Situation: A growing technology company is faced with several opportunities. The CEO is too busy to devote the time to analyze each of these. In addition, the CEO wants to develop her staff so that they can take on more responsibility and mature into a full organization. How do you choose between opportunities?
Advice from the CEOs:
Everything starts with a strategic plan for the company. Either the CEO or an outside consultant should coordinate a strategic planning session to develop and rank the opportunities facing the company. The ranking exercise is best done as an open departmental or company-wide exercise so that everyone is involved in the process. This helps to build consensus and commitment to the opportunities developed.
Once the opportunities have been identified assign one to each of the employees that you want to develop. Each of the employees will be the champion for that opportunity.
Ask each champion to develop a business case and plan for their opportunity. This will include a development plan and ROI analysis. Allow each champion to access all company resources as they develop their plans. Set a deadline for all champions to complete their plans.
Once the plans have been completed, reconvene the group that participated in the strategic planning session and have the champions pitch their plans to the group. The group will provide feedback and suggestions for each plan. At the end of the session repeat the ranking exercise based on the new information developed and presented.
This will provide a wonderful training opportunity for the champions as well as valuable insight into their talents and potential for future development. In addition. Because the strategic planning sessions will be conducted as a company-wide exercise, they will act as team-building exercises and excite everyone about the potential facing the company.
Situation: The CEO of a professional service company is reaching retirement age. The plan for years has been for a key field manager to take on this role; however, neither the CEO, the founder nor most employees feel that this individual is up to the job. What can be done to either better prepare the key manager for the new role, or to demonstrate that this is unfeasible? How do you transition to new leadership?
Advice from the CEOs:
For the long-term benefit of the company, it is important to create a situation that will either prepare the field manager to succeed or provide the Company with a back-up plan for ongoing leadership.
If the CEO and founder are concerned about this individual’s ability to succeed, then coordinate a plan with the founder and then meet with the key manager.
Let the key manager know that the owners plan to sell the company in 3 years.
This can be an internal sale – the CEO and founder sell their shares to the key manager – or the owners will look for an outside buyer to buy out all current owners.
See how the key manager responds.
If the key manager expresses an interest in buying the CEO’s and founder’s shares, then require this individual to make the same level of financial commitment that the CEO and founder have made.
Another CEO experienced a comparable situation with an individual who was both underperforming and a significant shareholder.
This CEO created a very public vision of what he expected this individual to achieve – in positive terms. The CEO also put an outside hire in a similar role to create a performance comparison. The result was a significant increase in performance by the inside individual and a successful transition to additional responsibility.
If the key manager is to be put on a track that leads to the CEO role there will be two challenges: assuring that this individual can acquire the skills to succeed and assuring that the individual can demonstrate successful leadership within the Company. To meet these challenges, take the following steps:
Make a public announcement of the plan to transfer the mantle of leadership to the key manager;
Raise the bar of expectations for the key manager to demonstrate his or her leadership capacity;
Define a full program of training to provide the key manager with the skills to lead the Company;
Ideally, allow the key manager to prove his or her mettle through a highly visible responsibility – like growing a key market segment – so that he or she gains the respect of the others.
Require the same level of financial commitment that the CEO and founder currently bear, so that everyone knows that the key manager has “skin in the game.”
Put the key manager on the same compensation program as the CEO and founder, as this will become his or her compensation program on becoming CEO.
Situation: The CEO of a product and service company has seen her company struggle for several years. While the overall market has turned around, her company has not. She is tired of barely staying afloat and not making the kind of money that she a decade ago. Is the glass half-full or half-empty?
Advice from the CEOs:
What keeps you from hitting the numbers? Creating a forecast, budget and objectives allows you to establish a reward system for meeting and exceeding objectives. Once there is an upside, then not hitting the numbers means that a manager misses the upside and the financial rewards that accompany this achievement. This is often consequence enough, particularly if others are hitting their numbers and getting performance bonuses.
The glass is half-full. The past few years have been difficult. Review what the company accomplished during an extended recession. Look at how the company fares versus local competitors. Review positive changes that have been made and take credit for these. This will provide energy to move forward.
Given the company’s successes, sit down with the management and show them what the company has accomplished. Celebrate. Use this opportunity to set goals for next year. A good place to start is to set a bottom line profitability objective before taxes.
To be a great manager requires more than just a revenue and profitability target. People rally around a vision and a culture that they aspire to and want to enjoy. The role of the leader is to create this vision and culture. Do this, and revenue and profitability will take care of themselves.
Two more thoughts on whether the glass is half full or half empty to check your bearings:
What is your passion? If you love what you’re doing, what else would you do?
If you were doing something else, would you be making more money or enjoying more success?
Situation: The CEO of a family business is anticipating retirement in the next two years. Currently, there is no succession plan. Other family members do not seem interested in running the company. What steps should the CEO be taking? How do you plan for retirement?
Advice from the CEOs:
To set the stage for your successor, make sure that you are being paid adequately for your job. If you are being paid less than some of your key employees, nobody else will want your job. Raise your salary to a point where it is appropriate for a CEO, and so it is attractive enough to entice a qualified successor. This will also help attract a buyer should you decide to sell or merge the business. Raising your salary will also help your bottom line if your company is an S Corporation.
