When Stubborn Becomes Stupid

This is a true story of a business I advised. It illustrates that sometimes being stubborn, an oft-admired trait in the business world, often leads to unexpected and unintended consequences.

The company, a family business, had been around for a number of years, in a mature industry. It had grown big enough to survive economic ups and downs, yet its saving grace was its business model. The company signed long term contracts with clients, who in turn sold to consumers.

When this company became a client of mine, they were doing what I would call “okay” financially, despite having a strong business model.

What were the problems? For starters, it was a family business. Family-owned businesses can be excellent organizations, or very weak ones, depending on if the family members are treated like every other employee or if they were treated differently, simply because of their last name or who they were related to.

609A royal pain

In my opinion, there were a few family members at various levels in the company who believed that the rules did not apply to them, and they did not need to answer to anyone. I would call these people royalty, with a small r.

Sometimes royalty becomes a liability. While this is the case in many companies, it’s seldom spoken about.

Weak managers

The second issue was that several areas of the company were run by weak managers. Finance and accounting were a problem, and despite having more than 50 employees, no one really owned Human Resources. Several departments had people in charge who had been strong solo contributors, but could not manage a team.

Sometimes in companies, loyalty becomes a liability. That means promotions, titles, pay increases and job assignments are given to individuals simply because they have been employed by the company for a long time, not because they’re qualified.

Loyal but unhappy

Third, it was assumed that because very few employees left the company, everyone was happy working there. The truth was different.

While it is true people were loyal, meaning they showed up and did their job, some employees were very unhappy. Most I noticed were disengaged, and they stayed because it was too much trouble to find a new job. And why should they leave when they were never pushed to work harder or deliver better results?

One long term employee did nothing all day long, apparently for years. She was fired when all of the company’s insurance policies were terminated by the carriers for non-payment of premiums. The lady simply stuck envelopes with the invoices into a filing cabinet and never responded to emails or telephone calls. The owner received a frantic phone call from the insurance agency and confronted the employee, then fired her. She got what she really wanted: unemployment checks.

No accountability

There was no real accountability in this company. People went years without any type of appraisal for performance, and raises were essentially non-existent. When raises were given they were meager.

From time to time employees would attempt to make things right in their own minds by stealing from the company. I knew of several that were terminated for stealing from petty cash.

The head of finance, though, was able to embezzle money for years before getting caught. The amount stolen was well into six, possibly seven figures. Whatever his motive was, he certainly had the opportunity to do what he did, because no one checked on him.

Not long after meeting this owner, and after quickly assessing the situation, I provided counsel to him. I advised him to terminate or retire a couple of his relatives, replace the head of finance, and fill a new position, someone to handle human resources, including payroll.

He said he appreciated my advice, which I gave him repeatedly over the years. But despite getting the advice and having to deal with the issues I outlined above, some which weighed on him heavily, he refused to do anything. In the end he said, “It’s my decision and I don’t want to do any of this.”

I can only wonder what will happen to this company when he gets wheeled out of the building with a white sheet covering his body by the folks from the coroner’s office. Because that’s his exit strategy.

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