Tag Archives: Accountability

How Do You Finance an Early Stage Company? Three Considerations

3 Replies

Situation: The CEO of 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 others evaluated these options? How do you finance an early stage company?
Advice from the CEOs:
• Raising money takes time and is a major distraction to the development process. The two big variables will be investor interest and the timing of investment. Talk to Angels and venture capitalists 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 the company. It also creates a roadmap to funding if the response is positive.
• What is the company seeking – money or accountability? One CEO bootstrapped her company during the early stages, 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 Internet portal, consider a more creative way to gain content. Can you use a Web portal through which your target audience provides both the content and the consumer audience in a marketplace exchange? Establish the audience and then 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.

[like]

How Do You Redefine the Top Executive’s Role in the Business? Four Points

Situation: The President of a family-owned business that has been in operation for over 30 years wishes to change her role by increasing delegation of responsibility and accountability within the business in preparation for her eventual retirement. Other family members in the business are happy with their current responsibilities and are resistant to taking on more responsibility. What advice does the group have for this member?
Advice from the CEOs:
• Given that you are preparing for retirement, it is important to let others know about your plans and your desire to increasingly hand off your responsibilities to others. Ideally, one or more of the others will express a desire to take on more leadership, particularly if it includes a boost in pay.
• It is important to clarify responsibilities and prioritize which ones you wish to hand off. Once this is done build and execute a hand-off plan.
• Transition current managers who are misplaced in their position to other roles. Work with them to identify alternate roles where their talents can better benefit the company. They may be aware of their current discomfort and welcome the opportunity to take on a different role more suited to their abilities.
• Focus on removing barriers to delegation that may be in place. For example, bring others into the discussion and review the projects that they are overseeing. Identify the challenges underlying those projects and ask for their suggestions on how to address these. Don’t provide the answers. Ask questions and push them to develop appropriate solutions.

[like]

How Do You Encourage Employees to Take Full Responsibility for their Jobs? Five Points

Situation: A CEO is discouraged because employees are neither taking initiative nor holding themselves accountable for results. They see potential problems, but don’t act to either prevent or resolve them. They continually bring situations to the CEO and expect the CEO to solve the problem or save the day.  What have others done to shift responsibility and accountability to staff? How do you encourage employees to take full responsibility for their jobs?

Advice from the CEOs:

  • There are two important questions to ask:
    • Is this a situation that includes a large number of employees or just a few? If it’s just a few then these situations can be handled individually. If more than a few then systemic changes may be necessary.
    • Are all employees clear on their responsibilities and what is expected of them? Is there written documentation on responsibilities associated with specific roles or individuals? Has this been communicated to individual employees during performance reviews?
  • It is essential that direction and individual responsibility be clearly stated and understood. Encourage dialogue once direction or instruction is given to test understanding. Important direction should be documented in writing.
  • Have clear core values been established that guide both the company and individual responsibility and decisions? Have these core values been publicized and posted in break  areas as well as work areas? Use the core values to assess employees’ work to reinforce emphasis.
  • Assure that employees are clearly empowered to make decisions. This is particularly  important if employees have been subjected to micromanagement in the past.
  • Ask for and encourage dialogue, both in one-on-one situations and in team and company meetings. Make employees part of the decision process so that they feel ownership over their responsibilities. Assure that excellent performance is recognized, rewarded and publicized.

[like]

How Do You Recruit and Retain the Best People? Three Suggestions

Situation: A company is losing employees. Not the top ones, but the 2nd level. It’s not a manner of money but other reasons. Some don’t like the developing culture of accountability. Others are younger high potential employees who have performed well but have left for unexplained reasons. How do you recruit and retain the best people?

Advice from the CEOs:

  • It’s important to learn why they are leaving.
    • It may be a millennial phenomenon – this group may regard work as a transitory necessity.
    • Determine whether it because of accountability or other reasons.
      • Could they be unhappy with the level of growth opportunity?
      • Previous generations were used to moving to move up – are the younger employees less prone to do this?
    • Could younger workers see work as a job, whereas previous generations saw work as their livelihood – as their life.
  • What options could be tried?
    • Set up a hiring plan – over-hire to assure availability of talent – 15 people in the next 3 months.
    • During the hiring process employ a focused interview diagnostic to identify the key factors that will boost in employee retention.
  • One CEO has suggested an approach:
    • Start with a volunteer employee focus group that holds a series of meetings over lunch.
    • Use company channels to ask for volunteers.
    • Allow the group to relax and open-up over time. Then begin to drill down to the real issues, including legacy issues.
    • Use feedback from the focus group meetings to design a survey to establish metrics, validate the findings of the focus group, and establish benchmarks for long-term attitude monitoring.

