A Turnaround Consultant

Dan Heath: Entrepreneurs are famously optimistic. So when things aren't going well for a company, they sometimes aren't willing to admit that things aren't going well.

Jeff Vogelsang: And for a lot of CEOs, especially if you've had years and years of success, you've got a self-confidence where you think, I can do this, I can do this. And then it just isn't working. And it's very difficult to reach out and say, help me.

Dan Heath: That's Jeff Vogelsang. He's what's called a turnaround consultant. He parachutes into companies that are having a financial crisis, and his job is to turn things around. He says the most difficult part of the job is often just convincing company leadership to make tough decisions.

Jeff Vogelsang: This is where they get caught up in. We should analyze this further. Let's talk about it more. Let's do more research, let's get more data. And I always say, "Listen, we're done with that process. We're gonna make a decision. And we're gonna pick," I'll say this politely, "We're gonna pick the least crappy option." I've coined that the LSO over the years, but we'll call it the LCO here. But good business leaders make a decision. They don't wait for perfect information. They don't wait till one of the answers is obviously good. They've got two bad options, which is the least bad? Let's go.

Dan Heath: I'm Dan Heath, and this is "What It's Like To Be..." In every episode of the show, we interview someone from a different profession. We ask what it's like to walk in their shoes, a standup comedian, a hairstylist, a welder. We wanna know what they do all day at work. Today, we'll ask Jeff Vogelsang what it's like to be a turnaround consultant. We'll talk about how he figures out what's wrong at a company, what kind of personality you need to do the job, and how he handles the stress of making decisions that deeply affect people's livelihoods. Stay with us. When Jeff Vogelsang starts working with a company that's struggling, he doesn't arrive with answers. Just a lot of questions.

Jeff Vogelsang: What do you think the situation is? What are you concerned about? What do you think is gonna help get you out of this? Who are the key people here who are gonna help you row the boat in the right direction? And is there anybody you think that's working against you? And one of the, you know, I call it the dirty little secret of what we do, people often say like, how can you go into a company and in two weeks without knowing anything about it, really when you got there, you have a good idea what's wrong and how to fix it? And the key to that is we just ask the employees and we shut up and listen, and they tell us. By the time we get hired, they're so frustrated, and they've talked amongst themselves so repeatedly about what needs to happen and the decisions that aren't getting done. I can tell you numerous times in my career, I've walked in and somebody has come into the meeting with me with 10 pages of notes. And the meeting, for me, it's a great sign when they start out with, I don't care if I get fired, this is what's really going on. This is what you need to know.

Dan Heath: Hmm.

Jeff Vogelsang: And when you interview say, 10 people, you'll find that you're getting a lot of common themes, you're getting a lot of direction on where you really need to focus. And 8 out of the 10 of them are gonna be pointing you in very similar directions. And the benefit for the two that are completely off course is you're already getting to identify where you can start freeing up some costs, because they're clearly not gonna be with us for long.

Dan Heath: Talk me through a recent example that comes to mind. Like, kind of paint the picture for us. You know, what was the situation when you came in, and what were some of the early moves you made to try to restore the company to health?

Jeff Vogelsang: I was hired on a recent engagement to come in and be an interim CFO. The current CFO was an under-performer, it was a family-owned business. They had just put together their first outside board of directors. And at the very first meeting of that board of directors, they had asked the CFO to present. After that meeting, they told the family and the CEO, you have to fire him.

Dan Heath: That bad?

Jeff Vogelsang: It was that bad.

Dan Heath: That must have been some presentation.

Jeff Vogelsang: Well, I would tell you he was a very good verbal communicator. He dressed well. He looked like he just came out of a, you know, a Harvard seminar, and he talked the talk, but there was really no substance to it. And he just really didn't know what he was doing. And the independent people who hadn't known him for a long time, recognized it immediately that he was an imposter. So I was referred in this situation. They didn't fully disclose this to us, but they'd been losing money for some time. They had multiple locations across four divisions, and about 80% of those divisions and locations were unprofitable. And there was a general lack of accountability. And it was a lackadaisical environment. Like, some of the locations that had lost money seven years in a row, no one got fired and no one was particularly concerned about it.

Dan Heath: How could that be? That is such a weird description. Like, even the way you phrased it, like, we found that they had been losing money. Like, how could they not have known that without you coming in to tell them?

