The story of what happened when a company's founder brought in his wife to run the company.
You know the nightmare: bring in a professional manager to help run your company, and next thing you know, you don't have your job. Now imagine that the manager is your wife
It was the kind of management meeting that runs on its own momentum, with agenda items nearly checking themselves off. Should we buy a pay phone for the employees to make personal calls? No. Have the 16,000 Mineral Magic kits on back order come in yet? They're on their way. What about the search for an art director? It's ongoing. Then Fred DaMert, wearing his trademark psychedelic shirt, made what in other circumstances might have sounded like a modest proposal.
"I'd like to launch a home page on the World Wide Web," he said, going on to explain how a competing toy-and-gift manufacturer had put its catalog on the Internet. "It would cost about $2,500 to do it." Everybody knew what was coming.
"There's no money in the budget for that," the CEO shot back, and after consulting her trusted managers, she instructed him, "You'd better make a presentation to the budget committee."
He touched his lips, nodded, and said nothing, tapping his pen on the table. Fred DaMert wasn't just looking for a few thousand dollars. He was looking for a way to contribute to the $10.5-million company where he had worked since 1973. Actually, it was more complicated than that. DaMert, 49, had founded the DaMert Co. back in 1973, after inventing a popular rainbow-making prism. Now, in April 1996, about a half dozen years after bringing in a professional manager to, as he put it, "take care of the money," he couldn't get even the smallest of projects approved without a struggle.
DaMert might have been able to console himself with a little historical perspective: he certainly wasn't the first founder-tinkerer to find himself displeased -- and displaced -- by the arrival of an outside manager. But for Fred DaMert, every no-vote on a project was a referendum on his very presence at the company, based in Berkeley, Calif., whose products are available in stores like the Nature Co. and Natural Wonders. He took it personally, and for good reason: the company's CEO was his wife of 13 years, Gail Patton DaMert. "To make this company grow, we have to be honest with each other," she now insists.
They had always tried to be honest with each other, especially back in 1989, when Fred proposed that Gail leave her $70,000-a-year post as a systems-engineering manager at a division of the aerospace giant Lockheed Corp. to join his suddenly surging business. After treading water at $400,000 in annual sales from 1982 to 1987, the DaMert Co. had jumped to nearly $2 million in sales in 1989 -- thanks to heavenly demand for its solar-system mobiles -- and had even posted profits for the first time, netting more than $100,000. Such growth thrust Fred, whose main interest was developing new products, into an uncomfortable administrative role. "I started this company out of love for the product," he says.
He could have searched for an outsider with a feel for the business. But at the time, Fred recalls, he was still nursing the sting of having had two business managers embezzle from him. He wanted someone he could trust. And both he and Gail grew enamored of the prospect of Gail's being able to keep her daily commute short and add the flexibility to work some crucial appointments into her schedule -- their preschooler's Halloween pageant, for example.
The arrangement held out the promise of allowing both of them to do more of what they loved. A worthwhile goal, and not an uncommon one for couples pondering such a plunge. But what the DaMerts learned was that the road to that kind of mutual self-fulfillment is dotted with dangers nobody talks about.
Not that there aren't plenty of helpful experts out there, with much to say about the need for talking things through, for working at keeping each other honest, for finding creative ways to communicate -- renting a cabin in the woods, for instance, to get at what's bugging you while swatting at actual bugs. But where the experts often get it wrong is in their assessment of what's at stake: it's not just a question of either your company or your marriage being destroyed. Revenues at the DaMert Co. have more than quadrupled since 1989, and profits have grown sevenfold. The family is still very much intact, having moved to a mountaintop ranch house, complete with its own redwood grove. Even so, the DaMerts are only too willing to admit that they paid a higher physical and emotional price than they ever imagined they would for going into business together. "As a business owner, I like what Gail has done with the company, and I support her," says Fred. "From a personal standpoint, it was difficult to accept the changes she made."
Gail offers a more direct assessment. "I was trying to be like a good wife and not step on his ego as I came to work in his domain," she says. "If I had to do it over, I wouldn't avoid discussing the things that frustrate me with Fred."
Not even Fred's perception-bending toys can take the two of them back in time, of course. But for couples at any stage of embarking on a business together, the DaMerts' experience raises hard questions well worth taking the time to answer for yourselves. Maybe you'll already know where you stand. But if you don't, realize this: what's at stake may be different than you think.* * *
1. Making the Decision
Why Are We Really Doing This?
