Situation: The CEO of a business that has been in place for several generations is frustrated by the challenges of working with family members. Relatives are involved in top positions, but frequently place personal concerns above the priorities of the business. This leads to tense situations where other family members, not in the business, will intervene to support their close relatives without appreciating the conditions facing the business. Must a family business always be “family”?
Advice from the CEOs:
For the business to thrive, you must match skills and talent to available positions – not just the “best” family member fit for the position.
Understanding that it is difficult for one family member to communicate negative news to another family member, consider hiring a consultant or HR company to evaluate and be the go-between in determining best family fit, or family/non-family choices for open positions.
If the company involved unionized employees, and some family member employees are union members, this may complicate your choices. Seek outside non-union counsel to help you evaluate situations and navigate solutions.
Hire a professional facilitator to assist in running company planning meetings which involve family members. A facilitator can approach the situation from a neutral standpoint, and does not carry the personal history of brother-sister or close relationships within the company. Choose an individual with experience with family-owned companies who can build a company vision that goes beyond personal relationships and concerns. This individual can also help navigate the operational situations facing the company.
Look at both your organization and ownership structure versus applicable regulations and licensing requirements. This may present new alternatives for you to consider.
Situation: A company’s reputation is based on quality of work. The CEO notes that occasionally they have mishaps due to suboptimal documentation. They are considering a concerted quality effort. Based on your experience, would you do this whether or not you were bound by ISO requirements? If so, would you hire an outside consultant to guide your efforts? How do you optimize quality improvement?
Advice from the CEOs:
Some companies have successfully used ISO to force documentation. ISO provides a structure to enforce keeping the company and employees diligent and honest.
Other companies have used standard operating procedures (SOPs) for field as well as internal functions to speed completion of documentation and accelerate invoicing. These companies may or may not have ISO requirements.
One company tried to go cheap – implementing process improvement without a qualified consultant. While the effort was eventually successful, it took way too much time and money. From this experience, they recommend hiring someone who is experienced and who already has a template to guide the process.
To test the experience of an outside consultant, start with a small project to get the company accustomed to the process and to evaluate the consultant’s efficacy.
If the choice is to work on this yourself with your employees, start by documenting what happens correctly. Once you have done this, work on improvements to address problem areas.
This is not a simple exercise – plan for it and use the right inside or outside person to guide the process.
Situation: A company hired an experienced individual to sell for them as a consultant. The individual initially asked to be paid on an hourly basis. Results have come with surprising speed. Now the consultant is asking for a commission on sales. How much should you pay a salesperson?
Advice from the CEOs:
Tailor the commission structure to company objectives. For example, if the objective is to reward new business development, and to retain the individual, try something like:
Offer 10% commission on Year 1 sales.
If both the customer and the consultant are still with the company in Year 3, the consultant gets a 5% bonus on Year 2 and 3 sales.
Repeat this for successive years.
If the interest is a long-term relationship, determine the nature of the sales services where the consultant excels.
What is the individual’s focus?
Have a highly qualified sales expert do a telephone interview of the consultant and offer their assessment of the individual’s talents.
One successful sales model includes one measure to retain the job, and another to calculate commissions:
Set a dollar quota for sales performance – if the individual does not hit at least 85% of quota, they lose their job.
However, calculate commissions based on the gross profit that their sales generate.
This properly balances the focus between revenue and gross profit generation. To succeed, the individual must pay attention to both measures.
If the individual wants a substantial commission, then don’t pay a substantial base. Instead pay a draw against commissions to allow them to support themselves between sales.
Pay on receipt of payment, not on receipt of orders.
Situation: A small company has no formal human resources, pay scale or performance review systems. The CEO wants to create a structure to address these gaps, as well as to encourage employee feedback. How do you build an HR function for a company with under 20 employees?
Advice from the CEOs:
Many small companies outsource HR services. There are a number of firms who provide outsourced HR services, and through them much of the HR activity can be conducted online. Examples include ADP, Administaff, Express Employment Professionals and PayChex.
These systems cover all of the mechanics of HR, and help to assure that the company is in step with changing regulatory requirements.
There are also a host of individual consultants who put together HR systems for smaller companies. These are most easily found using locally-focused Internet searches.
Employees in small companies are used to wearing many functional hats. Hire or assign a manager to create an HR system and implement it once it is set-up. This person will be in charge of the personnel review schedule, changes to regulations and contact with outside HR resources.
One company’s HR Manager has a one hour conversation with the company’s lawyers once a year to make sure that the company is up to speed on any regulatory changes.
Hire a Director of Operations and include HR in this individual’s responsibilities. This person can research options for discussion by the leadership team. Empower them to bring in resources that will meet the company’s needs.
