CEOs and Divorce

I have a couple of divorces going on now. Over the years, it seemed to me that I had a divorce going on with at least one of my members at any given point in time. With three TEC groups and 45 members in total, one might expect some “normal” percentage of member marriages to be headed for the rocks.

I wondered, however, if CEOs were more likely to experience failed marriages. The stress of the job. The time commitment. The travel. The temptations. Might they all add up to a higher percentage of divorce among CEOs?

An informal survey of my colleagues, however, revealed no evidence to support the proposition. It was, by and large, the position of other TEC chairs that CEOs were no more or less likely to have a marriage end in divorce. It also appeared that a fair number of CEOs remained in unhappy marriages. This would be similar, I suspect, to the married population as a whole.

There was, however, one common thread among CEOs of privately held companies whose marriages had failed. It was the almost desperate need on the part of the CEO to “keep the company.”

When it came to splitting assets and negotiating marital property settlements, the desire of the CEO to retain his or her company appeared almost as strong as child custody rights. In many cases, CEOs seemingly ignored the valuation of the company and the recommendations their advisors. In the end, they wanted to keep the company. It was, after all, their baby.

The implications? Good divorce attorneys on both sides probably are well aware of the save-the-company phenomenon. It is certainly healthy for the CEO to recognize this financially irrational desire. With the supercharged emotion of a divorce, rational thinking has been known, sometimes, to take the back seat.

Competent legal advice and strategy can help. Trusted advisors, like the peers in a TEC group, can assist. In the end, however, it is the CEO in the divorce who must come to terms with the reality of a fair marital property settlement and the need to keep the company. The evidence suggests that even in divorce, reality always wins.

Williston

Several TEC members have been making money in Williston. Some are participating as subcontract suppliers to tier one vendors who are already there. Other TEC member firms are (literally) on the ground, building roads and providing staffing services. Still others are working on waste water treatment alternatives for the process known as "fracking."

An impressive example of a TEC member firm who anticipated the boom in Williston, is an old line, made in America, metal fabricating and manufacturing company located in a suburb of Milwaukee. Through a rigorous strategic planning process, the company identified specific energy related markets as opportunities that took advantage of their strengths. They calculated they could shore up their identified weaknesses, apply some resources in terms of people and money and enter a new market. This piece of the strategic planning process was initiated in 2007. It was tweaked every year along the way.

In hindsight, it looks easy. Identify your strengths and weaknesses. See the opportunities and threats. Apply some resource. Voila. Williston.

Not exactly. It took the commitment of the CEO to spend real money on the planning process, when everyone else in the company was "too busy to plan." A recession was looming. Time to hunker down. Well, yes and no.

By definition, the strategic planning process is taking the organization "out there" somewhere. When management is doing strategic work, there are no immediate results to give the leadership team feedback relative to the intended course of direction. It is, a leap of faith. A belief that the process will save the day. It requires courage. It requires leadership.

The alternatives? Most organizations end up slogging it out with a plethora of competitors...known and unknown. They fight for market share. They offer lower and lower prices to compete. They commoditize their products and services. They don't make much money.

Call it a Blue Ocean or Williston. "Out there," there are new markets. "Out there," there is more than enough to go around.

Inspiration on 27th Street

TEC 33 member, Gary Wenzel, hosted a meeting of TEC 31 recently. TEC 31 is a new group going through the forming, storming and norming process. I asked Gary to host the meeting at his company to give the members of this new TEC group a glimpse of "the possible."

Gary Wenzel is president of Capitol Stampings Company. The plant is located at 27th Street and North Avenue in Milwaukee. Gary was part of an ownership group that purchased Capitol Stampings out of receivership in 2005. The plant was originally constructed by Steeltech in 1990. Steeltech went bust in 1999.

Capitol Stampings currently employs 85 full time workers. Most of the workers are from the neighborhood. The workers earn a family supporting wage. They have decent benefits. Their jobs, based on performance, are reasonably secure.