To their credit, the DaMerts were clear about their reasons for going into business together. Gail wanted to spend more time with their children, Brian and Sara. Fred needed someone he could trust to handle the managerial aspects of the business. What they didn't sort out was what they would need from each other to reach those goals.
From Fred's point of view, Gail was coming into the business to protect him from the tasks that he enjoyed least, leaving him time for such activities as looking over items submitted by freelance inventors for the company's science-and-nature-oriented wholesale catalog. She would be there, as he put it, "to shape up company systems."
That was hardly the ideal job description for someone who wanted to spend less time at work. "I thought I would be working two or three days a week as a consultant," Gail says. Fred failed -- in part because he was so grateful Gail was willing to help -- to reveal the full magnitude of the task she would be undertaking. "I needed somebody to bring order to this zany, crazy world I had created," he says. "I knew it needed stuff like budgets, but I didn't have time to take a class in budgetology. I had to keep focused on product development and talking with customers."
Given her high-powered career at Lockheed, not to mention her hard-earned Ph.D. in astronomy, Gail might have done well to figure out whether she could actually be satisfied assuming the kind of part-time role she thought she was accepting. "I didn't think about it all," she admits. "All I cared about was having the flexibility to see my children more."
Both saw the arrangement as a chance to get something each of them wanted -- badly. It might have become that, eventually. But not from day one. Ultimately, they paid a price for not preparing themselves to be patient. "It's the same mistake that men and women make when they marry each other without asking questions such as 'How important is it to save money versus spend money?' and how they feel about living for the present compared to the future," says Mardy Grothe, a psychologist in Bedford, Mass., whose practice includes many business partners. "Since they didn't do that to sufficient depth or breadth, every situation became an opportunity to clarify things."
When a married couple goes into business together, warns psychologist Peter Wylie of Washington, D.C., they'd best think of it as taking on an additional relationship with struggles of its own. "The amount of negative energy isn't doubled," says Wylie, "it increases logarithmically."
The DaMerts know that now.* * *
2. Thinking It Through
How Well Will This Serve the Business?
Before the DaMerts jumped into business together -- and after they coordinated their personal agendas -- they would have done well to carefully consider the ramifications of their intended actions on a third party: the company itself.
Looked at from a useful distance, Gail's hiring as general manager made less than perfect sense. For starters, she knew nothing about the toy industry, including such basics as navigating the rigors of a Christmas selling season. Nor did she have experience managing cash flow -- a critical skill in a company experiencing a growth spurt. Not that she or Fred really knew what she was headed for. "I didn't know what bad shape the company was in, because I had never worked anywhere else," Fred contends.
Gail, of course, had worked at Lockheed, where she took for granted such luxuries as eager secretaries and line engineers ready to do her bidding; the presence of intelligent colleagues with whom she could schmooze; and the mentor who guided her through unknown territory. "I thought I would be dealing with people who were used to taking direction," she says. "'Get me a list of our top 10 customers' would draw blank looks and responses like 'We don't have the list,' 'We don't know how to get the list,' and 'Why do you need something like that?"
It didn't help that Fred had hardly prepared the 11 employees for what Gail would be doing, only casually mentioning that she would be joining the company to "take care of the money."
It sounded simple. But Gail quickly deduced that there were no controls on company operations, nothing to "smooth out" in the way she had planned. So she began creating controls, collecting, for instance, 838 sales orders awaiting credit checks that had been stuffed into drawers and in-boxes throughout the company.
Over the course of her first 18 months, Gail logged 60-hour workweeks. According to Fred, she had shifted into "fire-drill mode," and it was easier for him to let her wear herself out than to try to slow her down. He needed to stay focused on product development, he reasoned, or they'd have a crisis on that front. He had high hopes for the unusual Triazzle puzzles the company was about to bring out.
After creating a sales order form, Gail spent months turning over dusty shoe boxes stuffed with sales receipts and developed a three-year sales history of the company. She then used the sales data to tackle inventory management, a task that meant spending hours doing tedious algebraic equations by hand because the company wasn't automated. "I never imagined myself doing nitty-gritty work," says Gail. Often she worked well into the evening, even as Fred was reading bedtime stories to the kids. She began to have dizzy spells.
She also began to feel that Fred had bamboozled her. "I resented the fact that I was working so hard and seeing our children less than I had planned," she says. Counters Fred, "She is admittedly type A and was overreacting and overachieving." But Gail's sense of urgency wasn't entirely a function of her adrenaline level. In 1990 the cash-strapped business's sales leaped 40%, to $2.7 million, creating enough pressure to make even an experienced entrepreneur nervous.
