How Do You Build International Sales? Five Observations

Situation: A CEO wants to create new markets outside the US. They have investigated options and locations and are starting to plan. One question is how long it will take to start seeing results, so that they budget accordingly. How do you build international sales?

Advice from the CEOs:

  • Decision timelines internationally are longer than they are in the US. For example, in Europe timelines are easily twice as long. This means that new entrants must budget for a sustained effort.
    • It took another company three years to develop traction in Europe. They have an office in Germany, but most new sales are coming from Eastern Europe. After three years their European operation is now break-even.
  • International markets, especially in Europe, can be very conservative. Job security and maintaining cash flow are the focus.
    • Labor laws encourage companies to do things themselves rather than outsource. The result is that a new entrant will face competition from internal departments of potential prospects.
  • In European the emphasis is not growth, but on conservative steady operation. Growth tends to come from acquisition.
    • Sales pitches should be tweaked for international audiences. For example, highlight reduced need for additional personnel to manage the systems, fewer breakdowns and glitches, and the ability to count on seasoned outside expertise to quickly address complications.
  • Relationship selling is very important internationally. Sales and tech support are best provided, and in some cases required to be provided in the local language.
  • In Europe, Italy can be an important lever to sales with the right partner. Italian companies can be excellent at marketing and can jump-start European sales. This will be a very personal relationship.

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How Do You Create an Incentive-based Compensation Plan? Seven Ideas

Situation: A CEO wants to build additional incentives into the company’s compensation plan. The objective is to add group incentives to the pay mix – to focus more attention on group performance rather than just company goals. How do you create an incentive-based compensation plan?

Advice from the CEOs:

  • The best policy is to be upfront, open, and transparent as the plan is presented.
  • Communication is the key to success, including the following bullet points:
    • Pay starts at a base which is 75th percentile – a generous base in our industry.
    • Group bonuses, which reflect the results of the group’s efforts, allow you allow to reach the 90th percentile or higher.
    • On top of this, profit sharing enables the addition of 10-20% of your base.
    • Altogether, management thinks that this is a generous package. The difference from the old system is that employees will be rewarded for making decisions which will benefit the group as well as the company – and you will be generously rewarded for this.
  • Once plans are communicated to employees 1-on-1, reinforce the message with a group presentation and open discussion at monthly company meetings.
  • Consider: significant changes in compensation may be best taken in small rather than large increments. Start with small incremental adjustments. If these are effective proceed to larger increments on a planned and open schedule. This is particularly true if the historic culture has been that we all win or lose together.
  • A downside of rewarding by team is that some will get rewarded for producing minimal results. Consider some percentage of discretionary payments to recognize and reward effort instead of pure parity within the team.
  • Consider longer-term results within the payment scheme – not just quarterly results.
  • People need to know that they are accountable. Let them know that a 75% base is reasonable but that the significant rewards will be for producing results above this level.

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How Do You Bring Children into the Company? Seven Observations

Situation: The CEO of a company is looking at her succession plan. The preferred option, from a family standpoint, is to groom one of her children to eventually become the CEO. A concern is how current key employees will react to this plan. How do you bring children into the company?

Advice from the CEOs:

  • As preparation for a key role at the company, have your child gain experience at a company that has been where the business is today but has grown to a higher level. Learn from them what they went through and what they would change were they to do it again.
  • How did Peter the Great become the greatest leader of Russia? As young man, and son of a czar, he apprenticed in England and Holland – in ship building and other important arts that were scarce in Russia. He was able to leverage what he learned to help build the country when he became czar.
  • Have them develop the leadership qualities and maturity that they need to run this company in another company – where there is the freedom to make mistakes and learn from them. Bring this wisdom and experience back to the company. It will help gain the respect and loyalty of company employees.
  • Have them take on tasks which are not comfortable – for example, sales. Don’t underestimate the value of being able to visit a new customer. This is the key role of the principal of any company.
  • A parent/child relationship can be difficult in business. It can get tense when business, money, survival of the company and making payroll are on the line.
  • The son or daughter must be aware that in a new role one doesn’t start out in control. This may be achieved in the end, but it is not the starting point.
  • An option, once experience has been gained in another company, is to have the individual start a new branch of the company in a different location. This will provide a valuable learning experience and will demonstrate both capacity and success to company staff.

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Who Owns Quality Control? Eight Recommendations

Situation: The CEO of a company has a problem. Quality control is an essential part of the company’s success, but ownership of quality control issues is proving difficult. When more than one department is involved, each blames the other for issues or deficiencies. Who owns quality control?

