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: Leaders who are successful in the long-term have figured out how to build high performance environments. This enables them to continually produce breakthroughs by stimulating the performance of others, and to rise above their competition. What are the factors involved in building a high performance environment?
Advice from Paul Limbrey:
Our work is based on 20 years of research into high performance in individuals and organizations. First one needs to understand the dynamics that stimulate high performance in people.
Our research indicates there are several elements that combine to form a system that stimulate improved performance in populations. These elements include concepts addressing Direction – Achievement, Failure and Strategy, providing Status of current performance, and Motivation – reason/purpose plus reward/consequence. The final unifying element is the culture or guiding philosophy in an environment.
On a company level, the first task is to understand these dynamics as you have created them today. This enables you to see where you need to tweak your environment to better stimulate high performance.
How consistent is high performance across difference fields of human endeavor?
We find that all elements that encourage high performance exist in all environments. However the potency of each element varies with the particular environment.
For example in some environments the Goals are more potent (Sales groups or athletes). In others culture is potent (the Military or companies like Southwest Airlines). In others the reward systems are most potent (Investment Banking) or the potential for failure (airline pilots or first responders).
Any of the elements can stimulate performance improvement.
How does one go about matching the right system and solution for a particular company?
Start by focusing on the potency of each subsystem – Directional, Status and Motivation – in your particular environment. How critical is each in shaping decisions and action taken?
Take the example of a CEO who has no vision for the future of the company. The result is inconsistent decisions day to day or week to week. The organization can’t focus on effective execution. The solution is to focus on Direction.
What about the CEO who is concerned with complacency. This is best addressed by looking to define what represents sub-standard more clearly for the organization.
If you have an “excuse rich” environment or desire greater accountability, look to your status or “exposure” systems to provide more accurate performance status first before looking toward your consequence systems.
Situation: A company has historically given Christmas bonuses at the rate of 10-20% of salary in a good year. The CEO is concerned that employees may stay until their bonus is received, and then leave for another job. What are your plans for 2011 bonuses?
Advice from the CEOs:
First, what is your objective in granting bonuses? Which among the following are you trying to achieve?
Acknowledgement of effort.
Effort above and beyond the norm.
Once you determine your goal, design a structure that will effect this goal.
What practices are typical for your industry – your competitors, vendors and clients?
Background research on industry practices provides a basis for your own practice. You can then evaluate whether varying from industry practice can give you an advantage.
Company performance should be a factor in determining bonus payment. So should performance against individual employee goals and objectives.
How much discretion should be given to managers for setting bonuses for their direct reports?
Talk to your managers and get their input on how they would handle bonus evaluation.
A number of companies give managers a pool guideline, and have them produce a spreadsheet of recommended bonus distribution for executive review and approval.
Individuals should not decide their own bonuses. Bonuses for all employees/managers should be decided by their direct supervisors.
Should the CEO be concerned if an employee takes their bonus and then leaves?
If an employee has earned their bonus, then you are granting them an earned reward. Their departure likely has much less to do with whether or not they receive a bonus than other factors.
Human resource research consistently demonstrates that compensation is at the bottom of the ladder of reasons that workers remain or leave – particularly workers who exercise critical thinking and judgment in their jobs.
Situation: In traditional marketing, many marketers are more focused on activity than results. In the digital environment, top marketing organizations must become better at listening to their customers, watching them, and tracking their purchase decision behavior. What does this mean for the marketer?
The digital world has changed marketing.
The traditional marketing campaign was led by creative. Through the early 90’s marketing was directed by media players and large publishers. Once a campaign was developed the pitch was “buy lots of impressions and customers will come.”
During the dot.com boom and into the 2000s there was a shift to ROI – spend $x with Google, get y clicks that will yield z buying customers. This was very transactional and could be expressed relatively simply.
Behavior is now changing, and the model is becoming more collaborative:
A potential customer expresses interest and a need.
A supplier offers a solution.
The potential customer verifies and validates the offer through online communities, Twitter, Facebook or other resources, and eventually may make a buying decision based on what they find along the way.
The buying decision today is very different from the traditional offer-driven process.
All of this can happen in minutes.
For the marketer, this means moving far beyond the simple advertisement.
The marketer needs a presence on Facebook, Twitter, and many more sites, in addition to their website, to woo potential customers.
For marketers this is expensive and requires a different level of resource commitment. It is, therefore, important for them to attribute the appropriate value to each online presence that the customer engages as they evaluate their buying choices.
Only through developing complex metrics, which change real time as customer behavior changes, can the marketer track and understand customer behavior and adapt the offer to the needs of the customer.
As individual consumers increasingly engage employ new forms of digital technology the challenge to marketers only increases.
The digital marketer who will thrive will develop a sophisticated, metric-driven understanding of the multiple touchpoints and social interaction of a given transaction.
Interview with Sanjay Sathe, President & CEO, RiseSmart.com
Situation: RiseSmart is in the process of building an inside sales program to complement their outside sales capabilities. What are the most important strategic components of an effective sales model?
In a marketing and sales system, marketing is the precursor to everything. If you can’t effectively deliver your message to your audience, you have no lead generation machine and sales must resort to cold calls.
In an online world, one of the key components of a marketing system is the email campaign, combined with tools for rapid and responsive follow-up.
In RiseSmart’s system, the inside sales team is primarily responsible for following up on leads. The team’s role is:
To qualify the prospect responding to our marketing efforts. Is this person the right buyer for their company? If not, who is?
Does the company have a budget for our services? If not, when will they?
Is this the right time? Do they have a current contract in place? Are they actively looking?
The most critical aspect of the inside sales rep’s role is to be an effective filter in collecting and passing data to the field sales force.
Many inside sales reps fail because their performance is measured on the number of calls made, not the quality of the calls or information gathered.
Our incentives for inside sales are based on the quality of data gathered and on the success of field sales in closing the leads they receive.
The effectiveness of outside sales really comes down to choosing the right people.
The 80/20 rule applies here. One out of five field sales reps hired is truly successful, one is marginal, and three don’t make it.
We hire based on experience selling to our target customer groups, subjective elements, and careful reference checks.
As CEO, I consider hiring good people the most important thing I do.