Jeff Vogelsang: Oh, they knew that they were losing money. I just don't think they knew what to do about it. And it was a family business, and the culture was one of very long-tenured employees. Everybody was very loyal to the company and the family. The family was loyal to a fault to the employees regardless of performance. And you know, this is one of the buzzwords that I talk about, most CEOs think of loyalty as a positive. I think of loyalty as a positive as long as they're performing employees. I mean, I'd be willing to be very loyal to you, Dan, if you would hire me at your company, pay me a very rich salary, and allow me to just come in and largely drink your coffee and use your toilet paper every day, without any other accountability, I'll stay forever.

Dan Heath: So on that note, I mean, how much of your job is about laying people off ultimately? Is that a usual part of what you're called in to do?

Jeff Vogelsang: Sort of, it's pretty common these days that by the time we're hired, the company's already done one layoff or reduction in force, which is good for me, because hopefully, they've taken out, you know, some of the excess that maybe just isn't a fit anymore. A lot of times these are good people. They're just too many of 'em, or they're good people, but they've been put or elevated into the wrong role. And hopefully, the company already laid a lot of those people off. When we come in, it's often more targeted towards, do we have the right people in the right positions who are willing to be accountable for the right things? So generally, we're not coming in to do a mass layoff, what we're doing is some targeted firings of people who just no longer fit the direction we're going in. And if you look back to the company I was just describing, I had to terminate the general managers of three of the four divisions, because they just were never going to meet the accountability expectations that we were setting for the culture. And they fairly quickly identified that, you know, we're not going to do that. Nobody comes out and says, Jeff, I'm not going to be accountable. What they come out and say is, I don't think that's a good plan. I think if we sit on our thumbs and you know, do a rain dance, revenue will come back, and that increase in revenue will hide the fact that none of us know how to run the business properly.

Dan Heath: I mean, is it hard to make those kinds of personnel decisions?

Jeff Vogelsang: No. My wife tells me that humans have emotions. So I had to stop and not just blurt it out, but...

Dan Heath: At least you paused before saying that.

Jeff Vogelsang: Right, that's the part where my wife says humans have emotions. No, it's not. You know, I would tell you, you know, this is not a business for somebody who, you know, when you take a personality test, you score in the high 90s for social empathy. You can't get caught up in the emotions of this is a good person, they've got a family, they've got dependents, they've got responsibilities, they've been loyal to this company and this family for 30 years. You know, I'm loyal to all the employees that are there for the future, and I'm loyal to the future of that company. The past is somewhat irrelevant to me. And if this person's not gonna be a critical part of the success in the future, it really doesn't bother me to let them go. I'd also tell you, I've seen people who are in these roles that they shouldn't be in. And as you set even modest expectations, they get very uncomfortable. They get very stressed. I've watched physical deterioration, I've watched stress deterioration. I'm sure I've seen, you know, some alcohol or other dependency issues accelerate, 'cause they're in the wrong role. They don't know how to recognize it on their own, and they don't think there's a way out. And if you can, I shouldn't say fire, we're not supposed to say fire. You know, if you can make them available to industry early enough in the process-

Dan Heath: Wait is that a real euphemism?

Jeff Vogelsang: Yeah, it is.

Dan Heath: Make people available to industry?

Jeff Vogelsang: Yeah, there's some gallows humor in this business that, you know, don't get me wrong, there's many depressing days where I'm at right now. We just did a reduction in force yesterday. It was highly unpleasant, because now we're down to, it's all good people. The business is in a lot of trouble. They had done a reduction before I got here. We've done some targeted replacements while I've been here. But the business has continued to deteriorate due to market conditions. And we had to make some very tough decisions. And I can tell you none of it was fad. None of 'em were bad people. They were all accountable. And it's heartbreaking, but I can't get caught up worrying for too long about 25 people when I've gotta worry long-term about the other 400 people.

Dan Heath: I kind of think of your work as, it's almost like you're a battlefield surgeon where, you know, you have to take off a leg to save the soldier, and it's horrible quite obviously to lose the leg, but it would be worse not to.

Jeff Vogelsang: That's a euphemism I've heard before, the concept of triage where you're deciding like, you know, who lives, who dies, is it comes in, especially when there's multiple divisions and you wanna save 'em all. And some of 'em may even be the ones that would be faster growing in the long-term, but they're the ones consuming the capital today. You know, the longer you go in these situations, the more dire the decisions become. I worked in a situation years ago, they had come close to running out of cash twice to where they couldn't make payroll. On both occasions, they'd gone to their bank and said, we're not going to make payroll Friday if you don't give us more money. The bank gave them more money until the third time when they're like, that's it, you need to hire a turnaround consultant, we're done. And unfortunately, they pushed it far enough that I was hired on December 18th, and we were told by the bank, if you're not cashflow neutral on January 3rd, we're gonna enter a bankruptcy liquidation proceedings. So I had to work with the six senior managers of that firm over the Christmas holidays to decide how to eliminate 25% of the workforce. And it was a consulting firm, and it was a younger consulting firm where literally, we had six couples that were married to each other, that both parties worked at the company.

