Tag Archives: Communicate

How Do You Generate Growth? Three Options

Leave a reply

Situation: A company faces three options to generate growth. The CEO wants to pursue a path that keeps employees happy and rewards them for their efforts on behalf of the company. What are the trade-offs between the options and the potential impact on employees? How do you generate growth?

Advice from the CEOs:

  • There are three options to generate growth – continuing organic growth, accelerating growth through a merger, or by being acquired. These options are not mutually exclusive. The company may pursue more than one.
  • Organic growth can be accelerated by hiring an individual who’s focus will be company growth. The offer may include a minor equity position that is non-dilutive to current employee-owners, with vesting two or more years out.
    • It is important that top staff and key employees are comfortable with the person before finalizing any offer.
    • The message to current owners: “This person will drive this business with X expectations for results. The ownership position is contingent on delivery of anticipated results. Is this works as we anticipate, it is a win for all owners.”
    • Have a buy-back agreement as part of the employment contract should the individual leave. This should guarantee the company the right to repurchase any shares at an agreed price in the case of a separation.
  • The CEO has been approached by another company interested in a merger.
    • Is the value of this option increased or decreased by hiring the person described above?
    • Should the merger option still make sense, calculate a merger split that makes sense to current owners and see whether the merger partner will accept this. If not, find an excuse to drop or defer the merger discussion.
  • The CEO has also been approached by a potential acquirer. This could expand the market position of the combined companies, provide additional opportunity for current employees, and a cash payoff for current owners.
    • Talk to the other owners. Does this option meet personal financial and professional targets? What about personal needs to stay involved in business?
    • Once these discussions are completed, tell the potential acquirer what you want and need from the deal. They may agree!

How Do You Manage Family in a Business? Three Approaches

Leave a reply

Situation: The CEO of a family-owned business finds it difficult to hold family-member managers accountable. They are responsible for significant portions of the business; however, family dynamics make it hard to supervise them. How do you communicate that their responsibilities affect both the business and the family? How to you manage family in a business?

Advice from the CEOs:

  • The first issue: Why have they not been asked for accountability to date? If you don’t ask for accountability, then don’t expect them to take this on by themselves.
  • Assign one family member responsibility for developing the marketing and sales strategy for the company.
    • Change the compensation from salary to salary plus commission. Over a 6-month period, reduce the base salary to half of what this individual currently earns and tie the rest to success increasing sales.
    • Assign this person responsibility for analyzing the markets that you serve. Are there areas that the company has not tapped into yet? What can you do to make your web site up more effective at driving sales? How can you use exclusivity on select products to your advantage?
  • When was the last time that the principals of the business met to figure out what to do?
    • Set the stage: we have split the business into two divisions and have separated the financials. This gives us more flexibility as we develop the business.
    • Show them the trends of each business.
    • Show them that if the current trend continues the business will be unsustainable in X years.
    • Facilitate a discussion that will start to generate solutions.
    • If the others do not respond:
      • Tell them that you appreciate their attendance at today’s meeting.
      • Tell them that you will meet in another two days as a team. Until then you expect them to think things over and to come ready to share their ideas.
    • Do not hold the meeting in your office or conference room. Secure an off-site neutral location with a white board.
    • If you are uncomfortable facilitating this meeting hire an outside facilitator. Ask for the input of the others in selecting a facilitator and follow their recommendation. If you work with a facilitator, start with your own dilemmas to set the tone.

How Do You Make The Best Use of Your Board? Eight Thoughts

Leave a reply

Situation: A private company has a Board of Directors that functions more as an Advisory Board than a traditional Board. For example, they do not have the power to fire or replace the CEO. The CEO wants feedback on how to interact with the Board, and how to work with them between meetings. How do you make the best use of your Board?

Advice from the CEOs:

  • Decide what you want from the Board, and clearly communicate this to the Members.
  • Treat the Board as a single entity – not as individuals. Avoid politicking individual members between meetings. Use the Board to drive decisions.
  • At your next Board meeting have a discussion with the Board:
    • Let the members know that you are concerned about whether you are using them effectively as a resource.
    • Lay out strategic elements to be dealt with over next period, and ask for their advice.
    • For example, if you are moving into a new market you need advice on how to succeed. Are they the right group to provide this advice? If not, what other expertise should be added to the Board?
    • Consider having this conversation in a special session of the Board.
  • Bring in expertise – if your industry has shifted, adjust the make-up of the Board to reflect the new realities. If you need to raise capital, look for expertise in this area.
  • Eliminate less productive members from the Board.
  • If you are looking at a new market, build an Advisory Board that is knowledgeable about this space, but who are not necessarily customers. Consider retired executives from companies in this market.
  • Additional needs that you might want to address either through your Board or an Advisory Board:
    • Financial expertise in new markets.
    • Where should you partner to make a complete offering or to supplement your offering?
  • Another CEO has a similar Board situation. In this case, the CEO makes it clear that Board members are expected to:
    • Make connections.
    • Assist in bringing in business.
    • Members are expected either to produce or they are off the Board.
    • Meetings are driven to a specific agenda with expectations of deliverables.

