Ayana Voorhees
Due: 10/4/16
A)
Hollate was a company that started in the 1950s. They began creating specific
products that were particularly popular in the home construction industry. For a
long time period in the company, Hollate focused on making doors and windows for
the Southeast region in the U.S. These specific products were being sold under store
brand names, as well as private labels. Years after the company started up, Jack
Brennahan became the company’s new CEO. While Hollate began branching out to
new manufacturers, their acquisitions allowed them to have a greater access to new
product markets and geographic markets. This also allowed Hollate to gain
economies of scale within raw material purchasing and in management. The new
addition allowed Hollate to become a public company, after holding an initial public
offering. They used their proceeds to bring in a few other manufacturers,
broadening their position in the construction industry. Although Hollate was a
smaller company, they were slowly but surely beginning to rise up and expand.
While Hollate began to mold into a great company, their successes did not come
easy. Due to a major decline in the housing district, which heavily affected the entire
home construction industry, Hollate had taken a major blow in both their profit
margins and revenue growth. Though they continued to do better than all of their
peers within the industry, this was still a major concern. At this point in time,
Hollate was a company having 14 divisions, located in both the U.S. and Canada, and
2,100 employees. They acquired $1 billion in profit margins, which according to the
industry’s history was in the norms. Hollate’s market capitalization was higher
reaching roughly $1.5 billion. Hollate was doing fairly well with each of their
divisions maintaining market share and being profitable; all except for one or two.
Prior to Brennahan being CEO, he had earlier joined the company as CFO, having had
experience in several management positions at other firms. Brennahan had always
considered himself to be a general manager, even while having an accounting and
finance background. Brennahan played a dominant role in consolidating Hollate’s
earlier mentioned acquisitions, which created operation and financial successes. He
also played the major role in Hollate becoming public. Brennahan was viewed as the
most fitting candidate to become CEO after the previous CEO had retired.
Brennahan led Hollate to sustainable progress and he also launched their last four
acquisitions. Brennahan made it clear that his main goals were to grow the
company as much as he possibly could, and after being CEO for a while, he branched
out in hopes to find Hollate’s new CFO. He wanted someone with experience in a
public company, and someone top-notch who was better than anyone that Hollate
had ever seen. After a long and hard decision, Brennahan chose to go with William
Blackburt as Hollate’s new CFO. This is where the major problems began to occur.
Blackburt was a CPA with his MBA and 25 years of related experience. He came to
Hollate looking for new and grand opportunities. Finding someone with Blackburt’s
level of experience, level of confidence, drive and willingness to learn was nearly
impossible. From the beginning, Blackburt showed signs of greed and being money
hungry. When initially entering the company, he bargained hard for his
compensation and negotiated a bonus almost as high as his pay, essentially doubling
his year-end salary. Although this sounded high, the bonus was based on his ability
to earn and move up in tiers. Due to the fact that the home construction industry
was not a high-growth industry, this was not easy and seemed fairly unlikely for
Blackburt to earn even his lowest tier. It was hard, but if anyone could do it, it was
Blackburt. His confidence and aggressive attitude is what Brennahan loved most
about him. Blackburt was viewed as one of the best in the company and was always
under a lot of pressures to perform and produce. Although many pressures came
into play, Blackburt was always excited and ready to negotiate the next deal.
Regardless of the company’s obstacles, trials and tribulations, Blackburt always
seemed to come out on top and overcome anything that came his way.
Here lies one of many problems. Blackburt began acting as the CEO of the company,
making primary decisions without permission from Brennahan, and doing as he
pleased. Blackburt would give permission to other employees to hire considerable
candidates for Hollate, such as Jonas Durand, who was Hollate’s chief audit executive
(CAE), when he wanted to hire another accountant with internal audit experience.
