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Business Q&A

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David Rothstein

If owners pay attention, they know what their customers arethinking.

Personal file:

David Rothstein, 60, is chief executive officer at Mountain Meadows in Ashland. He has more than 18 years' experience in operations management, organizational development and human resource management. As a university professor, he taught courses and conducted research in organizational behavior and employee relations. He has held key positions as a human resources and organizational development executive with several high-technology companies.

His consulting work has focused on operations management, strategic planning/plan implementation, organizational development and human resource systems. His clients include manufacturing and technology companies, banks, retail, and professional services businesses. Two of his recent projects illustrate his expertise.

He has been an adjunct faculty member of the Haas School of Business, and the Business Extension, University of California, Berkeley. Rothstein received bachelor's and master's degrees from the University of California-Riverside and a Ph.D. from the University of Oregon.

He lives in Jacksonville with his wife Donis, where she operates a women's apparel store. They have a grown son who teaches bio-chemistry at Michigan State University.

Q: Your consulting background has been with companies that grew too fast. What causes a company to grow too fast and what problems does it cause?

The answer is one word: success. Businesses get away from people when they're growing much faster than anticipated. They're companies that have done many things well, have been successful and can't manage the success. When you're dealing with companies with serious problems and their survival is at stake, the No. — thing you find is that the owner or chief person has an inability to deal with people problems directly. Once you get past the financials you see the CEO, president or whoever it is has a number of higher-level people not performing well. The CEO isn't able to confront the people issues, especially with senior individuals.

The second piece is that there hasn't been planning. There aren't contingencies if this (company) gets bigger than we thought. Ordinarily in a small company you don't want to go out and hire a bunch of people at a high level and then not be able to sustain it.

The last piece is failure to recognize it or not get help when you need it.

Q: How do you create controlled growth and how does it show up in business activity?

Growth is very hard to control. It's very hard for an entrepreneur to control growth; that's the payoff, that's what you're there for. When it happens that way, it's a heady experience. Entrepreneurs believe they can do anything - they're bullet-proof. The more entrepreneurial the owners are, the less likely they are to rely on other people and the more likely to get in over their heads before they recognize it. You are not going to control things day to day, but quarter to quarter, you need expertise to effectively deal with problems that rapid growth presents. Then you basically apply business common sense.

If you're a manufacturing organization, you want to look at how and what the manufacturing process is, how suppliers are able to provide materials, all sorts of things. Are your customers happy? When you're growing fast, you get stretched. You're looking for new customers and early customers are the ones that make you successful, keep you going and will be there in the long run.

Q: What are the specific indicators of something going wrong with a growing company?

The indicators are pretty straightforward in most instances. If owners pay attention, they know what their customers are thinking. If there are complaints or returns, are shipments going out as scheduled, are they complete? Is the product performing the way you said it would or according to expectations you created? It's important for a fast-growing organization to keep in contact with its customers.

Internally, the people themselves are enormously stressed and frustrated about not being able to handle the load they've got. Often, your will see internal dissension where one department has gotten defensive at the cost of another department. That's where managerial leadership is hugely important. The owner or chief executive has to know how to get people to work together.

Q: Who has a more favorable chance of dealing with meteoric growth, closely held or publicly traded companies?

Closely held companies do not have any external governance. You own the business, there are no shareholders. You may have some investors you've got to satisfy and that's it. Publicly held companies are in a better position because they've got more experienced people and a board of directors.

Q: What challenges await business school-trained managers?

Anyone who has never met a payroll is not in the position to tell anyone else how to run a business. If you haven't, you don't understand the day-to-day difficulties and pragmatic things you have to do to become successful.

You can learn from textbooks, but most business schools have internships. It's very difficult to come out and run a small business when your only qualification is a degree.

It isn't easy for people coming out of business schools into a small business where the demands are greater than at a big company and there are far fewer support systems. But in my opinion, the successful ones are the ones that are the most humble about their abilities. They don't assume because they have an MBA that they have day-to-day nuts and bolts knowledge of the business. Some of the best people at coming in and turning a business around have a minimum of business education. They have a great technical knowledge and know what they don't know. They're not afraid to go get the help they need.

If you're a technical person and know your market, but don't know much about finance , the smart ones go out and get a finance person and let that person run the operation. It's the old adage of hiring great people and letting them do their jobs.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail