Category Archives: Team

How Do You Shift the Sales Mix? Five Suggestions

Situation: The CEO of a professional services company wants to shift the focus of the company from emphasis on service of existing customers to new customer development. Historically they have counted on repeat sales, but these have lagged. The CEO wants to develop new customers to build current and future revenue. This is a mentality shift. How do you shift the sales mix?

Advice from the CEOs:

  • The objective is to move the current customer to new customer mix from 80/20 toward 40/60.
    • As an example, the CEO has shifted her focus day to day management to long-term planning and strategy over the last two years.
    • Now it’s time to motivate others to make a similar shift in customer development.
  • Make the shift to sales – to rain-maker – a requirement for Partner Track. Let those who want to pursue Partner Track know that this is a key part of their qualification for Partner.
  • Make cash flow analysis an integral part of new project proposals and current project tracking. Have project managers devise their project analyses to show return but review these to assure that their analyses are accurate. Require them to sell their analyses to the Partners. This will help them to see the value of correctly bidding new projects up-front.
  • Ask them – what do you want to be doing in 10 years? How will you be contributing to the goals of the firm? What are you doing to get there? Communicate the critical metrics that will be evaluated: sales, new account development, profitable bids and project cost control. Focus cost control on keeping options presented under control and minimizing rework.
  • Reserve Partner Track for those who can produce both sales and effective delivery of services. In employee reviews make this distinction clear.

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How Do You Evaluate Management Team Performance? Four Points

Situation: As the end of the year approaches, a CEO is evaluating management performance over the year. An area of focus during the year have been evaluating new business opportunities and the impact of these on the company. The CEO has been uncomfortable with disagreements between departments which have slowed opportunity evaluations. How do you evaluate management team performance?

Advice from the CEOs:

  • Breaking down issues of concern, there are two areas of focus.
    • Problems that should have been resolved by two people have required a referee (the CEO) to mediate the solution because the two parties could not work things out themselves.
    • Individuals who are otherwise highly skilled have become overly sensitive about minor issues that have prevented them from developing their own solutions
  • The most important step is to have the management team agree on a protocol for dealing with new business opportunities and the impact of new sales opportunities on development and support. A protocol will help to avoid the two issues of concern that have been identified.
    • Direct the team to come up with a protocol that they all agree to, subject to CEO review.
    • Once it is finalized, announce it with great fanfare as the new process that will guide the company. Make it mandatory.
    • Support this process with daily (short – 10-15 minute) or weekly (longer but 1 hour or less) team meetings to anticipate and remove blocks to execution.
  • Tension between sales, service and engineering are natural and healthy. This is because each is driven by different priorities, all of which are necessary to serve the customer.
    • Resolution of this tension requires a turnkey handoff protocol, involving checklists and flow charts.
    • The best protocols are not imposed on people but are developed by the people involved. This gives them ownership, and a stake in implementing and maintaining the protocol.
  • If, despite everyone’s best efforts there is ongoing dysfunction, it may be necessary to replace difficult people. As challenging as this seems, those who report to difficult top managers likely experience similar difficulties with them. Organizations often respond with relief after leadership eliminates a difficult manager.

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What Do You Manage as You Adapt to Market Conditions? Four Points

Situation: A company is in the process of adjusting its customer and business focus in response to changing market conditions. Gross margin on projects that have been the company mainstay in the past have fallen significantly. The CEO is evaluating different adjustments to address this. What do you manage as you adapt to market conditions?

