Situation: A professional services company is constructed as a network of members. The company’s contract specifies that if a member of their network goes to work for a client – even a client that the member brought to them – the client owes the company a fee of 50% of either the member’s salary or the annual consulting revenue paid to the member. This is onerous. What is the best way to respond? What is a fair revenue split?
Advice from the CEOs:
This does seem like an onerous provision. It is unclear whether the bite is as fierce as the growl.
Consult a lawyer. If you quit the network and go to work for the client, what is the level of risk that the company will successfully sue, and what you can do to mitigate this risk?
If the offer from the client is appealing, quit or avoid using this company’s services. Given their cut to your revenue you will see a net gain in your own pay for services rendered.
If several members agree that this stipulation is onerous, team up and start your own network with better terms. This can provide you and the others with an annuity revenue stream.
Integrity in professional circles is everything. Whatever course you decide on, be up front.
Situation: A company started small with everyone wearing many hats including the person in charge of HR. They wish to create a more formal HR structure with professional advice, but don’t yet want to hire a full-time HR professional. How do you create HR using outside resources?
Advice from the CEOs:
One company outsources their full HR function. Services include:
Putting records in order and maintaining them.
Developing different hiring packages for different levels of employees.
Keeping the company and employees updated on compliance regulations.
Coordinating on-boarding and training.
There are several national HR and personnel outsourcing companies that can help. Examples include Paychex and ADT. There are also a large number of local providers. Network with your business peers or check out your local Chamber of Commerce to learn who these providers are.
What about training?
Outsourced HR professionals can organize training for formal certifications and some aspects of job skills training.
Training in company culture should be done by company leadership. Outsourced HR can organize schedules for this. The key point is that company leadership is the face of the company and the foundation of company culture. This can’t be effectively outsourced.
In some cases, training can be done via video. Outsourced HR can help to plan and coordinate creation of the videos, and can then schedule video training for new employees.
Have your in-house person join an HR roundtable to embellish their own training.
Situation: A company is a professional organization with exempt employees who sometimes work extra time. Some employees are fine working 50-60 hours per week, others are not. The latter want comp time in exchange for the extra hours worked. What are appropriate policies for comp time?
Advice from the CEOs:
When weekend duty is called for based on company needs, one company swaps dates to give the affected employees time off during the week. On the other hand, if they need extra hours to get their normal job done, this is part of the job and does not merit comp time; particularly if other employees manage similar work during regular hours.
What about on call duty? If this is a regular part of the job, particularly if it is not frequent, it’s just part of the job. However, you may want to consider a spot bonus for special duty.
Do not allow employees to accrue unlimited personal time off – PTO. Start limiting what you allow them to rollover and give them time to use it or lose it.
Look at the individual, what is happening and their work processes. Help them to save time if their processes need to be improved.
People sometimes feel that they are “entitled” with no justification. Rate your employees A, B and C. Inform them of their rating, and the reasons for it during their regular reviews. In a tight job market C’s either upgrade their performance to B or A, or they become candidates for replacement.
Situation: A company has been approached by a larger company that may be interested in acquiring them. The prospective acquirer is a current customer. Absent an extraordinary offer, the company isn’t interested in selling. Nevertheless, a conversation could be valuable. How much information about the company should the CEO share now? How much do you share with a potential acquirer?
Advice from the CEOs:
The key term here is potential. At this point, there is no commitment, and you really don’t know the other company’s motivation. As you start this process, don’t share confidential details about your plans or prospects, or your pipeline. Just broad information. If things get serious, slowly open the kimono.
Make sure that you have an NDA in place covering anything that they ask you to disclose for this possible transaction.
Given your current situation, a standard offer probably won’t be appealing, so be open to a creative option.
Decide ahead of time what your price is. If they are in the ball park, keep talking.
For example, Say you want $XX. Would you be attracted to 50% of that now, 50% later? Under what terms?
Put a low valve on future payouts, particularly if you are not in a position to call the shots.
Be open and creative. You never know what can happen. You could sell to them now at the right price. Then, if the acquisition doesn’t work out, buy the company back in 2-3 years at a discount!
If you get into higher level negotiations, employee retention will be critical. Make provision for this as part of the deal.
