Oh, Crapper!

By J. D. Richard

It is the end of the booming 90s. Because of decreased sales, earnings and a sluggish stock price, the CEO of Crapper Companies, a Fortune 500 manufacturing conglomerate, is forced to resign. An outsider is appointed his replacement causing conflict, confusion and anxiety among employees who fear losing their jobs. Oh, Crapper! is the story of people hoping to survive in a big business thats going through a change of life. Many voices reveal its secrets - from officers at the top to the wannabes trying to get there.

• Language: English
• Publisher: Xlibris US
• Release date: Aug 19, 2003
• ISBN: 9781462821549

J. D. Richard

Author of the Air trilogy--earthbound, fantasy, magical, paranormal, and thrilling young adult fiction.

Book preview

1

Rumors

February 1999. Two long-term employees eating lunch in the company cafeteria react to rumors on the fate of the CEO.

He won’t survive!

I don’t know about that. We’ve heard these rumors before and he’s still here.

Make a bet? I say he won’t be around much longer. His luck has run out. This time he’s going. C’mon. Bet.

Okay. It’s a bet. I say he stays.

You’re gonna lose. Mark my words. This time he goes.

The rumor: Theo Kanakaris, chairman and chief executive officer of Crapper Companies is being pressured to resign by the members of his handpicked board of directors. Wall Street analysts and major investors are unhappy with his performance.

Theo lived through a wave of similar rumors a year ago, but because of the company’s present stock price, projected sales, earnings and his age, the odds are three to one that this time he will not survive.

Crapper stock had climbed from its initial public offering price of $18-per-share in January of 1995, to over $40 in December of 1996, considered then to be a very good two-year performance. Emboldened by that accomplishment, Theo foolishly predicted much higher earnings per share with a stock price that would reach $90 before the end of 1997. Based on the financial information he presented to the analysts at that time, it seemed entirely possible. At the end of the second quarter of 1998, however, when bad investments in joint ventures, poor acquisitions and his once praised but now outmoded management style forced the price of Crapper stock to a low of $29, it became obvious that Theo would never achieve the $90 price. The analysts changed their ratings for Crapper stock from outperform to in-line and from buy to hold, triggering the now recurring rumor that the board would force Theo to resign.

My name is Caroline Tobias. I am a character in this sometimes farcical story of Crapper Companies Inc., a $7.5 billion Fortune 500 company whose slogan is, Our company grows stronger every year by: increasing earnings per share to benefit stockholders and ensure employee security. It sounds good. The truth of the matter is that it does not grow stronger every year, does not always benefit the stockholders and has only ensured the security of senior management. (Sound familiar?)

Crapper’s present operations consist of three major businesses: Crapper Plumbing Products—develops and manufactures bathroom and kitchen fixtures. (You can see Crapper’s name most prominently displayed on the back of toilets and urinals in practically every restroom in the world. Toilets and urinals, though no longer their major money making business, is why Crapper Company is most famous. Once the pride and joy of the company, setting the standard worldwide for like products, in recent years it has allowed quality and customer service to deteriorate thereby permitting competitors to claim a large share of its market); Ice Makers Inc. (Crapper’s top moneymaker)—develops and manufactures refrigeration equipment for commercial and residential use; Scooters Inc. (small but profitable, with huge potential)—develops and manufactures braking and control systems for motor bikes.

Contrary to widespread belief, Crapper Companies is not named for Thomas Crapper, the English plumber Queen Victoria asked to install drains and plumbing at Sandringham House in Norfolk in the 1880s. For over a century Thomas Crapper has erroneously been given credit for inventing the siphonic flush, which may account for the belief that Crapper Corporation was named for him. Not so. The company was founded to make toilets in which to defecate. Needing a synonym for defecate, the founders seized upon the word crap an ancient vulgarism for waste that early English settlers took with them to America, and named the company Crapper Corporation.

Theo Kanakaris’ rumored resignation became fact when the Wall Street Journal reported that; Mr. Kanakaris has decided to retire on his approaching sixty-fifth birthday ending eleven years as CEO of the company. He has been chairman of the board for the past three years. The article went on to say that Crapper’s board of directors had appointed a search committee to find his replacement.

