Category Archives: Team

What’s the Best Way to Allocate a Bonus Pool? Three Points

Situation: A company allocates 10% of pre-tax profit to a Bonus Pool. Employees qualify for quarterly bonuses based on company and group performance, and for semiannual bonuses based on individual performance. Last year not all funds were paid out of the pool because some employees failed to hit performance targets. What’s the best and fairest way to allocate the excess funds in the pool?

Advice from the CEOs:

  • Why not let the pool be the pool? Employees will or will not qualify for bonus participation based on individual and group performance. The company determines who qualifies at each level and these individuals become the pool participants, splitting the full pool in proportion to their level of qualification and their salary.
  • Not all companies will do this based on pay and bonus level policies. For these companies there are options on what to do with unpaid bonus funds in the pool:
    • Leave the funds in the pool for future distribution;
    • Shift unpaid bonus to Retained Earnings; or
    • Retain a percent of the funds in the pool and shift the rest Retained Earnings.
  • Another consideration is whether to use discretionary or metric criteria to determine bonuses. Some companies use only or primarily metric criteria, others use discretionary criteria, and some use a blend of metrics for one portion of the bonus with the remaining portion discretionary. The rationale behind discretionary criteria is to give managers the opportunity to recognize extraordinary contributions that fall outside the normal metrics.

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How Do You Smoothly Transition Employee Roles? Four Suggestions

Situation: Two employees within a small company are shifting roles. One is shifting from Operations Manager, a higher level position, to an engineering role in charge of production, with no reports. The second has been promoted from Customer Service Supervisor to greater responsibilities for purchasing and production scheduling. How should the CEO adjust the titles and compensation of these individuals?

Advice from the CEOs:

  • The Operations Manger is really shifting to a staff engineer position. Consider the title Senior Engineer or Senior Staff Engineer if the individual is comfortable with this. It conveys respect for prior experience while delineating this individual’s preferred responsibility. You may want to make adjustments to compensation over time by holding back on salary raises rather than by cutting salary right now.
  • The Customer Service Supervisor is moving into new responsibilities, and this may take time. In a sense this is a lateral move with potential for growth. Consider retaining the title of supervisor until this individual has demonstrated ability to perform these new duties. Salary adjustments and raises can be added as the individual grows in responsibility.
  • There is no problem having multiple titles and business cards. Many small companies do this. You can give the second person two titles: Customer Service Supervisor and Production Supervisor. This enables you to elevate this individual to manager of one or both areas as ability is demonstrated to take on additional responsibility and accountability.
  • Because both employees will be working in production, albeit in different capacities, monitor the situation closely to assure that conflicts don’t develop.

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How Would You Address a New Employee Challenge? Three Thoughts

Situation: A company just hired an individual to fill a key position. The position has a steep learning curve, and requires an on-site presence so the CEO made sure during the interview process to emphasize that he wanted a 3-5 year service commitment. Two days after the new individual started he told the CEO that his wife and child are moving to North Carolina and asked whether he could he work remotely from NC. The CEO said this was not an option. The employee says that he will stay, but the CEO is concerned whether this individual will fulfill his verbal commitment of service. How should the CEO handle this situation going forward?

Advice from the CEOs:

  • Verbal commitments made during an interview process are difficult to enforce. Further, under California law once you have hired an employee, you cannot fire or let the employee go except for cause – performance or company financial adjustments such as layoffs.
  • What should the CEO say to the employee at this point about the situation?
    • Thank him for his honesty. Let him know that if the situation changes you would appreciate knowing as soon as possible. Assure the employee that you will not fire or otherwise penalize him for giving you this notice.
  • Is there anything else that the CEO can do to protect his training investment?
    • As the employee moves from training into productive work, make it one of his responsibilities to thoroughly document the position and responsibilities. If he eventually leaves, this may reduce the learning curve of his successor.

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Should You Offer Employees Stock Ownership? Four Thoughts

Situation: When an early stage company was founded, the CEO made vague promises of stock ownership to new employees. Some original employees have asked whether and when they will receive ownership. Should the CEO offer stock ownership, and what is the message to employees?