Advice from the CEOs:

  • At the end of the day the project owner must own this responsibility. This individual can delegate work but not accountability.
  • QC must be embedded within the company’s systems. In addition, someone has to walk in daily to ask what is wrong with this project? What can be done better? A skeptic.
  • Put a skeptic in the QC role – the job is to find what’s wrong, not what’s right – a tactical skeptic.
    • Skeptics are ideal for design reviews.
    • It isn’t necessary to hire someone for this role if there’s already a productive skeptic on staff.
    • This person needs to be vocal and will irritate some of the other staff. Coach staff to tolerate this, because the individual is performing an essential role.
  • It’s impossible to check everything. However, as issues are identified, everything can be documented.
    • As systems are reviewed, look for patterns of problems.
    • Develop solutions as problems are identified.
    • Log issues and solutions on a shared server to facilitate access by project managers.
  • Institute cross-functional design reviews – representatives from different functions offer different perspectives. Formalize design reviews in the early and start-up stages of projects.
  • Work on company culture – build anticipation of challenges into the culture.
  • Build a heuristic of the output of each program. Use this to make sure that inputs, filters and system checks will produce the desired output and the desired level of quality.
  • Ask: where is QC currently working within the company? Why is it working?
    • Operations and testers catch the errors.
    • The issue is distributing the knowledge gained. In complex systems nobody understands the full picture or the impact on the customer.
    • This becomes the responsibility of the project owner.

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How Do You Implement a Process Change? Six Suggestions

Situation: The CEO of a service company is concerned about lost income from uncaptured billing. He has identified the cause – failure to capture extra hours that haven’t been billed – but is struggling to get employees to monitor this more effectively. How do you implement a process change?

Advice from the CEOs:

  • The group presented two options for growth: bring in experienced outside people to develop additional systems to run the company, or a hybrid model using internal resources, augmented with outside expertise.
  • Bring in Experienced Outside Resources: Hire an experienced outsider with a track record in your industry to design and implement the needed systems.
    • Pros for this solution: the outsider will bring a fresh vision and new energy, plus the experience and know-how to make the desired changes.
    • Cons: impact on current business culture. This may generate resentment among employees who can no longer make decisions on the spot and may remove a path to management for existing staff. Possible negative impact on customers who receive larger bills due to change orders.
  • Hybrid Model: Outside person creates model and trains employees to implement it, then monitors the system and progress long-term. The key is to change expectations and behavior within the team.
    • Pros for this solution: more opportunity for current employee participation; involves employees in the design of the system, providing better buy-in to the solution.
    • Cons: as with any change, this won’t provide the full expected return. Just the fact that things are being changed impacts the efficiency of implementation. Unanticipated blocks and resistance may hinder progress – don’t be surprised by this, it is predictable.
  • Implement SOPs that facilitate rapid response to change orders – starting now and with whichever option is chosen.
  • Generate a pick list of all possible change orders with pre-calculated costs to guide employee choices and keep customers informed.
  • Whatever solution is chosen, be sure to communicate frequently and consistently with employees to facilitate the change.

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How Do You Boost Company Morale? Five Suggestions

Situation: A CEO is concerned that her #2 is being challenged by others in the company. An option is to hire a technical project manager; someone who carries the CEO’s authority and who can get things done. What are the obstacles to achieving this? How do you boost company morale?

Advice from the CEOs:

  • The technical project manager must have a non-threatening role – they shouldn’t challenge the technical skills of the developers. The role is to oversee schedules, progress, and to resolve barriers – both technical and personal. The job is to get things back into shape.
  • While the business involves highly technical software, operationally it is people centered, not software centered. People centered means a team that collaborates and supports one-another. The important questions are:
    • Where do the needed people skills come from?
    • How do the model and reality transition to a people centered business?
    • Look for someone who can nurture talent. People skills are more important for this role than technical skills, with the caveat that individual must be able to understand technical challenges.
  • An option is a 3rd party within company to straighten this out.
    • “COO” Responsible for Technical Direction – title is important because it conveys respect.
    • The CEO’s voice and ears.
    • Run weekly meetings and is the go-to person when the CEO us traveling.
    • The focus is to manage the primadonnas and keep them focused on their jobs instead of on interpersonal conflicts.
    • This role focuses inwardly on company vs. the CEO who focuses outward on the broader vision, key stakeholders, etc.
  • The bottom line – this is your company, your vision. Make it work. The task is teaching maturity – learning to give rather than worrying about making a name for themselves.
  • Have regular lunches with each of the developers and have frank conversations with them. What’s up and what’s wrong? Listen and let them air their concerns. Talk them through these concerns, but make sure that they understand that the CEO sets the direction both for the company and the boundaries of acceptable and unacceptable behavior within the company.

