The Saga of Lou
Sometimes projects are made to suck because people are cussed and they just won’t listen.
There was this time in late 1988. It was my first job out of college, with my freshly minted B.A. in Mathematics (!) and a lot of enthusiasm. It was a little financial services company just off East 9th and Euclid.
One of the first things they asked me to do was… kind of a drudge job. See, there was this database on our IBM System/38 mini. It had a file that included (among a lot of other fields) customer identifying information, balance due, and last activity date.
There was also an Accounts Receivable balance carried as an asset on the Lotus spreadsheets that our CFO used to feed into the Solomon accounting software for quarterly financial statements. (Oh yes. Solomon.) Which went to the regulators in every state we did business in. And oh yeah, the shareholders. And the SEC. Can’t forget the SEC.
Two problems. One, the A/R balance didn’t precisely match the total in our files, which actually wasn’t a huge deal because the asset was kind of an estimate anyway. Two, the estimate was more like a guess.
Receivables in a nutshell
See, there’s money people owe you. That’s not an asset! There’s money people owe you that you will actually receive, and that is an asset. In our industry–I didn’t know this at the time–we figure anything more than 90 days past due is probably a write-off. The CFO had already eyeballed about 20% of this asset as probably uncollectable and had put an equivalent liability on the books to offset.
Still, management wanted to know how accurate that liability was. I was assigned to figure that out.
Chuck in IT created for me a downloadable copy of the relevant accounting file. I imported that into dBASE III (again, yes, I’m really that old) and spent a late evening running some reports on that. In what amounted to a day or two of work, I provided the CFO a simple aging summary that indicated… oh, I don’t remember how much, but a lot more than 20% of the receivables were more than a year past due. I think we ended up writing off something like half of the accounts’ dollar value, or more.
It’s just an accounting adjustment, right?
Wrong. The asset had been carried for three years; therefore we had to revise annual reports from previous years. The SEC was of course informed, as were the state regulators. And the man who held about 35% of our stock? I don’t know what he said, but I can imagine.
So that’s the technical version of the story.
But there’s more.
In the days of confusion and restated earnings, my cube neighbor Lou showed me something. Lou is highly educated and he had something like ten years of experience ahead of me. He was and is an avid student of how things get done in IT departments. He’s curious and capable. Lou was also, sadly, thought of as kind of a wonk in the department. He had a gift for being misunderstood.
What Lou showed me
He pulled from a file folder a hardcopy of a memo he’d sent to management a year or so beforehand. It said there’s a problem with the A/R asset, it’s likely overstated, and he’d run some aging analysis on the billing files to confirm that the reserve offset was insufficient to cover the inevitable write-offs.
It was obvious what had happened. Lou had taken the initiative to identify the problem and raised the red flag, but everyone in a position to do something ignored it. A year ahead of time.
The lesson from this
A lot of consultants and executive coaches would say that obviously Lou needs to work on his communication skills. He’s doing valuable work but he’s ineffective because of the so-called soft skills.
I looked at Lou’s memo. It was unmistakably clear. Anyone paying attention would have immediately seen the connection: Our books are wrong. We need to fix them before things get worse.
That’s the problem though. You can’t make people pay attention. As weird as he was, the problem was not with Lou. I’m pointing at senior management, who had this memo in their hands and didn’t want to be bothered by that kook in the windowless back room.
If there’s a Lou on your team–someone who’s doing useful, interesting, creative work, but who somehow doesn’t “fit in” with your department’s image–losing his input is your problem, not Lou’s. Anyone who actually belongs on your team is worth listening to. Sure, there are weirdos who are also clueless, but why are you keeping them around?
Take a minute today to notice which of your colleagues get ignored in meetings. Are you missing something important? Like last year’s 10-Q statements?