Situation: A company’s accountants advise them to make distributions for tax purposes. Simultaneously, the company’s future is based on technology and staying ahead of the competition. This requires ongoing investment. Do you focus on taxes or investment?
Advice from the CEOs:
The focus of the answer is distributions and company morale, not tax planning. Think about the impact on the team. Are there considerable differentials in compensation within the company? If so, this may be impacting morale.
Differentiate bonuses from variable compensation. Make bonuses special. This starts at the top. The attitude should be that if someone works hard, they will be compensated. Once bonuses become assumed, they are just regarded as part of the overall compensation package.
Smaller geographical units can help retain a small company atmosphere and drive. As a company grows, similar results can be achieved with Tiger Team projects.
If the organizational structure enables this, foster friendly competition metrics between offices – and publish the results.
One company distributes performance data to top staff – with color-color coded red/yellow/green metrics based on performance. All red and yellow numbers require an explanation. The company has seen a significant reduction in red and yellow metrics since they started this.
At company meetings – publicize and recognize top 10 performers in various areas. Recognition boosts morale.
Company events boost teamwork and morale. These may include company barbeques, in-house cooking shows created and run by staff, and quarterly outings – bocce ball, tubing, sailing on the Bay.
Growth is accompanied by change. When a company starts it’s a mission. After 15 years it’s a job. This is a function of growth, and it takes ongoing creativity to keep individual employees excited about their job and role.
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 company has done a number of things to build company morale. Participation is variable depending on the activity. The CEO wants to build a system to measure employee morale. What metrics do you use to measure changes in your culture over time?
Advice from the CEOs:
The Gallup Organization has focused on this issue perhaps more than any other organization in the world. They find that regularly conducting surveys allows you to measure and improve your culture over time. Their surveys focus on 12 questions that they have found most critical to employee morale within a company.
Do I know what is expected of me at work?
Do I have the materials and equipment I need to do my work right?
At work, do I have the opportunity to do what I do best every day?
In the last seven days, have I received recognition or praise for doing good work?
Does my supervisor, or someone at work, seem to care about me as a person?
Is there someone at work who is interested in and encourages my development?
At work, do my opinions seem to count?
Does the mission/purpose of my company inspire me make me feel that my job is important?
Are my co-workers committed to doing quality work?
Do I have a best friend or mentor at work?
In the last six months, has anyone at work given me a review or talked to me about my performance/progress?
This last year, have I had opportunities at work to learn and grow?
Notice that not one of these has to do with compensation or benefits. Rather they focus on employee perception of how they are managed, whether they have to do the tools to do their job, and feeling that others at work care about them.
Another measure to watch is employee retention – particularly of your best employees.
Situation: The CEO has regular lunches with staff to foster communication and sharing of information. In recent months few employees are attending these lunches. Also, a negative tone is beginning to pervade the office, though the situation seems to improve when the CEO is present. How would you address this situation?
Advice from the CEOs:
The immediate priority is to correctly diagnose the problem. Is this a question of the CEO’s energy or the team’s awareness of plans for the company? Is there something else going on of which the CEO is unaware?
Meet with employees. Have an open and frank discussion with them about the future of the company.
Meet with the most valuable employees first. Share hopes and vision for the business. Express appreciation for their contributions and discuss plans for their continued growth. Next, ask open-ended questions about the company and seek their input on how to improve it. Listen to what they have to say.
Next are borderline employees. Again, share the vision and appreciate their past and current contributions, but be honest about expectations for performance. Then ask the same open-ended questions that you asked the first group and listen.
For underperforming employees, again appreciate past and current contributions, but be clear that unless they substantially improve performance, future employment isn’t guaranteed. Ask the same open-ended questions asked of the other groups and listen.
Be patient. Don’t try to develop all the answers immediately. Listen and learn what drives employees – particularly keepers. Involve them in developing programs to drive the future.
Situation: The industry is changing and the Company must adapt both structure and focus. This may require a layoff of staff not aligned with the new focus. How do you maintain morale in the face of uncertainty and possible layoffs?
Advice from the CEOs:
Ask for employee input as to industry trends and what possible directions for the company.
Employees are closer to the customer than the CEO and have valuable insights.
Gather input in small group meetings to prompt discussion and ideas.
Make this a research talk. Leverage the “wisdom of the crowd.”
Research other industries that have undergone similar changes.
What strategies did the most successful companies pursue? Could these work for you?
If faced with protracted uncertainty, what did they do while waiting for market clarity?
If a layoff is necessary, conduct it in one day:
Monday is better than Friday.
Do it early in the day. Give final checks the day of the layoff.
Provide instructions for filing for unemployment assistance via the Internet.
Hold a company meeting for remaining staff immediately after the layoffs. Focus your message on the future and positioning the company for the future.
Prepare a brief summary of your message, to distribute as a take-away.
Be prepared for a grieving process following the layoff. Consider outside assistance on grieving to overview the process.
Following the company meeting, have key employees conduct smaller group meetings to lead discussions and allay fears about the layoff. Fully prep these individuals about the situation with written responses to likely questions.
The benefit of a Monday layoff is that you will see everyone on Tuesday, and the team can continue to address their concerns.