Even though everyone knew Theo had not met analysts’ expectations and might resign, till that announcement everybody thought either Peter Wright, the general manager of Ice Makers, or Paul Truex, the president of Scooters would replace him. Both men were in their early fifties. Peter, a short, barrel-chested, dark haired, always pleasant man who I knew quite well, and Paul, a tall, prematurely balding, polite, obvious physical fitness freak who I knew only slightly, had been with the company for many years, their divisions contributing heftily to the bottom line. They were well known and respected for their good judgment and management style. Assuming that one of them would be selected to replace Theo, most of us felt secure in our positions. Did a search committee mean that would not be? What would happen to all of us if one of them were not chosen?

Rumor: The search committee is only interviewing people from outside the company.

Like most of the rumors, this one shortly became fact by another story in the Wall Street Journal stating that the board, the search committee and the analysts felt Crapper had been managed far too long by insiders and "the only way to get it performing as it should and could is to bring in someone from outside the company to lead

Crapper on a more profitable course. Someone from outside the company, it is felt, can bring a more objective approach to achieving financial goals."

Then, the search committee changed their minds. Not only did they interview Paul and Peter, but had called back each of them twice. Believing that the Wall Street Journal article about an outsider being chosen was incorrect and that either Peter or Paul would indeed be selected to succeed Theo, everyone became somewhat relaxed.

Rumor: A candidate from a Fortune 100 company has been chosen.

It was now October. Theo’s birthday was the first of December. The plan was that his successor would be in place by January 1, 2000. We anxiously waited for the announcement naming the person, hoping to be informed before reading it in the Wall Street Journal.

The name of the person chosen and the company from which he would come leaked out, but on the day of the contract signing, that person phoned the committee and said he had changed his mind. He didn’t want the position. This turn of events brought new hope that either Peter or Paul would be chosen, if for no other reason than time was getting short for the committee to find a suitable outside replacement.

Alas, at the end of October, the committee announced that John M. Roses, the ousted chief operating officer of Cohort, the giant conglomerate manufacturer of industrial engineering products, had been chosen Crapper’s new CEO effective January 1, 2000. Cohort had just merged with Precious Inc., the nation’s largest manufacturer of industrial engineering products, and the CEO of Precious did not need Mr. Roses’ assistance with the operations of the new company.

What now? I wondered. Some of the present employees had been with Crapper as long as Theo. We were all Theo’s people, secure in our weekday daytime life. For me, Crapper had become a safe harbor, my refuge from the world once the door closed behind me in the morning. I liked my work, my bosses, for the most part, and my co-workers some of whom I considered my extended family. I enjoyed sharing my life with them, talking about our children, vacations, mortgage rates, the stock market, golf, horses, new cars—the economic downturn, AIDS, and any other societal problem that could have a positive or negative affect on our lives.

With this John M. Roses, what would happen to all of us now? I wondered.

2

Theo, Crapper and Me

All of us that work in corporations know that when senior management changes everybody’s employment becomes tenuous until the new team is in place and makes known their organization plan. We wait anxiously to find out whether or not we still have a job. Some of us find out immediately; for others it is a long, slow and agonizing ordeal.

Most of us at Crapper would not be as worried about losing our positions under the new administration if the change had occurred a year ago when jobs were plentiful. We would be mailing out job resumes and most likely be leaving Crapper for another company before being asked to do so. But with the booming nineties coming to an end, another economic downturn being predicted, companies downsizing because of dwindling markets and increased competition, the job market was fast shrinking. Therefore, we did everything possible to hold on to our jobs because we knew finding another would not be easy.

It was not my intention to ever work in the corporate world. After graduating with a Bachelor of Fine Arts in acting from the University of Wisconsin, I went directly to New York to claim the title of First Lady of the American Theatre from Helen Hayes. Since Ms. Hayes had not acted on the New York stage for many,

many years, almost my entire lifetime, I didn’t think claiming the title would be so difficult. How, I wondered, does she continue to hold on to the title? (Miss Hayes is now deceased but is still referred to as The First Lady of the American Theatre!)

After struggling for eight years, acting in plays on the stage of practically every church basement and loft in Manhattan, I began to understand. I was a dramatic actress, not a singer-dancer-actress and there were not enough straight plays on Broadway in which a dramatic actress could stake her claim to Miss Hayes’ title. Musicals played in just about every available theatre making the competition for roles in the few dramas and comedies fierce. Nonetheless, I continued preparing for my big break in a Broadway drama by appearing in one play after another for any Off-Broadway or OffOff-Broadway group that would hire me.

