Situation: A CEO’s company has experienced margin erosion due to designs that did not transfer well to manufacturing, and inefficiencies in the transfer process between design and manufacturing engineering. He wants to transform the culture without losing technical performance while meeting cost targets and delivery timelines. How do you improve internal processes and procedures?
Advice from the CEOs:
Reinventing the culture of a workforce is an organizational design challenge.
The heart of the challenge is understanding the motivations and desires of the individuals involved – particularly the natural leaders within the groups.
Learn this is by speaking with them one-on-one, either as the CEO, or through individuals with whom they will be open and trusting.
Once their emotional drivers are understood, design accountability and incentive solutions that will align their personal reliability and accountability drivers with their emotional drivers.
Tailor the language of communication with the organization so that it responds to the emotional triggers discovered during the 1-on-1s. For example, if there is a negative reaction to sales within the engineering teams, use a different term like client development.
Expose the designers to the “hot seat” that gets created when their designs produce manufacturing challenges. The objective is for the designer to see the manufacturing group as their “customer.”
Involve manufacturing engineering in design architecture meetings. Do this early in the process so that they can communicate the framework and constraints under which manufacturing occurs and suggest options that will ease manufacturability.
Shift from individual to team recognition on projects. Instead of recognizing the contributions of the design component or the manufacturing component, recognize the contributions of the team of design and manufacturing engineers that produced a project on time, on budget, with good early reliability.
To kick off the new process:
Identify some of the waste targets.
Involve individuals who are known to be early adopters.
Have them look at the problem, develop and implement a solution.
Deliver ample recognition/rewards to these individuals.
Next use these people to mentor the next level of 2nd
Situation: A CEO wants to fund future growth through better management of cash flow. Cash flow has been positive for several years, and the company uses a bank line to fund receivables. How to you manage cash flow to fund growth?
Advice from the CEOs:
Since the company is cash flow positive, go to the bank with the assistance of a connected Board member and ask for better terms on your line. This will reduce financing expense.
What are the company’s Days Sales Outstanding (DSO = accounts receivable (AR) divided by average daily revenue)? Reducing this will have an immediate positive impact on cash flow.
Normal up-front payment is 20%. With 35% gross margins and 20% up-front, the company is funding profits through the bank line. The adjusted gross margin (GM) is the company’s Operating GM less the cost of the bank line.
Solutions: Reduce DSO by offering a 1% discount for payment in 15 days and increase up front retainers from 20% to 50%. This takes time but is doable by working with customers.
Some customers have seen AR slip from 30 to 45 days. Offering a 1% discount for payment in 15 days is an inexpensive way to decrease AR and increase cash flow.
What is the most immediate need?
The company has positive cash flow, marquee accounts and proof of concept.
What is needed is additional referenceability. Can reference accounts come from exiting marquee accounts? What would this take? Can the Board help to identify and develop additional reference accounts?
The company is resource limited in sales. At this point people are needed. How can this be done without extending current resources?
Shift resources from other departments to sales to boost sales efforts. Another CEO did this very successfully and generated a substantial pick-up in revenue growth.
Increase the incentive for service people to come up with new revenue opportunities. Consider teaming them with the salespeople to generate opportunities.
Consider independent rep firms. Ask key customers who they respect among the independent rep firms.
Develop a joint venture or strategic partnership to feed sales – a situation where this is a strong win-win for both parties.
Leverage the Board to create opportunities. Another CEO has a Board objective of 3 new accounts per year. This comes from 10 leads/connections per year (2 per Board member). Board members who can’t produce leads are turned over.
Situation: A company founder was advised by her Board to help them hire a CEO with more experience to run the company. This new CEO is now in place. As the founder gains more experience, the Board has indicated its willing to consider her as CEO. How do you transition to a new CEO?
Advice from the CEOs:
Become the fire hose! Build a tight relationship with the new CEO and together build the future strategy that will enable you both to win.
Others will focus on past issues. Keep your approach and advice positive. Position yourself as a partner, not an adversary. Emphasize your supportive and collaborative capacities.
Become the new CEO’s go-to person: trustworthy, objective, knowledgeable, reliable. Nurture the development of chemistry with the new CEO.
When the new CEO asks what needs to be done, produce the plan. Leverage your knowledge and expertise to become his greatest resource.
Enlist the CEO’s support of one or more of the focused strategies that are already in play within the company. Build the support of the Board and focus on boosting company value to 2x sales. The Board won’t forget who produced the original initiatives.
You have more power than you imagine – both with the Board and the new CEO – due to your knowledge of the marketplace and the business. Use it wisely.
While there is a new CEO, the company has already been profitable and company operations are clean. The Board will remember this.
How do you boost the chances to eventually be named CEO by the Board?
Tie yourself very closely to the new CEO – be this person’s more important resource. Build and cement your position as his most important ally within the company. It will help you to gain his support for implementing your ideas.
Segue your relationship with the Board members to become the company’s next CEO.
At the same time, grow your successor within the company so that you will be ready to move up to CEO when the opportunity arises.
