Situation: A valuable tool for CEOs is Susan Scott’s book Fierce Conversations. This includes challenging conversations with staff. Scott characterizes Fierce Conversations as being robust, intense, strong, powerful and passionate. These are the traits that a leader must bring to challenging conversations instead of avoiding them. How do you have a fierce conversation?
Advice from the CEOs:
The first step is to master the courage to interrogate reality. This means confronting the difference between “ground truth” or reality and official truth or what we or others wish to believe. There is often a difference between the truth that we want others to see and reality. Jim Collins calls this confronting the brutal facts of our situation without losing faith in our ability to deal with it.
Be here, prepared to be nowhere else. The conversation must be your only point of focus when you are having it. Choose a location where you won’t be interrupted or distracted. Don’t allow yourself to be distracted by texts, phone calls or anything else.
Tackle your toughest challenge today – you gain little by putting it off for another day. Prioritize your challenges, and tackle the most difficult ones first. Handling these will make the most difference.
Obey your instincts – but remember that instincts are subjective and must be verified through reality checks. Trust your gut, but verify it objectively with evidence.
Take responsibility for your emotional wake – what he or she will remember after the conversation. Keep the focus on factors that the other party can control, and offer to assist. But be sensitive to how you deliver the message and how the other party responds. Don’t leave more of a mess than you had before the conversation.
Harness the power of silence – silence slows a conversation and increases your chances of making it meaningful.
Situation: A company started a new branch office last year. This office started with three people and has remained at that level with some turnover. Morale is low because the branch office team doesn’t feel supported by the home office. The CEO is concerned that this could kill the branch office if it is not fixed. How do you boost morale in a branch office?
Advice from the CEOs:
The problem is most likely the home office, as they assert. There have been few visits from home office personnel – particularly the company president. In addition, they are being criticized in weekly reviews for not hitting the same metrics as the company’s established operations.
Remediate this situation by scheduling weekly executive visits and monthly visits by the president until things are up and running and there is a track record of profitability.
Clarify your expectations to everyone – this is a new office running to different metrics until they establish themselves. Once they are established, they will run to the same metrics as everyone else. Coach the heads of other divisions that the new office needs support, not criticism, until they establish themselves.
Allow the branch office to bid low for market share until they are established in their new location for a period – at least 6-12 months. Create a different set of metrics for a start-up office, and review these during weekly sales meetings.
The role of management is to show the colors in the new location and manage peer feedback from established locations. Help them win! Establish start-up metrics like lunches with potential clients to establish relationships. Since the branch office is generating business for other locations, create separate general performance metrics from territory specific metrics for this office and show both in staff meetings.
Situation: The recovery continues to be uneven and uncertain. One company finds that both staff and their families are nervous about how the company will fare and the future of their jobs, and this has created strain. What are you doing to stay balanced and positive – both within your company and also in your personal relationships?
Advice from the CEOs:
Transparency and communication. These are critical in both business and personal affairs. You have to be honest, avoiding either pessimism or unwarranted optimism.
Share the metrics of where you are – the reality – and projections on your expectations of how things will go. This has been a long bump in the road, but eventually things will get smoother.
Involve your staff in difficult decisions. Do the same with family on difficult personal or family decisions.
Be frank with family, but keep communicating. Time is more important to family than money – they want you to be there with them. If you’re working long hours in the evening, at least go home and have dinner with your family.
Staff adjustments, where necessary, have been done as single events and weren’t drawn out. CEOs have communicated more frequently about the state of business and pipeline. Assure staff that the company is solid. Show them the runway.
Those most worried are employees without project work. Some companies focused them on infrastructure projects to keep them engaged.
Cross-fertilize your teams. One company brought professional service employees into product engineering. Both groups learned and benefitted from understanding each other’s perspective.
Situation: A company has received an inquiry from a large client requesting that they dedicate a significant portion of their staff to that client. The company hasn’t done this in the past, and the CEO seeks advice on the advisability of this choice. Would you dedicate significant staff to a single client?
Advice from the CEOs:
Provided that the terms offered by the client are favorable, the proposition may make sense. However, there are certain terms that you may want to assure are included in the contract:
In return for your dedicating choice staff to this project, ask for a substantial upfront payment – perhaps 50% of the total contract – to reimburse you for the opportunity costs that you incur committing your resources to the project.
Insist that the contract allows interchangeability of personnel if circumstances prevent initial personnel from continuing with the project.
Internally, work to assure that this project does not adversely impact your culture.
Talk to other companies that you know who have had similar arrangements with large clients. This will give you an understanding of the benefits and pitfalls of the arrangements.
Do everything that you can to assure that this project does not distract from your broader business strategy. Cash from the project may be nice, but if it inhibits your overall business strategy it may not be worth it.
If the employees assigned to this project are not happy with their assignment, the project may lead to unwanted turnover.
Situation: A company was recently acquired. The acquirer wants to merge benefit structures between the two entities. Both contribute a similar amount toward benefits; however the distribution of benefits between retirement and health plans, and other benefits varies considerably. How do you approach the staff to communicate changes in benefits following an acquisition?
