increasethe company's stock price under hismanagement. As the stockbrokerand his shareholders soon learned,to their dismay, this board memberwas never a manager, just a sales­man-type, with most of their stereo­typical inability to organize andmanage.

I will never forget one particularstatement at the board meeting inwhich I learned the shocking newsof my dismissal. When asked whatrole I would play in the company'sfuture, someone said: "None. I hopeyou starve and wind up in thestreet." This was shocking comingfrom a person who, over the years,had never stopped complimenting

me for taking care of their familyfinancially through the companyand outside investments. Basicbusiness truth was that I knew myinternal "Judas" should have beenfired for incompetence many times(a sentiment that was confirmed byan outside consultant), but I resis­ted this temptation out of a feelingofloyalty.

A new president was elected bythe board. The new board includedan outside shareholder loyal to thestockbroker and carrying the proxyvote of many shareholders. One ofthe board's first actions, supportedby lawyers who were brought in toenforce its edicts, was to give me 24hours to get my stuff out. I wasshocked and overwhelmed by all ofthis and packed everything I couldinto my car that night, while undersurveillance of a company employeewho was instructed to not leave meuntil I vacated the premises. Thiscompany employee, who was loyalto me, cried as I left.

It became obvious to me that thiswas a palace revolt, one that had beensecretly planned well in advance.

LAST GASPS BEFORE DEATHAlthough the largest shareholder(39%) in the company, I was in aminority voting position on theboard. I stayed on the board untilthings were being run so terriblythat I didn't want to be associatedwith the imminent destruction.Unfortunately for the sharehold­ers, including myself, the new pres­ident could not manage the compa­ny, and within a year it went intobankruptcy.

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sherwoodonmanagementIronically, the same stockbroker

who was instrumental in causing thedestruction of the company laterasked me to come back as presidentin attempt to save it. I refusedbecause the company debt hadbecome overwhelming during myabsence, and I was advised by taxcounsel that I might be held person­ally liable for it.

ENTER THE LAWYERSThe company hired a big law firmto defend the lawsuit I was forced toinitiate when attempting to obtainmoney owed me from my vestedaccount in the company retirementfund. They churned the suit withunjust attacks on my character,forcing my lawyer to respond. Thecompany probably spent moremoney in defending the suit than Ireceived in obtaining the fullamount claimed. This apparentwaste of effort became so burden­some that the trial judge admon­ished all four lawyers for spendingtoo much time on their unneces­sary claims and my lawyer's manda­tory responses. Finally, I was award­ed the full amount of my claimbased on the fact that the boardhad previously approved it while Iwas still president.

The ultimate in ridiculous legalcosts came when the opposinglawyer was invited to a lunch/confer­ence at an expensive restaurantwhich, as it turned out, was ownedby my lawyer. More humor that con­tributes to the many jokes aboutlawyers: I received a bill for the lunchplus my lawyer's fees at his regularhourly rate.

Much like some scene from a the­atrical comedy, the company lawyerwould attend the board meetingand sneak around in an attempt topeer over my shoulder and look atmy notes. He stopped only after Ibecame angry and protested thathe, and the company, were infring­ing on my privacy. Despite this, thecompany's lawyers persisted intreating me, the company's largest

December 2008 I metalfinishing I 48

shareholder, as an enemy agent.

POST BANKRUPTCYThe company emerged from theChapter 11 bankruptcy with a newname and new owners. It is hard forme to accurately detail the new com­pany that emerged, but I wasinformed that the shareholders,myself included, and most of thecreditors, received nothing. Thereremained large debts to the IRS andthe bank. As it turned out, the newowners had pledged partial paymentto the secured creditors with proper­ty they didn't own.

MY LAST LOOKI had finally suppressed most of myanger and hatred toward the entireepisode when one of the new own­ers asked me, as a consultant, tovisit the site of a subsequent fire atthe new company (suspected to bearson) to determine what was sal­vageable and part of his assets. Thevisit for me was overwhelminglydepressing, like visiting a loved oneat the cemetery. But, on the positiveside, it was truly closure. Chemplateand its Truckmate Division werefinally gone.

