Tag Archives: Support

How Do You Establish Performance Metrics? Three Guidelines

Situation: A CEO wants to establish baseline metrics to evaluate company performance, and guide both planning and operations. Without baseline metrics it is difficult to compare the impact of options that the company faces. What are the most important areas to analyze, and what do other companies measure? How do you establish performance metrics?

Advice from the CEOs:

  • Start with the basic divisions of the business. As an example, take a company which has three arms to its business – products that it represents for other companies, products that it distributes, and custom products that it manufactures to customer specifications.  
    • For each of these lines track gross revenue, profit net of direct costs, FTEs necessary to support the business, number of customers, net profit percent, net profit per employee and net profit per customer.
    • Calculate these metrics on at least a quarterly basis for the past 2-3 years to set a baseline and a chart of historic trends.
  • Once you establish a baseline, chart current performance on at least a quarterly basis and look for trends and patterns.
    • Where is your greatest growth and greatest profitability – not just on a global basis but in terms of profit per customer and profit per employee?
    • If you’ve included your full costs including the costs of the FTEs to support each business, then the analysis should show you where you want to invest and what it will cost you to support additional investment.
    • Do a similar analysis of costs per line to further support investment analysis.
  • This analysis will help to evaluate whether it is better to purchase another rep line, or whether you would be better off investing the same funds to grow custom business.
    • Similarly, it will demonstrate on what kinds of customers and products you want your sales force to focus to grow profitable business and will help you to establish objectives based on anticipated revenue or profit per new customer that sales closes.
    • Finally, it will highlight potential vulnerabilities such as the impact of the loss of a key customer in one portion of the business.

How Do You Evaluate an Acquisition Opportunity? Four Issues

Situation: A company is considering purchasing a line from another company to complement its existing product line. They would split commissions with the current owner, and gain an additional employee with knowledge of the products to be acquired. The purchase would add to the company’s offering, as well as rights to additional products. The CEO sees this as a low risk move. How do you evaluate an acquisition opportunity?

Advice from the CEOs:

  • In evaluating a commission split opportunity, will the commissions that you would receive exceed the cost of both the additional employee which you will add, plus the support that it will require to maintain the new business? Do the new commissions cover the anticipated costs, plus a reasonable profit?
  • Have you vetted the numbers to demonstrate that this purchase provides a suitable return on investment vs. other potential investments that you could make? Is the marginal revenue that you will receive greater than the marginal cost that you will bear? Is the ROI of the new line greater than your cost of capital? If not, what can you do to improve the return?
  • Looking at your current operations, do you have your existing shop in order? Have you calculated the metrics that will allow you to understand, where you’ve been, where you are, and which provide a clear vision of where you want to go? If not, the question is whether you are ready to take on another line.
  • The bottom line question is – how do you know that this acquisition is the best use of your funds?

What is an Effective Sales Compensation Plan? Seven Thoughts

Situation: The CEO of a software company pays a high base and incentives for their key sales person. While this is in line with the company’s industry, the CEO wants the opinions of others as to the comp packages they offer and any controls that they put in place. What is an effective sales compensation plan?

Advice from the CEOs:

  • While the paid seems high, your industry may be different from other industries. Most see a 50/50 split between base and incentive as the norm.
  • Consider a draw system so that if the individual falls behind you have the option to reduce future draws.
  • Look at both the compensation formulas, and at the individuals’ predilections and the behaviors that you want to generate. Compensation should align with desired behavior and results.
  • Do you have bonus incentive plans in place for your sales support people? Consider these, and check whether the goals and objectives for your sales and support people complement each other. They should.
  • Consider a discretionary bonus pot that you can use to reward specific achievements at your discretion.
  • What will you do if your sales person performs significantly below target – for example, this person is only hitting 40% of the objective after 2-3 quarters?
    • Consequences for non-performance should be clearly understood by both you and the employee before you launch any new plan with the individual.
  • Whatever you decide for this person, you may well be setting a standard that you will have to live with as you hire additional sales personnel.

How Do You Hire Your First Employee? Seven Suggestions

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.

How Do You Boost Morale in a Branch Office? Five Solutions

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.

Is It Time To Change Horses? Four Suggestions

Situation: A company has a business relationship with another firm. The relationship involves co-development of technology as well as marketing and other support. Portions of the relationship have worked, however, the other firm has not kept its part of the bargain in terms of marketing and support promised. What is the best way to approach the other firm to resolve this situation? Is it time to change horses?

Advice from the CEOs:

  • Have you have clearly communicated to the firm both what you are pleased with about the relationship as well as your level of dissatisfaction regarding lack of marketing and other support promise? To whom has this been communicated? Are you sure that your message has gone all of the way to the top?
  • Do a SWOT (strengths, weaknesses, opportunities, threats) analysis on the current arrangement and alternatives available to you to support your trade-off analysis before taking action.
  • Present a marketing option that will address the situation and ask whether the firm will support it as previously agreed.
    • If they say yes, have a contract ready for them to sign.
    • Negotiate other key items at same time.
    • Be sure to involve all parties on your side in the preparation, including the individual(s) who made the introductions that led to the relationship. Additional heads can bring more insight into the options that the firm and relationship offers. Bring the key parties involved to the negotiation, and be sure to prep them in advance.
  • Business relationships should be based on clearly stated deliverables and timelines. If deliverables are missed then it is time to make a business decision – either repair the situation or part ways.

