With neither balance sheet nor income statement to guide them, O'Neil outlined the month's results. The advisers didn't like what they heard: company expenses were not fluctuating with sales volume, and a mainframe project was on its way to eating up more than half a million in cash, despite uncertain market potential. O'Neil believed the investment would pay off, but the advisers were not convinced.
At the end of 1988, sales were starting to decline, and the company had lost $600,000 on sales of $1.7 million. O'Neil was ready to listen. He abandoned his mainframe dream, fired six employees, and slashed expenses. He also asked his board for an appraisal of his performance. "I needed a sanity check," he recalls. "I couldn't tell what was going wrong."
O'Neil gave himself five months to implement the plan that he and the board had agreed on. Then they'd grade him, paying particular attention to his ability to focus effectively on realistic marketing targets, product planning, and financial controls.
By then the board had learned not to rely solely on O'Neil's firsthand account of the company's activities, and several took their own measurements. Chuck Morrissey, for example, arrived at a Micro-Frame presentation unannounced and seated himself in the audience of potential customers to get his own reading of Micro-Frame's message. Brad Spencer worked with the staff at Micro-Frame to assess attitudes and morale.
When the report card arrived, opinion was divided down the middle. Half the advisers thought O'Neil was doing a good job. The other side of the table disagreed. "We beat John up badly, no malice intended," Spencer recalls. "Just straight, honest feedback. Few owners would invite this; I have to credit John."
Given the division, the board decided to send one of its own, Chuck Morrissey, into Micro-Frame as a visiting chief operating officer for five months to see what the problems were and to work with O'Neil to solve them.
His advice was both practical and personal. "I noticed that in meetings, John would often answer questions directed at other people." Morrissey worked to change that, since he considered such actions destructive to the other person's self-image. He also went to work on systems problems, helping O'Neil build an easy and reliable accounting system. He instituted a weekly managers meeting and helped mold a cohesive marketing strategy.
However difficult it may have been for O'Neil at the time, he now says, "Chuck has lifted a huge burden off my shoulders."
What's in It for the Board
It's 9 o'clock on an August night, and Micro-Frame's board of advisers has just completed a three-hour strategy session -- a session with none of the apprehension of those first few meetings 16 months ago. Sales are up to $4 million, expenses are down 25%, and strategic partnering has been the talk of the meeting. Afterward, at dinner, O'Neil tells of the 100-hour, four-day, all-out effort he and his team made to win one of the company's largest customers to date. Everyone at the table has a similar story of odds overcome in nursing Micro-Frame to health -- and the fun they had in doing it. Morrissey, who teaches entrepreneurism and technology-management courses at Pepperdine, sees Micro-Frame as a welcome respite from his textbooks. "It's a living case," he says. Bob Cherry claims he gets "as much if not more than John does from this experience."
They've come to be friends in the process. Board meetings are often interrupted by contests for the best new joke or the most unusual electronic toy. "We're a better board today not just because we have a better understanding of the company's operations or even a better understanding of the market, but because we're all so much more comfortable with one another," Cherry says.
But for all its help, this brain trust believes the ultimate challenge is knowing when to stop helping and walk away from O'Neil and his company. "We have a sunset clause -- meaning we'll all be out by May after serving two years," explains Spencer. "By that time the company will need a fresh perspective, and it won't be awkward to decide who stays and who goes."
Meetings: Eight to 10 times a year. Usually gather off-site for three hours; then continue over dinner.
How recruited: Beyond turning to people whom he admired in his industry, O'Neil tapped two other sources: a local entrepreneurial network and a trusted consultant. Only two of the seven candidates who were asked to join the board declined -- both for lack of time.
Compensation: O'Neil picks up the dinner tab, and the board shares options on 1% of Micro-Frame's stock.
CEO's average preparation time: Three to four hours
A NOVICE AT MANUFACTURING
If there's one thing Don Beaver, 37, understands, it's service. Whether cleaning the grime off a factory floor or changing storm windows, all his early business ventures relied on an uncanny ability to make "Aunt Millie feel I was there holding her hand, understanding her problems," Beaver explains.
But hand-holding didn't seem to count for much when Beaver suddenly found himself thrust into the manufacturing business. After toiling away in the industrial cleaning business, in 1985 Beaver and his partner, Ben Stapelfeld, now 39, invented the Pig sock, an affectionate moniker describing a long tubular hose that slurps up dripping oil from leaky machinery (see "High on the Hog," March 1987). As Beaver recalls, the question wasn't whether they had a product, but rather how to make the product they had: "I hardly knew where to begin. Time clocks, unions, production lines, all this was new to me."
For help, Beaver turned to two local manufacturers, Dan Hoover, one of the owners of a $30-million fifth-generation paper converter, and Don Snyder, president of a $14-million lighting-fixture manufacturer, and invited them to be on the board of New Pig Corp. It didn't hurt that these manufacturers were also potential purchasers of the Pig sock and therefore would keep Beaver tuned into his customers' needs. Later Beaver recruited the talent to fill other needs. LeRoy Metz, a CPA and attorney, brings expertise on tax matters, and Mike Kranich, owner of a $3-million chain of jewelry stores and a director of Mellon Bank Central, tackles financial and retail questions.
