The Chairman: Wharton B. School addresses an analysts’ meeting (1994)
(Willy Sellmore: At our sales meetings, we often used puppet, “Willy Sellmore,” on screen, as the sales force spokesman. Willy raised questions and issues with management that individual sales people might be reluctant to do. Willy was played by writer, humorist, puppeteer Joe Vuotto.)
Note to Staff: The following letter is being sent from the Chairman’s office to all I.D.M. shareholders of record as of the start of the previous fiscal quarter. It is intended to address the shareholders’ and financial community’s concerns about the company’s recent reports regarding profitability and continuing viability. Please insure that all employees receive copies at home and see it posted on all headquarter’s bulletin boards. -HR
To: All Shareholders, Employees, Analysts, and Friends of I.D.M., Inc.
From: Wharton B. School, Chairman, BA, MBA, CPA, Ph.D, MDC*
Subject: Quarter 4, Year-to-Date, Operating Results Analysis
The company’s recent quarterly performance was not up to your Chairman’s expectations. Specifics will be announced in due course, but the root causes of this shortfall are well known to the business and investment communities. They include the economic crisis in Greece and Italy, the continuing inroads made by the European Common Market, the strength of the Euro, uncertainties in Iran and North Korea, the counterfeiting of U.S. One Hundred Dollar bills in China, and the world wide concerns about unrest in the Middle East, the co-called Global Warning scares perpetrated by the Media, and El Nino. The issue of the American economy speaks for itself.
The company has responded to these challenges by reorganizing the headquarters function and managing several mid-level executives out of the business for performance related issues.
The Chairman will not address the critics and other alarmists who suggested that his alleged quarterly bonus (publicly reported at $75 million but, in actuality, significantly less) contributed to the profit shortfall. The bonus was earned in accordance with the Executive Compensation Plan approved by your Board of Directors and on file and accessible to the public at our Nome, Alaska office during normal business hours.
Our focus now is on a return to profitability, and to that end we have reorganized ourselves for what we shall call “The Challenge of the New Millennium.” Your Chairman’s background in Human Resources and Finance has given him a unique perspective in developing a powerful, staff-centric, centralized operation. An organization with the support, control, and metrics necessary to call the corporate tune to which the line organizations will dance. We believe that the flexibility and dynamics of the New Millennium Third Generational Functional Mobility plan will enable the company to return to profitable within a forecastable time frame.
In addition, the Executive Compensation Plan has been reworked to help focus your Chairman’s attention on the work at hand. Retention bonuses have been paid to guard against the Chairman’s untimely departure before this important work has been concluded.
The Chairman believes that our future success lies in the continuing down sizing of our customer base to allow corporate focus on the key accounts responsible for the bulk of our revenues. A small group of corporate loyalists is obviously to our greater good than a larger mosaic of clients, each of whom may want something different.
Our Corporate Mission Statement: “To achieve results for our Founders, Principles, Key Executives, Shareholders, and Employees” was never truer than it is today.
A few illustrative examples of this new approach will be helpful:
1. The Research and Development Department now reports to Freight and Traffic. This new group, captained by the Chairman’s long time administrative aide, will encourage our engineers to design all new products to fit standard size cartons and containers to realize the great savings possible in the costly Packaging and Preservation areas.
2. The World-Wide Sales & Marketing Organization will now report to Human Resources. This new organization, led by another trusted and talented corporate loyalist, will recognize the attractive and personable people of Sales & Marketing by establishing a corporate cosmetic standard which will be administered within Human Resources, which your Chairman directed for the first ten years of his employment with the company.
The current corporate sales theme (“Sell Below Cost and Make it Up in Volume”) came to us directly from the Human Resources Think Tank.
3. Manufacturing and Customer Services will now report to Finance. Quality Control is Number One, at I.D.M. and Quality must be controlled, or it becomes very costly. Hence the involvement of our Finance Staff in these two important functions.
We have identified the party who altered the Quality slogan on our website to read: “The Quality Goes In, Before the Name Falls Off.” This person will be dealt with to the full extent of the law.
The Customer Services function has been expanded to include prompt payment scripts and account status reports to be reviewed with the calling customer. Service contracts will be offered to customers having repeat problems, as we firmly believe that in every problem there resides a revenue opportunity.
With changes such as these, we firmly believe that our Millennium Program, similar in many guises to that of Apple, Google, and Berkshire Hathaway, will likewise result in significant financial gains for the corporation in the intermediate and long term time frames.
At this point, the Chairman took questions from the floor:
1. Reporter: You allude to a huge loss. Exactly how “huge” will that loss be?
The Chairman: At my level, I don’t keep those details at my finger tips. Check the website in the near future.
2. Reporter: There are many references to your, and the Board’s, compensation plans, retention bonuses, deferred compensation, stock plans, expenses, and perks. Exactly how much did you receive this year-to-date, from all corporate sources?
