Harvard Business Review

Part of being a leader means deciding between what's right and what's best if the two are exclusive. Communicating is always the right thing to do; the best thing to do is to pick the appropriate time that doesn't disadvantage anyone. I would tell the customers about the current situation and the options I have on the table. I would solicit their advice and go back to the drawing board with senior management and find a solution.

The probable solution might be to try to sell the company if senior management is not passionate about their work or bring in a whole new team, selected in part, by major customers.

I would tell the two customers who want clarity about what they had heard that whatever information they had received from whoever they had heard from should be confirmed and verified by myself.
I would let them know the first thing that I care about in this situation is my commitment to them (the customers) and I would mean it -- even when selling my company.
My customers will know that I am the kind of guy who would keep my word (of living up to my commitment to my customers) because I am a true believer that that's the way I win, too.

No doubt this is a difficult situation for David. Keeping his customers is vital for anything so he needs to focus on that. This means it is key priority for the firm, thus a key assignment that he will personally have to handle during the transition period. At present, his customers have doubts about what's going on: this is a great chance for David to get close to them. He should not explain in debt the difficulties the company experiences, since this would erode confidence. What he MUST do is build confidence with his customers and ensure that - through his personal dedication and service - Clarinda clearly stands out versus low price commodity competition.

No doubt this is a difficult situation for David. Keeping his customers is vital for anything so he needs to focus on that. This means it is key priority for the firm, thus a key assignment that he will personally have to handle during the transition period. At present, his customers have doubts about what's going on: this is a great chance for David to get close to them. He should not explain at all in depth the difficulties the company experiences, since this would erode confidence. What he MUST do is build confidence with his customers and ensure that - through his personal dedication and service - Clarinda clearly stands out versus low price commodity competition. After this immediate action he must focus on broadening customer base and over a year or so bring the business in shape to sell.

I think David needs to contact his customers and explain that they will be best served if Clarinda is absorbed into a larger entity. He should reinforce the excellent service his company has provided in the past and how keeping multiple providers in the typesetting business will maintain competition and is in the customer's best interest. He should be frank in stating that customer defections will hurt him in the short term, but more importantly, hurt his customers in the medium/long term. He should ask his customers to continue to support him and to continue to give him a chance to bid on their business. In return, he will do everything in his power to ensure the transition of Clarinda is smooth and that the company continues to provide cost competitive services.

Firstly, David needs to communicate about the problems the company faces within his company.Transparency helps to clear confusion within an organisation.
Secondly,
I don't think he should tell his customers more than what is required or else they might start looking for alternatives which can affect clarinda's cash inflow.
Thirdly, i think david needs to fire the star salesman who eats too much into the company profits from pearsons. If this guy was a team player,he wouldn't ask for more than what is required and would think in terms of the company's growth.
Lastly,david will have to get over dan's loss and look for a quick replacement or better still,do the turnaround job himself.He has 2 options,either he can bring it around and run it like his dream company or he can make it attractive enough to sell it at a good price. In either case he will have to boost company sales.

The axiom that "communicating is always the right thing to do," like fashionable dictates of the time, is simplistic and perhaps disingenuous.

No company--or manager--ever shares all information with customers, suppliers, employees or shareholders, even if that information would be relevent to their current or future decision-making.

Rather, the issues here, and in general, are what (how much) to communicate, to whom, and when. Having lost much of its recent business to lower cost competitors, and David's desire to "get out" suggests Clarinda remains vulnerable. So, the first order of business should be to clarify Clarinda's value proposition, going forward, internally. Without the semblance of a plan, customers will lose confidence and look for alternatives. Presumably, the needs of customers Clarinda has retained differ in some meaningful way from those who defected. This should provide a foundation for discussions with all concerned and key customers. David can and should also be frank with customers about the state of the industry and its impact on Clarinda, hence the layoffs. Assuming Clarinda's ability to fulfill its customer promise remains intact, it should be backed in deed by a re-doubling of effort. This should buy Clarinda, David and Rich a little time while they sort through their respective options.

It is also critical to rally the troops internally, and it will take a little more frank talk to do so. I am not convinced, though, that David is the man for this job. His desire to cash out now has the appearance of a Captain looking to abandon a sinking ship without the crew. If he remains firm in that desire, I hold little hope for the survival of Clarinda, but whatever hope does exist rests on Rich's shoulders, and he should be the one talking to employees. The better solution is for David--of his own accord--to realize that this is not the time and place to bail (assuming he could even find a buyer), and to commit himself to righting this ship.

