Situation: A CEO faces challenges with clients. The first is vague customer specs because they don’t understand the product. Second is misunderstandings as to timelines. Third is insistence on strict timelines while simultaneously demanding revisions to previous work. How do you add more discipline to quotes and pricing?
Advice from the CEOs:
Is the company’s technology strategy aligned with its capabilities? Currently the company is trying to build advanced solutions in multiple international markets with a small staff. There does not seem to be the technology or development discipline to convert current capabilities into a sustainable market advantage.
For near term focus, because of commitments and milestone payments due from the key customers, focus resources on finishing the last piece of these projects. Once this is done, step back. Look at options and determine the company’s technology strategy moving forward.
The key challenge is to define ONE beachhead on which the company will focus and which they can dominate. The objective is to leverage existing engineering creativity to create a sustainable competitive advantage.
As this exercise is designed, start with a clean slate. Don’t burden the process with a lot of restrictive assumptions. Consider using an outside facilitator to help facilitate this process.
Until this exercise is completed does it really make sense to seek additional work or to commit the company to the next phases with current customers?
Once the company has selected and committed to a technology strategy, the decision process becomes different.
The objective is to develop laser-like focus on the technology. Minimize distracting the team with other opportunities.
It may be OK to lose money on development projects if this work will significantly impact or accelerate the development of the company’s core technology.
How does the company justify asking for payment for development for future projects?
First, determine and clearly state the company’s technology strategy. Evaluate all future development projects and decisions in terms of their alignment with this strategy.
Second, if a particular project is completely aligned with the technology strategy, the company may waive the requirement of payment for development. This, ideally, will be the only exception.
Ask for a limited time/scope project to jump start and define new projects. This provides proof of company capabilities and establishes its credibility.
If is it necessary to negotiate or bid, start high and bargain down to but not below the best estimate of the cost of development.
Remember that deciding what NOT to do or quote is often harder, but just as critical, as deciding what to quote.
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.
Situation: The CEO of a service company continually finds the company short of cash. They have just hired a new accountant, but it will take time for this individual to understand the financial situation and to generate recommendations to improve cash flow. How do you keep a company afloat short-term?
Advice from the CEOs:
Point #1: This isn’t just a question of controlling costs; the company needs to build the infrastructure to succeed.
If there isn’t someone on the team in a position of authority, who the CEO can trust completely, hire this person. The CEO can’t control all risks.
While the company has shrunk over the last two years, it is still a substantial company and needs professional management. To grow effectively, professionals are required in key leadership positions. If necessary, hire experienced outside talent
Look for teachable moments as challenges arrive. The CEO, instead of solving a problem, should work with employees and mentor them through discovering and implementing solutions.
How to communicate this to current staff?
Put the story together. Be able to make a clear statement to them, including the current situation and future possibilities for which the company must prepare.
Generate charts and metrics to support key points.
Use senior staff as the mouthpieces to present the story to the rest of the organization. Once they are onboard, have them help craft the message. Don’t underestimate the CEO’s authority. This is business, not a popularity contest.
Let others make mistakes – it is part of the learning process – no matter how critical the situation.
Point #2 – Return to the company’s roots.
The faster everyone accepts that a focused approach is the only way to survive, the faster the company will turn around. Reestablishing company presence in key markets with a new model that speaks to their desires makes a lot of sense.
Be very clear as to what flat-rate service pricing covers. Include this in the signed customer agreement. Don’t allow costs to creep up or it will kill the profitability of flat rate jobs.
Create an infrastructure nimble enough to adapt as market conditions change. Identify what really works and focus on this.
Situation: The CEO of a family business seeks to create a succession plan. One family member has expressed an interest in taking the reins of the company but has failed to take the initiative to demonstrate that he is prepared to take on this role. Another family member is now demonstrating both interest and initiative. How do you plan for succession?
Advice from the CEOs:
How should this situation be approached?
Do not view this situation competitively, but rather from the standpoint of what is best for the whole family because many family members stand to benefit from the ongoing success of the business.
Whatever decision is made, the successor will need support and assistance understanding both the financial and business sides of the company. This individual must also be aware of conflicts and challenges that face the business.
What else should be done to prepare for succession?
Given that there are two individuals interested in becoming CEO sit down with each individual and negotiate a clear boundary statement on what you, as CEO, can and can’t do, as well as what can and cannot be expected of you, as CEO, as the succession decision is made. This understanding should be documented in writing and signed, signifying understanding by both the CEO and the candidate. Each candidate should have their own signed agreement with the CEO.
In a family business, the CEO, as guarantor of the company, may be faced with a different level of financial risk than other family members. Both candidates for the CEO position must understand that if they accept this position, they also accept this risk.
Situation: A valuable tool for CEOs is Susan Scott’s book Fierce Conversations. This includes challenging conversations with staff. Scott characterizes Fierce Conversations as being robust, intense, strong, powerful and passionate. These are the traits that a leader must bring to challenging conversations instead of avoiding them. How do you have a fierce conversation?
Advice from the CEOs:
The first step is to master the courage to interrogate reality. This means confronting the difference between “ground truth” or reality and official truth or what we or others wish to believe. There is often a difference between the truth that we want others to see and reality. Jim Collins calls this confronting the brutal facts of our situation without losing faith in our ability to deal with it.
Be here, prepared to be nowhere else. The conversation must be your only point of focus when you are having it. Choose a location where you won’t be interrupted or distracted. Don’t allow yourself to be distracted by texts, phone calls or anything else.
Tackle your toughest challenge today – you gain little by putting it off for another day. Prioritize your challenges, and tackle the most difficult ones first. Handling these will make the most difference.
Obey your instincts – but remember that instincts are subjective and must be verified through reality checks. Trust your gut, but verify it objectively with evidence.