When Gary arrived in 2005, customers were rejecting 7000 Parts Per Million. Not good if you are trying to earn more work from existing or new customers. The people at Capitol Stampings worked to reduce bad parts to the current 500 PPM. 500 PPM is world class and low enough to garner an audience with some highly desirable OEM customers. More business followed.

How did this happen? Gary explained several cultural shifts that occurred over the years at Capitol Stampings. They needed African Americans to work with Hispanics to work with Caucasians. The new management team set clear performance expectations. They started treating all employees fairly and impartially. They terminated some people who were unable to align with the new culture. The leadership team was consistent. And, they persisted when the inevitable challenges might have pushed them off course.

The "new management team" was comprised of several people from the outside, like Mike Krajna, Ron Zeronis and Scott Wise. It also included several people from the inside, like Dan Hewitt and John Willmering. Gary worked to find the right seats on the bus for this blend of the right people.

The members of TEC 31 were inspired by the blend of new technology; new and old equipment; and people....people who energized this factory on 27th and North. The place was rocking. They were making money. And, they were accomplishing a mission that had more to do with reviving a neighborhood than anyone who wasn't part of it could hope to understand.

The Capitol Stampings story can be an inspiration to all of us who believe that business is one of the keys to creating "the possible." Well done to Gary Wenzel, his leadership team and the people of Capitol Stampings who are accomplishing this in-process transformation.

Lawrence E. Johnson

I met Larry Johnson in the mid-70's. He was recruited by a small, family owned company as part of a transition to a professional management team. I worked in inside sales at the time. I was part of the home grown talent, which meant I had very little exposure to the tools and ways of a professional manager.

Larry was with Honeywell prior to joining our firm. He was part of their avionics group at the time, yet came to our low tech, high energy firm. Some years later, I asked him why he joined a relatively small company in Milwaukee when he could have gone almost anywhere in the corporate world. He said it felt better to be a "bigger fish in a smaller pond." And, it worked.

Larry and the others he recruited to join the company helped turn a nice little, profitable company into a very attractive, highly profitable company. The company was eventually acquired by Reliance Electric. Reliance was a $1.5 billion publicly traded company headquartered in Cleveland. We had become a really professionally managed organization by then.

After the the Reliance deal, Larry became president of our still relatively small company. I left in 1980 to join a firm involved in mergers and acquisitions. Larry left a few years later to head up another nice little, privately owned firm in Watertown. He helped that firm grow, as well. The firm was eventually sold, at a handsome multiple of EBITDA, I suspect.

Larry then became president of the Kelly Company in Milwaukee. After a period of time, he bought the company, bringing several of his senior managers along for the ride. He sold the company in 1999.

Just before the deal closed, Larry was diagnosed with Parkinson's Disease. A while later, he came up with prostate cancer. My friend, who had made a lot of money for other people, finally had some real money of his own. He knew the quality of his life would never be the same.

I became Larry's brother-in-law when I married Larry's wife's sister. We all travelled together. Played golf. Ate really well. Went fishing. We talked about business. We talked about life.

Larry died on Saturday, October 22nd.

I have been using Larry's "professional management training" throughout my career and, perhaps most importantly, for the past 16 years of my TEC life. My members have heard Larry Johnson speaking to them along the way. His legacy will live well beyond what he might have imagined when he came to Milwaukee from Minneapolis 35 years ago. It lives on in all of us.

Armed & Dangerous

I settled in to prepare for a meeting of TEC 44 last month. I intended to review the issues the group's members wanted to bring to the table and other agenda items that needed to be covered during our meeting.

As I got ready, I noted a flurry of e-mails suggesting the group had taken control of the agenda. Two members sent written copies of their "issues" to the group. One member advised he was ill and unable to attend. Two others sent their "accountabilities" from the prior meeting. Everyone sent their Z-Factor Score. I was left with very little to do.

At the TEC meeting the next day the members of TEC 44 continued to take control of the process. The group introduced a new accountability protocol. The members worked a remarkably difficult issue without much intervention from the chair. They remained after the meeting ended to discuss what they had experienced during the day.