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How Do You Monetize Your Business Model? Five Suggestions

Situation: The CEO of a start-up software company focuses on connecting potential parties to business opportunities. Early signs are that this offering has legs and potential parties have responded positively. The critical question for the CEO is how best to turn interest into revenue. How to you monetize your business model?

Advice from the CEOs:

  • The first step is to segment the audience and determine both the potential for each segment to both benefit from and fund the service that they receive.
    • Individual contributors may not have a lot of financial resources but may be interested in participating as employees or providers of expertise or services. They also may know others and can spread the word.
    • Collaborating organizations may be able to offer both funding and services to help build and sustain momentum.
    • Companies have funds to support the effort provided they see value to their bottom lines as a result.
  • Suggest a fee or contribution for services from companies who will benefit. Provide guidelines or a sliding scale of fees depending upon duration of services provided to the company. Make it clear that moneys earned will be reinvested to increase the range and depth of services offered.
  • Suggest a sliding fee scale for individual contributors based on the financial benefit that they receive.
  • For companies and collaborating organizations offer levels of membership or recognition for support based on benefit received.
  • For all segments – start with small, timed fees and increase these as the model proves its benefit to them.

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How Do You Maintain Company Culture in a Merger? Four Suggestions

Situation: A US-based company is in the process of merging with a foreign company. The US company has multiple locations across the US, and there are cultural differences between these locations. The CEO has worked diligently to mitigate these differences. The foreign merger presents new challenges. How do you maintain company culture in a merger?

Advice from the CEOs:

  • Between some of the US locations, there has been a “we make money, but you spend money” perception. How did the company get past this?
    • The company adjusted metrics to demonstrate the contribution of each division to short and long-term profitability.
    • This information was communicated selectively to key opinion leaders within the company.
    • Use the lessons from this experience to plan post-merger communications and protocols that will contribute to team integration post-merger and improve the chances of merger success.
  • Focus on the common vision and interdependency of the teams. This accommodates differences in culture and encourages teams to appreciate each other’s contribution. Use the same technique during the merger.
  • Have lunch with CEOs of other companies that have been bought by foreign firms. Learn how they adapted to the new reality. Ask what worked or didn’t work. Seek specific details of solutions that were developed that could be applicable to the planned merger.
  • Become better educated on business culture in the country of the company with which you will merge. Seek experts who can give seminars to company employees on what to expect and how to work most effectively with workers and executives of the foreign company.

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How do You Minimize Inventory Damage by an Outsourced Manufacturer? Five Points

Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?

Advice from the CEOs:

  • It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
    • In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
  • It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
    • There is no point in assuming all this risk.
    • For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
    • Another option is to take on the project under a project management contract, and to bill engineering separately.
  • This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
  • Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
  • If the market opportunity is there do two things:
    • Set up an organization with professionals who know early stage manufacturing.
    • Be aware this group will have a different culture and approach compared to design engineers.

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How Do You Evaluate an Acquisition? Five Points

Situation: A CEO is evaluating an acquisition which could significantly contribute to his company’s financial position. Patented technology may add value to the deal. The founders of the acquisition target are willing to work part-time to facilitate the transition of their technology to the acquirer. How do you evaluate an acquisition?

Advice from the CEOs:

  • Set a timetable to close the deal or walk.
  • Two key factors in the due diligence process will be strength of the intellectual property and cost of the acquisition long term.
  • Another key factor to evaluation will be how this opportunity fits into the company’s larger financing plan. Currently the company is undertaking a financing round. How much will this acquisition contribute to or distract from the financing round?
    • If this is a primarily a value-add opportunity, will it add to the larger financing round?
    • Can the larger financing round be completed on time while pursuing this opportunity?
    • An option is to negotiate a white label agreement – an agreement that will keep the company in the game while completing the larger round.
    • If the founders are not amenable to a delay, what is the cost in terms of funds and effort versus the larger round.
  • The technology appears interesting, but the timing is bad given your need for the larger financing round. Here’s an option.
    • Go to the founders and start the discussion. Secure a license or hire their programmer. Let the technology go dark until the financing round is completed.
    • There is value here – but do this as a side focus if it’s not too expensive. Assure that the deal includes both rights and the underlying algorithms.
  • Delegate this to someone else in the organization. The CEO’s focus is the larger financing round.

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