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A Business Lesson From History

Imagine this scenario: there’s a new startup in a very competitive field. It’s off to a shaky debut but has real promise. The CEO is tall, aristocratic, smart, taciturn – the perfect qualities, he is indispensable. Above him is a board of directors that is divisive in the best of times. They spend most of the time arguing among themselves, in the two years the company has been in existence only two directors have bothered to visit the physical plant.

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The CEO

Below the CEO are two highly capable, much needed for completely different reasons, officers. They have the same title, diametrically opposed personalities, and are untied only in the written-in-stone belief they are both more qualified than the CEO and the CEO needs to go. The CEO suspects this, but has no proof, even if he decided to act on his hunch and save himself much grief down the road, he can’t fire either of them without board approval.

Just below the two bickering officers is an upper management type who’s brilliant, improvisational, but high strung. He is devoted to the CEO.

With the company on the verge of bankruptcy the manager pulls off a miraculous product launch that succeeds far beyond all expectations. It is one of the greatest success stories in history. The company rejoices, the markets respond accordingly.

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 The Manager

But, there’s a problem. One of the officers takes all the credit, doesn’t even mention the manager in his emails or press releases. The manager, as anyone who ever met him in any capacity would guess, takes it poorly and snaps – he issues his own emails and press releases and appeals directly to the CEO for relief.

The officer that took the credit is a political animal, he immediately goes to the board over the head of the CEO and moves to have the manager fired – for cause. The board runs with it, the CEO is buried in day to day operations and, regardless, shuns politics, so he leaves it to them to work it out.

The Officer

  The Officer

The manager gets wind of the complaint to the directors, that’s soon followed up by notice of a hearing in some indeterminable ‘near future.’ Meanwhile, six other managers are promoted over him.

This is a good place to note the following: this startup spun off from a long established company that had settled into the doldrums. The spin-off happened in a flash, virtually overnight, what few documents the founders drew up before launching were knock offs from the original company. No one had had the time – or inclination – to do more than hastily incorporate. Operating agreements, much less employment agreements and guidelines, do not competes and non-disclosures were never enacted.

With the hearing continuously postponed and daily leaks to the media about the manager’s ‘malfeasances’, the manager breaks – he’s had it – but he doesn’t resign, he becomes uncharacteristically quiet.

He arranges to sell one of the company’s most sensitive properties to the competition – the original parent company. It will ruin the start-up, virtually insure its demise. At that point, the best it could hope for would to be bought out by the jilted parent, though heads would roll.

The manager is stopped only by sheer, good luck moments before the handoff. By the end of it all, the manager is

The Board of Directors

The Board of Directors

hired by the parent company; the two officers subsequently disgrace themselves – one is fired, the other allowed to retire; the company gets its act together and gets to all the documents and agreements it should have had from day one, several lawyers pitch in to plan it all out; the CEO becomes chairman of board.

Without even looking at the images, you probably knew early on that the start-up is the United States circa the Fall of 1777. The CEO is, of course, George Washington; the board is the Continental Congress; the officers: Horatio Gates & Charles Lee; the manager Benedict Arnold; the miraculous occurrence – Saratoga. By the way, one of the two members of Congress to ever travel to the ‘front’ was also the oldest member, Benjamin Franklin.

It just goes to show that there’s nothing really new – the United States went into business virtually overnight – few could have anticipated the Battle of Lexington and Concord; no one could have foreseen the carnage of Bunker Hill (really, Breed’s Hill but …) cementing the deal.

The United States was a vast undertaking and it was done on the fly and under intense pressure – the kind you can only get ticking off the most powerful nation on the planet.

In other words, it was hardly planned and in its early days that lack of planning was almost fatal. Several times.

In the long run – except for the citizens of New London, Connecticut, the British Brigadier General Arnold burned it to the ground in 1781 – the lack of planning and the Arnold affair did not have any real long term effects.

But it could have – Arnold warned General Cornwallis not to base his army out of Yorktown, he was, thankfully, ignored.

History – a lot of lessons for a lot of businesses.

Brown & Sterling

Brown and Sterling, P.S. is dedicated to helping small to mid-sized business owners and entrepreneurs of the Pacific Northwest. We’ve been advising businesses from formation through owner exits for over fifteen years. With a team of seasoned attorneys with expertise in business, taxation, employment law, and real estate law, our firm is uniquely situated to walk business owners through all of the intricacies of a business acquisition or sale.