Once you identify a potential successor, bring this individual into the business as soon as possible so they have an opportunity to understand the business fully and can receive on-the-job training from you.
Understand the numbers and red flags that give you the information and authority to run the company and the respect of your employees. Teach these to your successor so that this person has the same overview of the company that you command.
Look at what skills your successor needs to be CEO and start mentoring that person on those as soon as possible.
You may need to delay your planned retirement so that you have time to select a successor and prepare that individual to take on your responsibilities. Your current 2-year plan may not work, at least without compromises.
Without a management succession plan, the company may not bring in as much in a sale or merger as you expect. It is important that you improve the numbers to maximize the value of the firm if you choose to sell or merge the business.
Look at your current range of projects. Focus on those which are most profitable to you and emphasize these. You may be able to reduce staff and expenses by being more focused.
Situation: The CEO of a family-owned business finds it difficult to hold family-member managers accountable. They are responsible for significant portions of the business; however, family dynamics make it hard to supervise them. How do you communicate that their responsibilities affect both the business and the family? How to you manage family in a business?
Advice from the CEOs:
The first issue: Why have they not been asked for accountability to date? If you don’t ask for accountability, then don’t expect them to take this on by themselves.
Assign one family member responsibility for developing the marketing and sales strategy for the company.
Change the compensation from salary to salary plus commission. Over a 6-month period, reduce the base salary to half of what this individual currently earns and tie the rest to success increasing sales.
Assign this person responsibility for analyzing the markets that you serve. Are there areas that the company has not tapped into yet? What can you do to make your web site up more effective at driving sales? How can you use exclusivity on select products to your advantage?
When was the last time that the principals of the business met to figure out what to do?
Set the stage: we have split the business into two divisions and have separated the financials. This gives us more flexibility as we develop the business.
Show them the trends of each business.
Show them that if the current trend continues the business will be unsustainable in X years.
Facilitate a discussion that will start to generate solutions.
If the others do not respond:
Tell them that you appreciate their attendance at today’s meeting.
Tell them that you will meet in another two days as a team. Until then you expect them to think things over and to come ready to share their ideas.
Do not hold the meeting in your office or conference room. Secure an off-site neutral location with a white board.
If you are uncomfortable facilitating this meeting hire an outside facilitator. Ask for the input of the others in selecting a facilitator and follow their recommendation. If you work with a facilitator, start with your own dilemmas to set the tone.
Situation: A software company relies on in-house expertise to both position itself and come up with unique solutions to clients’ problems. The CEO wants to significantly scale up the number of clients served per year. The challenge is that it is difficult to find software engineers who are experienced in a wide range of code languages. How do you scale with scarce talent?
Advice from the CEOs:
Start by looking at the load carried by your current employees. Do they have the capacity to significantly increase the number of clients that they serve? Do you have sufficient back-up to serve existing and new clients should something happen to a key employee? It’s one thing to have ambition to expand, but another to assure that you have the capacity to serve both existing and new clients.
Take a close look at your org chart.
What happens and where are the exposures when you double the current service volume? Where will the greatest stresses occur? These are the first areas in which you should start to build redundancy.
From an HR standpoint, you need a leadership development plan that extends down your organization chart. Use the stress analysis just mentioned to identify the areas in greatest need of additional resources and leadership development.
Look for areas where you can off-load current responsibilities to support staff to increase the capacity of your current talent. This increases potential capacity as well as the overall value of the company.
The lack of redundancy may prove to be detrimental to your ability to attract new large clients. Large potential clients and partners will use whatever means they have at their disposal (including stealth visits to your offices by local reps) to vet your organization before they make a commitment to you.
New client and partner relationships are like new product introductions.
A few early adopters will jump on your opportunity.
Many of the most established clients or partners will sit on the sideline to monitor the experience of early adopters.
If you trip in your service delivery early in your scale-up, most of the remaining targets will be slow to support your offering.
Count on the first two years of building additional clientele to be very intensive. It will distract you from many of the functions you perform today, unless you have additional personnel to support this.
Situation: A CEO is concerned that there is insufficient fairness and accountability within her company. One manager is paid hourly and the CEO is thinking about shifting this person to salary plus bonus both to put them on par with other mangers and to create more accountability. How do you create accountability?
Advice from the CEOs:
What exactly are you trying to achieve? An operations manager is paid competitively at hourly rates, even compared to salaried employees. The issue is that this person has no responsibility for results as they relate to the P&L. Given this, the group consensus is that it is better to have this person on an incentive program that ties compensation to the performance results that you want.
One objective is that you want this employee to contribute more to planning, strategy or the company’s attempts to develop solutions to the challenges that they face. Have you spoken to the employee about your expectations? Does the employee realize that you want or value their input? Direct communication with the employee is important.
While the employee understands his responsibilities in the operations area, be sure that he is aware that he is also important to the profitability of the company, and managing operational expenses which are contributors to that profitability. Depending upon the individual’s background, he may need training about the links between expenses and the P&L.