How Do You Bring in a General Manager? Four Recommendations

Situation: A CEO has hired an individual who is currently working on projects for the company. The CEO likes this person and anticipates that he could eventually become General Manager. There have been a few rough spots but, overall, objectives are being met. How do you bring in a new General Manager?

Advice from the CEOs:

  • Transition the individual from their current responsibilities to GM in small steps. This will allow him to develop relationships and credibility with the rest of the team. These relationships and credibility are what he will need in the more senior position.
  • Coach the individual about any behaviors that you may observe, or which may be reported to you by others within the company, which are contrary to your culture. Understand, from the new individual’s perspective, what motivates these behaviors. Encourage the individual to develop alternative behaviors that are more consistent with your culture. Be open to the possibility that some of the behavior may be addressing flaws in the current culture.
  • Maintain open communication with your key managers who will be impacted as the new individual gains responsibility. As the individual gains authority within the organization, be clear that you support your new manager.
  • Your current culture is always in flux, and will continue to change as you bring in the new GM. This will create natural resistance as people adapt to the new situation. Be patient and stick with the plan. When others complain be honest and up-front that you support the new manager, and that everyone will have to adapt.

How Do You Handle a Side Project? Two Considerations

Situation: An early principal of a company has done a lot of work on a product that no longer fits the company’s business strategy and focus. The CEO wants to reward this individual for past work. An arrangement could include equity plus a big chunk of whatever this individual can make marketing the product that he created. What is the best way to handle this side project?

Advice from the CEOs:

  • There may be benefits to working with this individual as proposed. Letting the individual play in his own sub-market gives you an additional customer and may lead to interesting but yet unknown opportunities. Take care that this does not impact critical timelines for the company’s principal strategy.
  • A set of guidelines for this arrangement may include:

o    No grant of additional stock in the company – the opportunity to pursue the project should be sufficient incentive.

o    Keep this side project as company property.

o    Give the individual a sizable chunk of any revenue that he can gain from the product.

o    Task the individual to manage and solve technical challenges so that this does not impact company priorities.

o    Retain control of timelines and quality sign-off so that this project does not conflict with your higher priorities.

o    Give the individual sufficient support so that he is more likely to succeed.

  • Are there concerns regarding brand risk?

o    Draft an agreement to allow this project to operate cleanly and treat the principal an early small customer. Define the requirements of the project, release timelines, and branding options so that they do not interfere with the company’s larger goals.

How Do You Plan for Contingencies Post-Deal? Three Insights

Situation: A company is in the midst of due diligence for sale of the company. Chances of closing the deal are 50/50. The CEO, key staff and the Board must plan for both contingencies. How have you planned for contingencies whether a sale goes through or not?

Advice from the CEOs:

  • You have to assume that the company will be a going concern. If there’s no hope for the future, there’s no power in the present. Without hope, you can’t establish a motivating vision around which to rally the team. Whether or not the sale goes through:
    • It is essential that the owners and Board make a commitment to the key employees, if not to the long term business.
    • Absent a long term commitment to the business, customer initiatives and alliances may prove difficult, because major customers will know that an offer is on the table. They want to be sure that they can count on you for ongoing needs.
  • The Board and Leadership Team must create a strategy for moving forward.
    • Key to success will be material and financial commitments from the Board to motivate the Leadership Team to stay on-board.
    • Retention plans may include:
      • Sizeable retention bonuses to the team.
      • If an employee stock-ownership program is in the works, there must be assurance that this will be put into place.
      • Rules of engagement in the case of future due diligences that will preserve the financial interests of the team.
  • For the CEO, support of the Board is crucial. It is imperative that the CEO impress on the Board how critical their support is to both the company and their own financial and fiduciary interests. If the Board fails to make commitment to the team and company moving forward, it will be difficult to create a winning strategy.

How Can You Reestablish a Key Partner Relationship? Four Suggestions

Situation: A company has a long-standing relationship with key partner which has become strained for the last 9 months due to a combination of conditions. The partner’s Board recently terminated their CEO and their management is now in flux. Is there an opportunity to reestablish the old relationship by approaching the partner’s Board and how would you go about reestablishing this key partner relationship?

Advice from the CEOs:

  • At this point, the Board of the partner is likely focused on selecting a successor to the CEO, and dealing with internal matters in the interim. It may not be timely to approach them now, as they may dismiss your entreaty as a distraction.
  • If this tactic is to work, you will need a champion within the partner to promote reestablishment of the relationship. Try to identify such a person and approach them individually instead of approaching the full Board. The champion may be a Board member or someone with whom the Board has a strong relationship. This carries less risk than approaching the full Board. If the champion is not receptive, your likelihood of success with the full Board is slim.
  • Is there a past President or senior executive of the partner company with whom you have very good relations? An individual like this can act as a quasi-third party to help you to reestablish relationships with the Board or key management of the partner company.
  • Because of the risk involved, it may be best to do this quietly through a party whom the potential champion will respect and listen to, and take the lead from the champion if this individual is supportive of your cause.