Boss Life

by Paul Downs

  Before I’ll pay myself a penny, I want to clear up the credit card debt. The balance—$42,097—is due on Saturday. And I’ve just sent out a heavy payroll and a bunch of vendor bills: goodbye to $81,274, more spending than any other week this year. I end up $578 ahead of where I started. Paying off that credit card, though, is a huge relief.

  On the last day of the month, we get three more orders, bringing us to $396,697. It’s been a good October.

  NOVEMBER

  DATE: THURSDAY, NOVEMBER 1, 2012

  BANK BALANCE: $150,716.50

  CASH RELATIVE TO START OF YEAR (“NET CASH”): +$13,562.18

  NEW-CONTRACT VALUE, YEAR-TO-DATE: $1,828,279

  Will November bring another flood of orders? For the past three years, October’s sales have been higher than September’s, and November’s have been much lower. But I’ve made drastic changes to my sales process. I hope to see a very different result this year.

  Despite our huge sales last month, my cash position isn’t nearly as strong as I want it to be. October’s credit card payments subtracted $67,097 from my working capital. My yearly net cash is currently positive, but next week brings payroll, rent, and a long list of vendor charges. I’ll be back into negative territory. The good news is that if we finish all the work we have on the books, we should collect $249,349. That’s way up from the low point in June, when it was $50,751.

  The main reason that the cash-to-come total has grown is that we took six jobs worth $117,644 on net-30 terms. Four are either military or large banks, one is the Houston accounting firm, and the last is a small electronics firm in Arizona. I know that the military and the bank, a repeat client, will pay on time if we deliver a good product. The others might not, but that risk is better than having no work to do.

  I’ve been watching the October sales as they were booked and thinking about which ones we should build first. It would be easiest to always build them in the order they came in, but each buyer has different requirements for turnaround. Some want their order as fast as possible. Some of them demand quick turnaround but then aren’t ready when we complete our work. A lot of clients who order a table are either renovating an old space or building a new one. If we deliver a table into an uncompleted room, it inevitably gets used as a work surface or scaffold and gets damaged. We can easily hold a completed table in our shop, but a lot of clients won’t make their final payments until they receive their table.

  Clients who aren’t doing construction can take their table as soon as we complete it. It would be sensible to push these jobs to the front of the queue, and sometimes we can. But the shop floor guys hate being yanked off one job to start another. It interrupts their planned build sequence and seems to lead to more mistakes.

  For the past decade, Andy Stahl and Steve Maturin managed the day-to-day workflow. They both arrived at the shop very early, between five-thirty and six a.m. I presume that they started their day by reviewing the schedule, but I actually don’t know how they did it. It’s yet another problem that I’ve let slide for years and been too busy to address. I decide to bring it up with Will in our meeting. “How are you deciding what jobs to work on each day?”

  He says he goes to Andy’s office every morning to see what drawings are ready, then reviews them with Andy before taking them out to the shop floor. He checks whether the required materials are on hand. Frequently, they aren’t. Either Andy hasn’t ordered them, or they’re still in transit, or they were used to fix errors in a previous job. If something is missing, he goes back to Andy to try to figure out what happened and to get Andy to order more. If all the materials are on hand, he cuts the required parts on the CNC and stacks them on the carts. Those go to whomever he tells to build that table. I ask Will why he’s running the CNC, a job Steve Maturin has always done.

  “I haven’t run a CNC before and I want to make sure I know how it works. And I need to be there if it crashes. Andy leaves a lot of mistakes in the code.” Those are good reasons. And they point to a capacity problem in engineering. I really need a second person doing that job, but I don’t have anyone on staff suitable. It’s very different from bench work. Even if I did, Andy would have to devote significant time to training them. We’d fall further behind. I tell Will, “Let’s assume there’s no short-term fix. Andy’s already tapped out. If we pile on more work, he may break down completely. I did his job for eleven years before I hired him, and it drove me crazy. So what can you do to compensate?”