Dan Heath: Oh, man.

Jeff Vogelsang: And we were having debates over, do we fire the husband, do we fire the wife or do we fire them both? It was brutal, and it was much more brutal for the leadership team that was there. The other thing that was really unfortunate in that situation is as we got close to finalizing the decisions, one of the senior leaders who was not a partner kind of woke up in a meeting, and he looked at me and he says, "We're not gonna be able to pay any severance, are we?" And I had known this already, but I didn't wanna say anything until, you know, we were there. And I said, "No, there will be no severance." So we, on January 3rd, laid off a quarter of that workforce with no severance. We generally always want to get release letters that say, you're not gonna sue us for firing you, but you have to give consideration for that. And these employees were scattered all over the country working remotely. And we basically agreed that we would give them all of the office equipment they had, they could keep it for free. We're gonna have to remotely delete all of the licensed software that we didn't have the rights to give them. But we basically gave them, you know, stripped down laptops as consideration for signing the "I won't sue you letter" for firing them three days after New Year's.

Dan Heath: It is so weird that, I mean, the former management basically drove a car, you know, directly at a wall, and then a foot before the impact, they hire you to come in and take the driver's seat. Like, what? It just feels like it's asking a lot for you to come in and be the adult to take care of the mess they've made.

Jeff Vogelsang: I'm laughing, 'cause I was the youngest person in the room when we were doing this. This was probably 20 years ago. And everybody in there, all the partners, all the senior managers were older than me. It's a very awkward situation. But entrepreneurs are, you know, they're inclined towards being positive and optimism. And there's a line where you just gotta kind of step back. And it's critical to have some advisors, even just personal friends that are, you know, smart business people, and you be honest with 'em and they could say, you're gonna hit the wall. You really need to ask for some help. I don't use this all the time, because I think addiction is a very personal topic, but running a business that's in this kind of trouble is much like addiction in that they don't seek help until they've hit bottom. And often they don't know where the bottom's at. And it can be very ugly when they get there.

Dan Heath: Hey, folks, Dan here, another casting call for future shows. We are currently looking for a city bus driver, a crisis PR agent, pest control techs, handymen, hotel concierges, college or NBA basketball referees. If you know anyone along those lines or know someone who knows someone, please have them call our voicemail box and introduce themselves. That number is 919-213-0456. You don't need to remember that. Just check the show notes on your app. Now back to the show. Have you ever come into a situation where there was just, like, outright fraud or criminal activity?

Jeff Vogelsang: I have, unfortunately it happens more than you think. The fraud that we see, it's less often that an employee was stealing a bunch of money or embezzling. The fraud is often accounting fraud, because the company's underperforming. They don't want the bank to know they're underperforming, 'cause the bank might shut off the funding. So they start fudging their numbers with the bank. And no CEO and CFO combination start out saying, "Hey, let's start defrauding the bank and keep it up for three years, and let's start out with just a $50,000 slight of hand, and let's turn it into a $50 million slight of hand over several years." Nobody starts out that way. It starts out with a minor, "Hey, let's just bury this in inventory." And then by the time we get hired, and this is a real story, we had a company that had been very profitable and growing for seven years in a row. When we unwound everything that had happened, all of those profits for seven years in a row were a fiction, and they had never been profitable.

Dan Heath: So speaking of profitability, one thing I wanted to ask you was, you know, your clients are businesses that almost by definition are running out of cash. Like, how in the world do you get paid?

Jeff Vogelsang: Weekly, it's a great question.

Dan Heath: On Sunday morning.

Jeff Vogelsang: It's not quite but close. I actually do all of the billing for our firm. I'm the managing partner and I actually do the billing. It is a very important part of our culture. Everybody has to get their hours and expenses into me on Friday night. If they don't, I am calling them on Saturday morning. I get up at 4:30 even on Saturdays, and I have their wife's cell phone numbers. So if they're not answering, I will start calling their wife's cell phone number and say, "Where are your hours?" So we bill every Saturday, and we expect to be paid via wire transfer, ACH, every Monday. It's not the type of business where you can afford to have a lot of accounts receivable outstanding. You need to get paid quickly. And we go back to when you asked about earlier, like, you know, what do you do first? Well, we're working on reducing expenses and improving that working capital liquidity position, not just so they can pay us, but so they can survive.

