Monday, May 11, 2009

a Message for Business Leaders from Al Walsh

People Run Businesses - For Good or Bad

People run businesses. Great teams can make a business hum, and flawed ones can wreak havoc. Recently I wrote an article in which I discussed the horrors experienced at one company when managers failed to properly review and understand contracts they were committing to. Another favorite story involves a defense contract at an aerospace firm.

I was asked by a former employer to return as consultant and review an old multi-year defense contract (from before my time), that had been a financial disaster, to determine if we had cause for a claim against the government.
To boil the story down:
The contract involved designing & manufacturing "strap-on" sub-systems for fighter aircraft. The government kicked off the debacle by providing out-of-date aircraft specs & drawings. Engineering designed to the government specs, then Manufacturing built prototypes and tested them; realizing in the process that they didn't work on the physical aircraft. Here's where things really started to break down. The Engineering & Manufacturing Managers (both canned by this point in time) hated each others' guts, and their staffs followed suit. Rather than revisit the flawed drawings & specs with Engineering, or try to determine what had gone wrong, Manufacturing just altered the drawings to suit the actual physical aircraft specs. The government then received product that worked, but drawings (the original Engineering designs) that didn't match. Engineering didn't know about the design problem so they had no hint that the original government aircraft specs were out of date or that their drawings had been altered.
Matters were further complicated by the reaction of the government contract overseer who, rather than try to get to the root of the problem, just shut down manufacturing for two months; at great expense to the company. The situation was even further complicated by the refusal of the Engineering & Manufacturing managers (and their staffs) to talk to each other.

There were even more complications to this sordid story, involving contract revisions, that I won't bore you with. I don't recall the specific circumstances as to how the dilemma was finally resolved, but at some point the CEO forced the Engineering & Manufacturing managers together and performed some "head-banging" to get to the bottom of things.

We were ultimately able to build a successful case for additional compensation based upon the government's initial delivery of outdated aircraft specs (turning a loss to a profit); but we sure had an awkward moment explaining the rest of the story.

There were other horror stories associated with this company. When I came in, they were in such horrible financial shape that crisis Turnaround measures were necessary. I was brought in because the Board was starting to get a glimmer of recognition that they had people problems, but the full extent took some time to uncover - including fraud by the former President; which was uncovered after his sudden death.

People run businesses, and they are fallible.
Despite great expenditures of time & money on systems, processes, and controls - ultimately people are the prime driver of a company's success or failure. I can recite other horror stories that I've encountered over the years. In the above case, the managers involved were technically competent, but emotionally immature; despite the fact that they were both in their early 50s.
Are your company's people giving you the value that you need?
Has your management team been carefully chosen? Do they work together?
If you're a management team member, are you part of the problem or part of the solution?
I'll let you draw your own conclusions from here.

Al Walsh, CEO
Walsh Enterprises, Business Advisors
Huntington Beach, Ca

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