Advice from the CEOs:

  • The company’s business model is shifting from a staffing agency to a product development model. This means that the business must be driven by a different set of parameters and metrics:
    • A different time/utilization mix.
    • Different personnel – the company needs managers.
    • Changes to the organizational chart and incentives.
  • How does the company currently charge clients for Project Management?
    • Currently it is time and materials.
    • Consider charging on a percent of project cost basis. For example, 15% of total project cost. The pitch will be that the client will be able to reduce the overall cost of the project – ideally in both dollars and time – and that the company will have increased accountability for delivering these results.
  • How will this impact the company’s cash position? How will the company retain adequate cash flow during the transition?
    • The current cash position is 4 months of projected monthly cash plus receivables.
    • If there is drop to 3 months, flag a yellow caution light.
    • Two months becomes a red light.
    • What is the backstop if the company runs shy – if, for example, some engineers are not very active? In this case, will deferral of unpaid vacation time and other options allow the company to survive without further draining cash? Have a meeting with key managers to evaluate the impact of this option.
  • Consider looking at competitors for possible collaborations. This can be delicate because they may want to steal the company’s personnel and there are other risks, but sometimes promising deals can be arranged.

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How Do You Build and Develop the Right Team? Four Points

Situation: A CEO has two issues. One concerns her COO about whom she is receiving complaints from staff as new processes are implemented, and the other is beefing up the sales team. On the latter issue she is concerned about both her ability to pay the high-level seller-doers that are needed to support growth and potential turnover. How do you build and develop the right team?

Advice from the CEOs:

  • The COO has already put the right process in place. Coach this individual to lighten up and allow everyone to adapt to the new regime.
    • As new processes are implemented coach him not to implement them rigidly at first. Allow people time to get used to the new process. Allow some flexibility in implementation so that the new processes can be adapted to the individual styles of the key players.
    • Over time tighten expectations gradually until each process is fully in place and running smoothly.
  • Have the COO communicate to the company that it’s growing, the focus is now on hiring, and the task facing the company is revenue growth.
  • For new salespeople, the investment cycle can be 6 months to full function.
    • In the mix of salary and bonus, weigh the bonus side heavily – the side that won’t become payable until the new individual produces.
    • This becomes an incentive for new salespeople to get up to speed quickly. It also helps to weed out those whose talents aren’t as sharp as they represented in the hiring process.
  • The salespeople are the key marketers for this company as well as the rainmakers and producers. It may be necessary to commit to this investment to ensure future growth and adjust the company’s annual earnings forecasts accordingly.

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How Do You Create a Succession Plan? Three Points

Situation: A CEO, planning for his future, wants to create a succession plan. Done correctly, this should also promote the growth of the company until it is time for him to retire. The challenge is that the company is highly decentralized, and a clear successor has yet to be identified. How do you create a succession plan?

Advice from the CEOs:

  • Tie succession planning to growth. This will benefit the company whether the CEO’s retirement is in the planning horizon or the more distant future.
    • Consider geographic transfers to provide growth opportunity for key managers and to proliferate the success of highly successful regions into less successful regions.
    • Develop a leadership generation engine. Consider GE as a model for this as noted in Jim Collins’s books Good to Great and its predecessor, Built to Last. GE’s success is a model for building long-lasting value substantially beyond the current value of the company.
    • Create a vision of what the company could be and the organization chart to fulfill this vision. This will guide and support the two points, above.
  • As new talent is acquired, conduct this with an eye to growth.
    • As the company identifies and hires top prospects, conduct the hiring process to fill the organization chart of the future company that is envisioned.
    • Look at outside hires for growth positions to complement home grown talent.
    • If business or company acquisitions are being considered, be aware that the leadership of the acquired business or company and its top talent may depart. Include retention clauses and incentives in any acquisition contract.
  • This effort must be approached as a long-term development process – it does not happen through quick-fixes but through a commitment to excellence in acquiring and developing talent.

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How Do You Control Insurance Expense? Four Options

Situation: A CEO has seen the expense of employee benefits, particularly the cost of health insurance, grow higher than the inflation rate in recent years. There are no indications that this will be reduced. Employees appreciate their benefits, and in the current environment the CEO is hesitant to reduce them. What alternatives are available? How do you control insurance expense?