Take responsibility for your emotional wake – what he or she will remember after the conversation. Keep the focus on factors that the other party can control, and offer to assist. But be sensitive to how you deliver the message and how the other party responds. Don’t leave more of a mess than you had before the conversation.
Harness the power of silence – silence slows a conversation and increases your chances of making it meaningful.
Situation: Much of a company’s work is non-standard. Each customer’s solution is individualized. Finding the best solution in each case frequently requires a stretch. The CEO’s approach is to simplify the problem to its essential components and from this develop a unique solution. However, several of the staff responsible for developing solutions shy from this approach when confronted with a new challenge. How do you create a bias for action?
Advice from the CEOs:
Company culture is defined by the CEO. In this case you wish to establish a culture of innovation. This might be defined by the phrase “we don’t do simple things.” This means that you need innovators or creative people in the problem solving positions.
Consider breaking the roles apart. You need experienced and balanced but creative people to develop the unique solutions. People like yourself. On the other hand, you need methodical, reliable people to put the solutions into effect. These two roles usually require teams of different personalities. They don’t conflict, but are different.
Look at Landmark Worldwide as a resource for your staff. Landmark specializes in teaching people to expand their horizons. This doesn’t mean changing who they are, but facilitating their ability to team with others with different but complimentary talents to achieve original and effective results.
To help the team understand what you want to accomplish, bring in an organizational development consultant to help communicate your vision and assist with culture transformation.
It is important to recognize that these individuals are likely as uncomfortable with this situation as you are. This realization helps to craft a win-win solution that will strengthen the company.
Situation: A company has been approached by another company with complimentary technology concerning a partnership. The other company is young and rapidly growing, though at this time they are much smaller. The two companies are already collaborating on a project. There have been hints that this could develop into a merger. Under these circumstances, what’s the best way to develop a partnership?
Advice from the CEOs:
It’s always best to date and get to know the other party before exploring a deeper relationship. You are already collaborating with this company, so just continue on this path as you get to know them. See how the relationship and value of the partnership develops before exploring options that could result in loss of ownership and control.
Partnerships and moves beyond partnership are really about culture and values. Cultural fit is a huge question that is too often ignored when companies discuss partnerships and mergers. This requires more investigation than you’ve done to date. Wait until real challenges develop, and see how the two companies respond. Do they collaborate effectively to develop a solution or does the relationship become contentious. This will tell you whether a deeper relationship is worth exploring.
To be successful, relationships have to offer a win-win value that surpasses the cost of collaboration. There is always a cost to collaborating with another company if only in time and effort put into the relationship. Find a way to measure this cost so that you can compare it to the value received. The other company should be doing the same.
If you could buy the other company right now would you?
If you can’t tell the value of the company based on the information that you have, why would you consider a deeper relationship at this time?
Situation: A company’s employees are increasingly getting offers from other companies. They believe that they have a good team, a good work environment and offer a competitive pay and benefit package. However, they are concerned that the job market in Silicon Valley is heating up. How do you keep your employees on-board when they start receiving offers from others?
Advice from the CEOs:
Make sure that your wage and benefit scale continues to be competitive. The Silicon Valley Index, published by Assets Unlimited in Campbell, is the best local survey covering Silicon Valley and the San Francisco technology market.
Survey after survey finds that compensation is basically a hygiene factor – it has to be good enough so that needs are satisfied, but it isn’t one of the more important factors in retention. The Gallup Organization has determined that respect, challenging responsibilities, and personal recognition are much more important factors in employee retention. Be sure that you are actively involving your key personnel as leaders in formulating and updating your processes, and that there are plenty of opportunities for recognition and celebration for your staff.
If you are generating a profit, share this with the employees as an incentive. This may well be better spent in fun and team-building activities like a weekend in Tahoe for a team, or supporting their creative needs by sponsoring their efforts in engineering design competitions. Whatever is appropriate for your company, involve your employees in setting company performance goals and give them a voice in determining how achievement should be rewarded. Making them part of the process builds better long-term loyalty.
On the sales side, establish a reward incentive structure for bringing in new business for the company to prompt field personnel to develop and exercise their business development skills.
Whatever you and your team decide, be sure that your choices support your overall strategic plan.
Situation: A company has a key relationship with a major corporation. They recently completed work in Phase I of a multi-phase project which was fraught with difficulties. Now they are evaluating whether and how to proceed with Phase II. Do you continue a difficult partnership?
Advice from the CEOs:
What made Phase I difficult?
Initial work was done to original specs and on time. The partner then asked for additional work and a change to the original specs, but would not agree to pay for these changes. As a result, the company lost money on Phase I.
What alternatives exist?
In brief, you must fundamentally change the terms of engagement. You can convert everything to time and materials, so that when the partner makes changes or asks you to make changes, they pay as they go.
A second alternative is to reconstruct the project as a waterfall project with a fixed price up front. You agree to X iterations, at Y cost per iteration. Each iteration has a deadline and the work completed as of each deadline constitutes the final work on that iteration. You charge for additional iterations if the partner wants additional work after the final negotiated iteration.
A third alternative is to set a price that is 2x your estimated price, recognizing that there may be a need to change specifications during development. You will provide documentation of your time and effort. If at the agreed end of the project you have not used all of the funds budgeted, you refund the difference to the partner.
Adjust how you communicate with the partner as you renegotiate. Do not assume that silence constitutes agreement. Provide written documentation of your understanding at the close of each negotiation and invite them to correct any misunderstandings. Require that both sides sign this documentation to confirm agreement. Do not proceed until there is clear mutual understanding on all key points.
Purchase and use software to track any changes to requirements during the project. This will enable you to document both the changes requested and their waterfall effect on other portions of the project.