It's Not Luck (3 page)

“Nope,” I agree. “I’m captured in a real cloud. My objective is to maintain my job. For that I must comply with the board’s resolution, which means that I have to collaborate with the selling of my companies.”

“But on the other hand,” Julie continues, “in order to maintain your job, the job must be there, which means you must do everything to stop the sale of your companies.”

“Exactly.”

“What are you going to do?”

“I don’t know yet. Probably sail with the wind for a while, at least until the situation becomes somewhat clearer,” I say, in a not-too-confident voice.

Julie switches to the sofa near me. “Honey,” she brushes my cheek, “you know what happens when you let bad situations naturally develop.”

Yes, I know. Left to themselves, things go from bad to worse.

I put my arm around her, “We can always live off your income,” I try to avoid the issue.

“Fine with me, but would you be happy about that?”

I kiss her. “You are right. I can’t rely on Granby alone. And there is no point in waiting for developments. I’ll have to find a way to influence them in the right direction.”

3

“This is a bad idea,” I try to shout at Don.

I guess, by reading his lips, that he says, “What?”

It’s useless. These huge printing presses are worse than Dave’s stereo. Monstrous, almost frightening, and the speeds the paper is serpentining through them is disturbing. Look at it for more than a minute or two and you become seasick. At least me. Besides, if you’ve seen one, unless you are a printing press freak, you’ve seen them all.

I grab Don, my assistant, with one hand, Pete, the president of this printing company, with the other, and head for the nearest exit. Out here, where shouts can be heard, I explain to Pete that when I said I wanted to see his operations, I didn’t mean his beloved machines. They will always look the same to me.

“So, what do you want to see?” Pete asks.

“The finished goods warehouse, for example.”

“But there is nothing to see there,” he says. “Haven’t you read my reports?”

“That’s exactly what I want to see with my own eyes,” I reply.

The warehouse is three times as big as the rest of the complex, and twice as tall. The first time I was here, a week after I became the EVP of the diversified group, it was jampacked with all sorts of printed stuff. The first thing that I did was to cancel their appropriation request for another warehouse. Then I went through the long but enjoyable process of teaching Pete and his managers how to run a company without the devastating crutch of mountains of inventory.

“What are you planning to do with this space?” I ask Pete. “Throw parties? Build airplanes?”

“Sell it, I guess,” he laughs. I don’t reply.

“What’s your on-time delivery?” Don asks.

“In the high nineties,” he proudly answers.

“And what was it before you emptied this warehouse?”

“Don’t ask. You know, at that point, none of us really believed Alex—that reducing finished goods would allow us to fill more orders on-time. That was a little bit hard to swallow. But let me take you to where the real change took place, the prep room.”

As we go, Don continues to question Pete on some details. Don is good, and his relentless eagerness to learn guarantees that he’ll become even better. I needed someone to take care of the details. Someone who is good enough to understand not just what I’m doing, but why I’m doing it. It has already been one and a half years since I decided to pinch this bright young engineer who was twiddling his thumbs on Bill Peach’s staff. Good decision; one of my best.

We enter the prep room.

No, it’s not one room, it’s almost an entire floor. It’s quiet. Here is where the real work is done, converting client’s wishes into “art work.” From here, once the client is satisfied, the work goes to the printing presses to be mass produced. At first glance I don’t see anything different, but then I realize that none of the nervousness, the running around, the tense expressions on people’s faces is left.

“No sense of urgency,” I say to Pete.

“Yes,” he smiles. “No sense of urgency, and nevertheless we are now turning around new designs in less than one week. Compare it to the four-weeks plus that was the accepted standard before.”

“This must have an impact on quality, as well,” Don says.

“No doubt,” Pete agrees, “quality in conjunction with lead time is today our strongest suit.”

“Impressive,” I say. “Let’s go back to your office and talk some numbers.”

Pete’s printing company is the smallest company in my group, but it is rapidly turning into a beauty. The huge investment that I put into this company—not in money but in time—to teach Pete and his people has certainly paid off. In one year they have turned from a mediocre printing house into one of the best. And in some aspects, they are the best. But the numbers are not so good. The company is profitable, but just barely.

“Pete,” I ask, even though I know the answer, “how come you are unable to translate your superior abilities—your high performance in delivering on time, your very fast response, and your quality—into higher prices?”

“Yes, isn’t it funny?” he says in a flat tone. “Every client demands shorter lead time and better performance. But when you deliver, they are unwilling to pay higher prices for it. It is as if they take this improved performance as the entry fee for doing business. If you don’t have it, you have a hard time getting business; if you do have it, you still can’t command higher prices.”

“Do you feel pressure to reduce prices?” Don asks.

Pete looks at him. “Yes, definitely. The pressure is immense, and I am afraid that some of my competitors will start to yield to this pressure, which will force us to reduce prices as well. Actually, it has already started. To get the contract for the small cereal boxes, we had to reduce our price by three percent. I sent you a memo about it.

“Yes, you did,” I confirm. “So what will be the impact on this year’s forecast?”

“It’s already factored in,” Pete replies. “But let’s face it, this anticipated reduction in prices has wiped out almost all the impact of our increase in sales. This year we are going to increase our market share, but not our profit.”

“This is a problem,” I say to Pete. “A real problem. What can you do to substantially increase profits?”