Given these factors consider the following options:
Adjust the employee’s compensation by switching from hourly to salary. Make the base livable, but not comfortable, and tie the bonus (which will make the total compensation package comfortable) to the profitability of the business. This will have an immediate effect.
Clearly explain to the employee that you value his creativity and input. Give this person the freedom to contribute and make it clear that his contribution is expected. Early on encourage this and acknowledge contributions in meetings.
You may want to make this person a part owner of the business. This will have a long-term effect.
Situation: A CEO feels like he is on a roller coaster ride with unpredictable revenue and processes month to month. His ideal outcome will be to be able to go on vacation for 4-6 weeks, and have the business running better when he returns than when he left. Have you managed to achieve this? How do you create consistency in a business?
Advice from the CEOs:
Make your managers live up to their titles.
Insist that they go to each other to solve problems first, instead of always asking you.
When they ask a question, answer how to solve it – but don’t give them the solution.
Require them to present solutions rather than problems.
Be willing to spend money on their solutions.
Answer all questions with questions.
Ask them for their recommendation.
Keep asking until they come up with the answer.
You should not be doing jobs or tasks that are really your employees’ responsibilities.
When you start to delegate, it hurts for a while but it will work itself out.
What has been the impact on other companies when they’ve made these changes?
Businesses have become more diversified.
CEOs are focused strategically vs. tactically.
Businesses are more successful and profitable.
CEOs enjoy coming to work again.
How do you work with younger workers, millennials?
Allow flexibility – where appropriate – on hours and how they do their jobs.
Responsibility will vary by pay level – with the understanding that higher pay equals more responsibility and most likely longer hours.
Situation: An early stage company is wrestling with team dynamics and coordinating the achievement of critical milestones. The strategic picture seems to change on almost a daily basis. New employees who have big company experience want to see formal job descriptions and role definition. Older employees are jealous of the attention that newer, more highly qualified employees are receiving. Where should the CEO be focusing. How should she be handling these challenges? Should a start-up focus on team dynamics?
Advice from the CEOs:
At this point, the company is in start-up stage. The most critical issue isn’t team dynamics, it’s getting a product to market and demonstrating that you can sell it. If you don’t have a product, you don’t have a company.
Your top 4 areas of focus for the next 3-6 months should be:
Get the product out.
Close 3-4 good customers – preferably customers that you can reference.
Securing the funding – partnership or investor – that will get you to your next key milestones or to positive cash flow.
Build your organization and keep planning.
As an early stage company, distinct roles and job definitions make no sense. Your strategic picture is currently very dynamic. You need good people who can flexibly wear several hats and fill diverse roles.
If employees with big company backgrounds press you on job descriptions and role definitions, tell them that as a small company you must be quick on your feet, and that you need them to fill flexible roles. As you grow beyond 35 employees then roles will start to become more clarified. Ask for their patience.
If they continue to struggle with loose role definitions, then they aren’t the right people for an early stage company.
Employees who started with you early were great for the beginning. However, they may not be the best for you long-term. They may feel hurt as newer employees with deeper expertise and resumes start to replace them. In the interests of the company, the game is not longevity with the company; it’s about quality and putting the most competent people in the most critical roles.
If you are playing pick-up basketball, you play with whoever comes along.
If you decide to form a team and to compete, you need quality players. Some of your pick-up players won’t make the cut and need to go find another pick-up game.
Situation: A company is faced with the imminent departure or retirement of several key sales personnel. This presents the opportunity to rethink and rebuild the sales team. What is the best way to take advantage of this opportunity? How do you revamp your sales team?
Advice from the CEOs:
The timing is good. Take advantage of this opportunity!
You’ve identified the next generation of sales leadership. Now determine their role building the future.
This is an opportunity to reset your vision for the next 3-5 years.
The task of the new sales leaders is to learn the products, customers, and processes. One of the best ways to do this is in the role of sales engineer.
Be the listener first – become the solutions person.
Use existing company personnel as resources to develop closer relationships with key people within the company.
Have existing staff can introduce them to current customers and point them toward new opportunities. Focus on impeccable customer service.
What are the immediate priorities for the new sales leaders?
Do what must be done.
Observe experts on the job.
Listen and learn.
Ask lots of questions.
It’s scary, but don’t worry – just do it!
Let others assist.
They will make mistakes – it’s called learning.
Be sure to build an approach and team that can support both your existing core business and build new opportunities.
You need to replace the capabilities of those who will be retiring, and at the same time bring in new opportunities for future growth. This includes sales hunters who are good at finding new customers and helping them define their unique needs.
What fears or concerns do you see in the new leaders?
Fear and concerns regarding short and long-term roles.
Focus on the near term. The President is focused on the long term. Focus now on visiting customers, being introduced to them, and learning about them.
Are you fully focused on marketing of your services?
What is your Sandbox? What is your Value Proposition? What is your Brand Promise?
Define these and let the definitions guide your development of the sales leadership as well as the search for additional personnel.