[like]

How Do You Improve Internal Processes and Procedures? Five Approaches

Situation: A CEO’s company has experienced margin erosion due to designs that did not transfer well to manufacturing, and inefficiencies in the transfer process between design and manufacturing engineering. He wants to transform the culture without losing technical performance while meeting cost targets and delivery timelines. How do you improve internal processes and procedures?

Advice from the CEOs:

  • Reinventing the culture of a workforce is an organizational design challenge.
    • The heart of the challenge is understanding the motivations and desires of the individuals involved – particularly the natural leaders within the groups.
    • Learn this is by speaking with them one-on-one, either as the CEO, or through individuals with whom they will be open and trusting.
    • Once their emotional drivers are understood, design accountability and incentive solutions that will align their personal reliability and accountability drivers with their emotional drivers.
  • Tailor the language of communication with the organization so that it responds to the emotional triggers discovered during the 1-on-1s. For example, if there is a negative reaction to sales within the engineering teams, use a different term like client development.
  • Expose the designers to the “hot seat” that gets created when their designs produce manufacturing challenges. The objective is for the designer to see the manufacturing group as their “customer.”
    • Involve manufacturing engineering in design architecture meetings. Do this early in the process so that they can communicate the framework and constraints under which manufacturing occurs and suggest options that will ease manufacturability.
  • Shift from individual to team recognition on projects. Instead of recognizing the contributions of the design component or the manufacturing component, recognize the contributions of the team of design and manufacturing engineers that produced a project on time, on budget, with good early reliability.
  • To kick off the new process:
    • Identify some of the waste targets.
    • Involve individuals who are known to be early adopters.
    • Have them look at the problem, develop and implement a solution.
    • Deliver ample recognition/rewards to these individuals.
    • Next use these people to mentor the next level of 2nd

[like]

How Do You Create Consistent Business Operations? Seven Thoughts

Situation: A CEO is concerned that business operations are inconsistent. Employees are always coming to her for answers instead of working things out themselves. As a result, the CEO is continually focused on operational details as opposed to strategic direction. How do you create consistent business operations?

Advice from the CEOs:

  • Make managers live up to their titles.
    • Require them to go to each other to solve problems first, instead of always asking the CEO.
    • When they ask a question, don’t give them the solution, but advice on how to solve it.
    • Require them to present solutions vs. problems
    • Be willing to spend money on their solutions.
  • Answer all questions with questions.
    • Ask them for their recommendation.
    • Keep asking until they come up with the answer.
  • When one starts to delegate, it hurts for a while but will work itself out.
  • The CEO should not be doing “regular jobs” that are really employees’ responsibilities.
  • How has implementing these suggestions impacted other companies?
    • Businesses have become more diversified.
    • CEOs are focused strategically vs. tactically.
    • Businesses are more successful and profitable.
    • CEOs enjoy coming to work again.
  • Create a sales intern program.
    • Hire 4 sales interns for $10-15/hour – with the offer that after 3 months there will be full time jobs for those who prove they can sell.
    • Have the top 4 sales staff design the intern program – call response scripts, responsibilities, etc. – subject to CEO review and approval.
    • Assign one intern to each of these 4 sales staff in mentor/mentee relationships. This will demonstrate the capacity that each has as a sales manager.
  • Should younger workers be handled differently?
    • Allow flexibility – where appropriate – on hours and how they do their jobs.
    • Responsibility will also vary by pay level – higher pay equals more hours and more accountability.

[like]

How Do You Incentivize Employees to Document SOPs? Six Observations

Situation: The CEO of a specialty component company wants to standardize documentation of company procedures covering sales, production and ISO documentation. This will take time and effort, and employees are concerned about accountability for poor results. How do you incentivize employees to document SOPs?

Advice from the CEOs:

  • Are employees are being asked for accountability without being empowered or rewarded for performance? Currently, there is nothing about employee performance that is directly tied to:
    • Longevity,
    • Dollars in raise, or
    • Share of the bonus pool.
    • Everything is determined at the CEO’s discretion.
    • Why would anyone want more accountability if they feel that they have little control over their jobs or future at the company?
  • To increase accountability and drive, employees must be given control over the factors tied to retention, pay and bonuses.
  • To create an effective system for employees to document standardized SOPs they need:
    • Incentives that are under their control to achieve the objective – creating standardized SOPs.
    • Objectives that are achievable with clearly stated rewards for performance.
    • Performance evaluations tied to clearly stated objectives, discussed with and agreed to by each employee, which drive raises, bonuses and rewards.
    • The messaging about these changes must be delivered with energy and passion. Employees must feel excited by this opportunity.
  • Understand that this may cost 10-15% in increased overhead but will boost the value of the company way beyond the cost.
  • Employees need to know the vision for the company and must be empowered to achieve the results to fulfill this vision.
    • The why behind the desire for standardized SOPs is just as important as the incentives created to achieve them.
    • The why must be clear, simple, and must be understood by the employees for everything to work.
  • To further motivate the team, involve them in designing the incentive program.
    • Ask what they want. Maybe it’s something as simple as a fun day with the team.
    • If they aren’t asked, the danger is that they will not respond to the incentive offered. Money is not the only, and in many cases is not the most effective incentive.

