In the 1992 film, SCENT OF A WOMAN, there’s a scene where (poor kid) Charlie Sims, played by Chris O’Donnell and (rich kid) George Willis Jr., played by the late Philip Seymour Hoffman, are subjects of a disciplinary hearing that’s played out in front of their entire high school student body; the intent to pressure the boys to divulge the culprits of a school prank whereby the school’s headmaster, played by the late James Rebhorn, was the victim. Al Pacino’s character, Col. Frank Slade, proclaims that the difference between George and Charlie is that when shit hit the fan, George cut and ran by naming his best friends, while Charlie faced the (consequential) fire by refusing to name the culprits – despite the fact that they weren’t his friends to begin with. Likewise, every startup faces crises that will, literally, bring it to its’ proverbial knees. This will usually occur on a weekly basis, if not more. How you deal with them is a test of patience, resolve and commitment. What to do? Cut and run like George Willis’ character? Or stay and face the fire like Charlie Sims’ character?
Last weekend was the ultimate test of all the above.
CRISIS #1, SATURDAY
My food manufacturing startup was skedded for production for one of my pickle SKUs. Except that it almost got shut down before it started. Upon arriving at the wholesale produce terminal, my supplier informed me that there were no pickling cucumbers. “No pickling cucumbers – at all?” I replied? “Monday,” I was told. Unfortunately, this wasn’t the first time my supplier let me down; only two weeks earlier, they shorted my pickling cucumber order by nearly half. I knew supply was extremely tight – especially in light of the recent cucumber/salmonella outbreak/recall affecting the nation. My guess is that my supplier allocated part of my order to a more established customer. With only half of a production and half the finished goods (but still 100% of the full production costs) under my belt from two weeks ago, combined with the possibility of having no pickles to manufacture this week, I was definitely up a creek.
As the gravity of the situation quickly sank in, the stress, the fear and sense of helplessness swept over me. Contractually, my production was locked in. I had sunk costs that were unrecoverable. I had my team of 4 depending upon me to provide them with work – it was too late to cut them loose to find replacement work the next day. I thought about making one of my other SKUs – the problem was, that I was completely out of inventory of the SKU I needed to make that weekend – and it would be another two weeks before I could manufacture again. And if I didn’t have product to supply my retail partners, my shelf slots were at risk for getting replaced because grocery stores don’t make money off empty shelves.
I made the decision to proceed with my original production. The only task at that very moment was securing pickling cucumbers at any cost – with only 2 hours to accomplish it. (Not all wholesalers open on Saturdays – and those that are, only open for a few hours in the morning.) After some mad-dashing between vendors and hitting the phones to retailers up to 50 miles away, I secured the raw goods needed for production. Ok. Crisis resolved. Game back on.
CRISIS #2a, SUNDAY
Before hand-packing my products into jars, I remind my team that they must hit a specific weight beyond the listed weight of the product label. This is done to ensure customers truly receive the amount of food they’re paying for. Just before the capping stage, I happened to spot-weigh one of the just-filled jars – to discover that it was short on weight. – by about 9%. Uh-oh. I checked another jar. Short as well. This was bad. REALLY bad. The consequences of being discovered selling short-filled jars was a showstopper on many levels – my company would be open to state audits and inspections; I’d be forced to recall products; the perhaps-unrecoverable damage to my company’s reputation; getting kicked out of Whole Foods (whereby 1) I had just spent the previous year and a half trying to get into; and 2) Whole Foods had, literally, just been caught short-filling customers’ food orders themselves so no doubt they’re hyper-vigilant about the issue now); and the financial cost of having to deal with all of this. My production weekend that got off to a bad start just got a whole lot worse.
CRISIS #2b, SUNDAY
My false assumption that my team that day knew fractional weights was a clear oversight on my part and led to the second part of this short-fill crisis. Because this was the same team that had helped with production two weeks earlier, I knew that that entire batch was at risk for the same error.
I immediately had my team re-weigh and adjust the fill-weight of each and every jar currently in production – an exercise that added an additional 8 ½% cost to that day’s production run. Luckily, the second batch in question had not yet made its way to the distribution channel, but still necessitated me clearing Monday’s schedule in order to break open each case of the batch in question – and weigh each jar – not once – but twice – to ensure my products were in compliance. I ended up withdrawing a little over 4% of that specific batch from inventory. (I was equally horrified to learn that most other jars were overfilled up to 7% – equally disturbing, albeit for other reasons.)
CRISIS #3, SUNDAY
Partly as a consequence of Crises #2a and #2b, one of my employees quit – on the spot. You might think that one person quitting not to be a big deal, however, that one employee represented 20% of my workforce. Fermentation is all about time, temperature and pH levels – I absolutely needed him because my inability to hit specific time and temperature benchmarks could deem this entire production run worthless. This production run that previously went from bad to worse – just fastracked onto the highway to hell.
At that moment, I was forced to shift from figuring out how to complete my production run to figuring out how to get this employee to re-engage. At that moment, he no longer cared about money. And nevermind the fact that I had given him a ride from the City – and the fact that it would take him upwards of 4 hours to get back via public transportation on what turned out to be a scorching, 90 degree day. This employee had complete leverage over me, whether he knew it or not. I appealed to his sense of pride – pride in finishing the day and finishing the day strong. After some coaxing, he reluctantly re-engaged.
After three days of production and inventory (working the final 23 hours straight), production wrapped, inventory got corrected – and I crashed out in my office chair for 6 ½ hours straight. Needless to say, it was the most mentally and physically grueling experience in my company’s short existence. There were many lessons learned. The most important: remaining calm in the face of crisis; quickly assessing risks and exposures; determining solutions; then executing through those solutions. That’s not to say that I didn’t have my freak out moments – but I knew I had to quickly transition to problem-solving mode. Early on, I was dead-set on finding a way to do the original production I intended – no matter the financial cost. It was more important to me to take the short-term financial loss in order to preserve the longer term relationship with my retail partners; to show them that I was a dependable supplier/partner – despite what was happening behind the wizard’s curtain. When my employee quit mid-production, I knew the only currency I held in return for helping me complete production was appealing to his sense of pride. The under-fill/over-fill issue showed me that not only do I need to better educate my employees, but I need to establish better controls in order to mitigate this issue going forward.
At the end of the day, crisis moments are requisite tests to the success of any startup. They can be brutally painful to get through, prove potentially fatal, but are functionally important by exposing areas for needed improvement (and weeding out weak businesses). I don’t know if my company will be the success I hope it will be some day, but with each crisis fought and won, I know my company has a better shot at making it.
NOTE: please don’t harangue the author about punctuation, story structure and sentence structure errors – he’s too busy trying to source pickling cucumbers.