I’ve seen some pretty scary hiring mistakes.  Here is an example in which “The Emperor Had No Clothes.”

In the 1990′s, I became  Interim CEO of a  company that was experiencing the worst production problems I had ever seen.  The company had hired a new Director of Materials Management.  He had been referred by a management team member who had worked with him elsewhere, and his references from former employers were excellent.  Everyone told me–and seemed to believe–that this guy was a genius.  During meetings, he typed on his own notebook computer (fairly unusual at that time), looked impressive,  and made “pronouncements.”

I, however, couldn’t understand a thing the guy was saying (plus, of course, materials management  was still totally out-of-control.).  I said to myself, “I have an MBA, am pretty darned bright, and  have run more than 10  companies.  If I can’t understand him, maybe he isn’t saying anything.  Something is wrong.”

HR had checked his references, but I asked them to contact the universities listed on his resume to verify his degrees.  Surprise, surprise:  this fellow had lied on his resume and had no college degree.   Needless to say, that was the end of his employment with the company.  (The company, by the way, was successfully turned around.)

The question in my mind remains:  Why in the world hadn’t someone else called his bluff?  (A question to be explored in a future blog..)

At least three of Renee’s Rules™ apply:

• If you can’t understand what someone is saying, he may not be saying anything.
• Too often, people are afraid to speak out when they think something is wrong.
• Check references thoroughly.

Click here to go to the new contest page we created so we could add an entry form and a graph showing what people have predicted so far. Good luck!

When is it “safer” to hire a “big” professional firm rather than a smaller one?  This is a topic I’ll be exploring in several different posts.  For the moment, here is an instructional story. (The names and some details have been withheld to protect the guilty.)

Some time ago, a principal from PE (private equity) Firm A, with investments across the country, called me to take the place of the CFO they had hired because he was a consultant with a national (“big”) consulting firm.  Why was the PE firm replacing him?  When the portfolio company’s lender conducted its audit, guess what they found?  The “F” word: Fraud.  (I did not accept this engagement for a variety of reasons I’ll discuss in a later post.)

Several months later, PE Firm B interviewed me for a turnaround in an industry in which I had successfully turned around more than one company.  Did they hire me? No.  Why did they pick someone else?

• He’s from a national firm, so that’s “safer.”
• He has industry “experience.”
• We know him.

Here is what I know about this person:

• He IS a consultant with a national firm.
• He was involved with a company but definitely did not lead a successful turnaround in the “industry.”
• He was the person who was removed by PE Firm A because bank fraud occurred while he was CFO.  (Evidently, PE Firm B didn’t really “know” him.)

I also know that the company was not, in fact, successfully turned around.

Let me be clear:  There are some times that a bigger firm really IS safer; nonetheless, there are many lessons to be drawn from the above story.  Stay tuned for further posts.

In the meantime, remember these Renee’s Rules™:

• When hiring, RESULTS are more important than “experience.”

• Always check references.

• There is no substitute for common sense.
  

I have been shocked by the number of companies I’ve met recently that have been placed on COD or credit hold by their vendors but have not put any of their own, troubled customers on COD or credit hold.

Whether you are the CEO of a company, a law firm, or an accounting firm: Stop selling to customers who can’t or won’t be able to pay.  There is no way to overemphasize this point.  When a company is faced with declining revenues and profits, uncollectible accounts receivable make the situation worse and—in extreme cases—can be the tipping point that causes the company’s demise.

Today, it is absolutely not safe to assume that customers who have always paid on time will be able to pay on time—or, for that matter, at all, so review your credit policies and procedures and define carefully

1. Who can have credit?
2. Who can authorize credit, and what are the guidelines?
3. How does the company verify current credit worthiness of customers?
4. Who is responsible for monitoring timeliness of accounts receivable collections?
5. What are the company’s collections policies; e.g.,
   • What steps does the company take when payments are late?
   • At what point is a customer put on COD or credit hold?

I will provide additional information about sound credit policies in a future blog post.  In the meantime, another Renee’s Rule™ applies: “The sooner, the better.”

Too often, people make hiring decisions based upon “experience” rather than “results.” A true story illustrates my point.

Several years ago, at the beginning of what ended up being a very successful turnaround project, the CEO told me, “We have a new CFO who has experience in turnarounds.”    (I’ll call the CFO “Jill,” to protect her real identity.)

“Oh?” I said, “What kind of experience?”

To make a long story short, Jill had been CFO at company A, and it went out of business.  Then, she went to company B, and it went out of business.

During my tenure in this extremely troubled company, it soon became apparent that although Jill talked a good game (and, indeed, sounded very impressive!), she was simply unable to make needed changes.  She fancied herself a turnaround expert but was absolutely unable to fulfill even her most important job function; i.e., producing timely, accurate financial statements.   I replaced her with someone who could.

Not long ago, I read about a company that expected to have to shut down if it could not get additional financing very soon.  Guess who had recently been a financial officer for that company?

The companies that hired Jill undoubtedly made “experience” their key criterion.  Instead, they should have asked about and verified what RESULTS she had actually achieved.

Please note: Although Jill, who marketed herself as someone who could turnaround a company, was neither capable of doing that nor able to accomplish basic accounting functions,  there are many extremely capable CFO’s who have found themselves in distressed companies through no fault of their own.  I have had the pleasure of working with some of them.

Renee’s Rule™ – When hiring, RESULTS are more important than “experience.”