Situation: A CEO is concerned that the current management team is not mature enough to support planned growth. Sales skills are necessary to start an office, but there is a wide range of business acumen and people skills among the managers. How do you develop current managers to support growth?
Advice from the CEOs:
Company policy requires manager candidates to demonstrate competence in at least three of five areas: sales, technical skills, customer management, customer management, and business acumen. A coaching or mentoring process from senior management would be beneficial.
A minimum number of clients is required to start an office. There are important differences in the skills needed to grow and sustain an office. More evaluation of the managerial skills of manager candidates will help.
Another CEO shared story of a regional office with a manager who was technically competent but had poor business development skills. This created a growth issue. Clear, mutually agreed upon, written goals helped. Office growth requires good administrative performance as well as technical or sales skills.
Frequent group meetings with managers and a deliberate agenda help. There is merit in allowing the field people to contribute to the agenda, having a “round table” type of review, and peer dialogue. In addition to current individual weekly telephone conversations and quarterly operations reviews, there is an opportunity to modify the format.
Sometimes there is a double loss in taking a good individual contributor and making them a poor manager. For example, of a good salesperson may turn out to be a bad sales manager. The transition may not play to the person’s strength. A more rigorous selection process will help.
Another CEO shared a story of one of his plant managers who reached the limits of his competency and could not continue to grow the plant. He was moved to a support position and a new plant manager was hired. The former manager found new satisfaction in the support role and was successful sharing his knowledge and skill with the new manager and a broader audience within the company.
Situation: A CEO has had to shift half of the company’s employees to part-time due to reduced business. This has hampered new product development. The situation has been exacerbated by slow payments from customers. Where should you focus for the next year?
Advice from the CEOs:
The company has a lot going on. Validate the company’s market potential for products in development, and start gearing up the marketing program so that it will impact this and next year’s sales.
Get a feel for how many customers want the new products in development. Invest in some market research to validate this.
The bottom line is that product development only pays if the company can sell a lot more product! The team needs to know whether customers for the new products exist, in what numbers, where and who they are, and their most critical needs. Without this market intelligence, the company is in no position to tell whether there is a market, nor is the company prepared to address it.
Assume that there is a market, that it can be quantified. Once the company knows who and where the customers are and knows their most critical needs, the next step is to prepare to attack this market. This is not something that is done in 1-2 months, after the product is ready to sell. The company needs to be starting now if marketing is to be initiated in 6-8 months.
Past practice has been to split R&D costs with the customer. The company has the expertise, the customer the money – this is close enough to 50/50. There is no need to show them the numbers. R&D should not be funded through future sales but should be making money now.
One project has been taking so much attention that it is hobbling the company. The company is so focused on getting this “just right” for the customer that sales and market development have been neglected.
For the next 3 months, focus on completing this project, getting it out the door, and getting the company’s focus back on growth. A sense of urgency is needed!
Situation: A CEO has a staffing issue. The company has four product areas but only three strong leads. There are no back-ups for these leads. The CEO feels that the company can’t afford full-time back-ups and is concerned that the presence of back-ups may threaten the leads. How do you create an effective staff back-up system?
Advice from the CEOs:
There are two problems, not one.
The leads may not be great managers and may not even like managerial responsibility.
The company has one administrator with support from the leads.
The company’s vulnerability is having an effective lead leave and taking their key core team members with them. This would create a significant hole in the company’s offering.
Change the structure – put manager administrators at top and let the leads do what they love to do. Fit the jobs of the leads to their skills and talents.
Hire the best #2s that can be found to back up the effective leads. Replace the less effective lead with a new lead.
Replace current team members who aren’t as good with new staff. This will provide the funding for the new people.
Then separate managers from architects in terms of role. This does not mean a change of compensation, or necessarily even titles. It means aligning roles with talents. It will also mean that individuals will be happier in their roles and will be less likely to leave.
Don’t do this all at once, but in gradual stages to avoid panic and allow individuals the time to adapt to their new roles. Act as a coach adjusting the whole team to a new playbook.
Consider adjusting the compensation structure to retain the key leads.
Situation: The CEO of a small company is concerned that the loss of a key individual could seriously impact operations. Alternatives include adding an assistant to the affected department or cross training another individual who could serve as a short-term back-up in case of an absence of 2 weeks or more. How do you mitigate temporary loss of personnel?
Advice from the CEOs:
In cases like the current pandemic, planning for multi-week personnel absences is essential. Though systems are documented, subtleties of key jobs may not be documented. This is where cross-training becomes an important alternative.
Train another employee as a backup for the person in question and refresh the training every 2-3 months. If the company runs into an emergency due to short or longer-term loss of an individual, hire a replacement for the individual and have the individual who is cross-trained train the replacement.
Have the key individual and the individual who is cross training refine the ISO 9000 documentation as the key employee trains the back-up individual. This will assure that ISO 9000 documentation is being updated regularly.
Establish a plan with appropriate procedures that all positions must have a back-up. Include this within the company’s personnel procedures.
