CEO National Coaching Register  - Case Histories - Profits

These are abbreviated conversations - from some hours of discussion - to illustrate key decision moments. Based on real cases with changed detail to preserve confidentiality

1. “HQ don’t mind the loss doubling”.

The recently appointed MD tells the coach he wants a new job ‘health check’.  Since his appointment one year ago, the revenue loss of £500k pa had doubled to a £1m and was headed for £2m.  The MD mentions 15 initiatives that could improve the situation but he was not doing them  ‘Because they’re tough decisions and “Head Office have said they are in for the long game and it doesn’t matter about the short term losses”

The coach said to him “Was your Head Office informant – who said it doesn’t matter about increasing losses -  responsible for a profit making division himself”

 The MD thought for a moment, then went white and said “Oh my God, it was my friend, the Call Centre Manager, who said he saw all the country sales activity.   I was clutching at straws.”

Coach:  If you are on the global board and looking at the UK trading, what would you say?

Client, slowly and with realisation: “If I were on that board I would say ‘If the best thing the new  MD can do is to double losses, then anyone can do better than that’”.  He looked at the coach.  “I’m going to get fired aren’t I?  I would fire me if I was on that board”

Coach:  “You have told me 15 things you could do that could actually turn the loss round.  Do you want to talk about them now? 

Six months later the MD had taken all the steps and turned the loss that had been headed for £2m to £1m pa profit.  He reported that his international board had commended him for the best turnaround results of 12 countries.

2. “Fire first, then take aim”.

The 32 year old Divisional MD said “The UK CEO has been rocketed by the the international group CEO  because profit has dropped to £1m from the budgeted £2.1m and is likely to go to £800k in the next six months.  The Group CEO says my division must cut 100 people off the payroll ‘tomorrow’.  I could do that but I have said he must follow the correct procedure and do all this in a professional manner.  That will take 3 – 4 months to give the right notice and consultation.  He and I have had a major bust-up over this and I am refusing to budge my position.

Coach. What do you think the UK CEO's position is with the board  if profits are reducing fast?

Client:  “He is close to being fired in my view”.

Coach:  If he were running your division, what would he do now?

Client:  “What he always does.  Fire first and then take aim.  He would lay off 100 people tomorrow and then deal with the fall-out as it unwound”..

Coach:  What would be the fall-out? 

Client:  “Well, it would be completely unprofessional and the workforce would be in uproar that proper notice wasn’t being given. And we would have to pay 90 days redundancy in lieu of notice. That’s £750k!”..

Coach:  So the fallout of the CEO's action would be that it would cost the company an extra 90 days redundancy pay in lieu of notice which would be £750k extra?

Client: “Yes …. Well no actually …. We have to pay 90 days redundancy either way …..I would need 3/4 months for proper consultation and to give people the chance to voluntarily take the package.  Then we would lay off the 100 people.  That would be the professional way of doing it. 

Coach. So what would the professional way of doing it  cost the company?

Client hesitates in thought …..:  “It would cost about £900k in wages for the four months of the consultation period……….  “

Looks thoughtful, hesitates and continues:  Then we would pay them the normal 90 days redundancy, which would be another £750k.  ………….mmmmmmmmmmm…..

Thinks silently for about a minute  mmmmmmmmmmmmmmmmmmm…………  “Yes I see what my boss means.  It would cost £900k more to do it my way, which is about half the annual profit we were going to make.  He didn’t tell it to me like that.  I see what he means now”.

The MD gave notice to 100 employees the next day and told his boss he had done so.  His boss said “That saved you getting fired 10 minutes before I did.  I have told the board we have done it and we are still hanging in!”

3. "We can’t close Switzerland because they only buy from Swiss people".

The young MD was trying to cut losses and had identified that Switzerland's  £1m pa sales were costing £1.2m in overheads.  The Swiss factory, distribution centre and call centre were costing £600k pa. 

MD:  “We could easily manufacture in UK and export the goods to Switzerland. That would save £300k pa nett. But if we closed down Switzerland we would lose all the sales because they will only buy from Swiss people.

Coach:  How do the Swiss buy products?

MD:  “By phone and website”.

The coach remained silent,  The MD sits quietly thinking.  Then realisation shows on his face ..

He whispers excitedly “The customers never see our plant so they wouldn’t know if we had one anyway!  If we close down the Swiss factory and distribution centre, the customers would never know!  That would save at least £300k nett.  But now I think of it, we could close down the call centre which would save another £100k.  That has always been over-manned and we could have four people doing in UK that who were Swiss speaking.

He looked up excitedly at the coach “That’s just turned a £200k loss to a £200k profit hasn’t it?”

4. " Keeping our staff is more important than a £2m short term loss”.

The CEO was aged 32 and the son of the owner of a family business.  He ran it with a free hand and had to report results quarterly to his father who lived abroad.

“The business has taken a downturn and a £500k profit will be a £2m loss this year.  My father will go crazy and I don’t know what to do.  He would never agree to me laying off any of the staff who have been with us for years but he will go crazy when he hears we are losing that amount of money.  I just do not know what to do, because I believe keeping our staff is more important than a short term loss'”.

Coach:  Suppose you do nothing.  What will happen then?

Client::  “By the time I see father, we will have lost £1.4m and it will be too late to stop it making £2m loss in this trading year.  We will be on our maximum overdraft and I already have the bank round my neck.  Father will want to know why I have let it go and not done anything about it.  When he left to live abroad, the business was making over £1m a year and he saw that as his pension.

The coach remained silent.

Client:   Everyone says I should move production to Taiwan and lay off our production division.  That would save £500k pa.  I can also outsource design and packing to the Far East which would save another £250k.  I could also cut the HQ to about five staff instead of 30, and that would take us into profit.  Then if the market picks up, we would be back to a pretty good profit again.  ……….  But that would mean laying off nearly all the staff and they have all been with us so long I just can’t do that. 

Coach:  If you don’t take that action, what do you think is likely to happen to the business?

Client, speaks hesitantly “If I don’t do something, we will go bust before I see father.  ……………  But I just can’t do it.  It’s not fair on the staff.  ………..

Coach:  What other choices do you have then?

Client, speaks hesitantly and sighs “I don’t have any choice, do I?  I have just been trying to avoid the tough decision and actually making it worse.  I have just got to go ahead and do it haven’t I? “

He looks expectantly at the coach.

Coach:  This has to be your decision. So what are you going to do? 

Client:  “Talking about it like this has made it clear.  I have been trying to please everyone, the staff and my father and all the family.  I have just made it worse and if I don’t move now, everyone will lose their jobs and the business will go bust.  I don’t have any choice, I have just got to get on with it. Move production to Asia and close down UK. It’s the only choice” 

Four months later the son saw the coach before meeting the father.  “I took all the steps we discussed and moved production out to the Far East, laying off all but five staff.  I got out of the UK premises and we now have a £250k pa profit coming through.  I have won new contracts that with the new margins will make another £400k profit in a full year.  I told my father on the phone all the steps I had taken and why.  He never even queried me laying off the people, which had been a real worry for me and just said ‘Well done, I’m proud of you!’  I can’t wait to see him.”

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