Archive for the ‘Leadership’ Category


San Francisco, February, 2014
Identifying Early Warning Signs & Maximizing Value of Distressed Portfolio Companies – Presentation at Stanford University by Mr. Steven Gerbsman
In, October, 2013, I video taped a presentation on “Corporate Governance”, “Early Warning Signs” and “Maximizing Value” for under-performing/distressed venture backed Intellectual Property companies at Stanford University. This video will be for used in the Stanford Engineering School via STVP (Stanford Technology Ventures Program) and SCPD (Stanford Center for Professional Devlopment).

Please visit the attached link to view the program.  Click here


I also was the moderator for a panel on the same subject that consisted of Marc Cadieux, Chief Credit Officer of Silicon Valley Bank, Peter Gilhuly, Esq., Partner at Latham & Watkins, Michael Lyons, Venture Investor and Michael Scissions, Entrepreneur/CEO and former head of Facebook Canada.


Please click here for video

Please review and hopefully the information will assist in “Identifying the Early Warning Signs” and provide “food for thought”.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 82 technology, medical device, life science, digital marketing/social commerce and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $ 2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Boston, Orange County, VA/DC, Europe and Israel.

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First Six Months Template

The format for the First Six Months Plan is organized as a matrix with time across the top and areas along the vertical axis.  Because there will be many things you do not know initially, the timeline provides greater clarity in greater detail in the short term and is  “fuzzier” as you approach the six-month milestone.  So, for example, typical timelines would be:  First Two Weeks, Second Two Weeks, Second Month, Months 3-4, Months 5-6.  The rows consist of the key areas that will need investigation.  While this will be dependent on the specific situation, typical categories would include “Strategy”, “Financials”, “Personnel”, “Customers”, “Sales”, “Services”, and “Operations”.

First Six Months Template

In most cases, a good First Six Months Plan will result in clear visibility to your board or management, and a reputation will be established for both accomplishment and transparency. The First Six Months Plan is a living document.  As time progresses, it should serve as a tracking mechanism for milestones met or not met, using simple visual clues. For example, highlight completed items in green, incomplete items in red or yellow, deleted items crossed out.  You can even make your Six Months Plan accessible online, with click-able details for each item.

As the first six months come to an end, a smooth transition to a Rolling Twelve-Month Plan as described in the section on Transforming the Business – A Three-Step Process for Business Transformation will ensure continued progress.

Copyright © 2012 Beatriz Infante  – All rights reserved.

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Leaders who have been recruited to take over a company or organization in order to lead a transformation and turnaround must address all of the items laid out in the section on Transforming the Business – A Three-Step Process for Business Transformation, including completing a Transformational Goal, Transformational Arc, and Twelve-Month Goals. In addition, they will have to deal with a host of immediate personnel priorities.

You will have no more than two to three months to demonstrate to your management and peers that you were the right person for the job, and that you can create the positive cycle of change that leads to corporate renewal or transformation.  That doesn’t mean the transformation is complete – that may take twelve to twenty-four months or longer – but the actions you take in the first 90 days will determine the ultimate success or failure of your corporate transformation effort.  This is why the First Six Months Plan provides a proven template and timeline for all the things that need to be accomplished in that timeframe.   This chapter is a step-by-step guide to the leadership skills you will need to succeed during this demanding challenge as you implement your First Six Months Plan and beyond.

The First Six Months Plan

The First Six Months Plan provides a highly structured, urgency-based, top-down approach that has been proven to work in many situations requiring rapid turnaround and crisis response.   This methodology is appropriate to a “hit the ground running, no time to waste” approach; however, once a level of stability has been reached, the First Six Months Plan format and timeframe flows seamlessly into the 12-Month Goal format.  This drives lower level goals in a cascading fashion from the Transformational Goal, and directly ties team MBO’s to corporate goals and the desired results in the Transformational Arc.

The First Six Months Plan is a one-page summary of the most relevant actions you must accomplish in the six-month timeframe and should serve as a measure of your progress and a communication mechanism with your boss or your board.  By its very nature, the Six Months Plan will be somewhat more fluid in the latter months – there will be many unknowns and inevitably surprises.  Nevertheless, best practices in corporate turnarounds dictate a rhythm and timing to sets of actions that are universal across industries and situations.  While the actions outlined below may appear to be extremely rapid, in most circumstances the timeframes below are completely achievable, and in many cases dictated by the financial constraints of the business.

Immediate Strategic Priorities

In any new transformational or renewal role, regardless of industry or situation, there are certain invariants that must be immediately addressed.

Stabilize and Secure Sources of Cash.  In any transformation, it is of primary importance to understand how much cash runway you have available to effect the transformation, and if the company has a cash cow business, how quickly it is likely to decline.   Debt may need to be restructured, vendor contracts re-negotiated or deferred payment arrangements made.  But, if the company is in a negative cash flow situation, especially if total cash is also low, all necessary steps should be taken to reduce cash outflow and reduce overall expense burn.

