Company Doctor

To his turnarounds he brings a heavy dose of discipline, a flair for the con game, and -- most often -- a pink slip for the CEO.

He has about him the air of a country doctor -- sympathetic, avuncular, and wise. His diagnoses are laced with homespun aphorisms delivered in a Nebraska drawl. But don't be fooled by the disarming demeanor, for behind it lurks a skilled physician who almost always prescribes radical surgery and bitter medicine for his ailing patients. And almost always the patients survive.

The patients in this case include more than a dozen high-technology companies that, to most practitioners, once looked as if they were headed for the morgue. Q. T. Wiles leaves it to his partner, venture capitalist William Hambrecht, to negotiate the terms of his consultation -- inevitably a large transfusion of new cash in return for management control, and a big equity stake for Wiles and his fellow investors if successful. Once the deal is sealed, most of the therapy is administered on site by a team of emergency management technicians who are assigned to many of the top management jobs and are well schooled in Q. T.'s rather elaborate set of "disciplines." Periodically, Wiles will make house calls on each of his patients, during which he prods, cajoles, berates, and flatters managers who gather to report to him one by one on their failings and their successes.

It was his training as a chemist and mathematician that taught Wiles to break any problem down to its smallest components. He first applied his management techniques at his own company, a capacitor manufacturer in Ogallala, Nebr., during the 1950s before selling Goodall-Electric to TRW Inc. Then, as a TRW executive for 12 years, he helped the conglomerate acquire young electronics companies and turn them into a group of profitable divisions. His association with Hambrecht & Quist began in 1972 and was formalized with the formation of the firm's Phoenix Ventures turnaround fund in the early 1980s.

Senior writer Robert A. Mamis and senior editor Steven Pearlstein spoke with Wiles at his clinic in Sherman Oaks, Calif.

INC.: You've been brought into a number of different companies. Is there a common thread in terms of the problems you find?

WILES: Well, remember, these are mostly technology companies that, at some point, were unable to keep up with a marketplace that was changing very fast. Either they hadn't managed a new product correctly, or their technology had become obsolete, or they hadn't been able to deliver the new product on time and missed the window of opportunity.

INC.: And how does the person who is running the company, and who meets you at the door, view that situation?

WILES: Generally, he thinks that all he needs is a little bit of time and money and he can solve his problem.

INC.: Is that it?

WILES: In the end, it is a management problem, and he really has no idea of how to handle the situation. Remember, now, that most of these companies had been growing at 35% and 40% a year for a number of years, and all they knew was a growing market. Now, they've hit a flat market or a down market, and they aren't equipped for that, emotionally and otherwise. The organization, more often than not, is still the CEO and a bunch of helpers versus a genuine management team, and they have no idea how to handle the situation.

INC.: Is it really that the CEO doesn't know what to do?

WILES: The first problem is that he underestimates the size of the problem. Rather than say to himself, "What different management style do I need?" he says, "How am I going to work harder in the same style I've always had?" And hell, there isn't any time for him to work harder -- he is already working 18 hours a day.

And then he hits the second problem. The company's going down, and he's faced with a series of decisions that look very hard and painful for him to make. Maybe he's going to have to make some layoffs. Maybe he is going to have to fire some of his top people -- people who've been with him from the beginning. Maybe he's going to have to pull the plug on a new product. But he can't do those things -- emotionally, I'm speaking now -- so he vacillates, or he tries to avoid them by trying other things, and that only makes things worse.

INC.: And that's when Q. T. arrives on the scene.

WILES: Usually about that time, yes.

INC.: And what does the CEO think your role is?

WILES: He thinks maybe I'm coming in to help him, which is only partially true. Because in these turnarounds, we have really bought control of his company. And so the first understanding he has to have is that I'm going to be the boss no matter what my title is. The question now is what his role is going to be, not the other way around.

INC.: Why should this come as any surprise? After all, he's been involved in the negotiations that led up to your arrival.

WILES: Honestly, we aren't completely candid with ourselves or with the people we're negotiating with when we set these things up. You really hope that you are going to be able to use the people who are there -- you hope that things will work out. But they seldom do.

INC.: Why?

WILES: Because it is seldom that he can stand the pressure of implementation -- the intensity we come in with. There's very little emotion in our decision. And his decisions are mostly emotion. And so 90% of the time he goes away. Then, after it is all over, he says to himself, "God, that was easy. I could have done that if they had just given me a little time."

INC.: Does he really think that?

WILES: Absolutely -- I think all of them think that. The general consensus among them is that Q. T. just got lucky -- he was there at the right time.

INC.: And are they right or wrong?

WILES: They're wrong as hell. After all, they're human. They don't see their own weaknesses, and so they can't go to work on the things that they are weak at. Remember, these are guys who start companies that go from zero to $100 million in three years. How could they be wrong?