Situation: Edgar Allen Poe’s “Surviving the Maelström,” is a tale is of three brothers whose fishing boat is caught in a monstrous whirlpool, and how the reaction of each brother determines his fate. Similarly, in times of uncertainty, our ability to react with either panic or a rational, reasoned response determines our fate. How do you survive a maelström?
Advice of the CEOs:
Based on Poe’s story, you need to replace fear with assurance, uncertainty with boldness, and doubt with conviction.
There are several potential financial bubbles forming including student loans and negative interest rate loans to sovereign governments. Both, in their own way, pose a threat to the international and domestic financial systems and could rapidly impact borrowing costs for companies. The solutions are to stay in ongoing contact with customers, and to stay light and flexible as companies so that you can adapt to market changes.
For Internet companies, the shift to Freemium offerings (a base product for free with pay as you go functional add-ons) makes it more difficult to design viable business models, and means new competition for established companies in low capital cost businesses. Again, a solution is to stay in ongoing contact with customers, constantly reinforcing your value proposition and the reality of switching costs.
Creative Destruction – particularly the emergence of new companies that threaten large customers and can change the value perception of suppliers’ core competencies. Solutions include ongoing communication with customers seeing what they see as “the next big thing,” focusing on continually improving our own core competencies, and possibly teaming with the more promising emerging companies.
The illusion that advertising will pay for everything – in reality, advertising dollars are a scarce resource like all other resources. Solutions include testing our own value-adds as an ongoing process, and creating fast-fail models to cost-effectively test our own promotions.
Definitions of value and productivity are no longer stable; all depends on the method of measurement. A solution is to remain aware of the innovator’s dilemma and to continually renew our value propositions.
A workforce in flux where young people don’t want to work for what they perceive as “old line” companies, as well as early-retiring baby boomers who may learn in 3-5 years that they can’t afford retirement. Solutions include focusing on employee engagement, building more flexible and “liberating” business models, and teaming younger with more experienced workers to cross-train each other.
Situation: A CEO’s “Number 2” is returning from maternity leave. He sees a role for her helping him grow the business and wants to give her an incentive for taking on that role. What is an appropriate incentive? What incentives do you offer your #2?
Advice from the CEOs:
Remember, first, that your #2 is a person with a new baby. Remember what it was like when you and your wife had your first child. How did your priorities change? How did your wife’s priorities change?
Never make her choose between child and job – you will lose. Offer her lots of flexibility. For example, allow her flexibility in hours to accommodate the needs of her child. This will mean a lot to her.
Find out what is important to her – what does she see as her role and goals. Be sensitive to the possibility that the birth of her first baby may have changed her priorities.
Here’s the message: “You’re valuable and I want you on my team. I appreciate your responsibilities with a newborn. How can we make this work for both of us?” Build a role around this – not an incentive program.
Many Silicon Valley and other urban families need two incomes. Work out something that works for her.
Have a Plan B in case it turns out that her priorities no longer align with yours.
Situation: A CEO feels overworked, fatigued and ready to retire! The core problem is a long-term employee who is constantly resisting the CEO’s the company’s strategic direction. How can the CEO alleviate this situation? How do you work with a resistant employee?
Advice from the CEOs:
If this individual is valuable, try to work with him first.
Can you give him a different focus – another role within the company for which his talents are suited and where he will make a significant contribution?
For a change like this to be effective it must be offered and accepted with the condition that this becomes his focus and not your strategic leadership of the company.
How is it best to have this conversation?
First, clearly state the direction of the company.
Then ask a question: What do you want to be doing for the next 5 years?
You may be surprised by the response to the question. It may lead you to a win-win solution; or it may become clear that this individual needs to be doing something else.
Conduct the discussion in two stages – but without a lot of time between these two discussions.
“You are valuable but things have to change. I prefer that you remain as part of the team, but on the strategic front you have a choice – are you on board or not?”
If after consideration the answer is that he is not on-board then you must let him go.
Don’t blindside this person. Think of a Resurrection versus a Come to Jesus Meeting.
If it turns out that you must get rid of this person you will wonder: why you didn’t do this 6 months ago.
Situation: A CEO recently attended a workshop on awareness of employees’ emotions. The message was that to effectively lead, the leader must be aware of both their own and their team’s emotions, and effectively address these in all communications. How have others acknowledged employee emotions? Can you effectively manage your team’s emotions?
