Run Inc Case Study

Run, Inc. manufactures and markets a number of automobile parts. In 1980, RUN went public and flourished until the stock fell considerably in 1990. RUN has a unique management style in that it is a family run business where the founder and the treasurer are married and the remaining members of the management team are all longtime friends of the founder. All executives are also on the Board of Directors. In 2004, Martin Field joined RUN as the controller with the promise that he would move up in a year to be the CFO. In Martin’s first few weeks he found some inconsistences in the accounts receivable and inventories figures and when brought up with senior executives they decided to write off $25 million of bad debts as a special charge against income.

While Martin was pulling together the financial information for his first annual report, he noticed that the inventory figure was much higher than its competitors even for a company that would hold a lot of inventory based upon their quick service, the receivables figure had also grown much faster than the sales figure has and this was cause for concern. When Martin spoke to the chair and other executives they brushed off his concerns and told him to ensure that payroll and the vendors got paid. The company is not adhering to the correct accounting standards, since Martin is the controller it is his responsibility to ensure that all the accounting principles are being adhered to and if he is not comfortable then he should be able to investigate the figures without any opposition.

        Martin faced the challenge of being the new man in the office and trying to infiltrate a family run management style business. All of the current executives and Board of Directors are family friends and trying to make changes to the accounting is going to be a constant battle even when the White’s retire. If Martin can hold his group with figures that he doesn’t agree with or policies that go against an accounting practice then he will be able to succeed at RUN and hopefully gain the respect from other executives.

The recommendations that Martin was making were credible and had validity. By Martin taking the CPAs to lunch away from the office an asking them to check the accounts receivable, inventory and the subsequent write off of $25 million, he was hoping that they would be able to find something and help him to bring the attention to the White’s. I think his approach would have been better if he could have stood up for himself and been able to look into those figures himself, although I do agree with the auditors findings of the situation.

Martin’s leadership skills negatively impacted his ability to persuade the White’s or the other executives to listen to his concerns about the accounts receivable or the inventory figures. I would have stood my ground with the White’s and not allowed them to make the adjustment to the books and prepare the subsequent financials, if Martin is the controller it is his responsibility to make the adjustments to the books and to ensure that all of the books and records are complete and accurate.

 I foresee a few obstacles for RUN, Inc. moving forward – including the change of leadership with the White’s and if the executives will allow Martin to complete all of his job responsibilities. I think if Martin works proactively to stand his ground and to prove that he will not back down if there is something that he doesn’t agree with then he will gain the respect of the other executives and will also help with the future discrepancies. Martin will continue to face issues until his colleagues can learn to respect his decisions.