Category Archives: Team

How Much Should Management Own Post-Financing? Five Points

Situation: A company anticipates closing a Round 3 financing this year. The CEO has an idea of the range of management team ownership that is likely at this round. He seeks advice from others with experience. What can the team do to assure that their ownership is at the upper end of the range? How much should management own post-financing?

Advice from the CEOs:

  • The numbers change depending upon both company valuation and the funding environment. Currently, Silicon Valley venture capital firms are becoming more cautious and risk averse. This is because many companies that have received financing over the last 2-3 years have underperformed. Many have yet to even produce and release a product. In this environment, the chances for maintaining a larger share of ownership for management are not as good as in headier times.
  • Seek two outside counsel to generate two independent opinions on a fair management option pool, and to assist in negotiations. These will likely be boutique firms.
  • Approach the situation as an executive option pool objective. Determine what needs to be in place to attract new executives, as well as to replace existing executives should they leave or be unable to serve.
  • When discussing this with your board and investors, phrase the challenge in win-win terms. The objective is to lock-in key personnel and assure that key positions will be filled to meet company objectives. This is the best way to assure future financial success.
  • Key members of the executive team may want to seek independent advice, apart from the company or executive team.

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How Do You Set Expectations for an Employee? Six Suggestions

Situation: A company hired an employee one year ago. The employee is competent but slow. Even after a year on the job, other employees with similar skills and experience are able to complete the same job three times faster. What is the best way to handle this? How do you set expectations for an employee?

Advice from the CEOs:

  • The most important principle governing situations like this is clarity of communications. You must clearly express your expectations, and you must assure that the employee clearly understands your expectations.
  • Assure that expectations are clearly expressed. This means what you expect in terms of performance, and firm timelines for achieving minimum requirements. You also must assure that the employee understands the consequences for failing to meet minimum requirements. The best assurance is written confirmation that the employee understands what is expected.
  • Don’t be vague or nice about your expectations, performance requirements or the consequences for failing to meet minimum requirements. This risks sending the wrong message to the employee.
  • Put the employee on a performance improvement plan to meet minimum job requirements. Monitor and document for 30-60 days and then handle according to how the employee responds.
  • If the individual can’t meet the objective, but has potential value to the company, offer the person an appropriate position at the level that the new position pays.
  • Have a second person in the room when you deliver the message. If you determine that you have to terminate the employee and the employee elects to sue, this will help your case in a judicial action.

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How Do You Recognize Employee Performance? Four Points

Situation: A company instituted employee awards two years ago. These include an annual President’s Award, at choice of the President, and a Peer Award which is awarded monthly by peers for outstanding achievement.  Recently, management recognized a team within the company with an award for a significant team contribution – a company-paid trip to Las Vegas. This caused resentment among some of the other employees.  How do you recognize employee performance?

Advice from the CEOs:

  • There are two benefits to employee awards – the award itself, and, more significantly, the employee being recognized among his or her peers. Transparency within any award system is important.
  • There does not appear to be anything wrong with the award to the team. However, it is important to communicate to the company that awards are proportional to the benefit that the employee or team has created for the company.
  • Since there has been a mixed response, a message to the company is appropriate. The best way to do this is a brief company meeting, with telephone access to those who are remote. Here are some key points to cover:
    • Make the theme of the meeting employee awards.
    • Recognize the team that received the Las Vegas award and use the meeting to update the company on your rewards policy. Detail the policy, how awards are recognized, and that rewards are commensurate with the level of benefit gained for the company.
    • Deliver the full message in a positive tone.
    • Schedule 1-on-1 telephone conferences with individual remote employees who are not able to participate in the meeting.
    • Optional – follow-up with an email detailing the awards policy.
  • The complaints that you heard meant that the company did the right thing. A little jealousy isn’t bad if it shows that the company will reward hard, productive work.

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Does it Pay to Share an Employee? Four Points

Situation: A company has an excellent bookkeeper. However, during slow seasons cash is tight and the bookkeeper is not occupied full time. The CEO contacted a friend at another company, and that company has hired the bookkeeper for 10 hours / week. This is working well for both for both companies. Are there downsides to doing this? Does it pay to share an employee?