  I’m hoping that he’ll move Steve back onto the CNC so he can devote more time to pre-checking the plans and managing the materials. From my seat in the office, that’s what I think would be best. But what do I know? I’m starting to realize that my daily walk-through isn’t enough to understand a very complex environment. Will considers my question. “I’m not sure what I can do right now. I’m still figuring out the CNC, so I don’t want to stop doing that. I suppose I could be keeping better track of the materials, but I’d need to watch that all day, and I wouldn’t be able to keep track of anything else. Guys go and get stuff whenever they need it, and the materials are stored all over the shop. If I walk around to keep track of them, then I’m not running the CNC.”

  “So why don’t you have Steve Maturin run it?”

  “He hates that machine. And he’s my best guy at building tops. He’s way faster than anyone else. If I put him on the CNC, then we don’t get as much done, and he’s even unhappier than usual.”

  “So that’s why you’re working so much OT?” Will says yes, he’s working long days and weekends to keep up with all his tasks, but he likes the money and he likes learning something new.

  Both of us know that there’s got to be a better way to organize the shop, but we don’t have extra resources—cash or people—to throw at the problem. Our only solution is to try modest improvements while still producing work.

  Getting back to the original question, scheduling, I tell Will that we should concentrate on the jobs we took without deposits. We want to finish those and ship them while we have cash. If we can get all of them done in November, we should be able to collect our balances before the end of the year. That might allow me to pay Christmas bonuses. And I don’t say it, but I’m also hoping to take home a little money myself.

  On Monday, November fifth, I report the last week’s sales and our cash position. We booked $38,093, but only $924 of that landed in November. I’m starting what promises to be an expensive week with $154,463.95 on hand. Later I head to the shop. I know what every machine and tool does. I can identify every type of wood we use and every project. I have a good grasp of how the money works. Why isn’t it enough? How can I have worked on this business for so long, learned so much, and still be so far from mastery? We do good work, but it’s not always easy. Why not? How can we get control of our processes?

  I think I see the problem. None of the different links in our production chain—sales, engineering, shop floor, finishing, shipping—talk to one another. They each get a job, do their thing, then pass it on. Steve Maturin, the Heroic Solitary Craftsman, was happy to operate that way. Will Krieger is heading down the same road. Even though he and I talk to each other, the shop floor is still running the old way. Will is putting in huge hours trying to monitor all the links in our production chain. But he’s overloaded—caught in an operational role, running the CNC. Even though he’s a much better foreman than Steve, he can’t do it all himself. The shop is too big, the work is too complex, there are too many guys doing things too many ways. Useful information is not passed from person to person, but rather from each person through Will. That’s presuming that guys are even sharing their ideas and complaints. They were all trained by Steve Maturin, who did not encourage innovation or communication. Nick has told me that when he was working on the bench, he came up with lots of ideas to do better work, but that when he took them to Steve, he never once got encouragement. Eventually he stopped trying to share. He simply
did things the way he wanted to and didn’t worry about how anyone else worked. He became a very fast, accurate builder, too. Meanwhile, his fellow workers, many of whom would have benefited from better skills and technique, struggled and often failed.

  What can I do to encourage innovation and communication? Give an inspiring speech? Or stern orders? Can I succeed by describing my new understanding to Will Krieger and leaving it up to him? I don’t think that will work. Maybe a regularly scheduled, all-hands meeting to discuss operational ideas, separate from the Monday meeting? That will eat up a lot of production hours. Does every single person need to attend a meeting in order to get the most benefit from it? Maybe I can work with a smaller group and get more bang for my buck.

  My musings are interrupted by Emma with the mail. There’s a big envelope from Independence Blue Cross. It’s that time of year: time to decide whether to renew our health insurance. We’re too small to have a dedicated human resources department, so I perform this task and all other HR work.