[like]

What is Appropriate Compensation for a Founder CEO? Four Points

Situation: A founder CEO established her company with a significant personal loan, which is being repaid. To compensate herself for the original investment, she is considering several options including an employee stock option plan (ESOP) through which employees would be able to establish ownership of a certain percent of the company. What is appropriate compensation for a founder CEO?

Advice from the CEOs:

  • The critical question is: what is the CEO’s goal? The next question is – what options best serve to achieve goal?
    • If the goal is long-term goal is maintaining or increasing current income combined with long-term security – like a Trust Fund – seek the counsel of a financial advisor who can help model how the options under consideration will satisfy the goal.
    • This individual can also evaluate the tax advantages associated with various options.
  • Is there a clear exit strategy in place?
    • Every company needs a written exit strategy, as well as a plan to put this strategy into action.
    • The simple existence of a strategy and a plan does not preclude adjusting either the strategy or the plan as conditions or opportunities change.
  • There are two important corollary points:
    • Having a strategy and plan is the only way to build a structure of accountability within the company; and
    • Recalling a lesson from Jim Collins’s book, Good to Great, the successful companies selected a solid strategy and stuck with it; the less successful comparators continually changed strategy and never allowed momentum to build.
  • To assist establishing an exit strategy, seek the advice of one or two consultants. There are several highly qualified exit advisors that can be researched through current professional contacts or via the Internet.

[like]

How Do You Structure a Small Company Board? Five Suggestions

Situation: A small tech company’s Board of Directors is made up primarily of founders and advisors. The CEO wants to know how other companies structure their Boards. Concerns include increasing accountability of management, obtaining an objective view of company operations so to counteract group-think, and accessing opportunities for strategic alignment. How do you structure a small company Board?

Advice from the CEOs:

  • In a small company, the fewer the number of board members and owners, the better. There are two considerations: control of the destiny of the company and complexity of the transaction in case of an investment or buy-out opportunity.
  • It is important to differentiate major from minor shareholders, including incentive-based owners.
  • What are the advantages of a Board of Directors?
    • Sounding Board – a group that can help management evaluate product and market opportunities.
    • Accountability – Board meetings provide an opportunity to assure that leadership and management are focusing on the best opportunities for the company.
    • Exit – knowledge of the industry, ties and introductions to potential acquirers.
  • Given new Federal regulations, the proper role of a Board has changed. Key responsibilities of Boards include:
    • Oversight of Corporate Governance.
    • Fiduciary Responsibility – to the shareholders.
    • Work with local or regional experts on Board role and structure. Experts can provide introductions to potential Board members that fit the company’s needs.
    • Good Board members will want Directors and Officers Insurance coverage.
  • Consider developing an Advisory Board, to compliment a stronger Boards of Directors.
    • Look at the key talents that the company is missing internally.
    • Ask friends, business partners and associates who they know who can add these talents.
    • Before kicking off a formal Advisory Board, start with informal discussions. Consider a facilitated dinner to share ideas.
    • One company has eight outside advisors who each receive 1/8 of a percent of the shares of the company for three years of service. The share offer required for service may be a function of the eventual forecasted exit value of the company.

Special thanks to the late Bill Rusher for his insight and contribution to this discussion.

[like]

How Do You Fund a Start-Up? Four Suggestions

Situation: Early stage companies often find it difficult to raise funds from traditional sources. An experienced CEO wants to help certain new companies of which she is aware in two ways – assisting them in receiving funding, and then helping to assure that they reach key milestones.  What is the best way to profitably address this ambition? How do you fund a start-up?

Advice from the CEOs:

  • Build relationships with a few select sets of local investors – venture capitalists, angels, and private investors – with whom you have strong credibility. For a retainer or fee, agree to bring them a number of new pre-vetted companies in the next year, and post-finding, help the companies to succeed and hit milestones. From the companies that you bring to funders, ask for equity in return for securing funding and providing guidance.
  • Put yourself in the shoes of the person who will pay you – what do they want and how do you deliver this for them? Develop statistics from your past successes that highlight your capabilities. Don’t be shy about your accomplishments.
  • What are you passionate about? If the answer is development – linking technology entrepreneurs to strategic partners and then being an accountability partner to assure that milestones are met – this will be your focus and your pitch to both funders and tech companies.
  • Your value is linking the entrepreneur to the funding source and being an accountability partner.

[like]