Carroll had been working with L. Vaughn for three months when, in early 1980, he assembled the embattled owners for an afternoon meeting. He handed out a 20-page business plan; it was the first time in anyone's memory that L. Vaughn had had a business plan.
This company has great potential, he began, if we can just clear up some issues involving responsibility and authority. He read aloud relevant passages from textbooks. He showed the owners an organizational chart and pointed to where the president sits. You may call each other partner, Carroll said, but this is really a corporation. And the person in charge, he warned, can't be very effective if every decision is second-guessed. The family members sat quietly as he spoke.
Furthermore, Carroll went on, you are going after the wrong kind of jobs. We need to cultivate contacts among designers and architects in New York City to get those higher-margin jobs. The owners also have to work together to button up inefficiencies in the company's production cycle. Too many errors -- chipped cabinets, desks with the wrong number of drawers, paneling that arrived late -- were turning thin profit margins to sawdust.
When Carroll finished, he invited responses. Dick Vaughn cleared his throat. The afternoon sun ducked behind the clouds. Carroll wondered if the owners had even heard him. "We just weren't ready to accept it," says Dick today. Besides, the hour-long analysis didn't change the basic problem. "It was a good talk," says Charlie Vaughn. "But Mike Carroll didn't have the power to carry it out. No one was given the power to make those decisions."
Some things did change, though.
Although he wasn't by nature much of a leader, Dick Vaughn now had Carroll backing him up. Over lunch every day, Carroll pounded the message into Dick's head: you are the president, you have the right to make decisions. I do, don't I? Dick would respond. Bolstered by Carroll, Dick hired Loewenstein to start a new marketing division. He recruited a chief financial officer from the outside. Dick also added Carroll to the board -- the first nonfamily member ever to serve -- though he said it was the bank's idea, not his.
Loewenstein had a decade's worth of valuable contacts. Armed with slides and pictures, he started carrying out Carroll's mandate to reposition the company. Gradually, L. Vaughn began landing bigger and bigger jobs. AT&T's corporate headquarters. Trump Plaza & Casino and The Tropicana Hotel, in Atlantic City. The Aetna Life & Casualty Insurance offices, in Hartford. And the company's revenues started moving smartly: in 1982, sales climbed 70% to $9.5 million. In 1983, sales rose 30% to about $12 million.
Paradoxically, the big jobs only hastened the company's decline. A repositioning of the company had been desperately needed, but without equally dramatic changes in management and leadership, L. Vaughn wasn't ready to cope with the demands of complex woodworking jobs. Losses increased to nearly $400,000, and the company's short-term credit line ballooned from $192,000 to $1.6 million.
The company had done everything right in winning the AT&T contract. Loewenstein attended to every detail. For the mock-up, he flew to West Germany to find a rare Burmese teak. When the architect told him that it was important to create a homogeneous look, Loewenstein suggested a method for matching perfectly the inside and outside door panels. And according to industry sources, L. Vaughn's bid of just under $4 million was far and away the lowest. The closest bid, according to one industry source, was said to be nearly $1 million higher. The reason would soon be clear.
Delays began almost immediately. The squabbling, which had intensified, didn't help any. When Charlie got fed up with Dick, the president, he would simply shut down the mill and go home. "There was finger-pointing back and forth," recalls Harold "Skip" Belsky, who was then chief financial officer. "There was a lot of yelling and jumping up and down." Once, Dick asked a cousin to work overtime. He's not working late, said the cousin, pointing to another partner, why should I? Family members lunched at different spots to avoid one another. "There were weeks when everybody was walking around not talking to others," says Loewenstein.
Loewenstein, who felt his professional reputation was on the line, was furious. He charged into a board meeting to tell the owners what he thought. "I can't believe you people," he shouted. "We get the jobs, all right, but then when it comes down to delivering what we say, we don't carry through." He stopped and scanned their faces for a response. Charlie gave the only reply: he blushed. Loewenstein was fed up, and he soon quit the company.
The company was crumbling around the family. The AT&T estimate was way off; tasks that had been estimated at 80 hours took more than three times that amount. Even when they had the numbers in front of them, the cousins couldn't agree on what they meant. L. Vaughn paid for it. Hammered by overtime costs, the company lost at least $1 million on the $4-million job.
When Dick Vaughn closed the books on 1984, he was opening the final chapter in the story of L. Vaughn's disintegration. The company had lost $700,000 on record sales of about $14 million. There must be some mistake, he thought. He had been working seven days a week, promising everybody that the company was going to post a profit.
The company's banker wasn't interested in excuses. You deceived us, he said. No, Dick pleased, we took too many jobs at once. "If they didn't believe my story, there was nothing more I could do," he says.
The bank urged L. Vaughn to hire Peter Pelletier, a turnaround pro. Pelletier quickly pushed the family aside. During his first meeting with the family, he turned to Dick and asked, "What is your goal in the woodworking business?" "I want to be the best woodworker there is," Vaughn replied. Pelletier's voice boomed back: "Don't you want to make a profit?" Dick soon found himself without a job -- or even an office.