Advice from the CEOs:

  • The first question concerns company policy on ownership. For example, what do the founding owners think about expanding the ownership pool? It is important for the founders to have this discussion and agree on official company policy on ownership. This can then be communicated consistently to employees.
  • Investigate practices for similar companies in your industry. If you find that there is a size at which companies typically start to diversify ownership, then have a conversation among the owners as to what your company will do. You don’t have to follow the pack, but you may risk turnover if your policy is significantly different from the industry norm.
  • Employee stock ownership is a double edged sword. Employee shares only receive a true value in a liquidity event – sale of the company or an IPO. Absent a liquidity event, employee stock ownership can complicate corporate decisions, and there’s also the question of the value of an employee’s stock if the employee leaves.
  • If you decide not to expand ownership, what’s the best way to update earlier promises of ownership?
    • Tell the story: stock ownership was one option that we considered. We looked at industry practice, and here’s what we found. We determined that at our size there are few advantages to broad employee ownership, and several potential disadvantages to additional owners including tax consequences. Therefore, we decided that we could achieve our objective more effectively through our profit sharing plan.

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How Do You Address a Key Manager Functioning at 80%? Three Points

Situation: A small company has a key employee who has been with them for one year.  Previously, this individual had been a production manager in a large company managing as many as 100 employees. He excels at analysis, QA and other “doer” roles but has not demonstrated strong supervisory skills. How do you address a key manager functioning at 80%?

Advice from the CEOs:

  • Small companies are different from large ones. In a small company, people must wear multiple hats and be willing to roll up their sleeves with the others. The atmosphere can be very different in a large company. Past experience in a large company does not mean that previous skills are transferable.
  • If the person is not a fit for your needs and organization, then you must find a fit or make a change.
    • Do you have room on your payroll for a job appropriate to this individual’s skills and talents? If so retain him in a new role. If not, then take action.
    • Engineers often do not transition well to management positions. Different skill sets are required. Shortcomings may have been masked in a large company.
    • If your future need is for an individual to take on many or your current responsibilities in the role of General Manager, hire an individual who has demonstrated success in this position in a company of in size and focus as yours.
  • If you need to hire a different person, review your selection process.
    • If this position requires the wearing of multiple hats, indicate the range of responsibilities in the position description.
    • During the selection process query candidates on their experience handling these responsibilities. Ask open questions and look for specific instances where they have demonstrated talent. Confirm responses in reference checks.

Key Words: HR, Selection, Performance, Doer, Manager, Supervisor, Big vs. Small Company, Success, Experience, Selection, Position Description, References

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How Do You Know Your Team Can Handle Planned Growth? Six Steps

Interview with Gene Tange, President, PearlHPS

Situation: An acquired company is poised for dramatic growth. The corporation that acquired them has questions about the current team’s capability to realize planned growth, and achieve their financial and operational targets. How can they assess whether the existing team is up to the task?

Advice from Gene Tange:

  • Think of this as an assessment process that accurately predicts the ability of the leadership team to realize planned outcomes while maturing key business processes. The leadership team is tied to both financial and operational outcomes that cover competence, continuity and alignment. This enables proactive management of organizational changes to support planned growth of the business. A real life example will illustrate the steps of the process.
  • The starting point was whether the current CEO had the right compliment of skills and capabilities to lead a high performance team. Could this leader see beyond the current stage of growth in terms of the talent and processes required for growth? Could he build a high performance team, align them and retain them to achieve results?
  • The CEO then laid out the future state organization. The essential question was whether he had teams of leaders in each of the key functions to assure success.
    • Specifically, the Product Development Team generated a competitive analysis comparing the current product with all others to assure a 2 year competitive advantage.  They were also tasked with improving cost of manufacturing.
    • The Sales Team installed an integrated CRM system to support large orders, including internal cross functional communication to increase customer visibility and satisfaction scores.
    • The Operations organization moved from a traditional batch manufacturing process to a state of the art, focused factory organization, eliminating WIP, reducing operational costs and increasing the speed of order to delivery.
    • Finally, the Finance and Administrative functions were assessed.
  • As a result, in 16 months the company grew 5x in revenue and increased margins. Time from order to delivery was reduced by 16x. Headcount was reduced while shipping volume increased by 5x.
  • A disciplined assessment process that predict business outcomes and ties your talent to the bottom line can provide a significant advantage in today’s highly competitive environment.

