Verbal Communications Inc.

Interstate Batteries president has a way with words

02:45 PM CDT on Friday, June 1, 2007

Philosopher-king Carlos Sepulveda is president and chief executive of Interstate Battery System International Inc., a $750 million company with headquarters overlooking LBJ

Freeway in Dallas.

There's a saying in the South that applies well to Mr. Sepulveda: "He could talk an owl down from a tree."

Several years ago, Interstate Battery bought and implemented an Enterprise Resource Planning software platform. When ERPs work, they're precious gems that can align a company's data and processes in one system. When they don't, they're the business equivalent of a never-ending root canal. In this case, the ERP never lived up to its expensive promise, even after several resets.

After lengthy wrangling, Mr. Sepulveda met with the huge software provider's two vice presidents in charge of the project, who told him they had considered terminating the project but elected instead to remain committed to it. Mr. Sepulveda responded: "We'll be more than fair with you, but we won't be held hostage." We admire that sentiment: It's clarifying but nonthreatening.

Interstate Battery president Carlos Sepulveda negotiated with the maker of Enterprise Resource Planning software that wasn't working for his company. He had a novel solution.

But after more time and dissatisfaction, the software provider proclaimed that:

The contract was unenforceable.
The software provider would only continue the project for significantly more money.
Under a proposed new contract, Interstate would not receive the benefits it originally expected.

Mr. Sepulveda was true to his promise not to be held hostage, and Interstate terminated the software contract and initiated litigation. Then, in a fairly unusual gambit, Mr. Sepulveda injected himself into the lawsuit as the company's representative at all major hearings and depositions.

Then, during a break in the deposition of the software provider's chief executive, a light bulb flashed. Mr. Sepulveda told the CEO that although Interstate was comfortable letting a jury hear Interstate's issues over the ERP, he was equally comfortable meeting with the CEO to resolve their dispute. Two weeks later they met on neutral turf.

Each man justified his company's respective position until they reached an impasse. Anticipating the deadlock, Mr. Sepulveda had planned in advance to make an unusual and compelling offer. He committed to invest 60 hours of his time to prepare for and speak to an audience of the software provider's choosing. The topics: What went wrong, how Mr. Sepulveda knew what went wrong, and how the software provider could do better when things go wrong.

Mr. Sepulveda's proposal was warmly embraced because it allowed the software provider's chief executive to save face. After all, he'd be paying tuition, not ransom, to settle the case. At the same time, Mr. Sepulveda gave up something that was affordable to him and very valuable to his adversary.

Ultimately, Mr. Sepulveda flew to California to address 2,700 salespeople about what to do when projects and customers don't get along - from a customer's perspective. According to the e-mails and letters that followed, it was the best speech the software provider's employees had ever heard - and at the cheapest tuition.

Mr. Sepulveda's story offers best practices for resolving major lawsuits:

Trial lawyers may understand businesses but not business. It's fair to say that they are not as attuned to business-centric settlement opportunities as businesspeople are. That's why it's smart to have the chief executive or another important business leader closely invested any significant litigation.

Leadership matters. Mr. Sepulveda saw an opportunity and took it. He didn't wait for his board to meet or ask his lawyers to write a letter. That's leadership.

Play out the sequence of events in advance. Knowing that the CEOs would deadlock, Mr. Sepulveda was ready. Inspired, spontaneous ideas such as Mr. Sepulveda's are rarely either. We call it "planned spontaneity." It requires brainstorming with a trusted team and careful planning.

Solutions aren't always complicated. Mr. Sepulveda came up with a unique but uncomplicated, win-win proposal.

Pauline Graivier is president of Dallas-based Verbal Communications Inc. Rob Hoffman is a partner with Gardere Wynne Sewell LLP. (Interstate Batteries is a client of his.)