How Do You Recognize Employee Performance? Four Points

Leave a reply

Situation: A company instituted employee awards two years ago. These include an annual President’s Award, at choice of the President, and a Peer Award which is awarded monthly by peers for outstanding achievement.  Recently, management recognized a team within the company with an award for a significant team contribution – a company-paid trip to Las Vegas. This caused resentment among some of the other employees.  How do you recognize employee performance?

Advice from the CEOs:

  • There are two benefits to employee awards – the award itself, and, more significantly, the employee being recognized among his or her peers. Transparency within any award system is important.
  • There does not appear to be anything wrong with the award to the team. However, it is important to communicate to the company that awards are proportional to the benefit that the employee or team has created for the company.
  • Since there has been a mixed response, a message to the company is appropriate. The best way to do this is a brief company meeting, with telephone access to those who are remote. Here are some key points to cover:
    • Make the theme of the meeting employee awards.
    • Recognize the team that received the Las Vegas award and use the meeting to update the company on your rewards policy. Detail the policy, how awards are recognized, and that rewards are commensurate with the level of benefit gained for the company.
    • Deliver the full message in a positive tone.
    • Schedule 1-on-1 telephone conferences with individual remote employees who are not able to participate in the meeting.
    • Optional – follow-up with an email detailing the awards policy.
  • The complaints that you heard meant that the company did the right thing. A little jealousy isn’t bad if it shows that the company will reward hard, productive work.

Are You Planning Salary Increases This Year? Five Thoughts

Leave a reply

Situation: A company’s staff is highly paid. Historically, annual raises have been 4-5%; however some individuals are above industry salary ranges. The CEO doesn’t want to lose key individuals who would be expensive to replace. The company is planning salary increases for the end of this year. If the level is lower than historic averages they are concerned about the impact. Are planning for salary increases this year? How will you communicate your decision to employees?

Advice from the CEOs:

  • What’s the problem? Even in an improving economy your employees are lucky to be making what they do! On top of this, you need to consider profitability compared to last year as well as historic levels. Selectively share financial data with your employees as well as financial realities – your and their top priority are to keep the company healthy.
  • Gather data on salary ranges for roles in your industry. Good sources are Salary.com for national data (it may be dated) or Assets Unlimited’s Silicon Valley Survey for up-to-date salary information by industry and position. This will help you to prepare for conversations with employees who are currently paid above the range for their positions.
  • If you have employees above the range and do not want to give them raises, give them bonuses or spot bonuses for work well done.
  • Formalize your bonus system – base bonuses on performance metrics. Consider tying bonuses to net margin performance for the company or for departments that can impact new margin.
  • Whatever you decide, make announcements about salary levels a positive event.

How Do You Deal With a Deadbeat Customer? Four Thoughts

Leave a reply

Situation: A company faces a difficult situation. One of their customers placed a substantial order for custom product a year ago. They have taken delivery of some product but the bulk of the order is still in the company’s warehouse. The company negotiated a cancellation fee with the customer, but they haven’t paid. What is the best option for the company? How do you deal with a deadbeat customer?

Advice from the CEOs:

  • Because the customer is unresponsive, be ready to take legal action. Get an attorney. The initial process to prepare for a suit may cost $5,000-7,000. Therefore be prepared to sue for damages plus legal fees, with the threat that liens will be put on the customer’s business during the settlement process.
  • Once everything is ready for a suit, talk to the customer – the message is either they pay in full what they owe or you’re ready to file a suit which will cost them much more.
  • The Uniform Commercial Code may cover you for custom product. Check this out. This is important so that the company won’t be exposed to a countersuit for filing a frivolous suit.
  • A route which may be less expensive is to hire a lawyer on a contingency basis. Contingency lawyers may want up to 40% of the settlement or judgement to take a case, and the value of the case has to be large enough to attract their attention.

 

Should You Conduct Random Drug Tests at Work? Seven Points

Leave a reply

Situation: A company is in the skilled trades. When there is an injury at work, Workers Compensation does not cover the employee if they were using drugs or alcohol at the time of the injury. Should you conduct random drug tests at work? How do you make employees aware of company policy on random drug tests?

