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Trial by Fire

Who better to clean up an accounting mess than a new CEO with a background in finance? That must have …

Who better to clean up an accounting mess than a new CEO with a background in finance? That must have been the thinking when

Sacramento, Calif.-based Unify recruited Todd Wille in mid-2000. More than a CPA with considerable CFO experience under his belt, Wille was also a Unify veteran-having served as its CFO from 1995 to 1998 and before that as corporate controller.

So he knew exactly what he was getting into rejoining the company, right? Not exactly. “You know when you pick up a rock in your backyard and there are all those bugs squirming around?” he says. “Well, that’s what my first day back was like.

There were 17 forensic auditors running around, and all of my people-software engineers, salespeople, finance guys-were scared to death.” Unify, which provides large companies with database software and tools to develop custom programs, was under investigation for a series of dubious transactions that eventually landed its former CEO in jail for fraud. Wille, who had left the company before the transgressions were made, was now responsible for cleaning up the books and restoring the understandably shaken faith of his employees, customers and investors.

It proved a tall order. “I would get in early and do the business operations until noon, then work on the audit issues in the afternoon and be up until 2 a.m. working on the books,” he recounts. “Those were dark, dark months.”

Meanwhile, the company was bleeding money-losing approximately $3 million a quarter. Sales had stagnated when the turbulent environment scuttled employee morale. With no way to jump-start revenue, Wille was forced to cut his staff from 125 to 90 employees within a few months of taking the helm.

That was a dark day, but the darkest of all came a month later when Wille discovered the company was actually too poor to file for Chapter 11. “We didn’t have debt; we were bringing in less money than we were spending in operating costs,” he explains. “But filing would have required us to deposit $500,000 for legal views. I had $700,000 in the bank and a $300,000 payroll to meet the next week. We were in a safety-nets-gone situation.”

Wille pared down by another 15 people and began the uphill battle of motivating his employees, reassuring existing customers and forging new relationships. “Even in the dark, dark days, I was always honest with people,” says Wille, who grew up on a farm in Klemme, Iowa. “My third day on board, I had a company meeting and told everyone where we stood, what we had planned, and what I needed them do to. And I did that once a week from then on.”

One unorthodox move was to anoint his service guru as head of sales. “He was the guy who solved customers’ problems and they liked him,” he explains. “His job was basically to call, fall on the sword, convince people that their problems would still get solved-that we had an operational issue, not a product issue.”

Wille was doing the same-personally meeting with customers to clarify Unify’s situation and ask for their support. One watershed moment came during such a meeting with 60 U.K. customers. “One guy said what everyone else was thinking, €˜I’m not comfortable paying my maintenance for the year in advance when I don’t know if you guys are going to be here. I want to pay as I go,'” recalls Wille. “I looked him right in the eye and said, €˜If you guys do that, that’s exactly what will happen because I won’t have the cash to pay my people.’ It was the longest 30 seconds of my life, but then my biggest U.K. customer-the one everyone else in the room looked up to-said, €˜That makes sense,’ and that turned everything around. It was a glimpse-of-sunshine moment.”

Those dark days are behind Wille-and Unify-now. The company weathered an earnings restatement that dropped its reported revenue by a whopping 45 percent, delisting by Nasdaq and 39 class action lawsuits (later dropped). But over time Wille brought it back on track. In fact, Unify recently reported its highest revenue in seven years, with its first operating profit-$692,000-in five quarters. Behind the numbers were a reported 95 percent renewal rate for software maintenance contracts and the addition of 63 new customers.

What’s more, the firm is positioning itself for growth. Wille describes new software that allows big companies to move complex programs written in the Lotus Notes format to Microsoft or other platforms as offering great potential. In fact, Unify is in the process of inking deals with storage and software giant EMC and Microsoft to market that migration program.

“This opportunity with Microsoft could eclipse the size of our current business, turn into a $20 million business in a year and a half,” says Wille. “If that happens, we will be a completely new company again. One of those sunshine days is coming.”

 

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.