OPPOSITES REACT

CASE STUDY:The contrasting styles of two business partners served their company well through the boom years but the downturn has sparked fierce disagreements about the best way to reduce costs

WHEN JIM REYNOLDS and Robert Franke joined forces 13 years ago it seemed like a business partnership made in heaven. Both men had already achieved significant success in their careers but were still young and keen to create a new business from scratch.

Jim's background is in electronics with a specialisation in machine controls. He graduated as an electronic engineer in 1986 and his first job was in the Limerick plant of a large multinational. He worked hardand was quickly promoted to running a team of like-minded young people.

He was transferred to a sister plant in the US, where he spent two years running a specialist R&D team before he was headhunted for a senior product development position with another US company setting up in Ireland.

Jim thrived in his new environment, found time to do an MBA and relished the role of being a manager.His leadership style is intuitively consultative. He leads by example, shares his enthusiasm with his team and consistently delivers results.

He is respected and is considered a great person to work for. He is demanding but considerate, always interested in achieving the best possible outcome and more perplexed than angry if this enthusiasm is not shared by those around him.

He met Robert Franke when they were attending a conference in Santa Monica and was immediately impressed by the Belfast-born businessman's sharpness and go-get-it attitude.

Two years Jim's senior, Robert was also working for a multinational at the time but in the area of business development and sales. The career of the business studies graduate had taken him into the same niche of electronic machine controls as Jim.

Robert is a salesman and entrepreneur to his fingertips. At school he was the "wheeler dealer" in his class, trading everything from second-hand CDs to concert tickets.

At college he was involved in organising and running events - for personal profit - and always assumed he would end up running his own business.

The Santa Monica conference was a turning point for both young men. They talked extensively about the opportunities they saw in the marketplace and agreed to keep in touch. They met again three months later to talk in more concrete terms about the possibility of joining forces to start a business in the electronic components supply sector.

Within six months they had a business plan prepared and Robert was pitching it hard to potential backers, including State funding agencies. In less than 18 months they had opened for business in a high-tech facility just outside Limerick with an initial staff of 45.

From the outset they had recognised that best business practice dictated only one of them should become chief executive. However, they felt this was a genuine 50/50 partnership with obvious divisions of responsibility so they became joint managing directors. Each took responsibility for a specific area.

Jim focused on R&D and production while Robert managed sales & marketing, customer relations and finance. The partners also recruited an experienced financial controller.

Day-to-day operations worked well on this basis while all larger decisions were discussed either at regular monthly management meetings or on a more ad hoc basis as the need arose.

In the buoyant market of the time, the management systems put in place seemed quite adequate to support and foster a growing business.

With a growing customer base and around 85 per cent of production exported, the business had nearly doubled in staff and more than quadrupled turnover over seven years.

The big question facing the company was whether to expand further or remain a medium-sized player in the sector.

With Robert pushing hard, a decision to expand was agreed; a move to new purpose-built premises followed and the future looked rosy.

But slowly the storm clouds began to gather.

Of particular concern was an undercurrent of uncertainty about the future, particularly in the US where the company did about 50 per cent of its business. Robert is a born optimist, a willing risk-taker and a confirmed believer in the idea that anything is possible.

Jim is much more conservative, keen to look at things from every possible angle before pushing ahead and a believer in piloting things first.

For Jim, risk is always something to be managed rather than merely "taken".

Having identified a good product niche, the partners had reaped the benefits in a thriving market.

Robert's impulsive, driving nature had helped them maintain momentum while Jim's more cautious, analytic approach had tempered Robert's possible excesses. They made a good team and complemented each other's strengths and weaknesses.

Problems often come in pairs and that was certainly true for this partnership. Jim was the first to realise new technologies were emerging in a closely related area that could have a major impact on their business.

Their only realistic option in the medium to longer term, he believed, would be to invest heavily in research themselves.

It would be expensive and there was no guarantee of success. But if others achieved efficiency breakthroughs it could intrude on their up-to-now profitable niche.

Robert accepted Jim knew more about the technology than he did, but still believed Jim was being overly pessimistic. There was plenty of opportunity left, he believed, and he doubted the new technologies would have anything like the catastrophic impact Jim feared.

Around 18 months ago the company began to see a sudden and significant decline in its sales. Cost-conscious customers who were heeding reports of recession coming down the tracks began switching their business to alternative suppliers in lower-cost countries such as China.

Jim was shocked to discover his company's quality edge and ability to add functionality to the product was no longer enough to keep them ahead.

In the face of these events and the possible defection of other customers to cheaper suppliers, the partners have agreed they have no real option but to restructure and scale down their operation. But neither has any experience of managing in a downturn and they disagree strongly about how this should be achieved.

Robert wants to reduce the workforce by at least 30 people immediately, paying the minimum legal redundancy to achieve the greatest cash savings. Jim thinks Robert's approach would discard much of the considerable expertise that has been built up in the company over the years and all of the goodwill that exists between the owners and the workforce.

He regards most of the people as friends, not just employees, and is keen to discuss the financial situation with them so consensus can be achieved on how best to move forward.

He thinks, for example, that short-time working and unpaid leave on top of normal holidays this summer could be introduced to ensure that as many people as possible remain on the payroll.

Robert's view is that these are hard times and tough decisions have to be made.

He says the workforce recognise this as much as anyone and expects the company to do the right thing to ensure it has a future - and the sooner the better.

Jim, however, is adamant that a viable future can only be secured if the owners are seen to do the right thing by their employees.

How can Robert and Jim agree a path forward?