You can contact Gene Tange at gtange@pearlhps.com

Key Words: Growth, Experience, Assess, Capability, Processes, Predictive, High Performance, Competence, Continuity, Alignment, Organization, Structure, Manufacturing, Sales, Marketing, Customer Relationship, Finance

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How Do You Handle A Loyal Employee Who No Longer Fits? Three Thoughts

Situation: A company has a long-term loyal employee who has served in a number of roles. The company is growing, and no longer has a clear role for this individual. This individual can’t and doesn’t want manage either other employees or projects. The CEO wants to be compassionate with this individual to honor their loyalty, but finds himself in a quandary. How would you handle a loyal employee who no longer fits the company’s needs?

Advice from the CEOs:

  • Your desire to treat this individual compassionately is commendable. This individual has been loyal and has served you well. There are a couple of questions to ask: is there a valuable function that this individual can serve within the company, and is this individual essential to the company?
    • What happens when this individual goes on vacation? Are there gaps in service or function?
    • Who handles this individual’s duties while they are on vacation?
    • If the answer to these questions is that others fill in easily and not a beat is missed, particularly when this individual is absent for long vacations, then either they have made excellent preparations prior to their vacation absence, or they may not be essential to the team.
  • As a business grows, it changes. Not everyone who came onboard early will have a place as the company grows. Think of a pick-up basketball team on the local playground. In pick-up basketball, you play with whoever is available. Let’s say that the team starts to improve, and they decide to join a competitive league. Now the game starts to change, and some of the buddies who played pick-up ball won’t be able to make the shift to competitive ball. They aren’t bad people; they just no longer fit the game that the team is playing.
  • You may need to sit down with this individual and have a heart-to-heart discussion about the needs of the company and their ability to serve these needs. This is difficult, but if there is truly no longer a role for this person, then you need to be honest with them while at the same time honoring their past contribution.

Key Words: Company, Growth, Needs, Roles, Manage, Function, Value, Essential, Honesty, Contribution

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How Do Identify and Bring In A COO? Five Suggestions

Situation: A company’s Board is pressing the CEO to hire a COO to oversee operations. The Board’s concerns include succession planning for the CEO and a desire for the CEO to put more focus on the vision and strategy of the company. There are no current candidates within the company. How do you identify and bring in a COO?

Advice from the CEOs:

  • Think beyond roles and responsibilities and consider how you would describe the ideal candidate. This includes attitudes and behaviors, talents, experience, and essential skills. Map these attributes and use them to guide your recruitment and selection process.
  • Increasingly, companies are using a values-based process to evaluate personnel both for promotion and outside selection. Tony Hsieh of Zappos talks about this in his book “Delivering Happiness.” This doesn’t substitute for skills and experience, but helps to identify candidates who will help to strengthen your company’s culture.
  • Assure that you have a full process in place that will help you to recruit and select a good candidate. If it has been a while since you last recruited a high level executive, consider securing outside resources to assist. One of the CEOs even hires a 2nd expert to vet the recommendations of the primary expert.
  • Where can you look for good candidates?
    • Talk to your key vendors about who is really good in the industry. Look for a high potential individual in another company who doesn’t have room to grow in their current situation.
    • Also look at related industries where there will be cross-over knowledge and skills.
    • Don’t overlook the military. Talented officers are regularly rotating out of the services – people who have exceptional experience leading and motivating people.
  • On-boarding a new senior executive is different from a lower level employee. If you choose the right individual and they fit your culture, this will ease the process. Be aware that some of your current senior employees will likely be upset that they were passed over and may be difficult. If you haven’t done this in some time, it is worthwhile to secure counsel on the best ways to bring a new COO on-board.

