Situation: A CEO is concerned that business operations are inconsistent. Employees are always coming to her for answers instead of working things out themselves. As a result, the CEO is continually focused on operational details as opposed to strategic direction. How do you create consistent business operations?
Advice from the CEOs:
Make managers live up to their titles.
Require them to go to each other to solve problems first, instead of always asking the CEO.
When they ask a question, don’t give them the solution, but advice on how to solve it.
Require them to present solutions vs. 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.
When one starts to delegate, it hurts for a while but will work itself out.
The CEO should not be doing “regular jobs” that are really employees’ responsibilities.
How has implementing these suggestions impacted other companies?
Businesses have become more diversified.
CEOs are focused strategically vs. tactically.
Businesses are more successful and profitable.
CEOs enjoy coming to work again.
Create a sales intern program.
Hire 4 sales interns for $10-15/hour – with the offer that after 3 months there will be full time jobs for those who prove they can sell.
Have the top 4 sales staff design the intern program – call response scripts, responsibilities, etc. – subject to CEO review and approval.
Assign one intern to each of these 4 sales staff in mentor/mentee relationships. This will demonstrate the capacity that each has as a sales manager.
Should younger workers be handled differently?
Allow flexibility – where appropriate – on hours and how they do their jobs.
Responsibility will also vary by pay level – higher pay equals more hours and more accountability.
Situation: A company is facing the expiration of the principal patent for its main product. There are subsidiary patents which still have life. Currently, there are no competing products, but several companies understand the technology. How do you plan for patent expiration?
Advice from the CEOs:
Think of this as a two-step process:
Step 1 – Step back and look at what the company has:
Patents – including the claims that have been awarded on all company patents.
Facilities – capable of manufacturing current products, but also additional products, perhaps with a minimum of additional equipment.
People – competent staff running manufacturing operations, and tight office operations.
Step 2 – Loot at where the company could go and evaluate the markets where the existing technology is applicable:
Work with outside, imaginative people who can take a fresh look at the options.
Looks carefully at the claims in all the company’s patents.
What do they cover?
Is there an opportunity to extend current claims through process patents?
Caveat: a company can file for a process patent on anything that has been for sale on the market for less than a year. However, if they have been selling a product covered by this application for more than a year, they cannot.
Look at other markets – companies that could license the company’s technology, or with whom the company could partner to provide new consumer-oriented products:
Is there inexpensive, affordable equipment that would enable the company to produce additional products in the current location?
Think outside the box: what business is the company in? Think more broadly than the current market about where high value opportunities exist. These can be low to medium volume, high price/margin or high-volume lower price/margin.
Patents are not the only protection – trade secrets also work. 3M’s primary IP strategy, particularly on their adhesives, etc. is through trade secret – both for low and high-volume products.
“Product” patent extensions have limited utility. They are easy to design around. “Process” patents have more utility. These can be licensed at low cost per application in high volume applications and provide a nice royalty reserve stream.
Situation: A CEO wants to increase brand awareness for her company and its primary service. The objective is to increase the client base and drive revenue growth. They have identified their primary growth opportunity and differentiating advantage. What else should they do? How do you increase brand awareness?
Advice from the CEOs:
What is lacking is a clear vision, path, and marketing plan. These are prerequisites to deciding either the solution or hiring a high caliber individual to execute the plan.
What steps are involved?
Survey 20% of current clients. Ask “why did you choose us?”
Develop the tools to track and show clients service performance online.
Use these same tools to show company performance online.
Tune messaging to potential clients to highlight demonstrated service performance.
Play elite – as the company’s name and reputation grow, clients should aspire to being accepted as clients.
What is unique about the company’s ability to manage and extend the longevity of clients’ key assets?
How well prepared are potential clients to manage this on their own?
How does the company help potential clients to manage and extend the life of those assets?
Once there is a clear plan, fine-tune the internal focus of the company to align with the plan.
Increase involvement in communities where potential clients are found.
Host seminars and webinars on relevant topics.
Evening seminars in locations that potential customers congregate – existing clients attend and bring a friend.
Focus on referrals from existing clients – with a reward – a free consultation.
Look for non-competing service providers who can be good referral sources.
Make it easy for potential clients to switch. Use mass-marketing to spread the word with a multi-tiered approach to different segments of the target market.
Situation: A small company has a parts supplier for product that they sell to their most important customer. That customer’s specs are “copy exact” on components for existing products; also, their new products are usually based on existing components. The supplier significantly raised prices on the parts supplied to the company. How you respond to a price increase from a supplier?
Advice from the CEOs:
This is an extremely sensitive situation. One solution is to not to rock the boat. The reality is that the company needs the parts, and it will take a lot of effort to replace them with parts from an alternate vendor. Just continue the relationship. Quit worrying about it and milk it for as long as it lasts.
