Orson B. Counter was the accounts receivables manager at Federated Tire. His professional life was governed by two rules: (1) Federated's customers must pay within 30 days and (2) if they did not pay, he gave them one warning before he cut them off past 60 days. If Orson broke either of these rules, his boss, Ed Bolton, Federated's comptroller, came down on him hard—"for his own good," as he often told Orson. Ed, whose leadership style had been compared to that of Benito Mussolini, had done so much for Orson's own good that Orson was terrified of him and kept past-due receivables nonexistent. Ed saw this fear and the absence of past-due accounts as triumphs of progressive management.
Federated Tire's largest customer (30 percent of gross sales) was Dutton Retail, a national account that was having major problems with the recession, which created severe cash-flow problems and forced it to stretch out payments to suppliers. Because Federated's marketing/sales department was killing itself trying to maintain Dutton's order levels, it never occurred to marketing/sales to emphasize to other functional departments how critical Dutton was to Federated. Marketing/sales assumed that everyone had to know Dutton was Federated's number-one customer.
Everyone didn't know. Orson knew that Dutton's revenue levels were higher than most, but his performance evaluations were not based on knowing strategic accounts. He was evaluated on those two rules, and as Dutton stretched out the payments even farther, it broke Ed Bolton's first rule...it went beyond 30 days. On day #31, Orson sent out the dunning letter that Ed had written, a masterpiece (thought Ed) at declaring that customers were not going to take advantage of Federated.
John Reardon, Dutton's accounts payable manager, was neither particularly guilty nor motivated by any wish to take advantage of Federated. But he did feel anger pure enough to cut through steel. He knew that Dutton's marketing managers were working with Federated and couldn't understand the motivation of the individual who had sent him and his company such a letter. He filed and forgot it.
Time passed. At 60 days, Dutton had still not paid the bill and Orson sent Dutton a letter that went far beyond dunning. It first cut off all product deliveries. It then mentioned—none too subtly—the massive law firm held on retainer.
If Reardon had been angry after receiving the first letter, he was furious at the second. He took it in trembling hands to his CEO, Stan Dutton, who read it and then reread it, his face growing more purple. Dutton picked up the phone and called Federated's CEO and, in an icy tone, told him that he was overnighting a check for the entire amount owed and that—by the way—Dutton would never buy tires from Federated again.
This story is true, with the names changed to protect the guilty. We've been surprised at how many businesspeople have said the same thing had happened at their firm. Chapters 1, 2, and 3 focus on how to get your departments heading in roughly the same direction—toward meeting the needs of strategic accounts.