Dan Heath: What kind of personality do you need to be good at this work?

Jeff Vogelsang: Oh, I think my personality comes through. I'm charming, I'm a people person. You can't be overly charming, you're not gonna be a people pleaser. You have to be comfortable in uncomfortable situations.

Dan Heath: And so how much of that is a character that you play versus, like, your authentic self?

Jeff Vogelsang: It's mostly my authentic self. You know, I come across where I can have a gruff demeanor, but I'm usually, you know, these things are, you're quite busy from the minute you get there. And it's quite stressful, so that might lead to the gruffness, but you know, I haven't found that yelling is an effective tool. So to get to, you know, when am I playing a character? Over the years, I have occasionally, purposefully, scripted out how I'm going to yell. And it's usually in a broader meeting where I'm trying to, like, get everybody off of a stagnant spot, get some inertia and shock them out of it. And I actually was in a conference room once with a bunch of people, and one of my partners was in another conference room. And I was yelling, and I actually took, like, a Big Gulp cup and smacked it and knocked 32 ounces of soda against the wall. And then I said, you know, "I'm gonna leave. You guys are gonna talk about this, and when I come back we're gonna make a decision." And then I storm out and slam the door, and I go talk to the woman partner. And I just sit down casual, you know, kind of joking with her, and she's looking at me, she's like, "What the hell was that?" I'm like, "I don't know, they're stuck in the mud. I kind of figured I gotta do something to shake it up." She's like, "I've never heard you yell." I'm like, "I never needed to."

Dan Heath: Have you ever been in a situation where you felt, like, you were just in over your head? Like, there was just too much chaos to ever redeem?

Jeff Vogelsang: Yesterday, tomorrow, it is very common. You're very often overwhelmed. So when you, you know, I go back to your earlier question, you know, what kind of person should do this? You've gotta be able to handle being overwhelmed without losing it.

Dan Heath: Does this sort of black and white, no nonsense exterior that your job demands of you, does it bleed over into your personal life?

Jeff Vogelsang: I think for a lot of people in this business, it does. I worked for two other firms before I started this firm with my partner. I saw quite a bit of personal dysfunction, and it's one of the reasons that I wanted to start this firm. I said to my partner early on, I said, if we end up getting divorced, I'm 100% certain it's gonna be our fault. We're personal friends, our wives are friends, and you have to work very hard to maintain your relationships with your spouse, your kids, and your friends, because it could be very easy to get home. You know, you get back from the airport on a Friday night, you're exhausted, you're unhappy from, you know, the companions you had on that flight. And you just wanna, like, lock yourself in the basement and guzzle whiskey. It's not a healthy outcome.

Dan Heath: Well, and it seems like it would be hard to turn off, like, the authoritarian instinct that you're having to practice every day at work too.

Jeff Vogelsang: Well, I am fortunate, as are all of our people that we've married strong partners. So you either turn it off or you are beaten into submission.

Dan Heath: So authoritarian meets authoritarian.

Jeff Vogelsang: I don't know if authoritarian's the right word, but you know, there is an element where your spouse has to be strong enough for you to have this job. You leave every Monday morning, you come back Friday night, you are always stressed out. There is often work that has to bleed over into the weekend. The situation I'm in now, we've got facilities all over the world. So I've got a time zone problem where I may have to have a teams meeting at two in the morning on a Sunday. My wife isn't happy about that. But if I tell her a couple of days ahead of time, and you know, I make sure she knows about it. And she also has to believe that I'm managing these things so that I can balance my job and our personal life. She's fine with it. Yeah, I think if your spouse feels like, you've lost the ability to balance and you're not trying to protect your personal life, they will push back very hard. And what I've seen with some of my coworkers in past roles is that they couldn't balance it, and they would get divorced, and then they'd blame their spouse and say, you know, he or she couldn't handle what I have to do.

Dan Heath: So Jeff, we always end our episodes with a quick lightning round of questions. Let me fire away here. What is a word or phrase that only someone from your profession would be likely to know? And what does it mean?

Jeff Vogelsang: Workout, and when I say workout, it means you're in workout, and that's usually with your bank. And that is a workout department is no longer the commercial loan department. You're in the group where troubled loans go and they're trying to work you out of the bank. They don't call it workout anymore, but everybody who's been around still does. Now they call it special asset group or special asset division, sad, special loan group, slug. They all mean the same thing. Your company's not performing, our bank is unhappy, get the hell out of the bank.