Establish Trust with Customers.  Particularly in situations where there have been visible misses in terms of forecast revenue, or where there have been customer-impacting issues such as product or support problems, customers may have concerns about the future of the company, and a management change at the top may increase that concern.  Therefore strong customer outreach is essential in order to reassure and stabilize, as well as open channels of communication and receive feedback on customer needs and requirements.

Analyze Prior Financial Performance and Issues.  Having a qualified CFO as trusted partner is essential to a thorough analysis of past financial statements.   The cleanest situation will be a public company with clean financials.  However, even in this situation a thorough analysis should be undertaken.  Companies that have had revenue reporting issues and private companies must receive the highest level of scrutiny, and if a qualified CFO is not in place, contract resources must be utilized. Smaller private companies in particular will need a complete examination of past revenue recognition practices, reconciliation with contract T&C’s, verification of receivables and payables, as well as validation of bookings and commission payments.

Model Financial Plan, Downside Plan, and Worst-case Plan.  While the company likely has a current operating plan, an immediate responsibility is to examine the plan and make a business judgment about its accuracy.  Based on this risk assessment, a Downside Plan should be modeled which reflects a significantly reduced risk profile.  Finally, Worst-case plan should be developed which models situations of increased risk such as a more rapidly declining mainstream business than historical precedent would indicate, or a greater falloff in planned revenue.

Establish Forward-going Spend Levels and Take Immediate Action.  Based on the sensitivity analysis above, it will likely be necessary to take immediate cost containment actions to ensure the financial health of the business.

Examine all Functional Areas.  Since the activities cited above will be time-consuming, triage should be performed on the functional areas that appear to need the most focus.  For example, support margins may have been significantly decreasing, so the support organization may need to be examined first, or product issues may be at the forefront, in which case an analysis of the product organization may be needed.  Often the initial flash point may prove to lead to a different root cause; for example, support margins may be increasing because of decreased quality in the product.  The First Six Months Plan should encompass deep operational reviews of all functional areas, but the timing should be adjusted so as to address the most critical areas first.

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Emotional Venting in a Stuck Company. Episode 1: Leadership

08/08/2012 By

“When people talk, listen completely. Most people never listen.”— Ernest Hemingway

When you are trying to figure out why a company is underperforming, where do you begin? What should be your starting point?

You can learn a tremendous amount right away by simply talking with, and listening to, the company’s people — the CEO, the management team, the employees, the investors, the Board, and other key shareholders.

Although that sounds obvious or even trite, it’s just common sense.  Listening carefully to what people are saying, absorbing it, and twirling it around a bit is a necessary prelude to delving deep into data.  If a company is stuck, emotions may squelch thoughtful, deliberate action, especially if the stuck situation has been going on for some time.

During CEO coaching, people of stuck companies talk and I hear three big themes:

  • concerns about LEADERSHIP
  • angst about EXTERNAL FORCES
  • confusion about OPERATIONS

Episode 1 illustrates the emotional reactions of a stuck company’s key people about leadership – the unfiltered, raw, spill your guts variety. Their voices express what they live everyday.

Episode 2 will be the angst caused by External Forces; Episode 3 will reveal confusion about Internal Ops.

Consider this one emotional exchange…

Brother A: My brother’s head in the sand attitude is going to strangle this company!
Brother B: My brother’s outlandish growth ideas will destroy all we have worked for.

Where do you go with that opening salvo? The real story was someplace in between…and that’s the essential point here.


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The March Hare CEO

By    Member Gerbsman Partners Board of Intellectual Capital

Have you attended a “Mad Tea Party” Board of Directors or management meeting and listened to the CEO’s unrealistic expectations about future performance?  Did you leave the meeting scratching your head about what you heard?

Lewis Carroll introduced us to the strange Mad Hatter and the March Hare in his 1865 book Alice’s Adventures in Wonderland.  The Mad Hatter hosted the Mad Tea Party; during this raucous event there was one revealing exchange with Alice:

‘Have some wine,’ the March Hare said in an encouraging tone.

Alice looked all around the table, but there was nothing on it but tea.

‘I don’t see any wine,’ she remarked.

‘There isn’t any,’ said the March Hare.

How many times has a corporate leader told you there was plenty of wine about, but in fact, there was only tea at best?  Your gut is screaming… “There is no way this company can hit those targets”.  But your hope and the March Hare CEO’s enthusiasm get the better of you.  I have seen this scenario repeated many times at stuck companies; there can be over optimism and not enough effort focused on analyzing the brutal facts and confronting reality.

What’s wrong with being optimistic and aiming high?

Nothing, as long as the predictions are believable and achievable.  In the July 2003 issue of the Harvard Business Review there is an article entitled ‘Delusions of Success: How Optimism Undermines Executives’ Decisions’.   The authors (Lovallo and Kahneman) warn of the negative consequences of ‘flawed decision-making’ based upon over optimism.  They state ‘…when pessimistic opinions are suppressed, while optimistic ones are rewarded, an organization’s ability to think critically is undermined.’  Recognizing that people like to rally behind optimism, they say there ‘…needs to be a balance between realism and optimism.’

Jim Collins, in his acclaimed best-seller Good to Great, devoted an entire chapter (‘Confront the Brutal Facts, Yet Never Lose Faith’) about dealing with reality.  Collins’ research proved that great companies were continually objective about their performance, their competitive position and their customers’ needs.  He said “…breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another.”  That is, breakthrough results don’t happen by simply rallying the troops with a lot of hot air.

Collins also discussed the potential negative impact a persuasive leader can have on an organization.  “Indeed, for those of you with a strong, charismatic personality, it is worthwhile to consider the idea that charisma can be as much a liability as an asset.  Your strength of personality can sow the seeds of problems, when people filter the brutal facts from you.  You can overcome the liabilities of charisma, but it does require conscious attention.”

How can you spot The March Hare CEO?

During one consulting engagement, I ran into a classic March Hare CEO who was functioning as a part-time Chairman/CEO for a struggling company with revenues around $120 million (let’s call it “SportsCo”).  SportsCo was in a restructuring phase and had the following issues:

  1. a huge debt burden, a history of covenant violations, and an impatient senior lender
  2. tight cash flow and some seasonality
  3. strong vendors that dictated purchasing practices
  4. a high overhead cost structure
  5. significant product line and business unit complexity
  6. old and bloated inventories
  7. mediocre information systems
  8. insufficient and untimely financial reporting
  9. low morale
  10. a thin management team
  11. an unfocused strategic direction

SportCo’s CEO had a long history of working for and running large corporations (note the word large) with ample resources and staff.  He was accustomed to the perks that accompanied corporate power and prestige.  The CEO was an extrovert… a gregarious and affable guy who had accomplished many good things in his early tenure with SportsCo.

SportsCo’s difficult circumstances meant there was still A LOT of hard work needed to fix the business and radically change its direction.  Despite all the significant challenges ahead, the March Hare CEO told his investors and management team that: 1) expenses had been ‘cut to the bone’; 2) revenue would increase 50%; and 3) EBITDA would triple in three years. Fifty percent revenue growth and EBITDA tripling!?

March Hare CEO made those broad, sweeping pronouncements without any reasonable action plans on how to back up the targetsHe was offering up expensive wine to the investors when there was only lukewarm tea available.  Fifty percent revenue growth was equal to about $60 million dollars additional annual revenue by year three.  Where was this growth going to come from when…

  • The industry was experiencing modest, but not spectacular growth rates
  • SportsCo was closing some of its weaker operating units
  • There would be no additional capital for acquisitions from the investors
  • The bank was not going to expand the credit line to accommodate growth; in fact, they were on a path to reduce the credit line
  • Funding for capital expenditures would have to come from cash generated by operations
  • In some product lines, margins had started to decline from increased competition

Getting to the $180 million level was not going to happen under those circumstances.

Following the company meeting where the grandiose and unachievable plans were presented, I told the investors the CEO had gone from ‘being a leader to a cheerleader’.  After challenging me on why I thought a cheerleader attitude was NOT beneficial to the business at that point in time, they ultimately decreased his influence throughout the change process. SportsCo was restructured based upon the theme of ‘less is more’: the business was downsized to the strongest, core operating units; corporate expenses were dramatically reduced; liquidity and cash flow significantly improved; and a new, clear strategic focus rallied the troops.

What are some ways to deal with a March Hare CEO?

If you think too much ‘wine’ is being offered up on an increasingly regular basis by the management team, go back to some basics:

  1. Trust your own instincts and your gut.
  2. Challenge all the assumptions behind the strategic and annual plans.
  3. Understand the industry forces – think external, not just internal – data, data, data.  Are customers and/or competitors consolidating? Is substitution occurring in your product lines?
  4. Understand in detail your competition across customer segments.  Does the company have strong niche positions or is it just an “also ran” in each segment?
  5. Assess the strength of the R&D and product development efforts – where’s the future growth going to come from?
  6. Talk to some of the key customers – get their unfiltered opinions on the company.
  7. Determine the nature of external relationships with lenders, vendors, and/or customers that are or will be impediments to future success.
  8. Look for specifics on the details of execution – are there monthly and annual operating plans that articulate priorities and assign who is accountable and in what time frame?
  9. Follow up on the company’s performance on a very regular basis using the details of the operating plan as the discussion structure.  Measure management on a regular basis.

‘There is no worse mistake in public leadership than to hold out false hopes soon to be swept away.’ – Winston Churchill

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