“I don’t
understand. I am hitting all of my performance targets that you agreed to
during my last review. The board approved my compensation package based on
those targets.”
“Are you
really coming at me with that? We are losing five-million dollars a month.
What do you expect me to do?”
“What sort
of severance package will I be getting?”
“The board
will finalize my recommendation before the end of the week.”
A Few Days Earlier
Horatio
Daniel Collins, who went by H.D. for obvious reasons, had been appointed the CEO
of LiTek-Hawley Pharmaceuticals almost
three months ago now and Firing his VP of operations was the toughest decision
he had made so far. He had no experience in manufacturing or operations in
general. H.D. had worked at three different pharmaceutical companies and in many
different roles, but they were all in either sales or marketing. In-fact,
LiTek’s board specifically selected him to drive sales in the organization
based on his track record in other companies. Many people will not make the
decision that he made because he didn’t have a candidate identified to take
over the operations function. Even worse, the VP of operations had convinced
the board of directors that the problems were not related to operations. It was
a clever ruse played on the board for many, many years.
H.D.
admitted that R&D had been slipping and when the patents ran out on four
key drugs that LiTek held, the profitability went into a death spiral. The
intellectual property was masking the lack of operational effectiveness.
Pharmaceuticals
is certainly not the business where you can miss customer expectations, so the
VP of operations set up agreements with third party manufacturing and
distribution centers to bridge the gaps and save money, so he stated.
“H.D., are
you sure about this? Drake is well respected among the operations community.”
“Absolutely,
I honestly don’t know what’s going on in the operations part of the
organization yet, but in the two months that I’ve been here all I get from him
are rosy stories while are profit continues to drop as sales increase and we
continue to lose more and more margin due to the toll manufacturer picking up
our slack.”
Another
board member quipped, “It looks like to me that our losses are right in line
with the downturn.”
A third
board member said, “But our competitors are making more and more money. You all
know that I used to be a consultant. The first question we would ask on an
engagement is: Are the results unique to this company? Our industry is not
suffering; this is absolutely an internal problem.
“So if you
do let Drake go, what is your plan?”
“Well… I
don’t exactly have one yet.” H.D. said begrudgingly.
“How are
we supposed to make this decision then?” another one chimed in.
“I know
what you are saying. I have been to all of the sites. There seem to be good
people in place. I have used my intuition my entire career and its rarely let
me down. I am definitely sure about this. I think we would be better off with
no leader than a bad one. I will formulate a plan and get back to the board in
two weeks after Drake’s termination is effective.”
“Are you
worried about intellectual property or any best practices he could take with
him to another firm?
“Not so
much” H.D. quipped, “If we had best practices the company would be making
money!”
The senior
board member, Tom D’Agostino, said, “We hired you because we trusted your
success and prior track record. I think this is a risky move, but not taking
any action is also risky. We are losing too much money to try and nudge this in
the right direction. Just remember, firing Drake isn’t going to fix the
problem. It could, however, stop the bleeding. We also need you to
formulate an aggressive strategy for recovery.
Leadership Learnings: If you chose not
to decide, you still have made a choice.
~Rush
I have seen, first-hand, that delaying
the decision as long as possible is a good strategy in most cases; however, not
acting when a decision is necessary will alienate your team while causing your
organization to fail simultaneously.
“I
understand and agree.” H.D. responded.
The board
meeting adjourned and H.D. couldn’t have been happier. He had his assistant,
Staci, set up a meeting with Drake for later on that week. His brain started
playing Ping-Pong with the decision he made to terminate an thirty-plus-year
operations veteran with a previously stellar track record. After going back and
forth in his head for about half an hour and through the entirety of the flight
attendant’s safety lecture, H.D. kicked back in his chair for some much needed
sleep.
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