August 19, 2017


















The Professor and The Distributor Think about “Restructuring”

Article 1.20

 

The Distributor and the Prof. Questionate “Restructuring”

 

 

Professor Hank Jones was glad that the 2008 academic year was over at Faber College because he was anxious to get to work on his new, over-subscribed, fall course:  “Integrative Thinking for Current Problems”. The course had been advertised as having: “case-based discussions for applying a toolkit of collaborative, thinking strategies”. As an inter-disciplinary program, the cases were to come from an array of departments, but half were coming from the “Entrepreneurial Studies” department because it already had the most cases and students. Since the department’s inception in the fall of 2001, student enrollment had exploded - as it had in all “entrepreneurship” courses at all college campuses - much to the envy of the rest of the liberal arts departments.

 

Both the toolkit and the cases needed a lot of summer work starting with a dinner date that evening with one of Hank’s own, locally-based, Faber room mates, Brian Bannister. Hank had been a long-time, unofficial advisor to Brian, who substantially owned and ran the $150MM-in-sales, Bannister Contractor Supply Company (BCS). Brian, in return, had been helping Hank with the decision-making, thinking-tools and had allowed two semi-disguised case studies to be written on his company by Faber in 2004 on an acquisition and in 2005 on creating an ESOP to buy out feuding family members’ stock.

 

The case development work had been overseen by Andy Stark, the Entrepreneurial Studies department chairman, and whenever Andy taught the cases, Brian and some associates would sit in the back of the class to listen to the discussion. At the end he would share the “real world”, messy view of how businesses really worked and of how imperfect the information was before having to make big decisions. The students loved it, and Brian claimed to get a lot of value out of participating in both the writing and teaching of the cases.

 

Thinking about the dinner agenda, Hank knew that Bannister Supply Company (BSC) was currently in a tough financial spot that would require some hard thinking and tough decisions. The company had increased debt significantly to fund both the acquisition and the family stock buy-out. The financial forecasts, at the time, made both moves seem reasonable, but since then both the housing and commercial construction industries - BSC’s two biggest customer segments - had gone from boom to bust faster than most anyone had imagined.

 

What was BSC’s predicament in June ‘08? The housing industry was still accelerating downward at unprecedented rates; the commercial construction market was softening quickly; the company was in modest violation of a few of its minor bank-loan covenants and the regional bank lender was under increasing financial stress; BSC’s largest supplier, for which it had an increasingly rare geographical exclusive distribution privilege, was grumbling about declining purchases; and latest monthly polls on the economic outlooks for both consumers and small business owners had just hit modern age lows. A number of US industries were in the throes of restructuring, recapitalizing and/or liquidating: commercial and investment banks; airlines; newspapers; auto manufacturers; home builders; specialty retailers; etc. Hank wondered if Brian might want to co-create a third case on the timely topic of “restructuring” for use in the fall course. It wasn’t on this evening’s agenda, and the topic seemed to be a bit more emotionally sensitive than the first two cases, but Hank thought he might slip in the request if appropriate.

 

Well, the dinner went sensationally! Brian, ever the “living-edge, forward thinking, rugged optimist”, had great ideas for refining and testing the thinking toolkit AND creating a third case study as a byproduct. He surprisingly had no ego or disclosure concerns about a case in which he would:

·          Admit the financial leverage mistakes that he made at the top of what - now in hind sight - appeared to be a true bubble in housing construction.

·          Share his on-going corporate story in a semi-disguised fashion, because he had such faith in BSC’s strategic focus and “service-culture, execution ability” that: “my competitors could take an open-book tour of our company and be more confused and flustered because of it”. (He was not, however, inviting any of them over just yet.)

·          Share his sincere emotional pain about having to execute some or all of the lay-offs, cut-backs, downsizing, re-sizing and joint venture merger-spin-off options that were all possibilities for the BCS management team.    

 

Most of the evening session was spent co-creating a working definition of and guidelines for “integrative thinking” that could practically work for Brian’s management team. The tools couldn’t be too abstract; they had to have some concrete, practice applications for the team. Brian’s biggest idea was to use both Hank and Andy as facilitators to teach BCS’s management team about the toolkit and how to apply it to the company’s current restructuring “opportunities” while generating the start of case study #3 as a by-product. The working case title was: “How Should Contractor Supply, Inc. Equitably Re-structure For All Stakeholders?”  

 

Thanks to good preparation, a great, long-term working relationship and a common spirit of “failing forward fast and flexibly”, the intrepid duo came up with the following, first-draft of principles to be further refined and then alpha-tested on BCS’s management team:

 

INTEGRATIVE THINKING: “PRINCIPLES 1.0”:

 

1.      When facing tough problems, no: whining, regrets or scapegoating. Forgive everyone fast for past sins, but, admit the mistakes; learn good lessons; and then redirect all mental energy into positive, creative thinking about the challenges at hand.

2.      A starting definition for “integrative thinking” was the Scott Fitzgerald quote:  “The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. One should, for example, be able to see that things are hopeless yet be determined to make them otherwise.”