Advice from the CEOs:
All companies have both cultures and ways in which employees and managers interact. These are either intentional or accidental.
It is important to develop a competency model for any company – skills and behaviors that reinforce company culture and guide both hiring decisions and personnel evaluations. Behaviors should be defined by competencies, including both technical and soft competencies.
Once a company competency model is established, position descriptions will be variations of the company competency model.
A competency model will help you to script candidate interviews. This works whether you use a panel or individual interview format. Questions should address past behavior in specific situations that the individual has experienced. Provide each interviewer with a set of questions that will help the interviewer understand how the candidate expresses soft competencies. Post-interview, get together and discuss how each candidate’s responses compare with the company model.
Supplement your interview results with a psychometric test which scores and effectively measure the key soft competencies expressed in your culture. Pair the psychometric test with cognitive testing to assess a candidate’s technical competency.
Use similar questions for employee evaluations or coaching situations. The difference will be that in the case of current employees, you will want to have the employee refer to situations and behaviors experienced at work or working with customers or company partners.
Special thanks to Maynard Brusman of Working Resources for leading this discussion.
Situation: A company has lost six people since the beginning of year – about 7% of employees. Currently the company doesn’t pay bonuses but increases salaries annually. The CEO has been considering creating a bonus pool, distributed based on performance points earned during the year, and including a component for employee longevity. How does your company award bonuses?
Advice from the CEOs:
There is fierce completion for good software engineers. You will lose people unless you focus on culture and pay bonuses of some sort.
Based on reasons that people left you need to start developing and enhancing your company culture.
Don’t kid yourself. You already have a company culture. Hire a consultant to help you identify it so that you are developing it along lines that you desire instead of by accident.
Make it clear that bonuses are not entitlements but are earned. There should be clear guidance as to bonus criteria.
Check out the following YouTube – “RSA Animate – The surprising truth about what motivates us” to see what motivates knowledge workers who are expected to develop creative solutions. The bottom line is that it is more than money!
An effective bonus program must have a bias toward performance – the metric is key. Be careful about the way you create metrics and incentives and be wary of unintended consequences.
Pay special attention to the quality and skills of your 1st and 2nd line managers.
Besides bonus, equity and culture – plan for 10% attrition. In your industry, this may be the norm.
Situation: The CEO of an early stage company has identified a person to help her as an assistant. This will be her first real employee. Prior hires have been contractors who have been paid on revenue generated. This individual’s salary will be an expense without clear association to revenue. What guidelines do you suggest as she makes this hire? How do you hire your first employee?
Advice from the CEOs:
Create a cash flow projection to make sure that you have the cash to afford an employee.
If you consistently expect 40+ hours of work from this individual, consider a salaried position which will give both of you more flexibility.
Paychex currently handles your payroll and benefits. Work with them to make sure that all labor law compliance issues are covered. Also, consider hiring a labor law consultant to help you avoid minefields.
Do a background check even if you have known this individual for a long time.
Consider working with a professional employment organization that can provide back-office HR support for you.
An employee handbook is unnecessary at this point. However, think through how you will want to handle issues that may come up including vacation, benefits and paid/unpaid leave like bereavement leave. Document these for inclusion in a future employee handbook.
Under the current health care law employers with less than fifty employees are not required to provide health benefits without paying a penalty. This may change as the law continues to evolve.
Situation: A company started a new branch office last year. This office started with three people and has remained at that level with some turnover. Morale is low because the branch office team doesn’t feel supported by the home office. The CEO is concerned that this could kill the branch office if it is not fixed. How do you boost morale in a branch office?
Advice from the CEOs:
The problem is most likely the home office, as they assert. There have been few visits from home office personnel – particularly the company president. In addition, they are being criticized in weekly reviews for not hitting the same metrics as the company’s established operations.
Remediate this situation by scheduling weekly executive visits and monthly visits by the president until things are up and running and there is a track record of profitability.
Clarify your expectations to everyone – this is a new office running to different metrics until they establish themselves. Once they are established, they will run to the same metrics as everyone else. Coach the heads of other divisions that the new office needs support, not criticism, until they establish themselves.
Allow the branch office to bid low for market share until they are established in their new location for a period – at least 6-12 months. Create a different set of metrics for a start-up office, and review these during weekly sales meetings.