Advice from the CEOs:
Ideally, you want to gather employee input on what benefits are important to them before the overall package is finalized. This will help you to negotiate in your employees’ interest.
Make sure that the acquiring entity is aware of state regulatory requirements that may force them to retain state-specific benefits.
National companies often employ a cafeteria benefit strategy that allows the employees to make choices among benefit options, and fund these choices either at a company-paid base level or allow employees to supplement their choices through pre- or post-tax payroll deductions. There are numerous providers who offer cafeteria plans.
What’s the best way to have a conversation with employees once the new benefit package has been finalized?
Emphasize that the company is offering and funding this benefit and specify the amount that the company is funding as a percent of salary.
Create a grid mapping the full program:
Amount of company contribution
Old Program and benefits
New Program and benefits
Changes in allocation and changes in the total value of benefits offered.
If you have access to industry or regional comparisons for like-sized companies, and those comparisons put your company in a favorable light, share these as part of the communications package.
If you know that a highly valued benefit is being reduced, consider a short-term subsidy to ease the shift.
Be sure that you are clear and concise in your communications of the new plan and changes to the employees. You may want to have an outside consultant on hand to cover specific questions.
Be sure that any decisions your employees must make in the new program are fully and clearly explained.
Situation: A company missed production milestones and had to reduce top and line staff by 20% to keep salaries in line with expected revenue. An executive who was very angry about being let go has asked the CEO to meet him for lunch. How do you manage communications with employees post-riff?
Advice from the CEOs:
If you haven’t already, call a company meeting to explain the situation, as well as the rationale for the riff. The company has to manage itself financially in line with current and expected future revenue to assure that it can take care of employees. Explain the connection between production milestones, revenue, and the company’s ability to afford staff. Employees generally understand these connections and will accept this well.
When you have lunch with the executive, first listen to what he has to say.
Anger expressed in an exit interview is part of a natural emotional response to difficult news or change. Listen for signs of ongoing anger or progress toward acceptance of the situation.
If the individual threatens the company or tries to bargain the severance package, don’t negotiate.
However, if the individual is reasonable and asks for assistance in finding a next position – references, introductions, etc. – then offer to assist as you can.
Should the CEO make an attempt to follow-up with others who were riffed?
No. If they contact you, then respond in a similar fashion as you are to the VP, but otherwise don’t try to contact them.
In the Silicon Valley economy, people are familiar that employment situations change and know that as this happens they can be affected.
Interview with Norman Boone, CEO, Mosaic Financial Partners
Situation: Many entrepreneurs who started companies in financial services and other industries are now 55+. They may be ready to move on, but not necessarily ready to move out. What questions should they be asking as they plan their exit strategies?
Advice from Norman Boone:
The most critical question is what you want to do with the rest of your life. Most people don’t give this enough thought. It all starts with what is most important to you.
Start with a self-inventory assessment – what are your resources, options, and what do you want to do or accomplish?
Discuss with your significant other or partner what will work for both of you.
Answering these questions helps to lay out the alternatives. Now, thinking about your company, what is important to you? Is it legacy, the future of your employees and business partners, the future of your clients? Does your business continue, or to you see a sunset?
If your business will continue, do you see an internal succession, or sale or merger of the company? If internal succession, here are the issues.
Who will be the new leadership? Do you have good candidates on staff, or do you need to hire someone who will take over?
Be careful not to expect your successor to be a mini-you. They need to be able to bring their own talents and perspectives to the leadership role, not try to duplicate you.
Do you need to beef up the training of current staff to increase their managerial capacities?
Is an employee buy-out an option? There is a variety of choices to investigate.
What will be your role during and after the transition? Will you accept that new leadership may take the company in new directions?
To be most effective, this needs to be a 5 or 10 year process. Ideally you will have two to four successor candidates to evaluate.
Do you sell to the highest bidder? Many of the questions here are like those above.
Will you sell to the highest bidder, or to the bidder who seems the best fit for your stakeholders and clients?
How much voice, if any, will you offer your employees and / or clients in the selection process?
What due diligence will you do on potential buyers?
Do you merge with a similar company?
If you can find a compatible merger partner the combination may be the best of two worlds.
What is the culture? If different, what will be the impact?
A merger of like companies may assume that the other party has a commitment to ongoing operation: but this is not guaranteed.
What will your role be, and what is the transition plan? How will you involve your key people in the transition?
The other option is to sunset the company. Here you must have enough in savings so that you can forgo future income from the business.
What about the other stakeholders and clients who’ve invested their careers and business in you?
Try to time your exit with the expiration of leases and other obligations to minimize exit cost.
How will you assist the transition of stakeholders and clients to new opportunities and providers?
Situation: Sales at a small company have grown rapidly. They need to expand staff to keep up with demand and fulfillment. There are two options: expanding current functional teams in sales and service or adding a back office operations function. Based on your experience, which of these two options makes more sense for a company of fewer than 20 people?
Advice from the CEOs:
Since the company is planning to grow from 10 to 20 people, create an organizational chart for what the company will look like with 20 people. From this back into what it looks like with 15, and then 10 people.