Situation: To maintain expense control as the Affordable Care Act is implemented, a company is looking at HSA options to replace their past insurance coverage. What do you think is the future of HSA policies and accounts as the ACA is implemented?
Advice from the CEOs:
HSA Accounts are expected to survive implementation of the ACA, at least for now, and may even thrive (Forbes Magazine analysis, 3/27/13).
The HSA Model combines a relatively inexpensive high deductible health insurance policy (minimum deductibles in 2013 at least $1,250 for individual and $2,500 for family coverage) with an HSA Account. Employer or employee contributions go into the account pre-tax. Most insurers offer a high deductible policy and many companies have adopted this option because it helps to control the growth in health care costs.
Annual HSA contributions are limited to the amount of the deductible, currently up to $3,250 for individual and $6,450 for family coverage, though these amounts are increased by $1,000 of the employee is 55 or older. Contributions are held in a bank account and can be withdrawn by the employee to cover most out of pocket health expenses. This is under an honor system, subject to possible audit by the IRS.
The key component that differentiates HSA Accounts from older health reserve accounts is that if the funds deposited annually are all not used to pay for health costs, the employee gets to keep the excess funds in the account. If the employee builds up excess funds in HSA Account, these can be transferred into an IRA. Check with your HSA bank for rules as to transfer of IRA funds back into the HSA Account if needed to cover out of pocket health care costs.
The down-side of the HSA Account is that if the employee encounters a significant health cost, above the amount in their HSA Account, they will have to cover this out of pocket. However, they have the option to reimburse themselves from future HSA contributions as these accrue.
If you are considering this for your company, it is advisable to hire a consultant to help you tailor the plan to the specific needs of your company.
Situation: A company wants to revamp its marketing materials and web site. They have no in-house resources, and no specific direction has been set. What are the best ways to revamp your brand and marketing materials?
Advice from the CEOs:
The first thing to consider is whether this Is just an adjustment to your current marketing, or whether you really need a broader in-depth analysis of branding, positioning and how well this is communicated by your marketing materials and web site. If it has been several years since your last revision of materials and web site, these may no longer be in step with current needs.
If you are located near a major metropolitan area there are many marketing consultants who can bring both a professional approach and a fresh vision to the task.
Work with your Chamber of Commerce, industry organizations, and your vendors, suppliers and distributors to find companies who have recently revamped their marketing. Check out the web sites of these companies and see which appeal to you. Ask the ones that you like what consultants they used.
If your company sells to consumers, or sells to consumers through outside channels, you should consider social media as a part of both your marketing mix. Even B2B companies now see see value in social media. Choose a consultant with expertise in social media as well as traditional marketing.
Interview several consultants before you make your final choice.
Many small companies are financially stretched and don’t have the dollars to support a major market revamp. Are there ways to reduce the cost?
Consider semester or summer interns for some of the analysis, data gathering and perhaps some of the design or social media work. Students at colleges and universities are hungry for intern positions – both paid and unpaid – to satisfy college course and graduation requirements as well as to get an inside track on future jobs.
Key Words: Collateral, Web Site, Branding, Budget, Intern, Consultant, Vendor, Supplier, Chamber, B2B, B2C, Social Media
Interview with Dirk Boecker, President, Toto Consulting
Situation: Through the technology revolution in medical diagnostics, products in some markets have become commoditized. For example, a proliferation of low cost blood glucose monitoring products has driven down price while increasing incidence and prevalence of diabetes has driven up demand. How do you create new value in a commodity market?
Taking a broader view of the market is key. Analyze the entire customer experience, not just your segment. Assess markets and industries surrounding your primary offering and look for un-served interfaces and gaps.
Where you find opportunity, elevate your offering to the next level by integrating your product as component. Create a compelling advantage but avoid unnecessary adaptation of your existing product or service.
Blood glucose monitoring is used to support insulin and diet adjustment in diabetics, a disease which is accompanied by a number of complications and complex to manage. Can your monitoring technology become part of a broader service offering, or even part of a personalized solution? Can you move higher up in the value chain?
Begin your transformation at the first signs of commoditization. Being first brings a huge advantage.
Once you identify an unmet need, consider working with related industry groups to create new standards addressing these gaps. Implementing the resulting standards will give you a new competitive advantage against your competitors.
Find other applications for your product or service. Consider new applications for the components used in your current offering. Find new customers outside of your historic customer base. Consider alliances with other companies experienced with the new opportunities you find.
Within your own organization begin a process that routinely analyzes the customer experience and general needs beyond your current offering. Working with an outside consultant can help by adding a new perspective.