Advice from the CEOs:

  • To control rises in healthcare benefit costs, consider offering high deductible health insurance combined with company contributions to HSA Accounts. This combination can be less than current health coverage and may reduce the cost inflation of these benefits.
  • Another alternative is to raise the deductible on medical insurance provided but cover the deductible differential for employees.
  • Consider a benefits administrator to assist in putting together a benefits package to reduce costs. There are many alternatives available.
  • Another big expense is Workers’ Comp (WC). The group shared strategies to control WC expense. Investigate those that apply to the company’s business model.
    • Make sure that the company is coded in the proper category – if not the company may be paying a higher rate than required;
    • Develop a proactive company safety policy, with documentation – this can gain discounts from some insurers;
    • Industry or trade associations have developed ADR components for association members to help control costs;
    • Investigate eliminating the medical coverage component on auto insurance for company cars that employees use to drive home. This may already be covered by WC;
    • Shop insurance providers for WC coverage – some will quote more competitive rates to get the company’s business;
    • Challenge the amount of WC reserves that are required for outstanding WC cases – the insurers may be assuming an excessive reserve to cover contingencies and charging the company for this excess;
    • If the company’s insurer is maintaining an employee on the WC list pending resolution of the claim for an excessive period, push them to resolve the case quickly;
    • Eliminate optional employees (e.g., officers) from WC coverage.

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How Do You Grow Knowledge Workers into Servant Leaders? Three Methods

Situation: A company’s staff is made up primarily of knowledge workers. These are highly skilled individuals who excel in their roles. The CEO wishes to shift their focus to servant leadership – where the focus is the growth and development of the company. How do you grow knowledge workers into servant leaders?

Advice from the CEOs:

  • One option is to create a different set of incentives. Offering key managers the option to invest in and hold shares in the company will change their perspective. This, in turn, can change their behavior because servant leadership will improve company performance and the value of their shares.
  • Another option, used by Accenture and many Fortune 500s, is to hire a lot of the best and brightest individuals that they can find out of college and see who rises to the top.
    • The ratio in large firms is generally 15 hires to produce 1 high performer. Another CEO at the table is now shifting to this model at his company.
    • Create an entry level position for recent graduates that will allow for this sifting without disrupting the company’s culture.
    • Speed identification and retention of the best talent through annual evaluations of the company’s talent. This includes ratings by employees’ supervisors of both how the individual is doing and their ultimate potential within the company.
    • Be aware of the downsides to this model. One is that the two groups that tend to leave of their own accord are the best and the worst employees.
  • A third option is to create two career tracks within the Company.
    • One track is upwardly mobile. This is the track that identifies, develops and grooms future servant leaders.
    • The other track is a specialty track, which can produce servant leaders along a different dimension – breadth of experience and expertise in key skills of value to the firm.
    • This second track also allows for growth, characterized by levels of title, salary and recognition that reward the acquisition and perfection of skills in key disciplines.
    • Several “kinder, gentler” environments such as 3M have used parallel tracks with great success.

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What Is Your Bonus Plan This Year? Four Thoughts

Situation: A CEO is thinking about the end of the year and bonus plans for his company. It has been a difficult year between remote work and workplace COVID restrictions for those on-site. Recent moves by public and large private employers to mandate vaccination has some employees worried. The latest inflation reports are also of concern to many employees. The CEO wants to retain as many staff as possible. What is your bonus plan this year?

Advice from the CEOs:

  • The CEO queued up a suggestion of a bonus in the 8% to 18% range depending upon performance on top of 10% 401K contribution. Several others agreed.
  • One CEO said that in a good year they award a 6% 401K match plus a bonus range of 10 -18% for non-commission personnel. They don’t offer bonuses for commissioned salespeople. Support staff get an 8-10% bonus.
  • Another CEO suggested that the CEOs plan was possibly over generous with a 10% 401K contribution. Given the current economy many employees may prefer cash.
  • This has been an exceedingly difficult year for most businesses with myriad challenges. As the economy reopens it will be as critical to hold on to high performing employees as it is bringing back previously laid-off employees or attracting new employees. Think in terms of recognition for those who have helped the business work throughout the year in additional to bonuses.