The Chairman: We like to say we’re a public company, run by private persons. The matter of my personal income should not be the subject of public discussion among gentlemen. However, I will say that without my own, and the Board’s, involvement, the losses would have been far greater than what we see today.
3. Reporter: The people who left the firm were not on the decision making level. They were mid-level managers who had little to say about corporate strategy. How does firing them resolve anything?
The Chairman: These people were on the tactical level and, as you know, tactics is the implementation of strategy. In that sense, they were at fault. Rest assured, I feel some responsibility for not having supervised them more closely. However, I am, as my staff constantly advises me, “only one man.”
4. Reporter: How exactly will you reduce expenses without cutting your executive compensation?
The Chairman: We will shortly announce a rigorous cost cutting program. which will touch areas like annual employee increases, employee expense reimbursement, the employee outing, holiday party, corporate giving, and additional layers of travel approval for all non-executive staff.
In addition, several of our busiest Board members have agreed to accept consultant contracts, and to tour our facilities around the world searching out opportunities for potential cost savings.
5. Reporter: You mention your Board members. I see from their resumes that they share with you long term relations dating from school days right up through your current private club memberships. Do you see any conflict of interest here?
The Chairman: No.
6.Reporter: It was reported on a television investigative program, that over the past year you have spent nearly $25 million on vacation homes, boats, and sports cars How can you justify such personal expenses in light of your current and on-going corporate losses?
The Chairman: I believe our employees, and the shareholder public, are well pleased with my personal acquisitions. I believe it shows my faith in them, and in our company, that I am willing to take on such personal financial obligations in any otherwise stressful time.
7. Reporter: Shareholders and the press alike complain that there is so little information available on your website. What is the best way for people to stay current with your operations?
The Chairman: My advice would be to read the website for my periodic letters and reports. What is key here, is that the public listen to what we say, read what we write, and not obsess over what we do.
8. Many I.D.M. employees have lost their jobs, and investors lost their money, due to what has been called by the Wall Street Journal a “mismanagement crisis.” Do you think you owe the employees and investor community any sort of an apology for this situation?
The Chairman: I am never too proud to acknowledge concern. I can truthfully say that if anyone feels that what I did, offended or harmed anyone, I am sorry they feel that way.
Thank you, and good day.
At this point, the Chairman’s son, “Tuck” School, recently appointed Vice President of Public Relations, thanked the media and shareholders for their attendance and interest, closing the meeting with a non-denominational prayer for the welfare of the United States of America. An open bar, buffet, and entertainment followed.
*MDC: “Member, Diner’s Club”
Ed Note: Many of the Chairman’s sentiments are based on actual executive comments I’ve read and heard over the past several decades. I worked for a CEO once who was telling us we all must take a voluntary salary cut, or the company might spiral into bankruptcy and our jobs lost. One of the executives asked why, if that was the case, did the CEO recently purchase an estate and speed boat on Cape Cod. The CEO’s answer was much the same as the Chairman’s: “You should be pleased that I believe in our recovery enough to take on such financial burdens.” People say such stuff, and sometimes, they get away with it.
Finally, the I.D.M. story: In 1964, I was moonlighting as a business writer, and met three young men from the Harvard Business School who were introducing their new company’s first product: It was a numbers pad that could be attached to your computer keyboard (the early computers did not all have built-in number pads as they do today). Their president, Jan, wanted me to write press releases and get them placed in trade magazines. I agreed. I asked Jan, “What does I.D.M. stand for?”
Jan replied, “It Doesn’t Matter.”
I said, “Probably not, I’d just like to know.”
Jan replied, “You don’t understand. I.D.M. stands for ‘It Doesn’t Matter.'” He told me this story:
“When the three of us started the company, we had a big argument over the name. I had a strong opinion, my first partner had a strong opinion, and our other partner kept saying: ‘Guys, it doesn’t matter.'”
“We settled on I.D.M.: ‘It Doesn’t Matter.'”
I thought that was funny. I kept it to myself and wrote and published several news releases for them.
Nearly two years later, Jan called and invited me to lunch to discuss an issue. I joined him. He told me that a company had offered to buy them out and they all felt this was a good time to exit the business. “The problem is,” Jan said, “their lawyers asked me what I.D.M. stands for. I said, ‘It Doesn’t Matter.’ The lawyer said, ‘Yes, it does. If you want the deal, call me tomorrow with that information.'”
Jan and I sat there for a while, munching sandwiches and drinking beer, before we came up with the meaning of I.D.M.: ‘Interactive Data Management.’ Jan pitched that to the lawyer, the lawyer bought it, and the deal went through.
Both I.D.M. and the company that bought them are long gone now, but every so often I think of I.D.M. and say: ‘It Doesn’t Matter.'”