Find out what caused the supplier to raise prices. The supplier needs to understand that to preserve the company’s margins they may have to raise prices to the final customer. This may threaten both the company’s and the supplier’s business with the customer.
Make sure that the supplier understands the company’s costs: office, salaries, equipment, maintenance, and local regulations that are unfriendly to business and difficult to deal with. Ask them to reconsider or reduce the price increase.
Assure that the supplier understands the value that the company provides and the importance of this collaboration to the business and profits and bottom lines of both companies. Leverage this value to get the price that the company needs.
Renegotiate the relationship to assure that supplier can’t go around go around the company and sell directly to the final customer.
Start building relationships with alternate suppliers.
Situation: A CEO has an option to purchase another company with whom they have a long and good relationship. A smooth transition will be important. The owner’s relationship with their customers is central to their success, as is his employees’ knowledge of their key accounts. How does the CEO assure that these relationships are retained? How do you construct a business acquisition?
Advice from the CEOs:
Based on the CEO’s responses to the Forum’s questions, the owner of the other company needs this deal more than the acquiring company needs him. This creates a strong bargaining position.
The owner of the business is the business and the key to a smooth transition post acquisition. Retaining his ongoing involvement – at least for a reasonable period – is essential to gaining maximum value from this acquisition.
The value of this business is its people: the owner’s relationships, and both the owner’s and his employees’ knowledge of their key accounts. His employees know the inner workings of their customers’ businesses. These are the relationships and the knowledge needed to assure that the acquisition is profitable post-close. Retention clauses and penalties must be part of the agreement.
If the owner wants 50% of the net income generated from his piece of the surviving company during a transition period, this is fair. However, the financial and operational details of the transition and his share of the income must be spelled out in the agreement and the agreement must assure that there is proper follow-through to qualify for the payments.
The income from the owner’s accounts must support his salary. However, even with this the owner will still cost the acquirer time and energy. Plan for this and budget for it in the agreement.
Situation: A CEO is in conversation about combining with another company. One option is for the other company to absorb his company. What are the pros and cons of this option? Are there other options that will better serve both owners and employees? How do you improve a business model?
Advice from the CEOs:
The company has a great model today. The option under consideration looks like a double compromise – it alters both the company’s strengths and its fundamental business model.
The company’s strength is lean and mean – moving from a hourly/fee-based model with high utilization to a salary-based model, as the option on the table proposes, will change this. It also changes the dynamics of who will work for the company.
The magic of the current model is that it attracts top talent by offering them the best of two worlds: high individual billing rates with ready access to billable hours. Over the long term this has also made it very profitable.
Explore an alternative – how does the company transform its existing business model while retaining its strengths – lean, mean, low overhead – while transforming the model so that it builds “products,” perception, and recognition for the company?
A longer-term alternative is to look for a financial acquisition of the company. It has good net margins, good cash flow, and even spins out cash. This is valuable to a financial buyer.
What is the role of the CEO right now? Another CEO was asked “Do you have a job or a company? What happens if you leave? If the company dies, you have a job. But it may not be necessary to change much to become a company.”
Situation: A CEO perceives that the company has a conflict between performance and planned timelines. Of concern is performance against key metrics like pipeline performance and closing new business. A sense of urgency isn’t present. How do you create and communicate urgency?
Advice from the CEOs:
Management knowledge of company financial status and performance against key metrics – particularly key drivers like pipeline performance – is critical to their being able to assist the company.
A company decision to focus on project profitability may have the unintended consequence of exacerbating the lack of urgency. If revenue growth lags, the only option for managers who are tasked to hit a profitability target is to cut expenses. This delays projects and can negatively impact morale.
Accountability comes from meetings. Not 1-on-1 meetings but team meetings. Peer pressure is an important component of accountability. Nobody wants to be the individual who is consistently behind on projects or initiatives.
The challenge may be more external than internal. When business closes more slowly then everything else slows down: hiring, new development, investment and profits. All of these are driven by new business acquisition.
Another CEO has same issue with her contracts. All contracts include a timeline. If work or deliverables slip, the customer wants to slow down delivery and billings. Her solution is to include stop work and delivery delay fees in the contracts.
What actions would others take to address this?
Institute progress payments. For example, instead of charging 50% up front and 50% on contract completion, shift to, for example, 50/30/20 with the 30% due on completion of project framework. This way, only 20% can be delayed due of customer timing issues.
Built financing into total pricing. The customer is free to delay projects, or aspects of projects, but there is a charge calculated into delayed delivery which covers the cost of money and additional management.
