Tag Archives: Internal

How Do You Manage Seasonal Gaps in Project Flow? Five Options

Situation: A company experiences seasonal gaps in project flow. This makes it difficult to project both cash flow and staffing needs into the future. In addition, monthly cash flow tends to be uneven. What can they do to improve control of internal and external resources in this environment? How do you manage seasonal gaps in project flow?

Advice from the CEOs:

  • The company currently focuses 60% on consulting and 40% on internal projects, some of which produce future projects. Relative proportions shift over time, and projects can be cancelled.
  • Try to write the company’s contracts to push revenue to early stages of a project, so that there is more cash cushion to help ride out short cash periods.
  • Look for options to change the business model to increase financial flexibility.
    • If there are significant margin differentials between different types of projects this has overhead implications when resources are shifted.
    • Look for ways to allocate less expensive resources or virtual resources with a lower cost to lower margin projects. Look for opportunities to utilize remote resources if these resources cost less.
  • Adjust staff assignments to maximize payoff, as well as staff retention options. Look for project work opportunities.
  • Analyze and evaluate the ability to switch personnel between paying projects and internal development projects.

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How Do You Build the Right Organization? Four Observations

Situation: To accommodate future growth, a company has to build its management infrastructure and has developed an organizational chart to guide this process. Should preference  be given to existing personnel who are qualified and have expressed an interest in the new positions or should leadership wait until they identify exceptional outside talent for the new positions? How do you build the right organization?

Advice from the CEOs:

  • Move forward with internal talent that have been identified. The company and management know these people and the “ideal” outsider may also come with “less than ideal” baggage.
  • Create a 90-day plan with specific broad objectives for those who will be offered the open positions. Let them know that the assignments are conditional upon their ability to achieve their objectives during the 90-day period. Provide coaching, and cross-departmental training to give them the best chance to succeed.
  • For one position, there are two individuals who have expressed an interest in the decision. How should the CEO choose between these individuals?
    • Move forward with the individual who is considered the best choice, but offer training and support for the second individual so that there is a ready candidate for new positions that may open, or a natural successor should the position in question open up for any reason.
  • The company has a very flat organization chart. Individual employees work on several projects, with a different manager for each, simultaneously. What is the best way to evaluate individuals in this situation?
    • Use a 360 peer-to-peer and peer-to-boss approach to gather feedback for performance appraisals. There are a number of web-based systems available. This will provide an objective source of feedback to support performance appraisals and reviews.

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What are the Pros & Cons of In-House Software Development? Three Points

Situation: A company used internal resources for a small in-house project – developing web-based time sheets. They had obtained bids for external development but found that internal resources could do the same time for about half of what external development would cost. The trade-off was slow delivery. What are the pros & cons of in-house software development?

Advice from the CEOs:

  • Why was delivery slow?
    • When faced with a choice in priority between the internal development task vs. responding to the needs of external customers, internal delivery was pushed back in time.
  • This is exactly what others have experienced when faced with the choice between internal and external software development. Look at the trade-off, not just in terms of “cost” quoted by internal developers, but also in terms of opportunity cost. The real cost is what these resources could have provided had the same time been spent to support external revenue-producing projects.
  • Just as the company did in the first place, get external bids. If the use of internal resources is an option, compare time to delivery forecasted using internal resources plus any other internal costs. Then analyze the opportunity cost of not dedicating these resources to revenue-producing activity. The sum of these costs should then be compared with external bids. Adding opportunity cost to the analysis can make a big difference.
  • Once the company has this information, make a business decision as to the best choice. Keep in mind that unless the priorities of the internal group doing the development work are changed, they may not respond to the needs of the internal project on a timely basis. It will be the CEO’s call as to whether the developers prioritize their time to support external projects or the internal project.

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Does Your Company Have the Right Focus? Three Alternatives

Situation: The CEO of a specialty service company is curious about whether they have the right internal focus to drive their business. Their internal focus statement is to the most competitive, most responsive company in their market with high profit per job. One school of thought calls this focus the Main Thing driving the company. Does your company have the right Main Thing or focus?

