Situation: A service company has been debating internally about which metrics they should use to evaluate company performance. This is important because it ties both to strategy, marketing, and bonus compensation. The CEO seeks advice based on the experience of others. What are good metrics for a service company?
Advice from the CEOs:
For a service company the key goal is delivery of a consistent quality product/service to the customer – as a company rather than as individual performers.
Instituting regular activities or meetings to infuse the company’s “special sauce” to projects will help assure consistent quality of service delivery.
To generate support and consensus within the company, ask employees what they would do to develop metrics to assure delivery of quality.
Have a clear view in mind of what the metrics should achieve – the result rather than the fully detailed process – before initiating this exercise and articulate this result as the desired objective.
Remain open to ideas from the group.
Use the exercise to establish a shared vision and to generate the best possible set of metrics to support the desired result.
Once both the metrics and a methodology for delivering the result have been selected – for example, weekly performance review meetings if this is the answer – then institutionalize these. It may be best to start with a “trial process” to refine details of the process.
An efficient regular process review meeting may save the company more than the 3 hours that it takes (preparation + travel + meeting) for this process.
If there are many “islands” of employees working at different company locations, consider organizing meetings into geographically convenient archipelagos.
Establish, within the service review process a “patented” company process that focuses on quality delivery. Publicize the existence of this process (not the details) when speaking with existing or potential clients. This is a key part of the company’s essential differentiation and “value add”.
Establish a definition of quality for the company.
Develop this as the company’s vision.
Develop the methodologies to consistently deliver this quality.
Long-term, drive this to professional training systems to consistently produce this quality.
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
Situation: A CEO wants to increase awareness of company products and services. They have a strong customer list and a long history of successful projects. How to they increase awareness among potential customer decision-makers? How do you boost awareness of your products and services?
Advice from the CEOs:
There are three stages to a good awareness strategy:
The company already has great products and services. Hire a quality PR Firm and have them highlight this for company trade shows, blogs, YouTube, etc.
The objective is not broad awareness but getting to specific decision-makers – what will get to them?
Generate broad awareness of company capabilities through entertaining videos to excite the team members of prospect companies who report to the decision makers.
This is a complex strategic sell. If recommenders think that the company’s stuff is cool they will pass the word – create a campaign to encourage this.
The priority is to close more business. Why not brand or co-brand and promote the company’s products? This may ease reaching the target decision makers.
The PR advice is good – but how will this play to the crowd that’s writing the check?
What makes current customers comfortable working with the company? Is it repeatability? Credibility? Creativity? Referenceability? Decide which it is and highlight it.
Everything that the company is doing on the “cool” side falls under the marketing strategy. Efforts in PR and sales must support this marketing strategy.
Consider a campaign on YouTube – How do the parts of “Sally” work? How did we design it? This attracts a smaller audience, but it may be the right audience.
Within company capabilities, there are two distinctions to clarify – both are important but require different emphasis:
Situation: A company is facing the expiration of the principal patent for its main product. There are subsidiary patents which still have life. Currently, there are no competing products, but several companies understand the technology. How do you plan for patent expiration?
Advice from the CEOs:
Think of this as a two-step process:
Step 1 – Step back and look at what the company has:
Patents – including the claims that have been awarded on all company patents.
Facilities – capable of manufacturing current products, but also additional products, perhaps with a minimum of additional equipment.
People – competent staff running manufacturing operations, and tight office operations.
Step 2 – Loot at where the company could go and evaluate the markets where the existing technology is applicable:
Work with outside, imaginative people who can take a fresh look at the options.
Looks carefully at the claims in all the company’s patents.
What do they cover?
Is there an opportunity to extend current claims through process patents?
Caveat: a company can file for a process patent on anything that has been for sale on the market for less than a year. However, if they have been selling a product covered by this application for more than a year, they cannot.
Look at other markets – companies that could license the company’s technology, or with whom the company could partner to provide new consumer-oriented products:
Is there inexpensive, affordable equipment that would enable the company to produce additional products in the current location?
Think outside the box: what business is the company in? Think more broadly than the current market about where high value opportunities exist. These can be low to medium volume, high price/margin or high-volume lower price/margin.
Patents are not the only protection – trade secrets also work. 3M’s primary IP strategy, particularly on their adhesives, etc. is through trade secret – both for low and high-volume products.
“Product” patent extensions have limited utility. They are easy to design around. “Process” patents have more utility. These can be licensed at low cost per application in high volume applications and provide a nice royalty reserve stream.
Situation: The CEO of a new company is struggling to generate sales momentum. Part of the issue is adequately productizing their current offer. A second issue is building a good sales team and sales momentum within the team. How do you productize an offer?
Advice from the CEOs:
The issue may be that the company is regarding its product and the sales process too narrowly. Look at the sales process in new and different way.
Role play the current sales-to-close process. Have salespeople document what they do. Look for a product concept that appears from this exercise.
Try different models to determine what works best at the company’s current stage of growth.
Position the company’s ability to deliver outcomes. Make it risk free if nothing is produced. “Here’s our package – it costs nothing if we don’t produce results as promised.”
Consider specializing in services that enhance other companies’ sales – a need that is always present.
Look at the car dealership model – lower level salespeople qualify prospects and bring the qualified prospects to more experienced colleagues for the close.
How is the company currently positioned – as a generalist or a specialist? Potential clients more often look for a specialist to help them solve specific needs.
Conduct local surveys to help define prospects’ and clients’ top needs.
Start developing and advertising specialty areas. Add to the list of specialties as the company expands.
To build the sales team look at younger salespeople currently with competitors. If these individuals have been recruited right out of school, they will often look for other opportunities after a year or two.
Target good salespeople who are currently employed. Tell them that the company is interested in getting to know their business and look for salespeople who are good at selling themselves as well as their offering.
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.
A company is losing billings because individual billings are getting lost in
their process flow. Requests for enhancements come from clients to Project
Managers. Project Managers take on development of the enhancements but are
sometimes too busy to keep track and don’t report their work to the billing
department. How do you improve quote to collections flow?
from the CEOs:
appears that two processes are missing:
formal trigger mechanism to assure that a PO is in place BEFORE Project
Managers undertake enhancement work, and
are incentivized to assure that the client is billed and revenue collected for
the work performed.
the process and do not allow Project Mangers to initiate any work until a work
request is logged in the billing system and a PO is received from the customer to
cover the expense.
a process to track customer requests, estimate development and transmission to
billing, forwarding of estimates by billing to the customer with a request for a
PO, and upon receipt of PO authorization by billing to initiate work.
can all be tracked and managed by most accounting software packages.
Facilitate tracking of
actual expense vs. estimate;
Tracking of requests
for which no POs are received, for client follow-up; and
Tracking of enhancement
requests to guide future product development.
Account Managers to track and manage the process.
an Account Manager receives a commission for enhancement work they will have an
incentive to keep track of all ongoing work, both for timely delivery and to
assure that the customer invoiced for the work.
paid to the Account Mangers will be a small percent of the extra revenue collected.
improve process management, schedule regular meetings to review all enhancement
and other work being done for clients. Review and assure that all work has
accompanying POs, that the work is being completed on a timely basis and in
line with original estimates, and that the company is invoicing and being paid
for the work. Empower Account Managers to organize and conduct these meetings. Their
incentive will be the commissions they will collect on payment for the work.
upgrades and a certain number of enhancements into the product price.
enables to company to increase prices and to collect prepayment for
enhancements and upgrades that may or may not be requested.
the process outlined above to track enhancements which are credited against the
prepaid accounts, and to assure that enhancements above the prepaid limit are
Situation: A technology-based company has a very successful product in a niche market. The team has been brainstorming about additional markets into which the product could be introduced. The only experience that the CEO and team members have is with the existing market. While other markets are appealing, they lack the experience and contacts to penetrate new market opportunities. How do you introduce a product into a new market?
Advice from the CEOs:
Hire someone, either an employee or a consultant, who intimately knows and can introduce you to the new market. If you have more than one good candidate consider hiring them both.
Start with clients that you already serve in your current market but who also serve the new market. This can provide quick wins and proof of concept. Overlap is important because you will have a shorter sales cycle with these clients.
Another company moved from on-site consulting to turn-key services. They found the purchase process to be completely different. Originally, they were unprepared for this, so the transition took longer than it might have.
Talk to existing customers and learn about their companies’ purchasing processes to organize your fact gathering and strategy.
Read case studies of other companies’ experience moving a single platform between markets.
Another company moved from niche photography – holiday photos – to photos for Fortune 500 companies. This was the same expertise, but the market and decision processes were different.
Key to the successful move was understanding the people in Fortune 500s who were making the buy decision and the structure of their decision process. The CEO of this company registered for conventions attended by client prospects. This provided a quick way to meet and learn about key people and their decision processes.
Situation: A CEO feels like he is on a roller coaster ride with unpredictable revenue and processes month to month. His ideal outcome will be to be able to go on vacation for 4-6 weeks, and have the business running better when he returns than when he left. Have you managed to achieve this? How do you create consistency in a business?
Advice from the CEOs:
Make your managers live up to their titles.
Insist that they go to each other to solve problems first, instead of always asking you.
When they ask a question, answer how to solve it – but don’t give them the solution.
Require them to present solutions rather than 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.
You should not be doing jobs or tasks that are really your employees’ responsibilities.
When you start to delegate, it hurts for a while but it will work itself out.
What has been the impact on other companies when they’ve made these changes?
Businesses have become more diversified.
CEOs are focused strategically vs. tactically.
Businesses are more successful and profitable.
CEOs enjoy coming to work again.
How do you work with younger workers, millennials?
Allow flexibility – where appropriate – on hours and how they do their jobs.
Responsibility will vary by pay level – with the understanding that higher pay equals more responsibility and most likely longer hours.
Situation: A company is a professional organization with exempt employees who sometimes work extra time. Some employees are fine working 50-60 hours per week, others are not. The latter want comp time in exchange for the extra hours worked. What are appropriate policies for comp time?
Advice from the CEOs:
When weekend duty is called for based on company needs, one company swaps dates to give the affected employees time off during the week. On the other hand, if they need extra hours to get their normal job done, this is part of the job and does not merit comp time; particularly if other employees manage similar work during regular hours.
What about on call duty? If this is a regular part of the job, particularly if it is not frequent, it’s just part of the job. However, you may want to consider a spot bonus for special duty.
Do not allow employees to accrue unlimited personal time off – PTO. Start limiting what you allow them to rollover and give them time to use it or lose it.
Look at the individual, what is happening and their work processes. Help them to save time if their processes need to be improved.
People sometimes feel that they are “entitled” with no justification. Rate your employees A, B and C. Inform them of their rating, and the reasons for it during their regular reviews. In a tight job market C’s either upgrade their performance to B or A, or they become candidates for replacement.