But it made Gail worse than nervous. In January 1991, just over a year after she had joined the DaMert Co., she was hospitalized for seven days. "It was a kidney stone," she reports, "but I'm convinced it was from the stress." Notes Fred: "It was a tough year. I knew it was going to be rough on Gail, but I didn't know how rough it was going to be."* * *
3. Domestic Affairs
How Will We Maintain Boundaries between Home and Office?
Before working together, the DaMerts rarely mixed business with their home life. Of necessity, Gail stayed mum about her often top-secret "Star Wars"-related work. Fred, hardly a typical entrepreneur, liked to leave work behind him and take refuge in what he called their "happy haven" of a home.
But in the fall of 1989, just as Gail was joining the business, they acted on an agreement they'd made five years earlier: to move closer to Fred's work. They chose a house 15 minutes away from the office in a stark development with barely a patch of grass on the lot. At least the house was brand new, which Gail appreciated because "I couldn't afford to worry about a stopped-up sink while I got this company on a sure footing." All in all, though, "No one was really crazy about it," admits Fred. To make the situation bearable, the two agreed to make the house a "five-year house." But in the interim, there was no more happy haven for the DaMerts. Their home, in effect, became a satellite office where Gail worked evenings and weekends and occasionally held management meetings. Their bedroom was so stuffed with office equipment that their bed was pushed into a lonely corner. "Why ruin a great office with a bed?" Fred quipped.
To counteract the deadening effects of bringing their work home, Fred proposed early on that they avoid talking business at home. But Gail overruled it. "Gail felt she really needed to talk about company stuff with me after hours," Fred says. "We put in a lot of overtime together. Things changed." While they had previously taken hikes together regularly around the scenic San Francisco Bay area, Fred began walking off into the Oakland Hills by himself while Gail let off steam at the gym. "I needed to work out my frustrations before going home," she says.
"We needed the extra space for ourselves," adds Fred. "You see the person across the dinner table and think about work. It isn't the greatest thing in the world."* * *
4. Running the Business
What if Other Managers Come between Us?
Given her increasing alienation from her husband, it's perhaps not surprising that Gail began working closely with a sales and marketing consultant named Greg McVey. The DaMerts first contracted with McVey in mid-1991 to help install some basic sales-management systems, such as having someone call customers to see if they were interested in reordering products. McVey also scouted for other retail chains, like Imaginarium and Learningsmith, to carry the line.
By the spring of 1992, McVey had become Gail's new mentor, and he began guiding her into the very territory that Fred had hired Gail to guard for him: product development. Fred didn't object to McVey's presence, but he also didn't realize the implications of McVey's plans to overhaul the department. As McVey diagnosed it, "Fred had lost the fire in the belly." To the sales-driven McVey, developing the kind of off-the-wall products that Fred liked most, such as Space Phones, which promised to produce an "astro-sound," and the Radiometer, a solar-powered engine, was a waste of time. Those one-shot products are orphans, he told Gail, while the company's emerging lines of mobiles, glow-in-the-dark items, and puzzles would continue to generate sales and spin-offs.
After the lukewarm 1991 Christmas sales of the Movie Motion Zoetrope -- a toy version of a kinescope that Fred and fellow toy developer Bill Hanlon had spent $10,000 and more than a year working on -- Gail edged closer to McVey's view. Without telling Fred, she began working with McVey on a plan that would ultimately reduce Fred's decision-making power. That "major undertaking," as she described it, would "bring new-product development underneath sales and marketing."
On June 17, 1992, she called key managers -- including Fred -- to a meeting at their house. "This was my meeting," she says. "Fred didn't know in advance what it was about."
Armed with a flip chart and reams of statistics, Gail first pumped up Fred's ego by giving him a dazzling bird's-eye view of the company they had built. Recalls Hanlon, who had worked with Fred since 1989: "Ah, yes, 'the pie.' She showed the product families we had created and how much of our sales came from those products." From there, she deftly wound around to how the company now needed to "close the loop of operations" and make product decisions that would take into consideration market trends she had identified. That way, fewer orphans would be created. "I wanted to move the department from being inspiration driven to being market driven," she says.
Two weeks after the meeting, she sent Fred a stern memo. "Effective immediately," it began, "I am instituting a more formal procedure for the review and evaluation of all proposed additions to the DaMert Co. product line." Explains Gail: "He was being very passive-aggressive. He just kept doing his job the same old way."
