Re; Ahem and Re: I once did
Re: Ahem: There is a third (or fourth) group. Those who manage but have no understanding of what it is that is being managed.
Which leads to :
Re: I once had a file ( a prospective lawsuit) where the clients owned 50% of the shares of a restaurant business which was actually run by the owners of the other 50%. My clients Group 1, put up 80% of the original investment. Group 2 ran the place. Group 1 lived in Vancouver, BC. The restaurant was at York University near Toronto, so Group 1 had little hands-on capability. Group2 consisted of dad, mum, 2 adult sons and adult daughter.
Since Group 1 was so far away and "'did nothing to run the place", Group 2 decided that they did not have to treat them fairly or account properly for the operations and could rip off the business. In part, the ripping off was an income hiding scheme.
Group1 was suspicious but did not know quite where to start. We started with disclosure requests under the Shareholders Agreement, for an accountant to look at things. They basically had no choice but to co-operate with us in disclosing the financial documents, cash transactions and credit transactions. We actually used a guy who had been a trouble-shooter and forensic manager for a couple of fast food chains. We told them he was an accounting student/intern. In fact he knew more about the business than any of the actual accountants.
We found out that students could use their student ID card as a credit card (about 60% of weekday transactions and 80% of Sunday morning events.
We soon determined that group 2 had been substituting in a 'spare' cash register on Sundays. The cash sales from that register did not appear in the account system, and we were told that the place was 'not even open' on Sunday mornings (which was a lie).
They had NO idea that every student id transaction run through the card reader was recorded with the University and, of course, easily recovered. (The University effectively operated as the merchant service provider for the cards as well as the issuer.)
They had NO idea that the cash registers produced a 'z-tape' recording *every* transaction. They had NO idea that the student ID card transactions were also recorded in the register as credit transactions (as would Visa/Mastercard transactions).
Since they had NO idea, they had boxes and boxes of old z-tapes (think: the equivalent of backup tapes). The registers were quite sophisticated for the time, so the z-tapes recorded that the order was a burger at $x or a cheeseburger at $x+1. It also broke down the 'combo' orders into the constituent parts (for inventory purposes).
And so we knew that the steaks which were ordered every week, NEVER got sold to a customer.
They had some idea that they needed to balance the cash deposits at the bank, so the Monday morning deposit only included Saturday's cash. Sunday did not exist. It turned out that Dad had a separate account at a different bank which got the skim. (No idea what story he told them there about the cash he deposited. Would likely ring money-laundering bells today.)
They could not hide the cheques from the University paying off the student credit card amounts, but claimed that the extra was Sunday afternoon and that, because of staffing problems, they did not take cash on Sundays.
In the end we never did issue a Statement of Claim. We reconstructed the financial history as best we could for the past 2 years and figured out roughly how much had been skimmed and inventory stolen. (Oh yes, son #1 was selling stuff out the back to another restaurant for his own skim. Mom and Dad did not know about that. And I think that daughter was blackmailing her brother for a cut!)
And then, we had a Sunday meeting where we laid out our (reconstructed) history of their frauds. After a while we left to let them talk. We were four walls and 3 doors away and could hear the kids at Dad: "We told you it wouldn't....". And Dad "But I don't understand...How did they know"
It was the only time in 40 years where I heard the opposing lawyer tell his clients to settle *in my presence* or he was going to ditch them.
A settlement satisfactory to my clients was soon reached and there was an entirely new crew in place on Monday and my clients ended up owning 100% of the shares. I got an entirely satisfactory bonus.
Takeaway: A manager who does not understand what he is managing is a disaster waiting to happen.
Secondary takeaway: That keyboard with a key for every item on the menu, is NOT there just so 'Mister-Want-Fries-With-That?' can actually serve you, but more importantly, so the franchisor knows exactly how many orders of fries were sold. Any efficiencies in order transmittal to the kitchen, and service delivery are merely nice adjuncts for the franchisee. Follow the money.
Biting the hand that feeds IT
