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That was an interesting article, Nathan. Thank you for conducting such an engaging interview. Kal Ghayur and I share some common ground, and it brings back a lot of memories for me.
Early in January 1978, just 32 months out of undergraduate school, I got hired as the first Controller who had a degree in finance or accounting at a 59-year-old retailer/wholesaler with 93 full-time employees. . .and no accounting system to speak of. They thought they had one—two Burroughs posting machines and a checkbook—but they didn't. So I set about designing a soup-to-nuts accounting system – chart of accounts, journals, standard closing entries, etc. (This was almost a decade before the first PC came to market.) For three months, I worked 16-hour days six days a week (and often seven) to get something in place. I almost keeled over when, on the first pass at preparing financial statements in April, the darned thing worked. It was truly exhilarating. I had never done anything on that scale before. Thank goodness I had saved all of my accounting textbooks.
That was in the spring of 1978. Those who were adults back then recall that 1978 was a high-inflation year. The U.S. had been on the receiving end of the first OPEC embargo in the fall of 1973, and it had been downhill from there for our economy and, indeed, our country: Nixon got impeached, the Vietnam War wound down to an ignominious end, inflation shot up, and Jimmy Carter got elected POTUS.
After seeing that the system I'd designed worked, I began publishing Department Expense reports each month. The managers screamed bloody murder because they'd never had a budget, much less someone reporting on their expenses. I stood my ground. Despite the inflation, expenses in every department declined during 1978, even though sales and headcount went up.
It gets better. The company's main location, a large retail facility, did a land-office business. But, because its financial were not audit and it had never had a real Controller, its internal controls were poor. Among its many innovations, it made cash advances to its traveling sales people out of one of the Cash Drawers. (You can't make this stuff up, folks.) As a result of that and other nutty practices, its Cash Register operations were short over $20,000 during 1977 alone. I later learned the shortages had been in that range for years.
The CEO, a trained lawyer who had married the boss's daughter, had decided a decade earlier that the solution to "all that stealing" was lie-detector tests. One day I asked him if the "polygraphs" had ever caught any thieves. He said that they hadn't. I asked him why. He said he didn't know. I said (paraphrasing), "Well, since we announce these 'tests' in advance, we create an incentive for any crooks to quit. But I also believe that the likelihood of anyone stealing to any significant extent is low because people have to sign an agreement saying they will submit to a 'polygraph' test as a condition of employment. I believe that the real problem is that we're not running our business the way we should."
He didn't like that, but I said I was going to prove it to him. He said he hoped I failed so he could fire me.
Well, during calendar year 1978, that retail location—the one that had been short from $20-25K per year for years—was $7.18 long. That's right—718 pennies out of millions of dollars of cash and credit-card transactions. His response was to continue the lie-detector test. I said that, in light of what we had accomplished through stringent internal controls, I found his 'solution' unacceptable and told him that I was going to look for another job. He offered me a sizable raise to stay, but I declined. He and I had incompatible views of how to manage and motivate people, and that wasn’t going to change.
My next job was as the CFO for a company whose capital structure was 93-1/2% funded debt when I arrived in early February 1979. Much of it was at prime + 250 bp; the prime rate then was 11-3/4%. My job was occasionally more exciting than it needed to be because the CEO, who didn't own any stock in the company, was a spendthrift. (I wish I had stopped to ask myself how I had found such 'interesting' bosses twice in a row.) After a couple of years, I got mowed down in a political cross-fire and landed on the street.
By then, with about 5-1/2 years of experience, but without CPA or MBA after my name, my base—before bonus—had quintupled from my starting pay at Union Pacific Corp. where I went to work after I graduated in May 1975. . . and that was before my bonus. Late in 1980, employers were reluctant to hire someone at a lower salary for fear they'd leave when they found something better. Worse, those in my pay bracket tended to have at least 15 years of experience, usually with MBA or CPA (and often both) after their name. I was in a heckuva pickle: too little experience to maintain my compensation level, but unable to find work making less.
So I drifted along doing "consulting" for about 2-1/2 years. I wasn't getting anywhere fast, so I enrolled in a night-time MBA program in January 1983. I found the work in a graduate management course really interesting. With the encouragement of the professor who taught it, I became a PhD student in strategic management that summer. Although I didn't finish my doctorate—academic politics are the most vicious politics. . .because the stakes are so low—I did complete all of my PhD coursework. Like marriage and children, that was a life-changing experience. I discovered a field for which I had real passion: business and corporate strategy. I didn't have much in the way of political smarts, though, so the faculty in the Management Department didn't like me. Even a year away as a visiting professor of strategic management at another university wasn't enough for me to reshape their perceptions of me, so I went back to the 'civilian world' without a doctorate. I don't think I would have remained in academe, but not finishing that PhD is one of the great regrets of my life. It still bugs me.
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