When I was twenty-nine years old and still had not acted on Broadway (I don’t know whether it was because or in spite of that fact), I met and fell in love with a fellow actor who happened to be directing the play I was in. After a great deal of mental strum und drang, we gave up our aspirations in the theatre, got married, moved to New Jersey to raise a family and start a small trucking firm. A little over a year later, I gave birth to the most beautiful eight-pound baby boy. The business was doing quite well, we were all healthy and happy and I didn’t miss the theatre at all! My life was incredibly perfect.

Two years later, I was driving home from our usual Saturday afternoon shopping excursion to the supermarket. The baby was being fussy and my husband was cuddling him on his lap in the front passenger seat when a speeding pick-up truck driven by a drunken teenager hit us, head-on. My baby was thrown through the windshield and instantly killed. My husband was thrown through the jagged remains of the glass that severed his jugular. He died in the ambulance on the way to the hospital. I was impaled by the steering wheel and suffered internal injuries.

After two weeks in the hospital, I was discharged to begin a new life. Blaming myself for the tragedy that using the baby’s car seat and seat belts may have prevented, I went into a state of depression brought on by guilt. With the help of a psychiatrist, family members and loving friends giving me reinforcement to live, I began to deal with what had happened, eventually accept what was and go on. About a year-and-a-half after the accident, I started dating my husband’s divorced partner, eventually married him, adopted his two boys ages two and four, and started to raise and breed show horses.

Our lifestyle (the horses actually) required more money than we were earning with the trucking company, so I decided to go to work as a secretary. Although I knew typing and could haltingly take dictation, skills that I used in part-time or temporary office jobs when I was an actress, no company would hire me. They didn’t come right out and say it, as the laws forbid, but they thought I was a little old to begin a career in business, albeit as an administrative assistant. After being rejected by several companies, I contacted an acquaintance at my old temp agency and asked if she would help me find long-term temporary employment. She sent me to Crapper’s headquarters in New York to work for the vice president of taxes whose administrative assistant was on sick leave. Six months later, the assistant decided not to return and I was offered and took the job with full benefits: savings plan, 401K, life insurance, and most important because our trucking business would no longer have the expense—health insurance that covered the entire family. (Now you know more about my personal life than anybody at Crapper ever did.)

When I began working for the Crapper Corporation, Theo Kanakaris was senior vice president of Crapper Plumbing Products. Having started as a vice president of the Greek plumbing company once owned by his father and purchased by Crapper twenty-five years ago, Theo had worked his way up to senior positions in the various divisions of Crapper Plumbing Products and onto the board of Crapper Corporation. In 1988 when the previous CEO decided to sell the company in a hostile takeover bid, certain board members found a white knight to prevent the sale, ousted the CEO and chose Theo to succeed him.

Theo was about six feet tall with a head of shiny, slicked-back, thinning gray hair and penetrating green eyes. An impeccable dresser with the most beautifully tailored shirts and suits I had ever seen, Theo was well mannered and always courteous, the epitome of a European aristocrat who held his ground in most situations. Despite his ascetic demeanor and his male chauvinist attitude, best characterized by his not appointing any women to management positions while CEO (the highest position held by a woman was director of human resources who he replaced with a man shortly after he became CEO), Theo was always available to any employee who made an appointment to see him.

Upon becoming CEO, Theo immediately divested Crapper of approximately eighty joint ventures, closed down several manufacturing facilities worldwide, sold a division to its employees, shuttered its small air force: two jet planes, two helicopters, eight pilots and eight stewards along with the fleet of twenty-five limousines and their drivers. He eliminated many departments within corporate headquarters thus reducing the overall number of employees and unnecessary overhead, as he liked to say.

When Theo finished his reorganization, Crapper became the company it is now consisting of the three major divisions; Crapper Plumbing Products, Ice Makers Inc. and Scooters Inc.; forty joint ventures, one hundred-ten manufacturing facilities in thirty-nine countries and over sixty-five thousand employees.

Theo eventually sold the land marked, art deco, twenty-two story Crapper building, moved corporate headquarters into the two top floors of a skyscraper from where he brought the company through a leveraged buyout. Immediately thereafter, Team Technology (TT) was implemented into the manufacturing facilities of Crapper.

TT will allow us to better service our customers by reducing manufacturing time, improving the quality of our products while increasing inventory turnover, thus reducing working capital as well as manufacturing and warehouse space, Theo maintained. He firmly believed that with the application of TT substantial savings would be realized which would greatly boost the bottom line.

