The Blindside

At the request of a TEC member, I met recently with a former business owner. Dave, the former owner, had run a successful business for nearly 30 years. He was now a former owner because he was “blindsided” over the last two.

Dave’s company was forced into bankruptcy after a series of bad decisions. One or two of these decisions might not have been fatal. A string of poor decisions, however, ended with tremendous personal loss in terms of the number of lives affected. These poor choices would have been caught by an astute mentor, a trusted advisor, an advisory board or a TEC group. Someone needed to cover Dave’s blindside like Joe Theismann needed a Michael Oher.

As the story played out, the series of some of the questionable decisions looked like this…

- Dave decided to expand aggressively heading into the downturn in the business cycle. TEC members had been advised by TEC Resource Specialists such as Brian Beaulieu to plan on a recession in 2007. The macro-economic outlook was clear, according to economist Beaulieu, three years in advance of the actual recession. TEC members prepared in advance.

- Not only did Dave take on substantial debt to finance the ill-timed expansion, he added significant fixed costs that were difficult to shed when the downturn became apparent. The balance sheet was now leveraged for the first time in years and the company was hemorrhaging cash, when hording cash was the order of the day. Once again, TEC members were being advised of the exact opposite strategy heading into the recession.

- Dave decided to change banks. Typically not the end of the world. But in this case, the change in lenders appears to have been made without appropriate due diligence. Perhaps the regulators became more inquisistive. But when sales and profits began to deteriorate, the new bank grew increasingly nervous…and aggressive.

- The new bank told Dave it would be better if he would agree to a personal loan guarantee for the preciously unsecured debt arrangement. Dave eventually agreed, even though he had significant personal assets available at the time. No TEC group on the planet would have allowed this to happen. Ever.

The end of the business story is the bank called the loan, liquidated the business and took substantially all of Dave’s personal assets to cover the personal loan guarantee. The end of the personal story is that after running a nice successful business for almost three decades, Dave was left with, quite literally, nothing. Furthermore, this basically good (business) man ended up dazed, confused and embarrassed. And it didn't have to be.

If you are running a business, the question is…”Who has your blindside?”

Retreat or Attack?

At a recent TEC meeting, a Resource Specialist from California suggested members dial back on their BHAGs to reflect the poor economic environment. Our speaker reasoned that scaling back the Big Hairy Audacious Goal was a first step to a more realistic assessment of vision, mission and strategy to account for certain “new economy” realities. He figured people in the organization needed to be reassured with sometime more "doable."

The TEC group pushed back. Pushed back on our West Coast friend rather hard, actually. Our members had scaled back in advance of the downturn in the business cycle – some as far back as 2007. They cleaned up their balance sheets, reducing debt and accumulating cash. Most members were making more money with less revenue, thanks to aggressive cost reduction programs that were in place heading into 2008 and reaping benefits through 2010.

Now, the TEC group reasoned, was the time to recalibrate on the upside, taking advantage of their relative strength vis-à-vis competition and potential new market and product opportunities. Now was the time to attack.

Let’s just let the poor schlemiel who had just limped through the downturn and exhausted his cash resources play defense now – or just go away, they agreed. This TEC group knew it was time to re-emphasize the strategic planning process. They had become “operationally excellence” oriented over the past few years. It was now time to shift to a higher gear with new strategy in light of the new playing field. It was time to attack.

Moreover, the members of this TEC group agreed that the people in the organization needed to know that the leadership of the company had a plan…to grow. It was time for leaders to lead.