Advice from the CEOs:

  • Look at the tie between your Main Thing and your financials.
    • Determine an appropriate measure of efficiency – for example, billable hours per field worker per day.
    • Look at cost per field worker versus efficiency.
    • Ask what will generate the profit to grow to the level that the company has established as the revenue target.
    • If you can boost the gross margin on services, this provides far more benefit than merely cutting expenses.
    • Look for market niches that support higher prices without a parallel rise in either expense or risk exposure.
    • Do leadership and staff have the right skills and talents to support growth objectives? What can be done to enhance skills and talents?
    • Consider the following – By increasing efficiency and margins from 16% to 20% on $10 million of job revenue, the company can increase the operating margin by $400,000. If certain staff cannot work within a more efficient structure, you may want to move them to jobs that are less critical to the business. Having the right staff in the right seats is critically important to bottom line results.
  • Look at the company’s customer selection criteria. Using the 80/20 rule – 20% of customers generate 80% of revenue and/or profits. How do you improve customer selection?
    • Rank all customers on measures of profitability of their business, payment time, and most importantly future business potential. Focus on customers with the highest scores, and “fire” low scoring customers.
  • Focus on cash flow: Look at early pay options or discounts to speed payment from large customers.
    • Incorporate a schedule of values in all contracts as an addendum to prompt earlier payment.
    • In proposals, include a payment schedule and finance the receivables through a factoring company – particularly in the case of slower paying or less desirable customers.

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What are Best Practices in Succession Planning? Four Ideas

Situation: A company wants to create a succession plan for key roles. Historically they haven’t had succession plans, but they are actively looking at candidates, skill sets, and so forth. The CEO wants to be able to make a recommendation to the Board. What are best practices in succession planning?

Advice from the CEOs:

  • Start with job and role descriptions. Select internal candidates for the positions and offer trial opportunities to assess their capabilities.
    • Test potential successors with projects to see if they can rise to the level of the higher responsibility. It may take more than one try to assess this.
    • Along the way you may discover hidden talents possessed by some of your employees.
  • Start with your incumbents. One of their responsibilities should be to identify possible inside candidates as successors for their positions, and to create a profile of qualifications for outside candidates. This should also be part of their job descriptions.
  • Succession candidates must desire the responsibility of the higher position. Don’t assume that everyone will want this. Some will be very good in their current role. Trying to force them to advance in responsibility can be counterproductive.
  • Do not assume that an outsider with a good resume and industry connections can fill the role of an insider who knows the company and its products and services.

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Can You Do Business With Competing Companies? Three Guidelines

Situation: A company has received RFPs from two companies who regularly do business with each other, but who are also competitors. The projects specified by the two RFPs might compete with each other. Under the terms of the two RFPs, the company can not disclose the existence of either RFP to the other company.  Can you do business with competing companies, and how do you protect the company if you do?

Advice from the CEOs:

  • The principal concern for the Company will be assuring that there is no violation of the CDAs that you have with each company.
    • Assign the RFPs to two different groups within the Company, with strict instructions that they must maintain their respective client’s confidentiality both internally and externally.
    • Emphasize the importance of confidentiality in responding to the RFPs to the Project Manager responsible for responding to each RFP.
  • Respond to both RFPs, but do so such that if both projects are contracted you can disclose this to both companies.
  • Prepare a set of talking points – the same talking points – to both companies and disclose the situation to both immediately after the project has been contracted.
    • Let them know what happened, share the timeline, share your obligations under your CDAs with both companies, let them know what you did internally to preserve their confidentiality, and that as soon as you were able – i.e., as soon as both projects was contracted – you informed them of the situation.
  • Companies commonly get involved in similar situations. The beauty is that you get business under either scenario. The challenge is that you must take all steps necessary to assure that the interests of both potential customers are preserved.
  • If you can successfully demonstrate to both companies that you have acted in an honorable fashion, they are more likely to trust you to do the same in the future.

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