  Doctors, hospitals, and health insurers treat small employers like me as convenient sources of cash, relying on the fact that it takes so much time for a boss to investigate the options, and to understand what is being offered, that most will surrender and buy the first choice presented to them. In 2005, insuring a single worker in an HMO cost me $206 per month. Insuring a family of four cost $606. Five years later, in 2010, those costs had more than doubled—the single premium stood at $425, the family premium was $1,247. Faced with those hikes, I forced my employees to contribute more and more of the cost each year. Now we pick up 66 percent of the cost, and the workers pay 34 percent.

  Why do I offer insurance at all? (I’m not legally required to, though that may change.) Two reasons: first, I need to buy it for myself, and it’s much cheaper for me to do that as part of a company group than by shopping on the open market. And second, because I want my company to be the kind of place where workers can stay for a long time. I try to offer compensation and benefits that allow them to raise families and have decent lives without having to search for better employment. Call me a softy, but I want them to succeed and prosper, and it makes me feel good to help that happen.

  On the day I actually have to pick a plan, though, I’m not feeling so happy. I take another look at the stuff that Independence Blue Cross has sent and quickly discard it. It’s useless. No description of all the choices available, and no pricing whatsoever. “Call your agent!” is repeated frequently.

  My agent, as it turns out, e-mails me in the afternoon. They’ve sent me a spreadsheet with the pricing for this year and the steps I need to renew, plus descriptions of the forty-nine different plans being offered. Forty-nine plans! It’s like looking into an abyss. One tab of the spreadsheet has a detailed description of my current plan, with thirty-seven separate copays and coinsurances. Every plan comes with a similar grid. If I want to shop the offerings of just this one company, I need to compare 1,813 different pieces of information, and that’s just Independence Blue Cross. I don’t have time for that.

  I give up on finding a better choice and sign up for the same plan as last year. Having made that decision, the real work begins. IBX wants to know not only the name and address of each employee who might sign up, but also the full name, social security number, and birth date of every one of their dependents. They already have some of that information, but I need to double-check that everything is correct and talk to each employee to make sure that nothing has changed. It’s a whole day of tedious clerical work. Then I’ll have to explain my decision to the employees, and hand out sign-up sheets, at the next meeting.

  On Thursday, a surprise: an order from Eurofurn, worth $10,810. Dan did all the preliminary work back in the spring and then forgot about it. We’ve heard nothing from them since Nigel and his henchmen came for lunch back in July, and we’ve received no business from them since the middle of June. Once sales started coming in from our normal clients, I moved them to the back of my mind and left them there.

  Dan prepares an invoice for the deposit. Out of curiosity, I total up the value of the jobs we’ve received from Eurofurn this year. It’s just $47,846. Then in my database, I look at how many hours we’ve spent building their jobs versus the number of hours we got paid for. We’re more than a hundred hours behind our estimates. I’ve put a huge effort into these people. So far, it’s been a big loss.

  On Friday afternoon, I review the week’s numbers. November is following the usual pattern, despite the changes to our sales process. We’ve sold just two jobs, totaling $18,717. Incoming cash has been even worse. We’ve picked up just $7,661, all pre-ship and final payments. As I predicted, we’re bleeding cash: the payroll, rent, and vendor bills have cost me $66,581. I’m down $41,611 for the week and back in negative territory for the year.

  On Friday, after Will and I go over the numbers, I ask, “How often do you gather all the guys together for a meeting?” He tells me that he gets the bench guys together now and then for an announcement or to demonstrate proper use of one of our machines.

  “How about the whole shop? Bench guys, finishing, everyone?” He’s never done that. “So how do you know the best solution to any problem? How do you know that what’s good for the bench guys isn’t screwing up the finishing room? Or shipping?” He responds with a statement in the form of a question: “I just think about it?”