In 1994 after adding more offices and a conference room to our midtown showroom (to be used for necessary New York meetings), Theo sold the lease on the skyscraper space for $500 thousand, and moved corporate headquarters into the company-owned Crapper Plumbing Products complex in New Jersey, two prize winning, three-story mirrored-glass edifices connected by a cavernous atrium on thirty acres of land bountifully planted with trees, grass and flowers; with parking for over 800 cars.

The most striking feature of the complex is the two-acre orchard, diagonally across from the main entrance, thickly planted with perfectly pruned cherry trees rising to heights of twenty-five to thirty feet. Flagstone paths and scattered picnic tables placed in the shade of some of the trees all but vocally invite you to enter and savor the pastoral scene. As you approach the entrance to the offices, you are surrounded by the reality of the orchard and its reflection in the mirrored glass walls of the buildings.

On my second day in this environment, I decided to cut across the orchard to my car in the parking lot only to find myself in a Woody Allen quandary. I descended the stairs to the diagonal flagstone path and was stopped from going any further by a strategically placed, compactly designed sign attached to a low, raw wood pedestal. No Pedestrian Traffic, it said! What? That can’t be true, I thought. They don’t have these paths here only for the squirrels and birds! As I took my first step onto the path a voice behind me said, You have to go around ma’am.

Why? I said turning to face a security guard. Why make it so inviting and then forbid us to use it?

Don’t ask me why, he said. I don’t know. Them’s the rules.

Ridiculous, I thought as I climbed the stairs and went around the orchard to the parking lot. It was like owning a house with a beautifully furnished room that couldn’t be lived in because it was just for show.

Six months after moving out here, Theo brought the company public in an initial public offering (IPO), with the stock opening at $18-a-share. It steadily climbed to $28-a-share by the end of the year. The Wall Street analysts, shareholders and officers of the company all agreed that Crapper was doing quite well. Theo maintained that the reason for our good performance was the implementation of TT in the manufacturing facilities and decided the company could do better if TT was also utilized in the daily operations of the corporate office.

Even though TT had been somewhat successful in the company’s factories, when Theo tried to apply it in the administrative facilities of the company its shortcomings were realized. For starters, the plan called for the officers to give up their executive titles—senor vice-president, vice president—and instead use group leader and team leader, which they reluctantly did. However, the officers balked when called upon to give up the privacy of their offices and sit in large open spaces, side-by-side with everyone else in their departments. (This was not a Team Technology innovation, as Theo wanted everyone to believe. A reading of Meryle Secrest’s biography, Frank Lloyd Wright reveals that in 1906, Wright designed a building for the Larkin Company, a mail-order soap company in Buffalo, New York, that consisted of a vast rectangular space where all of the employees sat together. Visitors to the building were most amazed that the officers of the company sat side-by-side with everyone else. In 1936, Wright incorporated the same principle of design into the Johnson Wax Company Building in Racine, Wisconsin. But as founder Samuel Johnson observed after the building had been in use a short while, . . . It’s a concept that may look attractive on paper but tends to grate on the nerves when it becomes reality.The interior and exterior design of both buildings were considered architectural gems, but the office experiment a failure.)

Senior management’s reluctance to give up their offices was the first indication that Theo’s implementation of TT in corporate headquarters would be erratic, at best.

Satisfying the customer is the most important objective of TT. The customer, however, orders specific products. TT principles can easily be applied to the manufacture of those products as well as getting them delivered to the customer quickly and economically without the buildup of inventory.

Applying TT to corporate administration, however, was a stretch. Theo became the customer and everyone had to apply time-consuming TT principles to make sure that he got the financial information he needed when he needed it, something that was already being done. Unlike manufactured products, his and the boards financial reporting requirements (products) varied from quarter to quarter necessitating a flexibility that TT did not accommodate. Nonetheless, in addition to investing over $1 million to found, renovate space for and equip the Crapper College, Theo hired a staff of facilitators to conduct classes in advanced TT principles and insisted that every employee in corporate headquarters be required to take instruction. But there was no way of measuring the results of TT’s application in the office. Therefore, it was never successfully implemented.

We spent all this time and money training you in the methods of Team Technology, but you wouldn’t change your paradigms, an exasperated Theo said at an all-corporate meeting. That’s why TT couldn’t be successful in the office. You had to change your paradigms and you couldn’t or wouldn’t. Having said that, corporate officers were allowed to reclaim their titles and Team Technology continued being used as the useful manufacturing management tool it was intended to be.