Key Words: COO, Operations, Succession, Candidate, Role, Responsibilities, Attitude, Behavior, Experience, Values, Process, On-Boarding

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How Can Private Business Help Retool the Workforce? Three Methods

Interview with Anju Bajaj, CEO, Zuna Infotech, Inc.

Situation: The US economy is slowly trying to get back on its feet, but many potential obstacles remain. In the mid-west, there is good talent with deep enterprise-level IT experience, and lots of new young talent looking for positions. How can private business help to retool the workforce and boost employment?

Advice from Anju Bajaj:

  • Working in IT services to provide end-to-end technology solutions, we have found highly skilled talent in the American Midwest. In recent years, many seasoned IT professionals have lost their jobs as Midwestern companies downsized. These individuals have deep enterprise level IT skills, but may not be up to speed with the latest technologies. There are also many brilliant young people available who have good web-based technology skills, but no experience in legacy systems or the working of complex enterprises. Our focus is on cross-training both groups as they collaborate to build IT solutions for our customers.
  • We have found that by organizing these two groups into small teams, guided by a lead who knows both web-based and legacy systems, we can leverage their individual strengths to cross-train each other. It turns out that both sets of workers are smart, capable and, in live project settings, collaborate and acquire technical skills and domain knowledge relatively quickly.
  • The bigger and more subtle challenge is teaching younger workers about business processes. Each process must fit the workflow so that a process change in one area doesn’t produce difficulties in other areas. For this, you need to have people with deep expertise in functional and domain disciplines as well as technical experts. By teaming talent, we can produce functional experts who understand all areas. We have found that in three to six months of working together, about 25% of team members reach almost guru status; while the remaining 75% have become quite skilled.
  • Like most leading service providers, we at Zuna Infotech also build capability through our Centers of Excellence.  We focus on developing practices within different industry verticals. With this comes knowledge and structure which we can then pass on through train-the-trainer programs.
  • We have been inspired by the desire to help keep US workers working while retooling their skills. The results that we’ve found to date have been very encouraging. We hope that this can provide a model for other companies.

You can contact Anju Bajaj at anju@zunainfotech.com;

Key Words: Workforce, Retool, Talent, Legacy, Web, Cross-train, Project, Business Process, Workflow, Functional, Domain, Technical, Agile

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How Do You Effectively Mentor Younger Workers? Five Suggestions

Situation: Most CEOs manage multi-generational staffs. While there are differences between baby-boomers and younger generations, it remains important to give younger workers meaningful guidance. What have you done to successfully mentor younger workers? If you are one of the younger workers, how have you been effectively mentored at work?

Advice from the CEOs:

  • Many have noted that, compared with baby-boomers, younger workers have higher levels of self-confidence. This enables them to be more accepting of constructive criticism and guidance. One company establishes individualized performance metrics to help younger employees monitor their progress. This helps them to chart and see their progress. Along the way, managers meet with them frequently to answer their questions about company processes and the rationale behind them.
  • In some cases, CEOs have found some younger workers have a tendency to short from the hip. They mentored them to communicate more thoughtfully and carefully using a team approach because they found younger workers to be more team-oriented than older workers.
  • Many forward thinking companies involve individuals from all levels of the organization in their planning processes. This addresses the desire of younger staff members to be included in high level decisions. Younger workers prefer this to being told to wait until they have more experience.
  • To help younger employees grow, one company breaks down job tiers into more levels or sub-levels, and offers incentives for reaching the next level of skills more rapidly. They also reset expectations more frequently.
  • Particularly in Silicon Valley many younger employees are swimming in debt. Some purchased houses on adjustable-rate interest-only loans and other creative financing solutions. As interest rates rise some will encounter difficulties. In anticipation of this, one company brings in external resources to offer counseling in personal finance. Some of the local financial services companies offer this as a benefit to company’s employees at no cost to the company.

Key Words: Multi-generational, Baby-boomer, Gen X, Gen Y, Millennial, Echo-boomer, Mentor, Coach, Self-confidence, Processes, Communication, Team approach, Involvement, Listening, Financial counseling, Patience

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