Fred responded by throwing himself into the development of an elaborate weathervane, ignoring everything Gail had advocated in her presentation and subsequent memo. "The weathervane didn't fit into Gail's system at all," he concedes.
Less than three years after she had joined the business, it now seemed clear that Gail was tangled in a not so subtle power struggle with her husband for control of the company he still owned.
"If you are in the fight mode, you find an ally, as Gail did," says Grothe, who has never met the couple. "It sounds like Fred was in the flight mode."* * *
5. Exit Strategy
What if It Doesn't Work Out?
In the spring of 1993, Gail ratcheted up the controls on Fred's department with a "new-product matrix" that boiled his job down to a dull, fill-in-the-blanks exercise: what we need now, the system would dictate, is a glow-in-the-dark item with an outdoor nature theme. "When I first came here, Fred said, 'I'm going to do this until it's no fun anymore," Hanlon recalls. "When Gail introduced the new-product matrix, it stopped being fun for Fred." Or, as Fred himself puts it, "My heart just wasn't in it anymore."
Neither was Gail's. She still wasn't seeing their children as much as she wanted. Then in July 1993, the DaMerts went to San Francisco for a business breakfast and listened to a lecture about the joys of planning. As they traveled back to the office, they began to explore a radical idea: what could they do to eliminate themselves from daily operations at the DaMert Co. and participate only on a strategic level? "We said, 'Let's get a plan together so we can get off this treadmill," Gail says.
It was a worthwhile effort. But for Fred, at least, it was probably too late.
Still, the two did manage to hammer out a five-year exit plan for themselves. Basically, it involved getting a management team in place and growing sales from $6 million in 1993 to $15 million by 1998. Gail took the title of CEO and put McVey in the slot of director of sales, marketing, and product development. After his rebellious weathervane flopped, Fred pursued the idea of reviving his trusty prisms.
Then in the fall of 1994, after six months of daily negotiations with a supplier, his prism deal fell through. Soon after, the official word went out: Fred had left on a four-month sabbatical. "I needed a break," he says. Adds Gail: "I understood why he needed to do it. But I resented the fact that I was still working 40-hour weeks."
For four months, Fred read psyche-soothing philosophy such as Carl Jung's theory of how a person spends the first half of his or her life accumulating an ego -- and the second half shedding it. "Over the years I've had to wear a lot of different hats," he explains. "I went from wearing a manufacturing hat to wearing a wholesaler's hat to wearing a salesman's hat to wearing a product developer's hat. Those weren't easy changes for me to make. I realized I was in a hat-changing period again and needed to find a new hat to wear at the company."
On January 4, 1995, Fred reappeared. "Fortunately," says Gail, "I had a couple of substantial projects for him to keep him out of Greg's way." Fred took charge of moving the company to a fancy warehouse/shopping district near the Marina in Berkeley. He drew up plans for their impressive 34,000-square-foot warehouse and office complex and oversaw its construction during the summer. Instead of following the predictable 90-degree angles of the walls, he divided the space along diagonal lines and kept the 22-foot-high ceilings. Smack in the middle of the company's entrance, he put Hanlon's vintage Ford woody station wagon. McVey designed the furniture for the office, sprinkling triangles on the carpet and conference table as an ode to the company's best-selling Triazzle line.
After he finished moving the company in August, Fred proceeded to move the family. The house the DaMerts found was a 25-minute drive from the office in an area graced with natural vistas and waterfalls.
Meanwhile, Gail had a mandate of her own to follow. At a team-building seminar in late 1994, she had been given the word by employees: lighten up, this isn't Lockheed. "I can't believe how severe I was," she says, leafing through some of her old, dictatorial memos. "Now I'm trying to be a softer, more fun-loving manager." It helps that with some key managers in place, she is also now able to spend more time with her children, who are 8 and 10 years old. She even works in their school's computer lab once a month.
Fred, however, has yet to recover his balance. He noses around the hallways, looking for more to do at the company he founded back when he was a 26-year-old driving a truck by night so he could mold prisms during the day. Will the DaMert Co. ever be a place where he and Gail can both have satisfying roles? He's not sure, but he does know this: "Perhaps in the beginning we should have been working according to some grand plan." Not that he's complaining about where he's ended up. "I'm the company's chief spokesperson, and I like to meet with important customers and attend major trade shows," he says. "I want to play more of a key role in mapping out the company's future and making major financial decisions.
"I'm still trying to find a new hat to wear," Fred DaMert adds. "But believe me, I'm not after Gail's job."