Steven Berglas, a clinical psychologist and an Inc. columnist, has seen plenty of those. He's treated more than a dozen entrepreneurs from the Young Presidents' Organization who, he says, "were utterly devastated" by a failure. "They were monomaniacal," says Berglas. "Typically, there was a horrific bout of depression, followed by either denial or acting-out behavior, like spending sprees or having an affair. They say, 'Hey, it's time to go to Monte Carlo!' One guy became a race-car driver. Another divorced his wife, grew a beard and ponytail, and left Boston for Seattle. It's a way to counter the depression, but it's also a dangerous form of denial." David Ferrari, a consultant who advises failing companies, estimates that 10% to 15% of the CEOs he counsels become heavy drinkers.
Even those who don't unravel can feel severely undone. Take Mike Campbell. In 1987 his Chicago-based software company, General Optimization, looked like a sure winner. Then 26, Campbell and a University of Chicago computer-science professor had developed software that allowed businesses to optimize numerous variables (say, helping a coal-blending company find the most efficient mix of ingredients). The program, called What'sBest!, was elegant, eminently useful, and a commercial flop. Most companies, Campbell soon discovered, had no idea they had optimization problems--and could have cared less about the lovely mathematics behind the product. Sales touched a million dollars, then sputtered.
The failure, as Hemingway once described the process, happened gradually, then all at once. The gradual part began two days before Campbell's wedding, when an IRS agent called him about shortfalls in his company's accounts. Campbell replied that he'd have to sort out the mess after he returned from his honeymoon. Feigning friendly interest, the agent asked him where the newlyweds were headed. Greece, Campbell responded cheerfully. The next day, Campbell discovered that the IRS had frozen his bank accounts. White-knuckled at his rehearsal dinner that night, Campbell pulled aside a friend and told him of his terrifying situation. The friend pulled out his checkbook and asked Campbell how much he needed. "I wept openly," says Campbell.
The check saved the honeymoon but not the company. After Campbell returned from the placid waters of the Aegean, the all-at-once part happened. "I was devastated," he says. "I was almost comatose for about a week." And the failure came close to wrecking his new marriage. "When you fail, it's like losing a child," says Campbell. "My wife was terrified. Absolutely terrified. You have a huge credit-card-debt load--$50,000 at 18% interest, racking up hundreds of dollars a month in finance charges. You have no job prospects. You're making noises like you're unhirable. You've got rent to pay. And she was thinking up to that point, 'It's about time to start a family."
So how bad did things get? "Let me put it to you this way," says Campbell. "I had to build my next computer out of parts that I was scrounging. I was a software person and I had no computer! I couldn't check my E-mail. I couldn't write a new business plan. What, write it out longhand? I did, in fact, but it took me a while to come to that." Couldn't he comprehend that his company had failed, not him? "The business was me," responds Campbell. "It's a little sick and twisted, I know, but that's the way it is. It's almost like having a part of you ripped out."
Had he seen the failure coming? "Running the business," Campbell says, "you're almost delusional. You have these blinders on--you have your head down and you're charging. When you hit the wall, it comes to you as a blow in the face." He adds: "You're so focused on the prize, you don't realize how big the crater can be. Do you want to lose your house, lose your wife? Do you want your kids to hate you?"
Likewise, few company owners reckon with the possibility of failure until it's irrevocably upon them. OK, so they might acknowledge its existence on some abstract level. But most are no more in touch with the reality of failure than, say, the average 16-year-old is in touch with the reality of death. Typical is the comment of Joe Burnieika, on whether he knew he could lose his house when he started his Boston public-relations firm: "Did I understand that intellectually? Yes. Did I ever think it would come to that? Never. Absolutely never."
Failing well, part one
Frequently, of course, it does come to that. Failure happens. So how does one fail intelligently? We took that question out into the field. Here's what we came back with.
- Don't leave your family in the dark. Colleen Campbell describes her marriage to her entrepreneur husband, Mike, this way: "We're in a two-man race car going very quickly--and I'm blindfolded." That was fine, she adds, "until the rear axle came off."
As harrowing as failure can be for business owners, it tends to be still more so for their spouses. "The most traumatic impact is on your wife, because everything is out of her control," says James Kilmer, whose Remlik Foods closed in 1996. "She doesn't know what's happening."
Hence, say experts, communication is of the essence. "The first thing you should do is bring the family into the sphere," says David Ferrari, whose Argus Management Corp., based in South Natick, Mass., counsels companies that are on the cusp of going under. All too often, he says, CEOs feel they must protect their families from the scary truth--or deny it outright. "I had one client whose company was in desperate shape," says Ferrari. "He said one day, 'I've got to leave early today because my wife and I have to go to the country club. It's a formal.' I thought, 'What an idiot this guy is. His wife doesn't even know his company is about to go out of business." Worse still was the time a bank sent an appraiser to a client's house to begin foreclosure proceedings, and the unknowing wife answered the door. Her reaction, says Ferrari, could have been predicted: "She went berserk."