3.      A simpler, practical version of the quote is:  don’t accept any “either/or” proposals. Brian was adamant that he was not an “either/or” kind of guy, but rather a believer in turning all “false dichotomies” into creative “and/both” stories in which “third way” solutions could achieve a majority of the most important goals of both choices. He prided himself, for example, on being able to weed losing or resource-trap parts of his business (“cut costs”) to fund or feed (and/both) innovate at what BCS did best in a focused, hi-return way.

4.      The real barriers to better thinking are within each one of us on the team. We will all have to resist the desires to:

a.      Not see the world only through the lens of what will optimize our function within the company. We have often acted like the blind experts who each guessed at what the elephant looked like by only touching one odd part of the animal.    

b.      Not keep all solutions simple, by rounding up the same old facts, (unspoken) assumptions and worn-out, no-advantage, solutions that are usually disguised by superficial modifications and a “we’ll execute better next time” resolution.

c.       Not accept and then make the same false, either/or trade-off decisions that industry-think competitors will typically do.

d.      Not need to be instant experts with fast answers to all problems. Prof. Hank summed this one up by saying: “When we are honest, we all know that our personal realities (or mental models) are crude, flawed approximations for what is really going in a dynamically changing (business) environment. Each of our versions of reality is an illusion, although a persistent one. We all have to be patient learners prepared to see new data and changes without a fixed ideology in order to find ever-better, but never perfect , models for what is going on and what could be.”

5.      But, what went into being a “patient learner”?

a.      We need to look at our problems in the broadest context(s) considering multi-directional and non-linear causal relationships (systems thinking is hard!)

b.      Create a whole-brain team of advisors who can understand our business niche, but also connect us to progressive solutions from other different, but similar business channels. And, introduce us to new vocabulary that allows us to see new information in new ways.

c.       Take a “multiple working hypothesis” approach to our problems which will make things at first complicated and messy, but in time will yield better solutions.

d.      “Questionate-2-innovate” (Q2I) and create a “question map” of new frontiers”.

6.      How to questionate?

a.      Work hard at brainstorming and mind-mapping the problems, but then rephrasing all points into compelling and standalone questions for which we aren’t immediately sure what the best, present answer(s) might be. Don’t bring in experts and expect them to provide instant answers; tell them their job is to leave us with lots of ideas, some new models and compelling questions on which to “ruminate, cogitate and investigate”. New ideas will, otherwise, be ignored by the group-think; if we don’t chew through them repetitiously, we don’t learn them, comfort zone them and ultimately do them. We, instead, go back to doing the past harder like all of our competitors.

b.      Key sub-topics on the question map should be: what are the un-discussable sacred cows or elephants-in-the-corporate-boardroom? What are all of our assumption/belief statements in this format: “We assume “X” for these reasons: “Y, Z, etc.”?

c.       To smoke out invisible assumptions, we might ask: what were past notable initiatives that fizzled? Why? What were the (false) assumptions behind them? If we could do them over, would we? How would we do them differently?

d.      Make no immediate effort to answer the questions remembering that fast answers will preclude better, undiscovered questions and better answers will come with time.

e.      Then, brainstorm on what type of quick, cheap – investigation steps; thought experiments; or practical experiments – might be taken by designated champion(s) (although everyone should think about all questions) to shed more light on each of the questions.

f.        Agree on future dates to re-gather and discuss the questions.

g.      Agree that because truly creative answers and solutions will seem strange to most stakeholders we will have to take time to come up with new vocabulary, mental categories and metaphors that will allow us to collectively “live into” both the questions and the emergent answers.

h.      In summary, Brian stated: “We don’t want fast, simple, makes-sense to everyone answers to our problems, because by the very fact that they make sense to everyone tells us that they are the same old answers to past problems disguised in new superficial modifications that everyone else in the industry will be doing. We want to create our first, question map to wrestle with.”

 

WHAT NEXT?

 

Hank and Brian decided to schedule a BCS management meeting – as quickly as possible, given the challenges at hand – that would be facilitated by both Hank and Andy. It would have two main objectives: 1) walk through “Integrative Thinking Principles 2.0” (assuming some polishing between now and then) illustrating every point with numerous BCS-specific examples which Brian would help to provide. And, 2) have Hank and Andy lead a “Q2I” session which would systematically cross-reference all of the company’s challenges by all of the “2.0 Principles”. The goal was to have no immediate answers, but lots of new questions to immediately start the - ruminate, cogitate and investigate - stage. In parallel, Brian was going to consult with an independent-distribution channel expert whom he knew to solicit out-of-the-channel solutions that were still novel in his contractor supply channel. He might then inject these ideas –in question format – into the discussion.

 

FINAL MUSINGS:

 

Brian was excited about the forthcoming meeting. He was facing the toughest economic downturn with the toughest company issues that he had ever experienced since hitting the workforce in the downturn of ’75. He knew that he needed some next-level solutions with total team and stakeholder (including one key supplier and the bank) buy in. This process had more promise of achieving those objectives than anything else he could think of. He even thought that an annual question map exercise would be valuable in the good times that he knew he and his team would get back to.         

 

Merrifield Consulting Group, Inc., June, 2008, Article 1.20