Advice from the CEOs:

  • If you share an employee, share at your cost – your fully burdened cost per hour. For the company using a piece of your employee, this may be a significant hourly cost, but is much less expensive than a consultant and lower risk than bringing on an unknown individual.
  • Keep a short term perspective – once the economy improves you will want the individual back full-time. Make sure that this is well understood by the other company.
  • Make sure that this is not a burden on your bookkeeper. Ask whether the individual can handle two bosses. It helps to fully segregate the individual’s time with time rules – for example, by day or half-day with clean break points in time worked for Company A vs. Company B.
  • Overall, the apparent benefits of this situation outweigh the challenges.

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How Do You Get Managers to Honestly Rate Teams? Seven Points

Situation: A company is preparing for end of year reviews. They use several performance measures to evaluation employee performance, including 360 Reviews. The challenge is that both managers and peers tend to rate everyone at the highest levels – even though everyone knows that this is not valid. How do you get managers to honestly rate their teams?

Advice from the CEOs:

  • This is a common problem for companies. The central issue is that managers want to get on well with their teams, and may fear that giving someone a less than stellar review will impact individual and team performance. You have to change both the perspective and the methodology.
    • Start with the basics. Performance reviews are about communication and documentation.
    • Expectations should be based on an up-to-date Job Description for the position.
    • Job Descriptions should address skills, expertise and behavior. Clarity and specificity are essential.
    • They should anticipate growth, and include standards of performance to measure growth.
    • To prepare for a review meeting, the manager rates the employee against the standards specified in the Job Description, as well as any objectives established in past reviews. The employee self-rates against the same measures.
    • Following the review meeting, the manager must document the discussion and objectives for the next period set during the meeting. The employee reviews and signs this document.
  • For managers, a key performance measure is quality and substance of reviews.
  • Besides individual reviews, have your managers rank their people 1 to X along several metrics:
    • Team performance
    • Reliability on the job
    • High or low maintenance
  • Use zero based thinking: Knowing what I do now, would I hire this employee for their current position?
  • Align the review process with the company’s goals.
  • Do a total ranking among company employees. Tell managers that those ranking last place(s) must be upgraded. The CEO approves the final ranking.

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Are You Planning Salary Increases This Year? Five Thoughts

Situation: A company’s staff is highly paid. Historically, annual raises have been 4-5%; however some individuals are above industry salary ranges. The CEO doesn’t want to lose key individuals who would be expensive to replace. The company is planning salary increases for the end of this year. If the level is lower than historic averages they are concerned about the impact. Are planning for salary increases this year? How will you communicate your decision to employees?

Advice from the CEOs:

  • What’s the problem? Even in an improving economy your employees are lucky to be making what they do! On top of this, you need to consider profitability compared to last year as well as historic levels. Selectively share financial data with your employees as well as financial realities – your and their top priority are to keep the company healthy.
  • Gather data on salary ranges for roles in your industry. Good sources are Salary.com for national data (it may be dated) or Assets Unlimited’s Silicon Valley Survey for up-to-date salary information by industry and position. This will help you to prepare for conversations with employees who are currently paid above the range for their positions.
  • If you have employees above the range and do not want to give them raises, give them bonuses or spot bonuses for work well done.
  • Formalize your bonus system – base bonuses on performance metrics. Consider tying bonuses to net margin performance for the company or for departments that can impact new margin.
  • Whatever you decide, make announcements about salary levels a positive event.

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How Do You Assess the Value of a Consultant? Four Thoughts

Situation: A company has relationship with a consultant. The consultant has approached the company for additional work with a higher dollar value. How do you assess the value of the services that are being offered? How do you assess the value of a consultant?

Advice from the CEOs:

  • Consulting is a competitive market. Look at the work being offered and tell the consultant that while you appreciate the value of her services and the relationship that she has with the company, you want to talk to others to understand the market rate for the additional services being offered.
  • Are consultants or contractors really much different from employees? How do you determine value when you are hiring? You determine this based on skills and market pay rate for skills. You’ll need to some homework to determine appropriate rates, but otherwise do the same here.
  • Look at your budget and upcoming expenses. If the proposed work is more important than other planned expenses, decide on a dollar figure and tell the consultant that this is what you’re willing to spend. If the consultant can convincingly pitch a higher value, you’ll listen.
  • Is the relationship with the consultant important to you? Is the proposed work important? If both are the case, sit down with the consultant and help them to craft a better offer.

