Leadership the hard way: Part 2

Surviving the shark tank in America

Between the ages of 28 and 33 I learned how to lead in a challenging business environment in a foreign culture nearly 4,000 miles from home. The lessons have shaped my radical approach to business leadership since.

Last week I began my leadership 'memoirs' with Leadership the hard way: Part 1 which described how I joined a rapidly growing textile machinery manufacturer in North East England led by a brilliant former computer salesman and how, aged just 28 and after a relatively short apprenticeship (less than 2 years) as UK Sales Manager I was given what seemed the chance of a lifetime - a move to the company's North American sales and service office in Charlotte, North Carolina.

Over the next 5 years I lived through tremendous highs and lows, discovered the joy and pain of leadership, and observed and experienced at first-hand how devastating the impact of unprincipled, manipulative, deliberately intimidating and bullying ‘fear and greed’ leadership can be. What happened in the States defined me as a businessman and a leader. It also burned me out, shattered my confidence and brought my career momentum to a temporary shuddering halt. My wife and I were to pay a high all-round price for the life lessons it provided, and it triggered unforeseeable consequences that have proved ‘character-building’ ever since.

25 years later, I reflect on an experience which for the first 3 years was largely wonderful in multiple ways – socially, culturally, lifestyle, building a great team in the States and together achieving excellent results. In less than 4 years as the new kid on the block in a very traditional, cautious industry we grew the business from $6 million to $20 million against hostile, entrenched and much more powerful competition. We worked in an extremely tough business situation nearly 4,000 miles and a 5-hour time difference away from the parent company and my home base, which demanded resilience and resourcefulness.

At times it felt like being on the front line in a war. I was a totally inexperienced leader, I received little support or positive encouragement, no effective coaching or mentoring, and was subjected to insidious, corrosive and ultimately catastrophic behaviours by my closest American colleague and my boss in the UK, 'Ken' and 'Mike' (not their real names). 

When I was sent to the States in early-1991 the company needed a permanent person there urgently, so nothing was too much trouble. They paid for an apartment, for my possessions to be shipped over, and ultimately my wife’s too. Indeed, they were willing to pay for her relocation to the States as my girlfriend, well before we were married and she finally moved out there.

North Dakota wagon train - picture credit americanprofile.com

Mike told me I would love the States and want to settle there, which was what he wanted. That might have been a possibility, except that my then girlfriend did not want to give up her job and life in the UK to move there, and even if she could be persuaded to do so she certainly did not intend to stay permanently. In the event, after much soul-searching she did come over for 3 very enjoyable years. Ironically neither of us had any pressing desire to return to the UK, but as Mike could not extract a commitment from us to stay in the US permanently he decided at the end of 1994 to bring us back to the UK a year later, having appointed my successor meantime and had a suitable handover period before I left. However, as it transpired events were starting to spiral out of control and he ultimately failed to fulfil that promise, washing his hands of me, leaving us high and dry in the States with a house to sell, and suggesting only that I find another job there because by then there was no job for me back in the UK due to the company’s collapsing fortunes. 

As I settled into my new role in the States in 1991 something rather odd, essentially hidden to my UK colleagues and certainly not spoken of openly by the UK management team started to dawn on me. In the mid-1980s the company had launched a radical high-speed electronic technology which promised to revolutionise an adjacent sub-sector of the weaving industry to the one in which it had competed for decades and in which it had a respected No 2 market position competing with the Swiss market leader, Gerhard Berg Hornli (GBH – not its real name!) As our new technology gained acceptance in weaving mills our company started to shift its business activities into this new sub-sector, and stopped developing new products and product enhancements in its traditional sub-sector. In the UK we knew that the new technology had been 'licensed' to GBH, so we suspected something was afoot behind the scenes, but no-one knew for sure because it was kept hidden from us.

However, in Charlotte there was a big clue. Our US office was in the GBH building – they were well-established there with a very profitable business. Apart from one or two Taiwanese newcomers on the horizon they had had no serious competition globally apart from us. The Executive Vice-President (Managing Director) of GBH USA and his two salesmen were Swiss. I think they had initially been sworn to secrecy, but they eventually told me that GBH owned (the majority of) our company. I pieced things together – in 1984 Mike had ousted the third-generation member of the founding family and had assumed full control of the company in a brutal ‘palace coup’. I realised that he had convinced the principal competitor, GBH, to back him financially since our company had superior electronic technology which could be fitted to their machines, and meantime we would move into the adjacent market sub-sector and not compete with them long-term. Wonderful – fast cars and luxury yachts on Lake Zurich all round! That’s not much of an exaggeration since Mike was eventually to end up as a tax exile in Switzerland….

Zurich, Switzerland - picture credit sniffapalooza.com

There is nothing wrong in principle with companies acquiring their competitors – it happens often. However, cynically concealing and denying it and subjecting customers to inflated pricing and lack of competition in a fraudulent market is another matter.    

