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?
Situation: A company is faced with the imminent departure or retirement of several key sales personnel. This presents the opportunity to rethink and rebuild the sales team. What is the best way to take advantage of this opportunity? How do you revamp your sales team?
Advice from the CEOs:
The timing is good. Take advantage of this opportunity!
You’ve identified the next generation of sales leadership. Now determine their role building the future.
This is an opportunity to reset your vision for the next 3-5 years.
The task of the new sales leaders is to learn the products, customers, and processes. One of the best ways to do this is in the role of sales engineer.
Be the listener first – become the solutions person.
Use existing company personnel as resources to develop closer relationships with key people within the company.
Have existing staff can introduce them to current customers and point them toward new opportunities. Focus on impeccable customer service.
What are the immediate priorities for the new sales leaders?
Do what must be done.
Observe experts on the job.
Listen and learn.
Ask lots of questions.
It’s scary, but don’t worry – just do it!
Let others assist.
They will make mistakes – it’s called learning.
Be sure to build an approach and team that can support both your existing core business and build new opportunities.
You need to replace the capabilities of those who will be retiring, and at the same time bring in new opportunities for future growth. This includes sales hunters who are good at finding new customers and helping them define their unique needs.
What fears or concerns do you see in the new leaders?
Fear and concerns regarding short and long-term roles.
Focus on the near term. The President is focused on the long term. Focus now on visiting customers, being introduced to them, and learning about them.
Are you fully focused on marketing of your services?
What is your Sandbox? What is your Value Proposition? What is your Brand Promise?
Define these and let the definitions guide your development of the sales leadership as well as the search for additional personnel.
Situation: A company’s Sales Manager is likely to retire in the next two years, but has no strict timeline. This individual is the chief rain-maker and has been for many years. The subject of replacing this individual has been sensitive when mentioned in the past. How do you replace a Sales Manager and how do you manage the transition?
Advice from the CEOs:
Have a frank conversation with the current Sales Manager. For the company to thrive it is necessary to start selecting and training an individual to take his place when he retires. Have him help develop the recruitment and transition plan. Also involve your Customer Service Manager.
o Hire a person like the current Sales Manager and allow for up to two years for the new individual to get up to speed.
o Find someone who is currently associated with one of your key customers and who has contacts.
o Adjust your compensation scheme to focus on growth and customer diversification with enhanced commissions for bringing in these accounts.
To ease the transition, start to build a different customer relations structure – one where the CEO has more engagement with key customers.
An alternative to replacing the Sales Manager is to create a different organizational structure. For example, hire a COO who will eventually take over business development as well. Think longer term about to how you want the management structure to grow. Build your future vision of the company into this process.
Situation: A small company (fewer than 50 employees) is reviewing their employee benefit package and wants to get a sense of what others are currently covering in their benefit packages. Where does your company currently stand on employee benefits, and what does your company cover in its benefit package?
Advice from the CEOs:
A recent small (unscientific) poll of entrepreneurial Silicon Valley SMB Companies on benefits offered found:
401K: 100%, 401K Match: 33% (most companies eliminated the match to reduce costs)
Reduced benefits in the last 6 months: 67%
Employee complaints or recruiting challenges following cuts: 0%
One company commented that when a key customer cut their payments they had to cut benefits. They reduced the company payment from 100% to 50% of benefit cost. Their employees make choices among options available, with a company dollar payment cap. Management explained the situation when they made the cuts, and there were no objections.
Several companies have shifted to consumer directed health care options.
A comment of caution was offered by one CEO – employees are unlikely to object to their company needing to reduce benefits to get through a difficult market. However, as conditions improve, employees are likely to expect some level of return to prior benefit levels. If not, the company at risk of increased turnover. It is best to stay ahead of the curve to assure that your benefits packages are competitive.
Situation: The spouse of a CEO works in the business but has conflicts with other employees. This creates personal tension for the CEO. The CEO wants to explore a different role for the spouse, and also wants to create more balance at home. The CEO believes that working with the spouse to create a simple family charter with common values, vision and mission will help the two of them to find common needs and goals both at work and at home. How do you create a family charter?
Advice from the CEOs:
As you build a family charter, consider both your individual and your common views. Once you have established common ground with your spouse, you can bring children into the process to reinforce values and share creation of the vision.
In preparation for this discussion, both you and your spouse should start by thinking about what you each want. Once you have done this, compare notes and look for commonalities where you agree on what is important. These commonalities will form the core of your shared values, vision and mission.
Have lunch with your spouse once a month, just the two of you. Why? Because you are telling your spouse that they take precedence over your second spouse – your job, and you are taking time and attention from work to spend time one-on-one with your spouse. Do this monthly, but not always on the same day – make it more spontaneous and special.
Reinforce your family charter with regular family or one-on-one meetings with your spouse and children.
When having a conversation, focus on listening and don’t try to “fix” things.
Situation: A company wants to execute a strategic shift in direction – taking it into a new business which will diversify its offering to customers. The CEO needs to assure that everyone is on-board to both speed the shift and minimize cost. What are the keys to successful strategic change?
Advice from the CEOs:
Be front and center with your vision. State the vision clearly, in terms that everyone will understand. Focus on the benefits of the change for the company and employees and be realistic about the challenges involved.
Be enthusiastic. This is critical to all change efforts. Be cheerleader as well as leader.
Plan ahead and begin to communicate well in advance of the anticipated change. Plant seeds and encourage the team to generate options or solutions. Give all levels of the organization the opportunity to become involved and participate in both design and implementation of the change.