Hire a disinterested professional negotiator you who you can trust.
If things get serious, bring in an investment broker to assist. It will cost you 5% but they are helpful in the negotiation and could bring in competing suitors to up the ante.
Situation: A professional service company is intrigued by LEAN and Six-Sigma approaches to increasing production efficiency and reducing costs. Most of the examples that they see of LEAN and Six-Sigma in action are in production or manufacturing settings. Do LEAN or Six-Sigma programs apply to processes in a professional services environment?
Advice from the CEOs:
LEAN and Six-Sigma are heads-down approaches to process improvement. In a customized solution environment, standardization of processes has less pay-off. As an alternative, consider Agile Development and similar heads-up process solutions.
Agile Development is both a philosophy and a process. Steps to introducing Agile Development to a professional services environment include:
Identifying high risk areas of individual project plans,
Double resourcing high risk areas to increase the likelihood of fast, satisfactory solution outcomes,
Looking for collaborative synergies and scenarios,
Scheduling regular team meetings to enhance collaboration,
Working opportunistically rather than systematically to increase efficiency, and
Using project post-mortems to refine systems and processes.
One professional services company which has adopted Agile Development assigns Senior Engineers as outside consultants on projects. These individuals bring a more experienced perspective, and can identify more efficient ways to find solutions and produce a more cost effective and timely result.
Situation: A company wants to expand its markets and customer base. Currently their business is dominated by a single customer. What best practices have you developed for identifying new customers and markets?
The key to getting new customers is to devote dedicated time to this task.
If your company is populated by engineer or software specialists, consider hiring a sales professional – a commission based hunter sales person who has experience landing big accounts in markets similar to yours. You may pay this person a good percentage of sales for brining in this business, but gaining the additional business can be worth it.
Much depends upon your relationship with your large customer. When a single client has rights over or ownership of the technology of the company but is not pursuing broader markets that the company is interested in, is it feasible to negotiate rights to pursue this business?
The larger client will pursue their own interests, not those of the smaller vendor. Perhaps a win-win deal can be worked out, but it may be difficult – particularly if the larger client is concerned that use of the technology in other markets could affect its interests in their primary markets.
Be very careful in this situation. The easiest tactic for the larger company to defend itself from a perceived threat is to sue and simply bury the smaller vendor through legal expenses. While the smaller company may be legally within its rights, deep pockets can beat shallow pockets through attrition.
In the case that the larger client simply continues to buy all capacity of the smaller company, an alternative is to raise rates, or perhaps to just say no.
Consider recreating the opportunity – create your own adjunct proprietary product with your own software or design talent and expand your horizons with this product.
Be aware, the large client can still sue if there is any appearance that your proprietary product impinges on their product rights. As in the case above, the larger company has the resources to bury the smaller company in legal expenses regardless of who is legally correct.
Situation: A new start-up has developed a SaaS application focused on helping sales people and small businesses leverage LinkedIn and other social media for prospecting. The Company’s customers build Private Shared Networks which can be used by sales people to accelerate the Pipeline. Their concern is that historically sales people have not adopted sales productivity and prospecting solutions. What have you done to attract and accelerate trial and acceptance when addressing a resistant audience?
Advice from Pradeep Bakshi:
Keep it simple and make the application very intuitive and easy to use.
Do not try to change behavior; make it easier for sales people to do things they already like to do.
Create an instant “I get it” experience.
Bias the interface toward instant gratification. This is critical to generating viral marketing.
Make it easy to tell others what you’ve found – similar to a “Like” button to share a YouTube video.
There are 15 million sales people in the US.
You won’t get everyone, but you want to get the “believers” and avoid the “haters”.
You must quickly find segments of the market who are likely early adopters. For us, the early adopters are in the SMB segment (startups, 25-200 emp.) and the service provider industry.
Select channels which are open to your messaging and solution.
LinkedIn Groups are becoming an excellent way to network with like-minded people who can spread the word.
Look to past contacts to whom you have provided value and who value you. They are more likely to get your value proposition and introduce you to others.
Allow customers to collaborate with referral sources: potential business partners and collaborators who aim at the same audience that you will serve; and lead sharing partners. These individuals can help you find customers who will value your solution.