Situation: A CEO and her staff are struggling with a difficult employee. This individual fails to send invoices on a timely basis, doesn’t provide required reports to management, and doesn’t return vendor calls. The CEO has spoken to the employee, who acknowledges the issues but then rapidly defaults to old habits. How do you manage a difficult employee?
Advice from the CEOs:
Ask for specific weekly/biweekly AP/AR reports, and be very clear as to everything that this should cover as well as the required deadlines. Make it clear that these deadlines are mandatory and that there will be disciplinary consequences for failure either to meet the deadlines or to create the report as specified. Address issues with timely mailing of invoices and timely return of vendor calls the same way. Make all three standard operating procedure.
This is not an at-will employee so assure that there is very good and complete documentation over a period of time to demonstrate that the employee is not meeting required job responsibilities.
Tell the employee that he has 90 days to demonstrate that he can consistently meet required responsibilities, and that there will be a retain or termination decision at the end of this period.
Update policies that are not being following so that they are clear.
Check with a human resources expert for advice on what needs to be done. Regulations are shifting, so this will assure that the company is following regulatory requirements.
If the final decision is to retain this employee, adjust responsibilities to mitigate potential future damage.
Given the current challenges, why is this employee’s behavior being tolerated? What message is this sending to other employees?
Situation: A CEO senses that employees don’t have his sense of urgency regarding the business. A case in point is responding quickly to new customer inquiries in a competitive market. Too often, he takes over to assure that bids are submitted quickly. How do you get comfortable delegating to staff?
Advice from the CEOs:
Prepare for a meeting with staff by defining the key desired standards in advance.
Initiate the meeting with this message: “We have a company image. This is how we define it.” Work with staff to create standards that define this image.
Agree on standards with the team.
Discuss standards with the team but have them make the decision. Guide the conversation – through questions – to focus on the desired standards. Be open to using the language developed by staff to enhance ownership.
Examples of standards that may apply:
Response time to incoming calls, maximum number of rings before response.
Time to return telephone messages.
Time to return emails.
Invoices completed the day or the order, or whatever is appropriate.
Establish a response regimen – assure that response is professional.
Train all people who pick up the phone.
Assign rotating office days for salespeople with responsibility to answer the phones.
Emphasize the importance of speedy response with an explanation that everyone will understand.
When a customer calls, assume that they are also calling 2-3 other suppliers. The first responder can shape the conversation in favor of their company and offering – for example the company can offer both a solution plus design and logistics assistance.
As first responded, assure that the focus is on the company’s strengths – this puts the competition at an immediate disadvantage.
Enforce and maintain the standards
Once standards are set, make review and updates of performance against standards part of weekly sales meetings. Use large charts to track this.
Create friendly internal competition. Who got the most business last week? Who did the best with incoming calls? Have the team develop competitive goals.
Recognize top performers with $50 – $100 cash award, restaurant certificate, etc. Make it fun!
If “everyone” is supposed to pick up the phone this becomes “nobody” because nobody is responsible for picking up the phone!
Situation: The CEO of a small but profitable company has a promising employee who she wants to promote to a supervisor role. The challenge is that this employee has limited English. Promoting this individual may upset the current supervisor. Do you promote an employee with limited English?
Advice from the CEOs:
Before making any decisions consider taking the “lead” position in manufacturing short-term instead of promoting or hiring a supervisor.
This will allow you to fully understand the manufacturing operations, as well as any points of art in the operation that can serve as the company’s foundation IP.
To think about the role of supervisor or Plant Manager, visit a Starbuck’s for an hour and watch the Starbucks Manager. This individual will, over the course of the hour, perform all functions within the establishment. This is a good model for a hands-on supervisor for a small operation.
Given the small size of the current operation, look for a more modest role for the position. Instead of Operations Manager perhaps Plant Manager. This will allow the individual time to grow into a larger role as the company grows.
How should the message be delivered to the promising employee with limited English as well as to the current supervisor?
Tell the employee “We like you and think that you have real potential. Would you be interested in an English as a second language course to build your English skills? We’ll pay for the course.” It is important to be enthusiastic and positive with the individual as you have this conversation.
A supplemental alternative is to reimburse the individual’s use of one of the online programs like Babbel or Duolingo that enables learning or improvement of language skills using a mobile phone. These programs are inexpensive and highly effective with diligent practice.
Promoting this individual above the current supervisor may generate a problem. This doesn’t prevent the promotion. Just assure that it is done carefully and be prepared for the current supervisor’s reaction.
When it is timely, instead of promoting this individual immediately, consider offering a temporary lead role for key tasks of increasing levels of responsibility. This will allow time for the individual to prove their merit and capabilities to others over 2-3 months.