I’m Up all Night Worrying that Things are “Too Good.” Three Considerations

Situation: Business has turned around in the last six months and I’m so focused on sales that I don’t have time to plan. How and when do you plan for growth?

Advice from the CEOs:

  • Think about the business cycle – the upswing, the peak and the downturn:
    • On the upswing there is a tendency to be so focused on the day to day that you spend no time testing the business environment or on the long-term planning activities that are critical to sustained growth and success.
    • If the CEO doesn’t take time during the upswing to evaluate new opportunities it’s easy to fall into the trap where planning occurs until after the cycle has peaked.
    • After the business cycle has peaked, it is too late to take advantage of opportunities that were available during the upswing.
    • Once the business cycle is in a downturn attention shifts to preservation and survival. The opportunity to reallocate resources to build alternative future scenarios has been lost.
  • If you feel pressure to bring on additional resources, set a timeframe to evaluate the situation – say a few weeks or a month – and see if the pressure is sustained. If it is, have a plan in place to secure those resources. Do this with a clear head – not on impulse. Exercise discipline.
  • Remember that leadership is your job – not being immersed in the day to day. A leader keeps others immersed in and focused on the day to day.

Key Words: Leadership, Business Cycle, Planning, Adding Personnel  [like]

The Dreaded Performance Review: Two Methodologies

Situation: We set objectives for employees; however these objectives frequently aren’t met, and there are lots of excuses for not meeting objectives. Most frustrating, employees are eager to share good news, but hide bad news and performance issues. What do other CEOs do to prevent these problems?

Advice from the CEOs:

  • A service company’s method:
    • Frequent measurement of performance against objectives.
    • Key metrics are monitored with top staff in weekly meetings that last tops one hour. We use a problem solving approach to address obstacles and to correct performance.
    • The CEO watches the direction, and staff makes the changes to make corrections to direction.
    • The trick is in the metrics. Metrics must measure meaningful performance and be tied directly to the company objectives.
  • A light manufacturing company’s method:
    • Historically the CEO had a problem holding on to non-performing individuals for too long.
    • He addressed this by instituting objectives and eliminating non-performers. The result: reduced complacency, and improved morale because performing employees were tired of taking up the slack for non-performers.
    • Documentation of non-performance and establishing a solid case for eliminating the employee are critical to avoiding wrongful termination suits.
  • General Observation: if a company has objectives, but lacks meaningful metrics to measure performance against objectives or a regular review process to assess performance against objectives, then the objectives are meaningless.
    • The CEOs’ experience is that establishing meaningful SMART (Specific, Measurable, Appropriate, Realistic, Time-Bound) objectives and regularly assessing performance in a collaborative atmosphere are the most important ingredients to an effective performance management system.

Key Words: Performance, Objectives, SMART Objectives, Employee Reviews, Performance Reviews  [like]
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Financing: OOM or OPM? Three Things to Consider

Situation: An early stage web Company is looking at steep ramp up expenses. Many companies have bootstrapped their way to success. However outside investment may speed the process. How have other CEOs evaluated these two options?

Advice from the CEOs:

  • Raising money takes time and is a major distraction to your development process. The two big variables will be investor interest and timing of investment.
    • Talk to Angels and VCs now. Start by presenting a broad outline of your technology and business model. Ask what they will want to see to offer you funding at different levels.
    • This will give you a reality check as to investor interest in funding you, and creates a roadmap to funding if the response is positive.
  • What are you seeking? Money or accountability? One CEO bootstrapped the company early, then looked for outside investment to gain accountability and advice – a whip to help move things along.
    • This CEO found that investors brought few of the anticipated assets, and added a new level of distraction and pain.
  • If you are looking for funding to purchase content to serve through your portal, consider a more creative way to gain content.
    • Can you use a Web 2.0 portal through which your target audience provides both the content and the consumer audience in a marketplace exchange? Establish the audience and add premium services to monetize the model.
    • This can minimize your upfront cash investment requirements, and may create a faster track to positive cash flow.