Rewarding the key individual with a bonus for selecting and training his or her back-up is the wrong thing to do. It’s both the wrong incentive and the wrong reward. Training a back-up is an essential part of each key employee’s job, not a special task that deserves separate recognition or reward.
Situation: A CEO has an opportunity to combine with another business to expand their market geographically. A lead to work with the current owner to manage the transition has been identified. A second option is to bring in a new manager from the outside to manage the transition and the expanded business. How do you construct a deal to expand?
Advice from the CEOs:
Basics that are needed prior to initiating negotiations:
Define what the seller wants – both financially from the sale and in terms of ongoing involvement in and support of the business.
Without a lengthy transition period, the value of the business is not significant. The value is in the current owner’s relationships – both with clients and his team. It is critical to retain both.
The other big question is what the seller wants personally.
Is it legacy? Is it the opportunity to transfer knowledge?
The seller knows the CEO’s company and approached them about a sale. Play on this.
Are there potential complications to the deal?
Do any non-compete clauses exist with other companies?
Do other agreements exist that impact the value of the acquisition?
What other aspects of the deal does the group recommend?
Within the new organization, put the current owner under the recommended lead. This gives the lead more prestige and demonstrates trust. It also raises the bar for the lead.
A bonus is that the current owner and the lead get along. This will facilitate the current owner’s mentoring of the lead – like the child that he wishes would have taken over the business.
The current owner is a savvy businessperson, and the existing relationship between the seller and the lead will facilitate his ability to pass this knowledge on to the lead.
The current owner’s key assets are his connections and knowledge of the business. This will include subtle aspects to the business of which only the current owner is aware.
The option to bring in an outside office manager potentially complicates the situation.
Bringing in an outside office manager to manage both the lead and the current owner is the worst case – the most likely to blow up.
This arrangement puts the current owner two reports away from the CEO.
With an additional person involved, the personal dynamics become more complex. Keep it simple.
Situation: A founder has created a new social media offering. The concept is to attract individuals with complimentary interests and have them engage each other for mutual benefit as a better source of information and connections. Implied trust is an important component of these connections. How do you engage people in a new offering?
Advice from the CEOs:
People are willing to experiment with a new social media offering – in this case because they like to help others. It makes them feel good and they like the role of helping others.
People are always seeking good talent. If this does a better job helping them to find good talent, they will try it out.
Hiring managers prefer to pass on a resume of someone known to them because a bad referral could reflect badly on them. Strengthen this aspect of the offering through information gathered from participants.
A small pool is a negative. Broaden the pool to include those who are looking to step up their careers. Think of this as people-to-people direct hiring and use a social approach with broad appeal. This will increase the number of people willing to play.
Be the place where people can come to help others. Add additional tags – help to build confidence and get inspiration. Getting a job happens as a consequence.
The element of trust and relationship is important to many – 40% of early users of the current network express this. Assure that the value proposition is also attractive to the 60% who are not concerned about this.
The network will build on the energy from the emotional play.
Expand the options for how people can help. Investigate allowing trusted referral relationships within the system. Allow people to refer trusted people in their own networks. This can include people who “I would trust to refer good people.”
Situation: A company currently has inside and outside sales teams, and coordinates efforts with SalesForce.com software. Their strategic initiatives are to double inbound leads, create a triage approach to new leads and to lower the cost of sales. How do you optimize your sales organization?
Advice from the CEOs:
When outside sales claims that they have limited band width, it is necessary to find how they are spending their time.
If they are not spending most of their time developing and closing sales, adjust the system so that they are concentrating their efforts in these two areas.
Decide what the sales teams are selling – set up the organization so that it complements the sales goals and objectives. Below are alternatives used by others.
One company has evolved “product managers” who are like sales engineers but more experienced. They are highly paid and highly skilled. They are business oriented, with good communication skills, well rounded, and have successfully closed sales.
In contrast, the role of this company’s “salespeople” is to follow up. Lower level salespeople are tasked with generating leads for the product managers
Another CEO observed that what the company has done up until now all has worked well. The question now is how to mature their system?
This company’s solution has been to use outsourced Inside Sales Support (ISS) based abroad to find prospects.
ISS personnel are teamed with and managed by the company’s salespeople. Salespeople develop their own system. The ratio is 1/1, but outside personnel are ½ time for each salesperson.
This allows the company to reduce services quickly if they become overwhelmed.
A third company uses a 3-tier system:
Inside sales for lead evaluation.
Outside sales – get hot leads from inside sales, develop, close.
Consider this alternative: instead of a shotgun approach, target three accounts – Elephants. One company did this with an intense 6-month focus. The President and CEO drive these sales. The result: they have closed one, one is pending, and a third is likely to close.
Another CEO observed that the essential issue appears to be an efficiency problem.
Too much of the outside sales time adds limited value to marketing or the company.
Redirect their efforts to hunting.
Once an account is closed, sales is out of the picture. The customer transitions to the customer service organization for additional sales and service.