Crapper had been an employee-owned company for more than half of Theo’s career as CEO. After he made it a public company, he continued to act as though it was still the privately owned company where he answered only to his handpicked board of directors who had tolerated his behavior. Ignoring the fact that both he and the board now answered to the Wall Street analysts and the stockholders, he randomly purchased companies, some that had nothing to do with our core businesses, for no other reason, it seemed, but that he liked them. The rumor was that he supposedly financed a joint venture with a small electronics company because distant relatives were on that company’s board. He also purchased a European film company without proper due diligence. By the time he became aware the company had misrepresented its sales, earnings and cash flow there was no alternative to closing it down and taking the write-off.

Shortly thereafter, the Dutch government filed a lawsuit against the company seeking $90 million plus interest for disputed taxes startling the analysts who blatantly began to question Theo’s management.

When the stock price hovered between $40 and $45-a-share, a major conglomerate offered to buy Crapper at $50-a-share. Theo refused the offer without consulting the board. They found out about it along with everyone else after the Wall Street Journal published a press release from the potential purchaser detailing the offer and the brush off manner in which it was refused. Crapper’s stockholders reacted to the article so vehemently that the chairman of the board called an emergency meeting to discuss ways to calm the storm. A damage control press release was issued touting Theo’s and the board’s belief that because of Team Technology, Crapper stock would surpass the $50 mark soon. That was why the offer was refused. Though not formally submitted to the board for a vote, the article stated, Theo’s action had their unanimous approval. Shortly thereafter, the chairman of the board decided to retire, and even though some board members, along with the analysts, were becoming dissatisfied with Theo, in addition to being president and chief executive officer, he was voted chairman of the board!

At the end of 1997, Theo had not delivered the promised stock price of $90-a-share. Rumors of his impending ouster began to circulate throughout the company. Mustering all his forces, he undertook a vigorous campaign to convince the analysts that savings achieved through the improved application of TT in our manufacturing facilities would indeed make the $90 prediction a reality soon. The analysts again bought it and the stock climbed to $52. When it dropped to $48 and stayed there, they started checking the numbers behind the latest projections and concluded that even with the improved TT the actual and projected sales and earnings figures could not support a $90-a-share price any time soon.

Crapper’s chief financial officer, with the aid of the independent auditors, warned Theo that the $90 price could not be achieved and urged him to lower his projection to a price based on actual sales and earnings. Theo refused. He insisted that reduced inventories achieved with Team Technology would get him the projected $90-a-share price. If everybody else had no faith, that was their problem. And that was that.

Theo then proceeded to finalize the questionable purchase of a small medical company. He banished the chief financial officer to its headquarters as its president and appointed a crony, Louis Adler, as the new CFO. Shortly after his appointment, Louis convinced Theo to revise the stock price projection to $60. The analysts were placated—for a while. Then they focused their attention on the purchase of the medical company and demanded to know, Why a medical company?

Because it is a good investment, Theo answered with a financial presentation designed to prove him right.

When a $95 million write-off was required in the second quarter of its operations, variations on the question were repeatedly asked. Why is Crapper in the medical business? It has nothing to do with your core businesses.

We didn’t know anything about the refrigeration business either when we bought Ice Makers in the mid-80s, Theo said. It’s our top moneymaker! Nor did we know anything about motorcycle braking systems when we purchased Scooters back in 1987. It’s also doing very well.

That’s different, the analysts said. They are both industrial manufacturing companies which is what your other businesses are. But you know nothing about the medical business? It is totally foreign to anything Crapper does. Why?

Why indeed? Many solicitations came across Theo’s desk; requests for capital to open new businesses, purchase existing companies, become involved in a joint venture, etc. Establishing the medical company, however, was the result of a personal tragedy. Theo’s daughter had been diagnosed with a rare form of cancer. Every two weeks, for over a year, he would accompany her to chemotherapy sessions at Memorial Hospital in New York where he met two doctors who had developed compact analytic test instruments using laser technology and reagents, devices that would allow physicians to perform medical diagnostic tests in their offices rather than admit patients to hospitals or screening centers for that purpose. This would not only save time in diagnosis but would also allow the doctors to bill the patients directly for the tests. For close to three years, 1995 to 1997, Crapper had quietly invested approximately $45 million in the development of these products.

Even though he had not achieved stock price projections and taken large accounting write-offs because of his problematic investments in acquisitions and joint ventures, in November of 1997 Theo announced