Situation: The CEO of a service company continually finds the company short of cash. They have just hired a new accountant, but it will take time for this individual to understand the financial situation and to generate recommendations to improve cash flow. How do you keep a company afloat short-term?
Advice from the CEOs:
Point #1: This isn’t just a question of controlling costs; the company needs to build the infrastructure to succeed.
If there isn’t someone on the team in a position of authority, who the CEO can trust completely, hire this person. The CEO can’t control all risks.
While the company has shrunk over the last two years, it is still a substantial company and needs professional management. To grow effectively, professionals are required in key leadership positions. If necessary, hire experienced outside talent
Look for teachable moments as challenges arrive. The CEO, instead of solving a problem, should work with employees and mentor them through discovering and implementing solutions.
How to communicate this to current staff?
Put the story together. Be able to make a clear statement to them, including the current situation and future possibilities for which the company must prepare.
Generate charts and metrics to support key points.
Use senior staff as the mouthpieces to present the story to the rest of the organization. Once they are onboard, have them help craft the message. Don’t underestimate the CEO’s authority. This is business, not a popularity contest.
Let others make mistakes – it is part of the learning process – no matter how critical the situation.
Point #2 – Return to the company’s roots.
The faster everyone accepts that a focused approach is the only way to survive, the faster the company will turn around. Reestablishing company presence in key markets with a new model that speaks to their desires makes a lot of sense.
Be very clear as to what flat-rate service pricing covers. Include this in the signed customer agreement. Don’t allow costs to creep up or it will kill the profitability of flat rate jobs.
Create an infrastructure nimble enough to adapt as market conditions change. Identify what really works and focus on this.
Situation: A company has a new set of employees coming up to speed, but this is happening slowly. The work environment is semi-skilled, with learning curves for new office employees and apprentices. How do you get new employees up to speed?
Advice from the CEOs:
Provide a competitive level of compensation to journeymen and higher level office employees. Make these levels of skill to which office employees and apprentices aspire.
Develop a mentor program. Provide chits (company currency) to both the mentor and the mentee for learning each new processes. Make awarding these chits a big deal. For example, the mentor and mentee collect their chits from the CEO who then takes them down to the treasurer to collect on the chits.
As appropriate, create a team learning environment. Game theory has demonstrated that both basic and more advanced skills can be successfully taught in a team game environment where there is both competition and rewards for attainment.
Set up a system where successful training is demonstrated bench performance.
Establish Operator 1, 2 and 3 levels to qualify for graduated levels of jobs or responsibilities. This creates a career track and an incentive to go for the next level. Celebrate employees as they move from level to level.
Company celebrations are important. Celebrate birthdays, tenure anniversaries, skill level attainment, career track attainment, and so on at monthly meetings or events.
Hire slow/fire fast. Give new employees a fair shake, but if their mentor doesn’t see promise in them, let them go.
Situation: A company faces dual challenges – assuring that payments are collected for work done and developing a business model that facilitates growth. How do assure that payments are collected to support your cash flow needs and that employees are focused on growth?
Advice from the CEOs:
It may be that the two problems are closely related. Ask whether your compensation and incentive system is focused on cash flow and growth. If not, you need to change it.
Restructure your compensation and incentive systems to create a direct link between profitability and compensation. Augment this with training. For example, if your engineering team isn’t good at assuring that change order costs are paid by their clients, teach them how to write statements of work to anticipate change requests and to include charges in the SOW. Then tie the team’s compensation to how well team members follow though in assuring that work is properly accounted for, billed, and payment collected.
Create simple procedures that are innate and complementary to team members’ natural behavior. The best way to do this is to involve them in the writing of the procedures.
Give them easy tools that take the guesswork out of negotiating change orders with clients. For example, if a client asks for faster delivery, give them a formula that ties delivery to cost::
Standard Delivery = 8 weeks at Price X
4 Week Delivery = Standard delivery price times Y
2 Week Delivery = Standard delivery price times Z
This turns client demands into a simple economic question – what is expedited delivery worth to you?
Hire a contracts manager to track contracts and change orders with authority to assure that change order costs are being billed.
Create “learning” teams to develop solutions. Allow the teams to speak to each other and to learn each other’s best practices. Supplement this with regular tutorial sessions to bring the whole group up to speed on new technologies.
Situation: Few economists predict a robust recovery. We know from past recessions that in a slow recovery some companies will fail while others rise to the top. What are the three qualities of the companies that will thrive and become the companies of the future?
Advice from Philippe Courtot:
Companies of the future will have three qualities. The first is a keen sense of who your customers are – what characterizes them and their buying and use decisions. You need to see yourself through their eyes. This will give you the ability to shift more easily as their needs shift. Making this shift is easier for a service company than for a manufacturing company because the infrastructure of a service company is more flexible.
Second is an intense focus on operational excellence. Everything is measured with the objective of obtaining the highest levels of productivity as well as the opportunity for ongoing learning and improvement. The companies of the future will have superior systems for gathering and tracking performance data, as well as cultures which allow them to learn from what they track.
Third is a culture of continuous innovation. The company of the future will be the company disrupting itself. Germany provides a wonderful example because of its culture of excellence in small, family owned companies. You may be surprised to learn that it is these small companies who are the true drivers of German innovation, not the big companies like Daimler or BMW. The small companies follow the three rules outlined here. Their success has been aided by the emphasis in German education on math and engineering which means that there is an ongoing supply of domestic talent to feed these jobs.
Interview with Muhammed Chaudhry, CEO, Silicon Valley Education Foundation
Situation: A critical component for the future of technology in the US is a workforce trained in math and the sciences. In Santa Clara County, California – the heart of Silicon Valley – only 49% of high school students complete University of California/CSU qualifying courses, and only 26% of Hispanic students. How can private industry contribute to the improvement of education and the training of future workers?
Advice from Muhammed Chaudhry:
Silicon Valley Education Foundation’s objective is to make Silicon Valley the number one region in California in student readiness for college and careers. It has been shown that the top predictor of college success is the completion of Algebra II in high school. Our primary program – Stepping Up to Algebra – focuses on students and teachers to increase the number of students who are ready for Algebra I in 8th Grade. To date 2,500 kids have gone through our program.
We actively encourage private industry to get involved in our programs and to invest in solutions that work. We call this involvement Work, Wealth and Wisdom.
Let’s talk about Work:
Our aim is for every business person to make it a priority to invest time in public education. This takes an investment – we ask for a consistent investment of 4-5 days a year.
Next is Wealth:
We encourage every business person to sign up to our Sustainer Program. The commitment is modest – only $5 per month to support our activities.
We encourage corporations to Adopt a Classroom for $10,000.
Finally we have Wisdom:
We encourage business people to get involved. We need help designing technology products that enhance learning and in formulating a blended learning approach.
We need to improve the enabling of technology in our schools to improve individualized learning to maximize the potential of each student.
We need support and involvement in policy work by contributing business thinking. Education has lessons to learn from business.
There is room for innovators who are interested in social benefit and long-term investment with profit as a secondary consideration.