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How Do You Manage Conflicts of Interest? Four Tactics

Situation: A service company was acquired by a larger company. There are limited operational crossovers between the two, but where conflicts of interest arise the acquirer seems uninterested in addressing these. How do you manage conflicts of interest?

Advice from the CEOs:

  • Within the company it is necessary to clarify what can be done autonomously and what must be done with the acquirer’s support.
    • Where the company sees issues it can develop a recommended set of actions that will avoid pain – particularly where its systems are more developed than those of the acquirer.
  • Reconstruct the acquirer’s motivations for the acquisition.
    • Was their objective synergy or portfolio diversification? If it was a synergy play, then more structure and integration are needed.
    • From observed behavior, it looks more like it was a portfolio diversification strategy. In this case they will expect the company to continue to perform as a quasi-independent structure, but under their umbrella.
    • Given this, where do possible market synergies between the companies exist? Look for these and develop mutually beneficial alternatives.
  • The CEO feels a responsibility to his company’s staff, assisting them to be more comfortable within the current situation.
    • If the analysis of the acquirer’s motivations rings true, then share this with the company’s staff. If this is the case then they should not be seeking a lead from the acquirer but should concentrate on maintaining what company has done well over the years.
  • What options are available for CEO?
    • It is possible to maintain status quo. The company is getting new business and performing well.
    • On the other hand, if the CEO is acting in the leadership role with decreasing focus and interest, this will not bode well for the organization or staff.
    • In the latter case, set a timeline and date for departure. This can be some time out but should be comfortable for the CEO.
    • Communicate this timeline to acquirer and when the time is right offer to help look for a successor.

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What Do You Gain by Buying Out a Co-founder? Six Points

Situation: A CEO founded his company with a long-term friend. For several years, this co-founder has contributed little and has proven to be difficult with key employees. In an important sense, the co-founder has become a distraction. A challenge is that the co-founder is a significant shareholder. What do you gain by buying out a co-founder?

Advice from the CEOs:

  • First and foremost – peace of mind. While the CEO and his allies control a majority of shares there is no guarantee that this remains the case. Long-term it can cause headaches to have a large block of shares in the hands of someone who could be hostile. The challenge is gaining control of a solid majority of shares at a reasonable price.
  • How is the value of the co-founder’s shares determined?
    • In most minority interest situations, minority interest is discounted because it is of limited value to a non-company purchaser. While it may be necessary to pay a premium to gain controlling interest in the company, this will be a premium over the discounted minority interest value, not over the fair value for all shares.
  • There are two aspects to a purchase: price and terms. It is acceptable to accept the co-founder’s price, but insist on favorable terms, e.g., 10 years to pay at 5% interest.
    • Set the terms so that the company guarantees the payment, not the CEO personally.
  • At this point the co-founder is a disruptive force within the company. Act now before more damage is done.
    • As to order of business, take action with respect to the co-founder first, then negotiate the purchase of his shares after he is no longer an employee.
    • Be sure to communicate the decision effectively to the other employees. Speak to the long-term strategic value of the company, the CEO’s vision for the company, and a determination to build the company into a viable entity with a range of customers and growth opportunities for the team.
  • Important steps as you move forward:
    • Have a plan.
    • Speak to an attorney – the company should pay but this is the CEO’s attorney, not the company’s attorney. Assure that as CEO you limit personal exposure and do things appropriately.
    • Assure that the employees understand and support this action and that they clearly understand the plan going forward.
    • Offer the co-founder a more generous severance package than would ordinarily be considered prudent.
    • Fire the co-founder as soon as plans are in place and announce a Board Meeting 30 days hence to discuss the management restructuring.
  • As a final note, this is one of the most difficult things that must be done by a CEO. The co-founder has been a long-term friend. Nothing about this is easy. It is likely to get more painful before it gets better. In the long run, however, this can be better for both individuals. Work toward that objective.

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