Note: OOM = Our Own Money; OPM = Other Peoples’ Money

Key Words: Investors, Investment, Ramp-up, Bootstrap, Financing, Cash Requirements  [like]

How Much Rope Do I Give the New Sales Guy to Hang Himself? Four Pieces of Advice

Situation:  We hired a new sales person 3 months ago. To date, the sales person has signed some good customers, but only generated $5K in sales. How patient should the CEO be with this person, how much time should be allowed to demonstrate performance, and what metrics do other Forum members use to assess or incentivize sales performance?

Advice from the CEOs:

  • Set 90 day targets that you expect for the individual to reach:
    • X new accounts.
    • Y in sales revenue.
    • Other measures as appropriate to your business.
    • Set these targets WITH the individual, not FOR them so that the individual has ownership of the targets.
    • Monitor frequently. If the trend is below the target, ask what the individual plans to do to meet or exceed the target.
    • Targets are best set at the time of hiring. If the individual cannot approach these numbers, then cut sooner rather than later.
  • How do you differentiate the sales person from the sales talker?
    • Based on results. Expect to see results quickly.
  • The traits that correlate with success are not traits that reps develop after they are hired. They have to have these from the beginning. Your hiring process must select for these traits.
  • There are a number of companies offering tools that will help you to identify whether candidates for a sales position possess the traits that you deem most important. Among these is TTI – Target Training International – www.ttidisc.net and Sandler Sales – www.sandler.com.

Key Words: Sales, Management, Performance, Assessment, Objectives  [like]

OMG – our Product is taking off! Two Considerations and Two Options

Situation: Demand for our product has increased, and we need to scale up production. We’re small, so how can we do this without killing the product?

Advice from the CEOs:

  • This represents a major change of mentality and culture. Essentially, you’re moving from a “handmade” process to a commodity volume process. You may also be moving from low volume/high margin production to high volume/low margin production – this will change you.
  • If you are sure that you will get the contract for long-term production consider establishing high volume production at a new site.
    • Rent/lease another facility. Also hire a different set of experienced people, and consider giving this facility a new name to suit the new team. This will help you to establish a new culture suitable to the new opportunity.
    • Ask for an option for additional space on the lease.
    • If things don’t pan out, look at this new space as the eventual location for your existing team.
  • Other options to consider:
    • Outsourcing to a 3rd party manufacturer. This is an option, unless you are an OEM outsourced producer yourself. Essentially you could be telling your OEM customer that they could go direct to another source at a lower price.
    • Establishing an overseas production capability – one where you own the facility and manage the QC. This will be a challenge if the customer wants to specify “Made in US”, or where quality concerns are essential.

Key Words: Production, Scale-up, Ramp-up, Outsourcing  [like]

Good News – Business is Building! Now, What to Pursue? Four Guidelines

Situation: The business climate is starting to improve. Opportunities are coming in. How do you decide what to do and what not to do?

Advice from the CEOs:

  • Talk to your customers. What do they value about your product/service and what is less valuable? Build on opportunities that customers value – which are consistent with your company’s strength and focus.
  • Consider a customer survey – Survey Monkey or a telephone.
    • If you don’t have in-house expertise to design and administer a survey, find knowledgeable outside resources.
    • Make sure that the survey questions will drive understanding of your focus.
    • If you are short of cash, at least get an expert to review the survey and administration plan.
    • Before you launch the survey to your full customer base, “test” it with a select group of customers – this will tell you whether it will produce usable information. If not, rewrite.
    • Have employees take the survey and predict how customers will respond. Compare these results with the actual results from customers. You may learn something!
  • Which opportunities will build sustainable recurring revenue vs. opportunistic (one-time) revenue?
    • Recurring revenue can be lower margin if the income stream is sustainable.
    • Balance efficiency and utilization. For example, fixed fee service contracts that renew consistently.
  • Judge opportunities against your “Hedgehog” as defined by Jim Collins in Good to Great:
    • What you are passionate about?
    • What you can be best at in your marketplace?
    • What you can measure by a single economic ratio?

Key Words: Customer Needs, Customer Survey, Business Opportunities  [like]