During my first 2 years in the States my American sales colleague Ken and I operated largely independently of one another in different sales territories and it generally worked. I liked him, we played golf sometimes, and business was on the up so life was good, except when Mike appeared from the UK to pull things apart and upset the apple cart. There were some minor tensions; it was always clear that Ken resented my presence and could not kow-tow to someone 25 years his junior. That was understandable, frankly - I’d have felt the same. However he did not want to take any responsibility in the management of the company – he was content to leave all of that to me – but he still wanted to be treated as a co-manager with me. Mike seemed happy to play us off against each other; he enjoyed that sort of thing – divide and conquer. And it was always clear to me, though unspoken, that Ken believed that if I screwed up he would get the nod.

Then came the first black swan event. The famous book ‘The Black Swan: The Impact of the Highly Improbable’ by Nassim Nicholas Taleb explains that massively disruptive events which no-one foresees do occur, and how you can minimise the downsides and exploit the opportunities they offer by adopting the right mindset, which is to anticipate them without knowing their precise nature and to plan accordingly. This usually never occurs to the arrogant and overconfident, who by definition are habitually complacent. Unfortunately, there are too many such people in positions of authority, though I now see that this also creates opportunities for the wiser and better-prepared!

Picture credit wildgratitude.com

In late-1993 or early-1994 I was contacted by the ex-Finance Director of one of our suppliers in South Carolina to say that he had regularly signed off payments over the last 2 years to my colleague Ken, and that he believed these were commissions for placing our business with them. I knew Ken had a good relationship with them, but it had never occurred to me that anything untoward was going on. Over the next 2 months I pieced together the data from our records and matched them to the information from my informant. They suggested that Ken had probably received over $13,000 in illegal inducements from the supplier. Our US lawyers told me that this was a federal felony because the transactions were across state lines – South Carolina and North Carolina - so the evidence could prompt an FBI investigation. It was all very surreal, as you might imagine.

I presented the findings to Mike. What he did next, in an admittedly very difficult situation, was extraordinary. He confronted Ken with the evidence and told him that if he agreed to pay all the money back over time the company would take no further action. Ken apparently protested his innocence, but Mike left only one course of action open to him.

Imagine the scenario. You have been ‘falsely accused’ or caught with both hands in the till by a jumped-up foreigner, 25 years your junior. You receive a blunt ultimatum from the CEO – whether you are guilty or not the course of action he proposes seems intolerable, but the alternatives are worse. The sense of humiliation and anger is overwhelming. 

So, what happened next? Over the next 18 months Ken began to talk secretly to our (new) major competitor in the sub-sector we now worked in, sharing competitive intelligence including key information on our technical problems and details he was privy to on the design of forthcoming machines.

Now the black swan events, self-inflicted or otherwise, started piling up.

Our competitor was another Swiss company, Nichtschw?che, a big, powerful, multi-divisional engineering group. What I did not know for a long time was that they and GBH were bitter, longstanding rivals, even though they did not compete directly. Neither did I know yet that Mike had at some stage asked for a secret face-to-face meeting with Nichtschw?che at which he had proposed a global price fixing arrangement, which had outraged them. I imagine that they also knew, or strongly suspected, the concealed ownership structure between our company and GBH. 

In the mid-1980s our company had established a huge technical lead and Nichtschw?che had initially buried its head in the sand, believing that electronic technology would never take off in a sub-sector dominated by Swiss and German precision mechanical engineering, and so this small new UK entrant would never succeed. Realising belatedly that they were wrong, that their technology faced a mortal threat so they had to invest in electronic technology and catch up rapidly, they had come tantalisingly close in the late-1980s to deciding to exit this lucrative sub-sector because we were winning so much business, they could not get their hastily cobbled together semi-electronic technology to work reliably, and it was costing them a fortune as well as steadily eroding customer confidence. Fortunately for them, but not for us, they had weathered the storm and succeeded in perfecting a design inferior to ours but sufficiently reliable to keep them in the hunt. Their industry knowhow, established machinery base, customer relationships and financial resources were vastly superior to ours. 

Choose your analogy for Mike's continuing bad behaviour - Icarus was flying too close to the Sun; Jack had provoked the Giant, who was now pursuing him back down a beanstalk that could not be severed; Aladdin had let the genie out of the bottle. In 1994 the dark clouds were gathering – the perfect storm was sweeping across the horizon towards us. In Part 3 I’ll explain:

• how the wheels came off during 1995 (my first annus horribilis) - a recession in the US textile industry combined with serious technical problems on the machinery and a decision by Nichtschw?che to do whatever it took to eliminate us as a serious threat once and for all
• what happened to me, the company in the US and globally after I left, and how it fuelled my enduring passion for what my friends at LeaderShape Global call the REAL thing - Radical, Ethical, Authentic Leadership.