TEC 44 had become "Armed & Dangerous." Armed & Dangerous is a concept developed by TEC Resource Specialist, Don Schmincke. Schmincke segmented TEC groups into three categories of health. The least effective segment, the "Seminar Club," almost totally relied on the leader to create value. An improvement was the "Shared Destiny" group which took a modicum of responsibility for its own performance, but continued to rely on the chair to provide value. According to Schmincke, the Armed & Dangerous group was the highest performing group, taking full responsibility for group health and effectiveness.

In addition to TEC groups, Don Schmincke's concept of group behavior applies to management teams and groups of all forms. If you are interested in an outline from Don Schmincke on how to create teams that are "Armed & Dangerous," please let me know. From a group leader's perspective, it is way less work and way more productive.

This Feeling Ain't Right

Something happened in June. Then, it happened again in July. As the months are closed and the financial statements printed, almost all of my TEC members are reporting that something weird is going on. And, it isn't good.

Some members say orders softened unexpectedly. Some noted a decrease in their backlogs. Some saw raw material costs increase to unforeseen levels, eroding relatively healthy profit margins. Others told me they felt uncomfortable with what was going on "out there." They were suddenly queasy. Even the TEC members who were able to maintain margins said things just didn't feel right. It was hard to explain.

Most of these CEOs began contemplating corrective action. Put a hold on that equipment purchase for a while. Want to hire two people? Get by with one for now. This is also about the time most TEC chairs start asking TEC members about Plan B. That is, a business plan that allows the company to make money with 20% less revenue. After the last recession, numerous TEC members reported that having a Plan B saved them from decision making in crisis. They knew what to cut, who to lay off and what to stop doing...in advance.

The current uncertainty feels somehow different than the financial meltdown of 2008. This uncertainty has led a few members to construct a Plan B1. That is, what do we need to do to take advantage of a 20% premium, above plan, in revenue. Competitors may be paralyzed into non-action. Market share may be there for the taking. The Balance Sheet gets particularly important here.

This is no esoteric exercise. It is a highly desirable time to create Plan B, at least until that ugly feeling goes away. It is also, however, an opportune time to create Plan B1. Others may miss the opportunity created by the uncertainty.

Corporate Retreat

I participated in three TEC meeting retreats with different TEC groups over the past three weeks. Each was an overnight meeting at a very nice resort. The members participating in the retreats knew each other to varying degrees. While the intended purpose of each retreat was similar, the actual outcome varied from group to group.

One group secured the services of a noted outside facilitator. The agenda for this retreat was chocked full of group exercises. Pre-meeting homework was required of the participants. There was little down time. The TEC members in attendance got what they expected. Plenty of action. But not much of a retreat.

I was the facilitator for the second meeting. The agenda was a bit more flexible. To be sure, this TEC group worked for the day and a half we were together. But there was sufficient "white space" during the meeting for unplanned and unstructured member interaction. An optional group activity - trap shooting - at the conclusion of the meeting, added a semi-competitive, fun event for participating members.

Once again, I facilitated the third meeting. This meeting had several new TEC members in attendance. Our group activity - a canoe trip down the Wisconsin River - was planned for the afternoon of the first day of the retreat. It was not optional and created a unique environment to get to know people that dinner at a fine restaurant could simply not allow. Again, members worked during parts of the retreat, but the bonding opportunity was the key to the success of the event.

Members of each group reported different degrees of satisfaction with their group retreats. The first group reported "too much stuff" on the agenda. The evening dinner for this group included a "working dinner" with a facilitated team building exercise. The fun meter was on low for this group. They got what they bargained for, but didn't totally appreciate the result.

Group number two was better. But again, I allowed the agenda to become too crowded and was unable to get to everything that needed to be discussed. A special follow up meeting needed to be scheduled to address a member issue that was omitted from the proceedings.

The third group got it about right. They worked. Had some fun. They got to know each other better on a beautiful sunny afternoon floating down the river. This group reported the highest member satisfaction with the event overall.

Webster's defines a retreat as "a period of group withdrawal for prayer, meditation, study and instruction under a director." The corporate retreat is indeed good for the soul. The lesson learned here is to build in sufficient time for people to get know each other as people.