As the nation digs itself out of the Great Recession, Americans are coming together to rebuild neighborhoods, raise money to save public services, and make personal sacrifices for the benefit of others. The Fiscal Times will feature some of their stories in a series, The Path to Recovery.
When chief executives make news, it's often due to some scandal or excessive bonus pay. But there’s another kind of CEO out there, the kind who believes bosses should sacrifice along with their employees when times are tough. National Instruments CEO James Truchard, cut salary to $1 in late 2010 after the engineering firm he co-founded ran into trouble. Similarly, when Japan Airlines hit turbulence in 2009, CEO Haruka Nishimatsu took a pay cut and started taking the bus to work. But few can match the sacrifice made by the 52-year-old founder and CEO of Accurate Background Check (ABC), Lola Gonzalez.
In May 2010, the Ocala, Fla. job applicant screening company founded by Gonzalez was in serious trouble. Two years earlier, Gonzalez had gotten a phone call from their biggest customer, LKQ Corp., an auto repair supply company. LKQ was in the middle of a corporate takeover and terminated its contract with ABC. Instantly, Gonzalez lost half her business, about $500,000 in annual revenue. As the recession deepened, ABC’s other big clients stopped hiring and no longer needed her services. Gonzalez had public sector clients, but as local budgets were slashed throughout Florida, her work with hospices, hospitals and county agencies dried up, as well.
Gonzalez had a few things going for the company. ABC had cash reserves of . $100,000, saved during the fat years, and owned its office space. When revenue dried up, cash reserves allowed the company to meet its eight-person payroll of around $240,000 a year and cover other expenses (though employees were not offered health insurance or a retirement savings plan). Gonzalez was able to sublet half of the company’s 1,900 square-feet of office, which brought in enough cash to cover the entire mortgage, association dues and utilities. But these stopgap measures only slowed the decline.
Gonzalez was facing a tough decision. She poured over the books and could think of only one way to keep the business afloat: layoff two people. But most of her staff had been with her since she founded the company eight years ago, and she knew that the spouses of both people she had identified as layoff candidates badly needed their salaries since their spouses had recently been let go. Florida had a 12 percent unemployment rate.
‘It’s sad when you hear about CEOs letting people go,
shutting down departments and [then] giving themselves
bonuses and raises. That should be illegal.’
Gonzalez prides herself on being open with her staff, and says they understood the company’s dire financial situation. “I’d told them that we’d gone through our savings,” she says. “Most of our clients were still there, but that didn’t help us if nobody was hiring.” Gonzalez wanted to end the suspense as quickly as possible, and she wanted everyone to hear the news all at once.
As soon as they arrived at work on that May morning in 2010, she called all employees, including her husband – who had left his job in construction and joined ABC — into her office. They lined up in chairs on the other side of her desk. She took them through the numbers. She was somber, and her staff began sinking into their seats. “I gave them my best Donald Trump,” she explained. “I said, ‘I have to let someone go, and that someone is going to be… me.”
The mood in the room swung from fear to relief to loss, as her co-workers realized what Gonzalez was saying. Though she would still own the company and would consult from afar, for Gonzalez, it was an easy choice, since eliminating her salary (she wouldn’t disclose the number, saying only, “I made a nice living”) would save her two employees Both were important to operations: without even one of them at their desk, “the quality of our research and customer service would have taken a big hit,” Gonzalez says.
So far, her sacrifice seems to be paying off. Accurate Background Check hasn’t had to fire anyone since Gonzalez’s resignation. The company continues to sublet space, and it qualified for the Fed’s ARC program, which provided an interest-free loan of $35,000. ABC used the money to reduce debt and purchase a scanner that allows them to fingerprint prospective hires on location. This year’s revenue is up 20 percent, according to Gonzalez, allowing the company to hire a new director of global operations to run the business, at a salary much lower than hers and closer to the company’s average of $30,000. Thanks to a rebranding strategy, they’ve signed up such new clients as Banyan Biomarkers and Good Spirit Home Health Services.
After she fired herself, Gonzalez took a job with a branch of Devereux Kids, a national nonprofit that assists children with emotional, developmental and cognitive disabilities. She says she makes 60 percent less than she paid herself at ABC, which was a shock to her family (her husband still works in ABC’s accounting department.) When that work is complete and ABC returns to profitability, she plans to return full-time. She expects that to happen within the year.
Certainly, not many CEOs are in a position to do what she did, but Gonzalez has a message for corporate leaders who profit while employees suffer during hard times. “It’s sad when you hear about CEOs letting people go, shutting down departments and [then] giving themselves bonuses and raises,” she says. “That should be illegal.”
Other articles in The Path to Recovery series:
Foreclosure Fighters: A Neighborhood Back from the Brink (The Fiscal Times)
School Budget Cuts: A Small Town Fights Back (The Fiscal Times)