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Is It Wrong to Hire Family Members? Six Considerations

Situation: A small but very profitable business was founded and has been run for two generations as a family-owned and operated business. To boost performance, the CEO hired a general manager with a good background who is not a family member. The general manager has told the CEO that he feels that there are too many family members in the business. The CEO likes hiring people she trusts, particularly friends and family that she has known for a long time. Is it wrong to hire family members?

Advice from the CEOs:

  • Don’t try to change what you’ve already done – plan for the future.
  • Acknowledge the GM’s idea. Tell him that you appreciate his suggestions. Suggest that he test hiring more non-family members to cover one of your low risk market segments. Measure the performance of this team versus the other teams within the business.
  • The challenge with family members is accountability and objectivity. The question for the family owners is whether they have the freedom to act in the interests of the company. Can they put family ties aside when someone is not serving the interests of the company?
  • The essential question for the family that owns the business is – what do you want to maximize? If it’s loyalty and longevity – keeping the family together, employed and in harmony – they can be good. If it’s profits and performance – family and friends can be difficult if emotional ties cloud business objectivity.
  • The upside to family is loyalty and trust. That said, family and extended family friends are different. The latter don’t have the same ties or sense of loyalty.
  • Can you keep employees for too long? Yes. Make sure that you evaluate all employees every year. Establish job and performance standards and make sure that all employees – family and non-family – are held to the same performance expectations.

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How Do You Optimize Quality Improvement? Six Suggestions

Situation: A company’s reputation is based on quality of work. The CEO notes that occasionally they have mishaps due to suboptimal documentation. They are considering a concerted quality effort.  Based on your experience, would you do this whether or not you were bound by ISO requirements? If so, would you hire an outside consultant to guide your efforts? How do you optimize quality improvement?

Advice from the CEOs:

  • Some companies have successfully used ISO to force documentation. ISO provides a structure to enforce keeping the company and employees diligent and honest.
  • Other companies have used standard operating procedures (SOPs) for field as well as internal functions to speed completion of documentation and accelerate invoicing. These companies may or may not have ISO requirements.
  • One company tried to go cheap – implementing process improvement without a qualified consultant. While the effort was eventually successful, it took way too much time and money. From this experience, they recommend hiring someone who is experienced and who already has a template to guide the process.
  • To test the experience of an outside consultant, start with a small project to get the company accustomed to the process and to evaluate the consultant’s efficacy.
  • If the choice is to work on this yourself with your employees, start by documenting what happens correctly. Once you have done this, work on improvements to address problem areas.
  • This is not a simple exercise – plan for it and use the right inside or outside person to guide the process.

 

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Have You Hired People with Disabilities? Six Suggestions

Situation: A company is expanding. Some jobs that need to be filled are either utilitarian or don’t require full mobility. Labor through agencies runs $20/hour including agency fees. The CEO considering hiring the disabled including wounded warriors for this work. Have you hired people with disabilities?

Advice from the CEOs:

  • In San Mateo County California there is a group called Community Gatepath. They assess the work and work requirements and the company pays for disabled services a fair price piece basis. This worked well for sample product with simple packaging.
  • National groups include SourceAmerica.org and the Small Business Association which can assist with any regulatory questions pertaining to hiring the disabled.
  • Working with Easter Seals one company hired high functioning disabled individuals. For everyone involved, it was a very positive experience.
  • If you are interested in hiring disabled veterans, organizations like Hire Heroes USA provides both resumes and assistance. Tax credits are available for hiring disabled veterans.
  • There may be issues around how disabled workers process information or how they handle emotional situations that are different from non-disabled workers. Sensitivity among those supervising is important.
  • Interview and investigate the sponsoring organization and arrangements. Make sure that they are set up well for your needs as well as those of the disabled workers.

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