Situation: A CEO is concerned that there is insufficient fairness and accountability within her company. One manager is paid hourly and the CEO is thinking about shifting this person to salary plus bonus both to put them on par with other mangers and to create more accountability. How do you create accountability?
Advice from the CEOs:
What exactly are you trying to achieve? An operations manager is paid competitively at hourly rates, even compared to salaried employees. The issue is that this person has no responsibility for results as they relate to the P&L. Given this, the group consensus is that it is better to have this person on an incentive program that ties compensation to the performance results that you want.
One objective is that you want this employee to contribute more to planning, strategy or the company’s attempts to develop solutions to the challenges that they face. Have you spoken to the employee about your expectations? Does the employee realize that you want or value their input? Direct communication with the employee is important.
While the employee understands his responsibilities in the operations area, be sure that he is aware that he is also important to the profitability of the company, and managing operational expenses which are contributors to that profitability. Depending upon the individual’s background, he may need training about the links between expenses and the P&L.
Given these factors consider the following options:
Adjust the employee’s compensation by switching from hourly to salary. Make the base livable, but not comfortable, and tie the bonus (which will make the total compensation package comfortable) to the profitability of the business. This will have an immediate effect.
Clearly explain to the employee that you value his creativity and input. Give this person the freedom to contribute and make it clear that his contribution is expected. Early on encourage this and acknowledge contributions in meetings.
You may want to make this person a part owner of the business. This will have a long-term effect.
Situation: The CEO of an early stage company has identified a person to help her as an assistant. This will be her first real employee. Prior hires have been contractors who have been paid on revenue generated. This individual’s salary will be an expense without clear association to revenue. What guidelines do you suggest as she makes this hire? How do you hire your first employee?
Advice from the CEOs:
Create a cash flow projection to make sure that you have the cash to afford an employee.
If you consistently expect 40+ hours of work from this individual, consider a salaried position which will give both of you more flexibility.
Paychex currently handles your payroll and benefits. Work with them to make sure that all labor law compliance issues are covered. Also, consider hiring a labor law consultant to help you avoid minefields.
Do a background check even if you have known this individual for a long time.
Consider working with a professional employment organization that can provide back-office HR support for you.
An employee handbook is unnecessary at this point. However, think through how you will want to handle issues that may come up including vacation, benefits and paid/unpaid leave like bereavement leave. Document these for inclusion in a future employee handbook.
Under the current health care law employers with less than fifty employees are not required to provide health benefits without paying a penalty. This may change as the law continues to evolve.
Situation: A company has grown to five times the size that that were when they hired their last Vice President of Sales & Marketing, and are looking for a new VP of Sales & Marketing. What is your advice as they embark on this search? How do you recruit a VP of Sales & Marketing?
Advice from the CEOs:
Think coach as opposed to star player. You are a much larger company, and at this phase of growth you need an individual with good marketing skills combined with sales management skills. You need a brand builder.
Recently, another CEO went through a similar process. His mistake was hiring a person with deep domain experience, when what they really needed was a person with process/methodology experience in complex sales. In your case, consider an individual from a larger company in your industry, or an allied industry. Somebody with knowledge of similar technical sales processes to your company with similar complexity and similar lead flows.
Skip head hunters. Based on your knowledge of good companies in your industry use LinkedIn to find who’s who. You can look at three pools of candidates – those that you can hire away from these companies, those who have worked there but are out of work, and early retirees who have found that they now need to go back to work.
Research current salary ranges in your industry and plan to be competitive, both base and bonus target.
As this individual will be a doer-manager make bonus qualification a combination of personal quota and team performance (overall new sales growth vs. existing projects).
While another CEO agrees that you don’t need a head hunter, find someone who can organize the process – review resumes, perform screening interviews, schedule higher level interviews, follow-ups, etc. – and who will work on an hourly basis.
Have a job application and be sure to ask for the following:
Copies of last W-2s.
State on the application: falsehood is grounds for immediate termination.
Do or outsource formal background checks including verification of education and degrees.
Personally call references for your finalists. Ask these references who else knows this person and speak to them, as well.
Interview with Charles Bellavia, CEO, ElectraDrive
Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?
Advice from Charles Bellavia:
The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
Can you fund the company out of your own pocket?
Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
What is the minimum funding needed for the company?
What funding do you need just to prove your technology and generate cash?
Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
How do you keep project workers motivated?
Plan for turnover. Know who is key to the project, and where you need back-ups.
Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.