“As I see it, there is only one way. Look at the breakdown of the numbers. Our box business is doing very well. The problem is with the candy wrappers. Last year wrapper department sales were twenty million dollars out of a total of sixty million dollars. But this twenty million dollars caused four million dollars in losses. We have to stop the bleeding on that side of the business; it reduced our overall profit to only nine hundred thousand dollars.”

“How do you suggest doing that?” I ask.

“We have to get the high-volume business. Right now almost all our wrapper business is in the low-runners—candies that sell in small quantities. We can’t get the work for the really popular candies, the ones selling in the zillions—that’s where most of the money is.”

“What do you need in order to get those orders?”

“Simple,” he answers, “more advanced equipment.” And he hands me a thick report. “We have surveyed it in depth, and we have a decisive recommendation.”

I flip through the pages for the bottom line number, and find 7.4 million dollars. He is out of his mind. Keeping a straight face, I say, “Pete, don’t ask for any investment.”

“Alex, we cannot compete with our old machines.”

“Old machines? They aren’t even five years old!”

“Technology is moving much faster than in the past. Five years ago they were state-of-the-art. But now I have to compete against companies, most of whom have the new generation. It’s not offset base, it’s rotogravure. Those machines have better resolution in dark colors; they are able to print in silver and gold, which I cannot; they can print on plastic, I can print only on paper. But above all, they are much wider. The width alone gives them three times more output per hour. This difference in output speed gives them a huge advantage when large quantities are concerned.”

I look at him. He does have a point. But it doesn’t matter, not in light of the board’s resolution. I decide to land it on him. In any event, I have to tell all my presidents about it.

“Pete, in the last board meeting the strategy of UniCo turned one hundred and eighty degrees.”

“What do you mean?” he asks.

“The board decided,” I say slowly, “to switch from diversification to concentrating on the core business.”

“So?”

He doesn’t get it. I’ll have to spell it out. “So, they are unwilling to invest even one more cent in our side of the business. Actually, they have decided to sell all the companies in our group.”

“Including me?” he asks.

“Yes, including you.”

He is turning white. “Alex, this is a disaster.”

“Calm down. It’s not a disaster. So you will work for another conglomerate. What’s the difference?”

“Alex, what are you talking about? Don’t you know the printing business? Do you think that any other company will allow me to operate the way that you have taught us? Do you think they’ll allow non-bottlenecks to stay idle from time to time? That they’ll allow us to not build finished goods? At every other printer I know the cost mentality is dominant; we will be forced to reverse everything we have done. Do you know what the results will be then?”

Actually, I do. I know it too well, I have seen it in other places. It is one thing to deliver on-time in only seventy percent of the cases—the clients are used to it and protect themselves accordingly. But if they are spoiled by your delivering constantly in the high nineties and then you drop your performance, you have caught your client off guard, when they are not protected by hefty raw material inventory. They will never forgive you for that. Degrading the performance translates almost immediately into lost clients. This will cause more layoffs, even worse performance, and the company spirals down at an incredible speed.

We are not talking here about finding another job for myself. We are talking about the livelihood of my companies. We are talking about almost two thousand jobs.

We sit quietly for a while. Then I pull myself together and say, “Pete, what can you do to increase profits for this year? Substantially?”

Pete doesn’t answer.

“Well?” I press.

“I don’t know,” he says. “I really don’t know.”

“Pete, let’s face it. Our chance of reversing the board’s resolution is like the chance of a snowflake in hell.”

“And Granby?” he says.

“Yes, Granby might do something about it. But we can’t count on him. Pete, the only way left for us is to increase the profits of your company so that when it is sold, it’s such a gold mine that the new owner will not interfere in your operations.”

“Fat chance,” he mutters, but the color is returning to his face.

“One thing is clear,” Don says, “Pete must stop the bleeding of the wrapper department.”

“Yeah,” Pete agrees. “But if you are unwilling to give me the money, the only way I can do it is by closing down the whole department.” It’s the same everywhere, it is just a matter of scale. At corporate we are talking about closing plants and at the company level we are talking about closing departments. There must be a better way. “No, it won’t do,” Pete says. “It will improve the bottom line, but it won’t turn the company into a gold mine. It will just reduce the possibilities. I don’t see any way out.”

I don’t know what to say. I don’t see it either, but to Pete I say, “Remember what I taught you? There is always a way out. In the last year you and your people have proven it over and over again.”

“Yes,” says Pete, “but on technical issues, on logistical issues. Not on such a problem.”

“Pete, think about it. Use Jonah’s techniques. It will come.” I wish I felt as confident as I sound.

“Until now, I hadn’t realized how devastating the board’s decision is,” Don says when we’re back in the car. “That’s the danger of using common sense, when the entire industry is using common nonsense. Things change above you and you are forced back.”

I don’t answer. I concentrate on finding my way back to the highway. Once we reach it, I say, “Don, you know it’s not just Pete’s problem, it’s ours as well. If Pete’s company is sold for peanuts, the black mark is on us. See, that’s why closing the wrapper department is out of the question.”

After a while, Don says, “I don’t see the connection.”

“On our books these giant printing presses are depreciated over a ten-year period. If we close the department, the value of the presses drops to their selling value, which is relatively nothing. It will further degrade the asset base of the company. Which could mean that we’d get an even lower price. Don, we are captured in a conflict.”

“Yeah, I see. And as you taught me, whenever we face a conflict we should not attempt to avoid it by compromising.” Don opens his briefcase, and takes out his folio. “First step is to precisely verbalize the conflict, then we can find how to break it.” He starts to write the cloud. “The objective is ‘Sell Pete’s company for a good price.’ ”