This situation is complicated but clearly not a dead end for David. I would consider this case a usual challenge of entrepreneurial life and tackle it as follows.

I would seek for more and more business via personal relations or existing sales force. This will minimize dependency on a limited number of cash cows the company currently has. Current situation with new business acquisition is unacceptable.

It is difficult to build a business without external funding and expertise. I would go and look for investors for a maximum of 25%+1 of the capital, trying to sell based on prior year’s volumes and potential for future growth. Selling a stake in the company to a right investor will help trigger new growth.

I would visit in person all major clients and tell them the truth, but not more than necessary, to keep them satisfied.

I think I cannot leave my customers lurching in the middle of this crisis , as that would be unethical and would also hamper my reputation as a leader and would effect any future businesses that I start.

One thing is clear, no matter what David does, he cannot afford to loose his customers.

So If I was David I would call my customers and apologize to them for lack of information available to them. Additionally, I would try to allay their fears and apprehensions regarding the future of Clarinda by putting across a solid plan for the next few months for the revival of the company and its growth.

I wouldn’t want to sell my company at this moment as it would not fetch me much and I would have to settle for a lesser deal , So once I get my company out of the crisis , I can take a call whether I want to be in the business or bail out. Either way , I will not betray my customer’s trust and would save myself from bankruptcy.

David should list his customers in order of relationship strength and advise each one of his dilemma.Without giving too much detail advise that he may need to put the business up for sale in the near future , but will negotiate good terms with new owners for business of existing customers.

People are more willing to empatize if you show you care about their business even in your troubled times. Remember its not just strangers , but your customers.

Customers do strange things, like give suggestions that can help add value to your decision -making process, there may be a solution waiting to be offered. Also, first hand information helps to build confidence, both for customers and leaders alike.

When the ship is sinking, you can call for help, or minimize the losses in the wreckage.

In the current situation David does not have too many options. The situation is completely against David and his company.
David needs to clearly communicate the situation to his customers and ask them to help. It is much better to communicate then to keep customers uninformed and also there is a probability of his customers standing by him.
David should not dealy and respond to his customers as soon as possible.

David’s decision to buy the company appears to have been a situational decision. He continues to be driven and “reacting” situationally. Under his leadership the internal guidance system of strategic thinking was never in place from the get-go; and that void of guidance thinking has taken them on a bottle rocket ride. David never developed an exit strategy, so now the company is faced with the conundrum of the cumulative decisions and the subsequent actions which were situationally driven versus strategically driven.

The company is already scuttled – there were no controls. I suggest David get out as fast and with as many $’s as he can (the publishing and printing industry currently can best be described as a street fight). An expensive lesson, but valuable for the next time.

Will Our Customers Bail Us Out?
David, ought to sit down and note the following instead of complaining about the customers bailing him out. What are the customers? Once they gave him profit, once he discarded the Christmas card sending to them, once he told of the few in front of the staff.
No. The whole thing is not the customers; it is what he has in hand now. Let us re look at these.
Typesetting company> The PC is taking over most of the printing of the cards and advertisement. Via net.
His first note> They’ve lost their biggest customers to cheaper compositors in India. The Indian and Chinese goods are everywhere as they are cheap and durable now. Gone are the days when we frowned on the quality of the goods a robust. Now we want cheap disposables ones.
David had to fire Dan, CEO, for alcohol abuse. The right step, as I do not want to come in the premises when the talk is on with the smell of liquor.
Rich’s lawyer friend Jack advises not telling customers anything.
There it goes. We have already started spreading the bugle that we are sinking help us please.
Jack argues that if he shares the inside information, customers might defect anyway. Count me in.
David first ought to seek what he competition in Indian and Chinese printed goods are offerings. May be they are very cheap and he had never looked at the avenue as most businesspersons think they are right and stick that policy. Thinking inside the box.
Having done his comparison he can perhaps go to the banks show the past B/S cash flows and look for the cheaper machineries while he carries on the small margin to keep the salary paid.
He has to survive while keeping the coast and keeping all the matter of begging from the customers at halt. Remember Solomon and Solomon?
David may have to call the family members, like Indians and Chinese do, to do more work in the printing then stay at home.
Customers are not like GOD. They give when you pray, beg, fall on your knees, cry, and plead as you bleed. Why should they want to water the falling tree?
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa

I would recommend action on multiple fronts.

