Helping a New CEO
Late in a recent quarter, the Consultant received a call from a key Board Member of a modestly-sized public Company whose main software products were focused on a relatively narrow niche of end-user engineers. The Board of Directors had recently hired a brand new CEO from outside the Company. The Board desired to leverage some sage assessment and advice from the Consultant, regarding the business directions and alternatives then being contemplated by the fresh chief executive.
Within one week from the Board Member's call, the Consultant had contacted the new CEO and had quickly negotiated a 3-day per week Consultant Agreement spread over one elapsed month.
The next day, the Consultant made the first of what would be three separate airline trips during the first two weeks of the Agreement to the Company's headquarters.
By the end of the first week, the Consultant had not only met with the CEO, but also he had met separately with all the CEO's key executives and important employees.
The Consultant then provided an initial assessment and established his first Strategic Summary, which read in part:
* The Company is faced with an extraordinary and relatively urgent strategic dilemma/opportunity.
* Because of a recent spin off of a very large part of the organization a few months prior, the residual Company had emerged as a relatively small public company in terms of existing revenue and product lines, but still sporting a significantly onerous monthly burn rate and, fortunately, a large cash entry on its balance sheet.
* Unfortunately, existing the Company product lines were unlikely to support sufficient organic revenue growth in the next year or even two, to get the Company to cash breakeven, regardless of any draconian personnel Reduction In Force.
* Moreover, due primarily to disruptions in the Company's personnel ranks caused by not one but two major ownership upheavals during the past 18 months, new versions of the Company's existing core products had been significantly late in their next releases, further jeopardizing these products' already-precarious competitive positions.
* These same disruptions had also played havoc with the continuity of the Company's executive team. Thanks primarily to the efforts of new CEO since his recent appointment, a new Company management structure was beginning to firm up, but several critical slots remained vacant at that moment.
* Hired from outside, the new Sales VP had been on board only about a month; solid company veterans had just then been offered the key slots of VP Biz Dev and VP R&D, respectively; and a permanent VP Marketing and a Director of Marketing, as well as a new, permanent CFO, all still need to be recruited and hired.
* It remained for the CEO to complete the team and concurrently meld these new executives into a coordinated whole along with one or two previous company officers.
* Thousands of miles of geographic disconnection between significant portions of the Company brought added pressure, both in terms of spotty remote software development management as well as current executive team members' physical separation, travel and impending relocations.
The new CEO had just begun the "geographic consolidation process", and there were still many other steps and details yet to be sorted out before this major situation could be fully stabilized:
* Issues also had previously plagued even the Company's non-core products, such as low resources and lateness. Customer usage of a previous product via ASP access had not gone well. No BETA SITE for an upcoming important product release had as yet been identified. And so on.
* Residual gaps in Company day-to-day infrastructure also remained as nuisances, such as the inordinate effort required by the new CEO to prepare even simple materials for Board meetings, for the SEC, and for financial analyst conferences that should have been done by others. No overall Company expense budget existed; assorted network issues were abundant; a holdover salary-bonus program of questionable origin had to be revamped; the HR function required a big upgrade; excessive & expensive office space in remote offices had to be jettisoned; inefficient space utilization in headquarters had to be fixed; and there was urgent need to execute flawlessly the then-planned heavy RIF.
* Of course since the Company was public, everything was open and visible to constant scrutiny by investors, analysts, assorted newsletter pundits and most importantly, competition. Because of the pressure on the Company, the Board of Directors had been meeting monthly and phone consultations were occurring far more frequently between the new CEO and certain BOD members, adding to the CEO's personal burden.
Actions Recommended and Execution begun:
During week number two of the Consultant's tenure, the CEO and the Consultant worked closely together and developed a multi-pronged series of projects and programs to begin immediately to address the Company's strategic and tactical dilemmas/opportunities.
These included but were not limited to the following:
* Negotiating an agreement with an overseas software firm, to shore up the product functionality, keeping the Company fresh in its niche.
* Investigating the possible purchase of non-traditional software technology from a recently-defunct start up.
* Considering the possibility of acquiring a separate existing company called ABC in a related but non-traditional niche (good revenue stream, but incurring losses).
* Renewing past dialogue between the Company and a far larger 3rd party rival regarding some sort of future merger.
* Carefully re-reviewing the aforementioned previous plans for an internal RIF.
* Carefully re-reviewing the ongoing executive management team restructuring.
* Hiring two (2) search firms for remaining key officers' executive recruiting.