  I keep after him. “Are you sure that works? I’ve been thinking about stuff for twenty-six years but I’m discovering that my solutions come from fantasyland. I don’t really know what’s going on anymore. The shop is just too big; everyone’s in a corner doing his own thing. I’m not experiencing things the way the rest of you do, and you aren’t experiencing them the way I do. That’s got to be true of everyone. What looks like a solution to you will be a problem to me.”

  He agrees, so I continue. “Our meetings, you and I, have been going really well. I’d like to do something similar with an expanded group and focus on identifying and fixing production problems. I want to make sure that someone from each department is attending, so that we can come up with solutions that work for everyone. Bonus, everyone will be hearing about the solution at the same time. So you won’t have to run from one end of the shop to the other repeating your explanation of what you want to do. What do you think?”

  He considers the idea, then asks, “Who will be on the committee?”

  “I don’t want to bring in the whole shop. It’s too expensive to shut down production. But I do want someone from sales, engineering, build, finish, and ship to sit in. Nick, Andy, you, Dave, and Bob. I’ll be in charge to keep things moving.” Will thinks that it’s worth a try, and we settle on eleven-thirty next Thursday morning. I decide to call it “Operations Committee.”

  On Monday, after devoting the meeting to the health insurance renewal, I get an unsettling e-mail from my contact at the big defense company. His boss, the CEO, has been fired after being caught in an affair with a subordinate. The news makes the front page of the New York Times business section.

  I try to muster sympathy for this guy whose private life has made the national papers, but I’m mostly concerned with losing the order. Andy hasn’t ordered the wood yet, and I tell him to hold off.

  Later, my contact calls to confirm that the job will be canceled. We have one of those “wutcha gonna do?” conversations; then I point out that we have a valid purchase order, and that the job is in process. He hems and haws a bit. I offer to let them cancel if I can bill them for the time we’ve put into it. We agree that I can keep $3,915 of the $18,000 deposit; I’ll have to refund the rest.

  This cancellation comes at a bad time. I’m going to be short on cash until we get paid for the net-30 jobs, and I’ll be paying my expenses for the rest of November out of what I have on hand plus whatever deposits we collect from new sales. The only bright spot is the credit card bill. We haven’t charged much since I paid it off last month, and th
e upcoming total is just $5,857.86. If we don’t make some sales, I’ll bottom out at around $40,000 in cash at the end of the month. After that, the net-30 payments will start to arrive, but only if there are no shipping delays and no installation problems.

  The next morning, I log in to the Defense Department’s Web site and check the status of our invoices. The site is for any company doing business with the military, and it has some amusing drop-down lists describing the range of products that are being bought, from solid-fuel rocket motors to naval patrol vessels to potatoes. There’s another drop-down for quantities delivered, ranging from grams to drums to railcars. Somewhere a junior officer is receiving a railcar full of potatoes and can use this system to affirm that it has arrived on time and in good condition. And thirty days later, the money is deposited in the seller’s bank account.

  I search for our jobs by product, NAICS code 337211: Wood Office Furniture. Two of our jobs have been received, but not formally accepted, so I’ll have Emma prod them to complete the paperwork.

  On Wednesday, Dan sells a job worth $19,630 to a gas company in Colorado. And on Thursday morning, Nick gets a nice one: $32,182, from a repeat customer. Both clients promise to send deposit checks. We should have that cash next week.

  The last two military tables are assembled and ready for crating. One, a very large U-shaped table for an army base in Arizona, sports an especially flamboyant combination of maple and Bolivian rosewood, along with a huge inlaid logo in the center of the U. The other, for a Special Forces battalion in Florida, is made from more modest woods but has an even better logo panel. At the end of each arm of the U, we’ve inlaid a shield-shaped panel, about three feet long and two feet wide, with a huge black widow spider above an Apache spear. My guys like to do this kind of work. Military logos are usually cool looking, and it’s a thrill to hear about our clients on the news. After Osama Bin Laden was killed, I pictured the returning special ops unit gathered around the table we’d made for them in 2010.