RETIREMENT COMES AND GOESAfter my lawsuit against the compa­ny was settled and thoughts aboutthe company disappeared from mylife, (well, almost) I decided toretire. It was supposed to be easy,since I had a comfortable retire­ment fund as a result of earningsfrom the company and investmentsin real estate initiated and managedby my wife, Joan, a grade-schoolteacher, law school graduate, realestate broker, and a creative risktaker. She was a real pro and didwell for us financially. Joan's verymuch appreciated support of meduring this personal business disas­ter has played a role of utmostimportance in my life.

LOOKING TOWARD THE FUTUREMy plan was for my time to be spent

playing my saxophone, sculpting,traveling, and writing professional­ly. I had been continuously writingfor the trade journals and associa­tion newsletters for many years onmanagement and technology sub­jects. The thought was to take thatexperience and become a profes­sional writer. Enrollment at a localcommunity college was easy, inex­pensive, and fruitful. My writingimproved and I starting sendingout articles on broad managementsubjects, such as solving familybusiness problems. I had becomeexperienced in this area.

WRITiNG PROFESSiONALLYWell, the world wasn't ready for me.Every manuscript sent in was reject­ed by publishers on the basis thatmy work "wasn't in their marketingplan." After many rejections andlots of tedious writing, it occurredto me that to become a successfulprofessional writer you had to,guess what, write every day. Thiswas boring and lonely. I neededsomething else and it wasn't toclean out the garage, do homemaintenance, or watch television.

Then there was an epiphany. Oneof my former fellow companyowner/managers called up and said,"Bert, why don't you come and trainmy young son to manage the com­pany? I am a production man, but Ihave seen that you are a skilled andsuccessful manager with the abilityto teach."

BECOMING A CONSULTANTMy initial retirement plan had beeneliminated, and I started a new,exciting career as a full-time con­sultant to owners and managers insurface finishing, finance, andmanufacturing. In addition, Ibecame a trainer for key employeesdesiring to become supervisors. Itwas a whole new world for which Iwas naturally suited. Joining theInstitute of ManagementConsultants was exhilarating andinformative. The members werehelpful and some of the brightest,best educated, articulate, and

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sherwoodonmanagementknowledgeable people I had ever met-in any field. Justbeing with them at the meetings was inspiring and veryeducational.

Starting the consulting business was easy. I hadbecome well known because I had written continuous­ly in publications and made speeches on those subjectsat trade meetings. Then, all it took was unsolicitedreferrals from some of my initial clients that had hiredme after just one phone call. They knew I had foundedand built one of the most successful companies in thebusiness.

In virtually every assignment clients were pleased withthe results. It was interesting to find out that the mostdifficult aspect ofbecoming a successful consultancy wasthat of building a client base. In contrast to most noviceconsultants, it was a snap for me.

THE END OF MY STORY IS STill PENDINGFor 24 years I have been an ethically driven technical,business, and management consultant to more than 95companies in surface finishing, manufacturing, retail,and distribution. My clients have varied in size from thesmallest one with one-and-a-halfemployees to one of the

largest multi-national Japanese companies, whichrequired assistance in locating and meeting the environ­mental and municipal regulations needed for a researchlaboratory.

I've helped a lot of companies and people. And, withrare exceptions, I've enjoyed the people and the work. Imade a few bucks and a lot of friends. There isn't muchelse needed when my business life is combined with agreat wife, two great kids, a great grandchild, and a largeextended family.

Thanks to all my clients and readers for all the oppor­tunities to serve and, most importantly, please keepreading my contributions to Metal Finishing!

BIOBert]. Sherwood, M.S. in Ch.E. isa consultantwho hasprovid­ed business and technical counsel to surface finishingand manu­facturing companies for more than 20years. He can be reachedat sherwoodbj@aol.

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December 2008 I metalfinishing I 49