Dan Heath: And what is it like to be in workout as someone that is holding some of the bank's money?

Jeff Vogelsang: Well, I'll give you both sides. When you're in the commercial side and they wanna lend you money, they're taking you to baseball games and giving you tickets to concerts, and wining and dining you. When you're in workout, you're getting no tickets. And if you're getting a meal, it's in a conference room, and they're catering in from Subway. You know, the difference is you're under a high level of scrutiny, they're unhappy with you, and they are turning the screws on you to force you to take the actions that they need you to take to protect the bank's loan.

Dan Heath: Just parenthetically, there's a great scene in Tom Wolfe's "A Man in Full" about a workout. And it's this Atlanta real estate developer who's in a windowless conference room with a bunch of bankers, and they're competing to see if they can make him sweat through his dress shirt.

Jeff Vogelsang: I have read that book, and I remember that part of the book where they want the sweat stains to go all the way down to his belt line.

Dan Heath: Very, very memorable writing.

Jeff Vogelsang: Exactly.

Dan Heath: Okay. What phrase or sentence strikes fear in the heart of a turnaround agent?

Jeff Vogelsang: First and foremost, we are a family business.

Dan Heath: Because?

Jeff Vogelsang: Well, very often, some or all of the family members that are in the business are under-qualified, under-motivated and under-accountable. They're only there because their family and their parents or grandfather or uncle, or whomever won't fire him, because they think, you know, I can't. And I can tell you, you wanna demoralize a high-performing employee, have him work for an underperforming family member who's never gonna get out of the way, never gonna be held accountable and is blocking his career trajectory. It's wildly frustrating, and parents just cannot be objective about their children. Most family members can't be objective about their family, and it's painful.

Dan Heath: What's a tool specific to your profession that you really like using?

Jeff Vogelsang: The main tool we have is we ask open-ended questions, and we shut up and listen. You'd be shocked at what people will tell you if you ask them the right questions and you just shut up.

Dan Heath: What are some of those questions?

Jeff Vogelsang: What's wrong with the business? I mean, that's it. And sometimes you gotta pry a little more, but you wanna keep it very open-ended and very loose, and you get them to start talking. Some are easier than others, but even with the tougher ones, once they start and they start opening up, and there's a flow of, you know, we've been pouring money into this opportunity for 10 years, it's never worked, it's never gonna work. We've gotta stop. You know, and you just kind of ask 'em, please keep going. I've routinely had meetings where I can get 10 pages of notes and not say a damn word.

Dan Heath: Hmm.

Jeff Vogelsang: They'll also tell me, you know, who's having affairs. They'll tell me who never shows up at work. They'll tell me who's a dramatic under-performer, and give me specific examples of why. We had a president of a division who was literally sleeping under his desk, a la George Costanza in "Seinfeld." And they would call me and say, "You gotta get down here." Because he'd have his door closed and he was snoring, and you could stand outside of his door and you could hear the snoring coming through the door. And I'm like, this guy is the president of a good-sized division. And it's not like he was a, you know, an older gentleman. The guy was, like, 40 years old, like, what the hell are you doing that you're sleeping?

Dan Heath: Did you call him on it?

Jeff Vogelsang: Yes, we made him available to industry.

Dan Heath: Jeff Vogelsang is a turnaround consultant and managing partner at Promontory Point Partners. This conversation with Jeff made me think about how certain professions almost demand a certain personality type. In an earlier episode, we had a couples therapist, and you need a certain personality to do that work. Like Jeff, he probably wouldn't work as a couples therapist, versus other professions we've covered, it seems more malleable. You could imagine very different personalities as high school principals or hairstylists, or nurses. I wonder why some professions seem more personality-centric than others. Maybe after enough of these episodes we'll figure it out together. But what we learned today in this chat is that when a business is in terrible trouble, you need someone who can be credible taking control as an outsider, somebody who listens and can synthesize quickly, and somebody who has the confidence to make fast decisions even when they can be very, very painful. And folks, that's what it's like to be a turnaround consultant. By the way, if you liked this episode, you might like one of our earlier conversations with a forensic accountant.

Chris Ekimoff: To me, it's much more about educating that individual when they call and they go, "No, no, no, no way Sharon could have done this." And you go, "Well, you know, I've met 11 Sharons in the past 10 years and they've all done it. So let's go in with open eyes."

Dan Heath: I am Dan Heath. This episode was produced by Matt Purdy. Thanks for listening.