A CEO is concerned that all her key personnel are over 50. This includes software
engineers who are experts in languages which remain at the foundation of many
customers’ databases, but which are no longer formally taught. How do you
replace aging talent?
from the CEOs:
at which areas potentially limit the company’s growth. Is it technology and software
expertise, or marketing and sales? Based on this assessment, rank the critical
positions to be filled and start hiring staff who can grow into the most
a cue from the Japanese. For years their aging workforce was predicted to limit
the country’s growth. Instead, they chose to retain employees through their 70s
and this has helped them to maintain both productivity and employment.
Baby Boomers are finding that they don’t have the savings to retire and are
working well past the historic retirement age.
Baby Boomers retired but found themselves bored after a productive career and have
returned to the labor pool.
factors may delay the company’s need to replace aging talent.
bigger question is what to do if a key player is lost. Focus on hiring back-ups
to key personnel and allow several years for them to come up to full speed. Current
employment trends suggest that numbers of experienced people are returning to
the labor pool. Look for a few good people to add to the team.
are the plans of the company’s key clients? Do they plan to stay with the
company’s products and expertise, or to sunset these and replace them with new
technology? Adjust operational objectives, as well as the exit strategy, to achieve
desired growth given customers’ timeframes.
Situation: A professional services company wants to grow while maintaining the small company atmosphere that has been the key to its success. There is a limit to how many clients a manager can manage, and with this the reality that if the firm is to grow they will have to bring on more client managers and support personnel. How do you maintain your culture as you grow?
Advice from the CEOs:
To maintain your boutique atmosphere, consider hiring to fit your needs rather than to maintain a culture. Use team meetings to direct team members while communicating and instilling the culture that you wish to maintain.
Don’t risk diluting the strength of your client relationships. A $250K client who is fully committed to your service may have more demands than a $1M client for whom you only represent 10% of their business.
Service companies with the highest profit ratios rotate customer contact among several qualified people. What matters is the level of service provided, not the individual providing the service.
Grow by adding locations. Instead of growing vertically in the same office, grow modularly by spawning additional offices.
Create an optimally sized model for the level of service that you wish to deliver.
Design the organizational structure for this model and identify the order in which slots will be filled as business grows through each office.
Develop a service and organizational template with standard operating procedures, metrics, technology, and reporting.
Once the model is created, spawn it.
Focus your business. Define a niche that you can serve better than your competitors. Focus on this niche and develop a sustainable advantage over your competition.
Assure that your service delivery is seamless to the client and make sure that it remains seamless.
Offer a menu of service options and price options by the level of service delivered. Some will want to buy a Mercedes, and some will be happy with a reliable lower priced sedan.
Situation: A family-owned business has a family member on hourly pay who puts in excessive overtime. The cost of overtime significantly cuts into company profits. The CEO wants to cut back these overtime hours and get the employee to work more efficiently. At the same time, she feels that maintaining peace within the extended family is important. How do you cut excessive overtime for a single employee?
Advice from the CEOs:
Situations like this within a family business are delicate because of relationships beyond the work place. Treat this individual respectfully, but make it clear that you have to act in the best interests of the company and all employees.
Develop a job description with this employee that will help to get their overtime under control.
Communicate to the employee: “I don’t want to take advantage of you by requiring this much overtime.”
Let the individual know that you are looking for additional talent and want to more tightly define the roles.
Develop a company policy on overtime that limits the amount of overtime that any one individual can accrue. If anyone starts to approach this limit, then have a process in place that shifts additional overtime to others.
This is a serious problem for the company. It calls for company transformation. Enlist the employee as a champion for the cause of transforming the company. Keep this a positive vision.
If the individual is not a keeper: start controlling hours, but don’t give a raise. Let them leave on their own time.
If the individual is a keeper: give them raise, while cutting overtime hours.
Situation: A closely-held, non-public company is in negotiation for a possible sale. The CEO seeks guidance on when and how to communicate this to employees. What event would demand communication? The CEO is concerned that if the sale falls through this may significantly damage employee morale. How do you communicate a company sale?
Advice from the CEOs:
The trigger point for any employee communication will be due diligence. At this point, you may have a serious buyer.
Going into due diligence, limit updates to those who will be involved in the process.
Most acquisitions do not go through, so a broader communication risks disrupting the company – unless you are very confident that the sale will proceed.
Prior to due diligence, there is no benefit to communicating any possible sale to employees.
What message do you deliver to those who will be involved in due diligence?
We are entering a due diligence. This is an exercise that we’re doing for our own education so that we understand the value of the company. This is just a drill.
Keep your eye on the business and don’t be distracted by the offer.
Have a good idea of an acceptable sale price.
For a company with intellectual property or significant assets, three to five times EBITDA is a good starting point – unless the sale is a strategic buy to the buyer.
A possible deal is often spoiled by terms and conditions that the buyer attaches to the deal.
One buyer (at any one time) is the same as no buyer. When owners get serious about selling the company they will need a broker to develop multiple buyers, to advise them through the sale process and to defend their interests.
Situation: A family-owned business received an unsolicited letter of intent to purchase the company. The Board is split on sale of the company, but has agreed to allow due diligence. Only a few key employees are aware of the LOI. What are best practices for managing a due diligence process?
Advice from the CEOs:
A due diligence process can be a major distraction. Put as short a fuse as you can on the due diligence process; insist that the information requested be limited in scope to essential materials to minimize distraction; and that the process not interfere with scheduled company commitments.
It is exceedingly difficult to hide reality from the troops. Good due diligence is incompatible with secrecy. Absent communication about the situation, if rumors develop at least a segment of employees will assume the worst leading to possible employee loss and erosion of leadership credibility.
It is better to explain the situation and put it in the best light. Here’s an example:
The company is not for sale but has received an unsolicited inquiry.
This is happening because the company is successful, is producing consistent value, and others appreciate our success.
Whatever happens, the company will continue as a going concern and if the company is sold, all efforts will be made to assure the retention and security of the employees.
Ideally, communicate this through a company-wide announcement, with video link to remote sites, and with the opportunity for employees to ask questions.
Brief all key managers in advance, with Q&A scripts to deliver a consistent message and address individual questions.
Strictly control the due diligence process.
Restrict direct contact with employees and, to the extent possible, with key customers.
Maintain your focus on the business – there is no guarantee of a sale.
Put retention packages in place for all key employees.
If the deal does not go through, assume that it will negatively impact company results for at least one quarter. Adjust your forecasts and incentive programs accordingly.
Key Words: Due Diligence, Purchase, Time Line, Distraction, Communication, Message, Coordinate, Q&A, Limit, Incentive, Retention Package