Be consistent in messaging and support across the team. Don’t vacillate or promise what you can’t deliver. Employees will watch for the presence or absence of consistency. If it’s absent, they won’t join in.
Conduct scenario analyses. This enables you to try out different futures and implementation options.
Identify critical issues. Look at possible results – first consider the “most likely”, then “best” and “worst” possible outcomes. Considering best and worst generates new alternatives, and improves the perspective on the most likely outcome.
Conduct visioning exercises. Create a graphic vision of possible futures.
This increases group participation and sparks creativity.
It improves group function, thereby enhancing results.
Visual representation is more memorable than standard bullets and lists.
Special thanks to Jan Richards of J G Richards Consulting – jgrichardsresults.com – for her insight on this topic.
Situation: The CEO came into a company as a engineering consultant. Three years later the Board asked him to take on the CEO role. This created a credibility issue with staff because the CEO is a duck out of water, though a duck with better business sense than most others within the company. How do you manage a company outside of your technical expertise?
Advice from the CEOs:
The staff credibility issue may just be one of self-confidence. You have already demonstrated competence in revising company processes and improving profitability. In fact, your non-industry perspective may have contributed to your success to date.
Near term, in what areas should you focus?
Focus on building bridges which will give you more leverage to address key barriers, particularly within the more entrenched groups in the company.
Look at how the company communicates and exchanges information with clients. One thing that customers want is more self-service options and access to data. You have the opportunity to develop Web 2.0 capabilities which will to set the company apart in what is historically a very conservative and paper-oriented client culture.
These actions will help you to increase your credibility as an effective leader and CEO.
Longer term, what should be the plan?
Keep the ship running smoothly. This by itself will help to build appreciation for your talents.
Use any free time to create business plans of your vision for the future. Share these interactively with key staff members and incorporate their input into the plan. Involve them in disseminating the plan within the company.
As you develop your vision and plan, look for opportunities to attribute success to others. This will be a breath of fresh air to staff and will strengthen the bridges that you have worked to build. They will start to see you as a key ally who shares credit instead of hoarding it.
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.
Situation: A membership association’s revenue is largely tied to its annual conference. The primary sponsor of the conference has decided to host their own annual conference. This will disrupt the association’s access to both conference attendees and vendors. The sponsor has offered terms of collaboration; however, the conditions are unfavorable to the association. What are the best alternatives available to the association and how should they pursue them?
Advice from the CEOs:
Are the association’s mission and vision are tied to or independent of the sponsor? If there is an ongoing reason for the association to continue without the sponsor then it is reasonable to pursue alternatives.
There are at least two options available to the association:
Accept the partner’s offer of collaboration, provided that this can be done under conditions that will allow the association to survive short-term. If the partner stumbles hosting its own conference this may allow the association to recover ownership of the annual conference. The danger is that this may lead to a slow death if the sponsor further cuts revenue to the association or a fast death if the sponsor decides to abandon the association.
Shift the focus of the conference and ancillary services under a new branding scheme. A survey of the membership indicates that the majority favor a mixed-platform solution, and may welcome a mixed-platform approach. You may need to rethink and rework your model but this may offer the best chance for ongoing survival.
What steps should be taken to pursue the second option?
Conduct a second survey of the membership to evaluate their preferences on platform focus, what they want to see in a multi-platform conference, and what platforms should be included.
Shift focus of the association to multi-platform as a response to members’ priorities and desires. Court the majority of the membership that favor a mixed-platform focus and de-emphasize those who favor the single platform solution.
Develop an alternate roster of sponsors including all competitive platforms. If this model succeeds, your current primary sponsor may find participation imperative.
Interview with Doug Merritt, President & CEO, Baynote
Situation: A company has a proven technology and satisfied customers. To achieve their goals, they need delivery on sales and service to ramp revenue. At the same time, new opportunities arise daily. How do you keep the team focused on execution and delivery?
Advice from Doug Merritt:
The first thing to focus on is focus itself. Most of us don’t suffer from lack of opportunities, but from an inability to make hard choices and diligently pursue the few critical or high pay-off options. To tell the difference between gold nuggets and distracting bright shiny objects, you must have a clear strategy and priorities on customers and channels you want to develop. It is critical to choose the right opportunities that will optimize achievement of the strategic plan and to say not to those that don’t. This must be constantly reaffirmed through a simple set of metrics around your optimal customer set, revenue ramp, and quality of services delivered.
The second thing is attracting the right talent. A small and rapidly growing company has little time and resources to effectively train fresh talent. If scale is the issue, it’s important to identify and attract experienced individuals – those who have proven their ability to deliver and who bring along a high quality, proven, loyal following. Top talent that can open the purse strings of your target customers. This means hiring rock stars who do this better than you can! The challenge for the CEO is remembering that success almost always comes from hiring people who can do their jobs much better than you ever could. The CEO’s unique talent isn’t being the smartest person in the room – it’s your ability to build and guide an organization that will achieve more than you can alone.
Third is to keep the team focused on the most important priorities. The CEO needs to generate a crisp vision and to distribute information that maintains focus on that vision. Most “Type A” overachievers want to do lots of things well. The key is doing the right things well. You do this by measuring, and by creating transparency around the few key levers that drive the strategy. It helps your cause to say no to a visible and enticing “bright shiny object” that, in the past, the team would have reluctantly accepted. Finally, it also helps to create a few large and non-negotiable milestones that get the company to focus, as a unit, on achievement. Ultimately, the CEO needs to coach and guide their team to do the right things right.