Advice from the CEOs:

  • Laws governing Workers Compensation vary by state. Be sure to get the latest update on regulations from your State.
  • The best policy is preventative. Always test for drugs and alcohol prior to hiring. Let potential employees know that this testing is a requirement of employment, and that a positive test disqualifies the candidate. A candidate has the option to disqualify him or herself rather than be tested.
  • The use of medical marijuana with a doctor’s prescription does not preclude a candidate or employee from failing a drug test. State laws regarding medical marijuana are evolving, so monitor state regulations.
  • In your employee policy, specify that you can test for drug use at any time, at your discretion. Additionally, state that you have the option to perform a drug test in case of an injury. If there is an injury on the job, have the treating physician perform a drug test on the injured employee.
  • Assure that you are consistent in treatment of employees and in how you apply your policy.
  • There should always be a reason for a drug test – tie it to employee safety.
  • As you institute a new policy, let all employees know about the policy. Prominently post the policy at your place of work, and remind employees about the policy at appropriate company or employee meetings.

How Do You Manage Internet Use by Employees? Six Suggestions

Leave a reply

Situation: A CEO notes that the company’s employees surf the Internet during work – some excessively so. The CEO has visited other companies and noted very different behavior around surfing. Does your company monitor or manage employee Internet use? How do you manage Internet use by employees?

Advice from the CEOs:

  • The first question to ask is whether your company culture allows or does not allow surfing during work.
    • Do you want it to or not?
    • Based on your desires for the company’s culture, set a policy that works for you.
    • If you want to more tightly control surfing, look at Surf Control software which allows you to create surfing rules, and allocate time allowed to surf.
  • Create and communicate your policy. It’s OK to let employees know that you’re not comfortable with what you’ve observed and that it’s time to set boundaries.
  • Act quickly, keep the message positive – for now – but make clear the consequences of inappropriate behavior in the future.
  • Don’t create double standards. Furthermore, a free-for-all atmosphere is corrosive.
  • Once you set your policy, if it is necessary to deal with a chronic and unresponsive offender, let everyone know what action you’ve taken and why.
  • Different companies around the table have created varying policies consistent with their cultures.
    • Company 1: Surfing during breaks and lunch is OK, as long as sites are appropriate.
    • Company 2: Surfing is OK – on your time and with our equipment – as long as you ask.
    • Company 3: As long as you are productive, we don’t monitor your surfing. Caveat: it is important to define and measure what is meant by “productive.”

How Do You Communicate a Company Sale? Six Guidelines

Leave a reply

Situation: A closely-held, non-public company is in negotiation for a possible sale. The CEO seeks guidance on when and how to communicate this to employees. What event would demand communication? The CEO is concerned that if the sale falls through this may significantly damage employee morale. How do you communicate a company sale?

Advice from the CEOs:

  • The trigger point for any employee communication will be due diligence. At this point, you may have a serious buyer.
    • Going into due diligence, limit updates to those who will be involved in the process.
    • Most acquisitions do not go through, so a broader communication risks disrupting the company – unless you are very confident that the sale will proceed.
    • Prior to due diligence, there is no benefit to communicating any possible sale to employees.
  • What message do you deliver to those who will be involved in due diligence?
    • We are entering a due diligence. This is an exercise that we’re doing for our own education so that we understand the value of the company. This is just a drill.
  • Keep your eye on the business and don’t be distracted by the offer.
  • Have a good idea of an acceptable sale price.
    • For a company with intellectual property or significant assets, three to five times EBITDA is a good starting point – unless the sale is a strategic buy to the buyer.
  • A possible deal is often spoiled by terms and conditions that the buyer attaches to the deal.
  • One buyer (at any one time) is the same as no buyer. When owners get serious about selling the company they will need a broker to develop multiple buyers, to advise them through the sale process and to defend their interests.

How Do You Optimize Your Buy/Sell Funnels? Three Strategies

Leave a reply

Situation: A CEO is concerned that his company’s sales and marketing efforts are not effective. Too often the sales team finds a good prospect, but fails to convert them to the company’s offering. How can the company improve its sales conversion rate? How do you optimize your buy/sell funnels?

Advice from the CEOs:

  • To improve both your marketing and sales functions, it is essential to move the company’s perspective from the Sales side of the Seller’s Funnel to the Marketing side of the Buyer’s Funnel. Only by understanding your customers can you:
    • Create awareness of their needs,
    • Acknowledge interest in a solution to their needs,
    • Consider options and develop preferences among the possible solutions, and
    • Determine how to effectively communicate with them through your marketing and sales efforts.
  • In today’s world, a quality web site is essential to your business. The objective of the web site is to convince the customer that they want to talk to or do business with you. Your web site must tell them:
    • Who you are.
    • What your values are.
    • Why you are special.
    • And it must include a “call to action” – a convincing reason for them to call you.
  • To better qualify your prospective clients:
    • Develop a scripted telephone interview that can be conducted by your sales people or less expensive inside sales/marketing people to qualify prospects before you spend the time and effort for an in-person sales call.
    • Use targeted marketing programs to leverage references to prospective customers.
    • Have lots of conversations with potential customers to understand their needs. Tailor your value creation process to address these needs.

Special Thanks to Craig Olson of MXL Partners for his contribution to this discussion.