Look at how the positions work, and what talents you want to see in each position. Assess how well your current staff fills both current and anticipated talent needs.
The company’s key market differentiation is and will continue to be exceptional client service. Here are some of the questions to ask:
Are the back office needs of the sales and service teams similar or different?
If there is enough overlap, can one person, and eventually a team, supply the operational needs of both your client services and sales functions?
If there is little overlap, what specific needs are currently unfulfilled by each team? Is there enough work to justify adding more than one person so that each team manages their own operations?
One option is a matrix organizational structure which can work well in a firm of 10 to 20 people. Key factors include:
Establishing a company culture to compliment your strategy and objectives.
Establishing clear expectations of accountability and expectations to govern the model.
Matrix structures don’t always succeed. Ask whether your current people and culture are suited to a matrix organization.
Situation: A company has experienced rapid growth. This is creating stress for the staff and CEO, who finds it difficult to break away from the day to day to focus on strategy. Employees are not keeping pace with the evolving needs of the company and turnover has increased. What have you done to manage rapid growth?
Advice from the CEOs:
The first task is to improve forecasting of business growth, and the infrastructure needed to support this growth. This includes:
Regularly updating your sales and production forecasts.
Updating staff and training plans to meet growth forecasts.
Updating infrastructure and support plans.
Without these, the organization will whipsaw in response to market demands.
Take a critical look at your staff development plans and staff training.
Look at those areas that are most impacted by business growth. Determine whether you have the right managers and support in place.
Evaluate whether you have the right people and whether they have the skills to handle new demands of their positions.
Critically evaluate each now job that you take on. Assure that you have the staff and infrastructure to meet client demands.
Always assure that you deliver on your company’s integrity, reputation and core values.
In addition to addressing immediate needs, look at long-term plans strategically. Ask where you will be in 10 years. Articulate this vision in detail, and drive plans down through the organization. Make sure that everyone is on the same page, aligned with the same values, aiming at the same targets.
Also differentiate your vision from your mission:
You vision is a 10 year time frame, not one year.
Your mission is what you will be doing this year and in 5 years – the activities you will undertake to realize your longer term vision.
Fine tune your vision and mission and drive these through the organization. This will give you clarity on how you wish to do business and will help you to make hard choices as you handle rapid growth.
Interview with Jim Kaskade, Global Executive (most recently SVP and General Manger, SIOS Technologies, Inc.)
Situation: Cloud computing as a concept dates back to the 1960s. “Cloud” became a more prominent concept in 1990s as a metaphor for service delivery over the Internet. The technology that makes it a practical reality has advanced significantly. Broad business adoption, however, has varied depending on the deployment architectures used. What are some of the barriers to enterprises “crossing the chasm” and embracing moving to the cloud?
Definitions: There are three cloud deployment architectures or market segments when defining the opportunities and barriers to entry:
Software as a Service – SaaS – represented by distinct B2B applications like Salesforce.com and Google Apps, and B2C applications like Apple’s iCloud.
Platform as a Service – PaaS – represented by application platforms targeted at application developers and including Microsoft Azure and Amazon Beanstalk.
Infrastructure as a Service – IaaS – represented by on-demand access to low-level IT infrastructure such as virtualized computer, storage, and networking infrastructure.
The elephant in the room is that, relative to global IT spend, use of public cloud is in its infancy.
Adoption of the cloud varies by business size and IT structure.
Start-ups – particularly technology start-ups – use all three segments. The rationale is simple. It is easier and conserves capital to use all three delivery segments as an expense rather than invest in IT infrastructure. Another benefit is time to market.
Mid-sized companies – up to hundreds of employees – have more challenges.
They start with SaaS applications to get their feet wet. Primary concerns are availability and security. If they have good, dependable Internet access, barriers to entry can be low.
Using a PaaS is also attractive but begins to compete with internal, existing platforms. Mid-sized companies typically have their own IT and developers who may prefer an internal platform. The company’s choices are also limited to a PaaS system that is similar to current development platforms.
The barrier to IaaS adoption is the IT staff itself. If the IT staff is savvy, they can maintain and run their internal data center less expensively than IaaS services. The question comes down to whether building and maintaining a “crazy smart” IT group is core to the company’s business model.
Enterprise companies – Fortune 100s or even 1,000s – have far greater challenges.
Their current IT model already has moved to a mix of 30% in-house and 70% outsourced with partners like CSC and Accenture.
Most Enterprise CIOs begin their use of “cloud” with a migration to SaaS. The barriers to PaaS are that their systems are tailored to customer-specific applications and internal infrastructure, limiting PaaS use to small, non-critical applications which require quick, global deployment.
The barriers to using IaaS services are similar to PaaS, where CIOs struggle with tradeoffs between agility and issues of cost, security, and availability.
The Achilles’ heel of these companies is that 80% of their IT spend is just keeping the lights on.
The implications of all this are that the cloud is ideally for small to medium companies, some of which will become large enterprises. If you can succeed with a migration of legacy applications to cloud-based services you will become more nimble in responding to customer’s needs – the biggest upside to cloud services in general.