* Bringing in a new HR person, and hiring an interim CFO.
* Engaging several other outside business consultants.
Key Challenges:
Not surprisingly, many strategic and tactical challenges surrounded most of these action plans. Here were some of them, as viewed by the Consultant:
* The need to first, or at least simultaneously, coalesce a seamless overarching vision and philosophy for the "Company of the future", in which the Company's old and new people, old and prospective acquired products, previous and new customers, et al, can, from today's starting point, become motivated to achieve mid-term business success and increased shareholder value.
* The overseas software would not come cheap; also there was the matter of predicted unit/revenue volume and the previous contractual royalty floor guarantees committed by the previous CEO.
* On first glance, re the possible purchase of non-traditional software technology, the Consultant felt that the software technical status & market niche strength were questionable; all employees save one were gone; the fresh cost to the Company to properly staff, complete a fresh product and launch, was unknown but far from insignificant; the spokesman-to-date for the non- traditional technology seemed somewhat intransigent; and due diligence was hampered by the conflict of interest with past investors.
* The whole ABC acquisition opportunity was then virtually unknown to Company management, mostly because of its very recent surprise introduction to the Company by a set of minority shareholders of ABC acting on their own without either the approval or even knowledge of the current ABC management.
* A combination of the Company with its larger rival appeared interesting to the Consultant, owing to (a) the rival's size and to the complementary status of each other's current products; (b) the complementary vendor support; and (c) complementary markets. A merged entity would arguably form a formidable juggernaut in the served market space, compared to competition worldwide. However, it would likely take substantial ingenuity to construct a near-term financial scenario that would appeal to both parties' shareholders & employees.
* Company product releases remained late and the products still contained weaknesses in certain functionality vs. independent competition. In addition, the development team has been remote from HQ, possibly understaffed, and possessed no "knowledge transition/integration plan". Unfortunately, these products were the only products that today offered real hope of major short-term organic revenue creation.
* Worse, analysis of the current quarter's likely results revealed that Company salespeople would miss their revenue forecasts by wide margins. The root causes of the revenue shortfalls and fresh future forecasts would not be known until at least after the Sales Meeting to be held the following week (The Consultant would subsequently attend the whole Sales Meeting!).
* The number of salespeople remaining on board was low; management confidence in their collective ability was not high; and there were fears that the then-current general economic slowdown would in any case dampen bookings in the next 2 to 3 quarters, all else being equal.
* The Company's overall sales strategy was yet to be articulated (direct, VARs, partners, productivity per person, geographic coverage, sales personnel quality & quantity, role of professional services, etc.).
* Finally, having seen the relatively-weak initial outline of the CEO's then-current thought process several weeks before the Consultant was hired, the Company's Board of Directors had requested CEO to present a compelling and far-more-detailed strategic vision at the next Board Meeting, only 4 weeks distant. This implied having a first pass of a whole new BOD pitch only two weeks after the hiring of the Consultant at the latest.
To correspond to the Action Items being undertaken, and to overcome the Key Challenges faced by the Company, the Consultant sketched out a suggested Calendar of Events for the subsequent several weeks on the CEO's white board during his next 1:1 meeting with CEO.
The Results:
Thanks to focused and dedicated efforts and cooperation, all tasks were carried out on time.
The Consultant attended the Sales Meeting and met all the sales and support people from the worldwide organization. Thereafter, he summarized the meeting and made several hard hitting recommendations regarding people, products, responsibility changes, new thrusts, and other related fixes.
The deal for the overseas software was completed.
The Consultant further researched the non-traditional technology purchase and strongly urged its consummation. In addition, the Consultant interviewed a principal player from the defunct entity that originally developed the technology, and urged that he be hired by the Company. The Company did so and also consummated the technology purchase.
The Consultant executed further due diligence on the possible ABC acquisition and strongly suggested that it be removed from consideration. It was.
The Consultant established a dialogue with the Company's larger rival and set the stage for further discussions after the next Board Meeting.
The Consultant assisted in the recruiting and hiring of a Director of Marketing and identified candidates for VP Marketing. The Director of Marketing was so good that she was promoted to VP Marketing within 4 weeks.
Finally, the Consultant developed an entirely new PowerPoint Pitch for the CEO to present to the Board of Directors at its next meeting. These new slides summarized the historical and present situation, documented the recent steps taken, merged all the previous actions and results, and established a new, more robust product vision which can uniquely re-position and strategically distance the Company from its rivals.
The entirety of the above, was all completed in one (rather hectic) month.
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