The role of management is to show the colors in the new location and manage peer feedback from established locations. Help them win! Establish start-up metrics like lunches with potential clients to establish relationships. Since the branch office is generating business for other locations, create separate general performance metrics from territory specific metrics for this office and show both in staff meetings.
Situation: Top managers of a company are all very experienced. All want to drive the company – but each in their own way. Overall objectives are not significantly different but the path forward varies considerably among the managers. Is this situation common? Should the CEO be doing things differently? How do you create management alignment?
Advice from the CEOs:
Strong differences among strong leaders are common. This is not necessarily a cause for concern or a problem. Rather, it means that you have a lot of options to help address opportunities or solve issues.
When you hire bright, talented people with good ideas, there will always be differences of opinion. This is healthy. You need this, particularly when sailing uncharted waters.
As CEO, sometimes you need a strong critic on your team to moderate your inclinations. Just because you are CEO doesn’t mean that you always have the answer. Rather, allowing the answer to come from the team strengthens the team as well as commitment to execution.
How do you leverage the strengths of this team to create the best future for your company?
First, assure that the broad roadmap is clear and that everyone agrees on this.
When addressing a choice, opportunity or challenge lay out the situation in broad terms. Allow all of the managers their say, and facilitate the discussion to identify commonalities and differences. Confirm the commonalities, and dig into the differences to understand the perspectives of each. Digging into differences can identify roadblocks as well as alternative options. Keep the discussion open instead of trying to drive toward a single, quick solution.
Summarize the options presented. If there are multiple alternatives, do a ranking exercise to see if one rises to the top. Be sure to credit the managers for their ideas and creative input.
In each situation there is a final decision maker. All must respect that after you’ve listened there will be a decision and that decision will be executed. Allow them to execute and focus on results.
Situation: Much of a company’s work is non-standard. Each customer’s solution is individualized. Finding the best solution in each case frequently requires a stretch. The CEO’s approach is to simplify the problem to its essential components and from this develop a unique solution. However, several of the staff responsible for developing solutions shy from this approach when confronted with a new challenge. How do you create a bias for action?
Advice from the CEOs:
Company culture is defined by the CEO. In this case you wish to establish a culture of innovation. This might be defined by the phrase “we don’t do simple things.” This means that you need innovators or creative people in the problem solving positions.
Consider breaking the roles apart. You need experienced and balanced but creative people to develop the unique solutions. People like yourself. On the other hand, you need methodical, reliable people to put the solutions into effect. These two roles usually require teams of different personalities. They don’t conflict, but are different.
Look at Landmark Worldwide as a resource for your staff. Landmark specializes in teaching people to expand their horizons. This doesn’t mean changing who they are, but facilitating their ability to team with others with different but complimentary talents to achieve original and effective results.
To help the team understand what you want to accomplish, bring in an organizational development consultant to help communicate your vision and assist with culture transformation.
It is important to recognize that these individuals are likely as uncomfortable with this situation as you are. This realization helps to craft a win-win solution that will strengthen the company.
Situation: A company has been approached by a larger company that may be interested in acquiring them. The prospective acquirer is a current customer. Absent an extraordinary offer, the company isn’t interested in selling. Nevertheless, a conversation could be valuable. How much information about the company should the CEO share now? How much do you share with a potential acquirer?
Advice from the CEOs:
The key term here is potential. At this point, there is no commitment, and you really don’t know the other company’s motivation. As you start this process, don’t share confidential details about your plans or prospects, or your pipeline. Just broad information. If things get serious, slowly open the kimono.
Make sure that you have an NDA in place covering anything that they ask you to disclose for this possible transaction.
Given your current situation, a standard offer probably won’t be appealing, so be open to a creative option.
Decide ahead of time what your price is. If they are in the ball park, keep talking.
For example, Say you want $XX. Would you be attracted to 50% of that now, 50% later? Under what terms?
Put a low valve on future payouts, particularly if you are not in a position to call the shots.
Be open and creative. You never know what can happen. You could sell to them now at the right price. Then, if the acquisition doesn’t work out, buy the company back in 2-3 years at a discount!
If you get into higher level negotiations, employee retention will be critical. Make provision for this as part of the deal.
Hire a disinterested professional negotiator you who you can trust.
If things get serious, bring in an investment broker to assist. It will cost you 5% but they are helpful in the negotiation and could bring in competing suitors to up the ante.