First, look at your product portfolio are you actually delvering services which can be replicated by another company in any region more economically, if yes, work on improving these services. A company can fight a valiant battle (read emotionally charged battle) for sometime but sooner or latter the economics catch up. Chances are there is a white space, e.g. in the same scenario they would work as aggregators for design outsourcing the execution and keep the thoughts as close to clients and with that themselves. With cultural differences and different approaches customers would be comfortable dealing with a firm which understands them best.

Second, visit these customers, they have a complain and want an explanation, perhaps it is good time to understand the needs better. Doing that and working first point together gives you a required prespective on things which require urgent attention and has the maximum potential. Some of the relationships particularly ones not based out transaction but provide servies are take longer to acquire and give some buffer and feedback before they leave. That is if you care to listen. And yes be open to customers, they would value you more!

Third, cut costs, see how you can cut costs interally, firing some people might be one step, reducing the product portfolio would be another. Focus on few things which give you maximum revenue or has the potential to give to the most.

In business you should always be open with your customer and tell them what is happening.If you do not tell them the truth, they will always hear it from your competitors.

In this case David has to vist his customers and tell them the challenges which his company is going thru, and what action they are taking to address the challenges and expected time frames.

With this approach he will gain trust and respect from the customers.The customers might even offer him alternatives to help him come out of this situation quicker.

David, he who steals your purse—or poaches your competitiveness—steals trash. 'Twas yours; 'tis his, and has been and will continue to be a fulcrum of economic Darwinism. But at any and all rates, while cutting your losses—even if they amount to $2M in personally guaranteed loans—safeguard the immediate jewel of your soul. To wit, capital budget for and insure your reputation; its equity may be all that will remain solvent.

The startle response and the flight or fight reflex likely dictate that—at least in the interest of self-preservation—"getting out" is the preferred method to remedy this situation. Furthermore, there seems to be the angling toward preemptively jumping ship before the customers beat Clarinda to it. If only in the interests of the aforementioned self-preservation, it remains in your best economic and personal best interests not to mortgage the immediate jewel of your soul for reasons having to do with indecision, timidity, sloth, or deceit. If the future is of any concern to you, do not be the one who filches from you your good name.

And leaves you poor indeed.

Until David understands the "core" of his business, he is doomed to fail. For David's company to be operational and successful, he has to take into account how he treats his customers, suppliers, employees, and the global village in which he does business. David must understand that in almost all cases there will be companies willing and able to provide similar products to his customers; therefore, the way his customers are treated dictates which company becomes their supplier.

With this said, David needs to come clean, considering the business was a struggling business to begin with. He also needs to assure the customers of his renewed commitment, and intention to bring onboard the right people to turn the company in the right direction. Without the support of his core (customers, suppliers, employees), consider this another failed company. Remember, a business that destroys its “Core” soon looses it all.

As per my understanding the problem lies with David and ppossibly in his ability to run a business.The case states that the growth has stalled again,which means it has recurred.Does that not imply that when the company was bought over there must have been a few problems that plagued the business and that were not addressed in a way desired only to resurface again.

Regarding whether to share with the customers or not- i reckon that its not a debate.Davida has to share with the clients as to whats on with the company.First,in todays transparent business environment its almost impossible to keep such things close to ones chest.Second its harmful in the long term to spring up surprises.Herein,rather than shocking the clients a conducive environment should be created wherein customers are given comfort and logic over a period of time about whats happening.

Since David bought Clarinda a couple of years back one can again assume that he is some kind of funding guy.It will serve his purpose right if he is transparent and atleast secure his image as one transparent,honest and straightforward businessman.

I seriously doubt being to open with client is the right thing to do. As a service suplier you should be the one fixing the problem, people like to think that you are succesful because of them, not that you are in trouble... You can not bring to much questions in the head of your client, they have to see you as a pro. that can help them grow. If you say you have problems, they will think to cover their back with someone else and to be sure, they will start doing business with them and once it is started, it is too late...

Tell your client thay are importnant for you and that you need their business because it is the only thing that is realy true.

