The sales team were misusing their travel privilegs

The sales people travelled a lot. The sales manager signed their expenses. I was supposed the sign the manager’s expenses. Our accountant comes in once a month to do the books. Last month he expressed his concern to me about the rising costs of the sales force. We now had three people plus the manager.

I began to look over their expense claims and noticed they were staying in expensive hotels, bought very expensive meals and drinks, and stayed overnight at places where they could easily drive home. When I questioned the manger, he said these were all legitimate expenses and it cost a lot to entertain customers. I suggested we establish an expense policy. At first he resisted but then agreed. The next month I checked and there was no real change in behavior.  I told the manager he needed to act now.

The next thing I learned through a friend was that the sales manager was seen in a hotel with a woman who wasn’t his wife in city X. I checked his expenses because he was supposed to be in city Y. There was a receipt from a hotel in city X but when I called the hotel, there was no record of his stay.

I hate confrontation, but met him the next morning. He denied everything and got really upset with me. He got very angry but couldn’t explain the situation. I told him we were going to audit all of the sales team’s expense for the past year. He got up, told me he quit, and left the building.

 

Transparency audit theft expense reports trust employees corruption 

My agreed to a number of side agreements with the customer

We agreed to supply company XYZ with eight kilos of product each month for one year. This was our first large contract and everyone was excited. The terms of the contract were okay, but not great. My partner said this was necessary to get started.

We shipped the first order and I called the customer to follow up. They were very pleased with the product. After 30 days they hadn’t paid. After 45 days we had shipped another order and still not payment. I called the customer again to see when he would pay. He said the agreement was 90 days credit, which surprised me because that wasn’t in the contract I saw. When I asked my partner, he said it was a verbal agreement and he had to do it to get the contract. We had to borrow money to bridge the payment period.

At the end of the six months, we got an invoice from the customer asking for his 7.5% override discount. I didn’t know what this was and my partner denied any knowledge of this. When I spoke to the customer, he said there was a side letter setting out these terms. He sent it to me and it had my partner’s signature on it.

The investors' board members prevented us from taking outside investment then gave a lowball offer

The first institutional investors wanted to have three Board seats. We decided to allow for seven seats but only filled five at the start. The Board meets every two months and deals with all the routine issues.

Business was growing and we could see from the cash forecasts that we would need more money sometime next year. We wanted to start raising money immediately so we wouldn’t run out of money. The Board members from the investors objected. I thought about it as a tactic that would make us more vulnerable to a lowball offer. The less cash we have the less leverage we have.

A friend said he was interested in investing in us. We met, agreed on terms, and then started the due diligence. Everything went well and the offer was reasonable.

We agreed on a term sheet and all that we needed was Board approval. The investors’ Board members voted no even though we only have six months cash left and this was the right thing to do for the company. We tried to appoint more Board members and the investors’ members rejected that too.

Two months before we ran out of money, the investor offered a loan that would convert into equity 35% below the offer we had from my friend.

Is this legal?

My staff were hiding the poor customer feedback from me

We started getting customer feedback by putting cards in the product and calling them directly. The feedback wasn’t good. People said the product didn’t live up to their expectations. They said customer service was poor and it often took a week to get a reply. Some said our staff were rude. The phone survey and the cards showed the same pattern.

The team questioned the research method. They said they didn’t get any complaints, that they reviewed every customer letter and monitored response times. I decided to do two things: read all the comment cards and call customers myself. What I read and heard was deeply disturbing. My team wasn’t telling me the truth. They were hiding real problems we had with our customers.

I gathered everyone together and told them what I found. I told them that from now on every problem should be brought to my attention. I also told them every product would have a survey card with my name and telephone number on it so that I would know what was really going on. If we start a company based on hiding data, rejecting market feedback, and ignoring facts, our business is doomed.

The CEO was setting unrealistic expectation with the board and investors

No matter how much time and effort we put into controlling our project costs everything always cost more and takes longer than we expect. We’re not dumb – we just can’t get it right.

We tried to figure out what was going on. After a lot of discussion, we focused on what the CEO expected. It emerged that the CEO made promises to the board and investors that he knew he couldn’t keep. He then tried to impose these targets on us and the projects. He just thought it was easier to manage the board this way.

We told him this wasn’t the way we wanted work. We needed honesty and transparency and it was better to face reality than to create expectations that we knew were unrealistic from the start. He and we couldn’t rely on this type of behavior as the business grew.