Will Our Customers Bail Us Out?
David.
I have an anecdote that may help.
I was in 70s working for an audit firm as tax manger dealing extensively in tax only. That was a real good work. Another audit firm partner wanted my services. Mind you, I will reserve the word needed for now, as I was not aware of this then.
He was in the social club as I was and a very good player of tennis. He was Australian. He approached me and asked me if I wanted to play better tennis as I had just started tennis. I took up the offer ad we decided to play after the players gad gone and on Sunday mornings before the players came. This was the month of October and November. End November he offered me twice the salary, car allowance , audit travel allowances, insurance, two months study leave and no questions asked on petty expenses like coffee to the tax officers.
Did I leave my old employer? Yes. Were they depending on me? Yes. The old employer immediately offered me the same package. Did I take it? No. why?
When they knew my potentials why did they not give me, what I deserved was my question the mind. Did I think of customers? Yes. They were with me as I hade done them many favours reducing their taxes.
I think at time we undermine our employees and customers. We lean on the customers too much leaving the employees aloof or take to much into the clutches the staff leaving the customers aloof. The thin line is very tricky. It is disastrous at times.
Any escape routes now. I doubt. .
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa

The best solution is to do a meeting.There will be done a brainstorming conversation with the appropriate dose of truthness.
Hear very carefully the others partners opinions and then with demokratic methodology,take the right decision...

My view is that he missed the big picture. What is that? The industry is not in a good shape. The layoffs may not be due to the company's performance but due of changes on the macro-environment. Most of the academic journals are distributed through electronic databases such as emerald, EBSCO, etc. Books also the same, you can get an e-book or even download it from the Internet.

Whether we say the truth or not will change nothing. Clients are aware that the industry is declining and surely they will seek ways to reduce their suppliers. This may be a "good excuse" to press Clarida for better discounts, lower prices, etc. that will reduce dramatically the firm's profit margin or even to eliminate Clarida in order to use this case to put some pressure on other vendors to reduce prices. There have been also some new innovations such as http://oreilly.com/openbook/. So what are doing now? Frankly speaking, the company is trouble. I would try to diversify and seek for new market niches, mostly using new technologies, such as distributing e-books and / or something like that.

Finally, never use your own property for loans....don't be a fool!!

I believe David needs to sit down with its top management to discuss the company and industry wide problems to better assess the situation. clearly he is not in a state of clear mind to get the company going in the right direction. The communication with the employees is also key to success. David can find the help he is seeking from the front lines as the sales force has strong relations with the customers. He needs to take them on board to be successful.

After agreeing on a roadmap internally, David can visit the large customers with the sales reps to explain the difficulties company is having and state the long term vision of the company. He can turn this into an opportunity to be closer to the customers and provide more value added services that will strengthen the ties between the customers and Clarinda.

From the brief description available, the following might have helped:
1.Call Customers and explain outsourcing as the main reason for layoffs.
2. Build Resiliency at individual as well as company level
A part of it could be by forming a "Crisis Mitigation Cell" to explore "Out of Box" thinking for innovative solutions.
3. Project a positive image to self/customers and evolve a strategy for a long term growth & healthy "Customer Relationships" where customers are more of "partners".
4.Initiate measures to increase work and cost cutting in the form of technology, organizational work culture, outsourcing i.e. no to give up without trying.
5. Build up a culture of belongingness and collaboration amongst employees ("Human Moment") towards rectification of growth hindering attitudes such as those of McSewenson.
6.Try having Clarinda approach more closely to being a "Learning Organization" with a "proactive approach" rather than a "reactive approach". Have a mechanism of "Double-loop learning" in place.
7.Have an effective and efficient feedback mechanism of the progress of measures taken.

I suggest that he resign at once. Clearly the industry has turned against him. By this time, the outsourcing has become a cresting wave and domestic production hasn't measured up. Deconstructing layers of inefficiency in a decrepit company is a PITA that isnt likely to succeed. He hasn't invested much more than 250,000 anyway, and rest is paper profit. If he quit, he would end up on his feet somewhere else, possibly with decent salary and benefits.
Hey read his book "Typo - The Last American Typesetter or How I Made 4 Million Dollars"

Sell the company to a strategic buyer and get out. As soon as you've lost your passion for the business you do it harm. As for the customers, the layoffs can be positioned as right-sizing for a new owner.