Situation: The CEO is moving a key employee from head of engineering to a more customer development focus. To support this, she will have to bring in or promote another employee to fill the position of leader/supervisor/manager of the engineering group. The CEO seeks advice on the best way to approach finding a replacement for this key job. How do you replace a key position?
Advice from the CEOs:
• First, it is necessary to develop a timeline for finding and transitioning the replacement. Realistically, count on 6 months to find a replacement and transition the responsibilities to a new person.
• Keep in mind that anybody you find or promote will be different from the individual who currently occupies the position, and will not handle their new responsibilities the same way as the current individual. Their motivation and their approach to their new responsibilities will be different, at least at the outset, and they will not handle their responsibilities the same way that the current individual does.
• Seek an individual, either currently within the company or an outside hire with strengths that, over time, will add significant value to the organization. Prepare for this by brainstorming and developing a profile of the ideal candidate.
• If you have qualified candidates, the ideal person will come from within the organization. This has the added advantage of demonstrating to other employees that they, also, may become candidates for future positions to grow both their skills and income.
Tag Archives: Responsibilities
How Do You Design an Effective Sales Compensation Plan? Three Steps
Situation: A young company is redeveloping its sales department and wants to develop an effective sales compensation plan. What advice do members have for the company on effective sales comp packages? How do you design an effective sales compensation plan?
Advice from the CEOs:
- The first step is to develop broad outlines to the plan:
- What salary range is the company contemplating? What can the company afford?
- What skills beyond the ability to sell will be required? For example, will the sales person require technical skills in addition to sales skills? Or will the sales person need engineering design assistance both in making the sale and in providing service post-sale?
- Who will be the ongoing contact for the customer once the sale is made? Will this be the salesperson, or will ongoing customer contact will be managed by engineering?
- The higher the skill level and both sales and post-sale responsibilities, the higher the potential salary.
- Once the broad outline is decided, set parameters and objectives for the position. The compensation plan should reflect and be consistent with these.
- Third, establish the behaviors that sales people are expected to exhibit. Any compensation plan should reinforce the behaviors desired by the company.
- If salespeople are expected to bring in high margin business, focus and scale compensation based on the margin generated by the sale.
- If an objective is to avoid customers who are bad credit risks, then pay sales people on collected funds rather than on invoiced business.
[like]
How Do You Train Others to Do Your Old Job? Four Points
Situation: A CEO has a key employee who has just been promoted to an important managerial position within the company. The task for this individual is to train others to do what he has done in the past. However. this individual feels uncomfortable training others to do what he was able to do. He feels like he is obsolescing himself. How do you coach this individual to let go of past responsibilities? How do you train others to do your old job?
Advice from the CEOs:
- This individual was promoted because he excelled in his former job. His mastery of these skills, plus his past management background, prompted the CEO to offer him a managerial position. It is critical to understand that his job and responsibilities are no longer what they used to be.
- As a manager, an individual is no longer expected to be a “doer”. The primary responsibility is now to select, manage, train, and promote others whose primary responsibility is “doing.”
- As this individual is coached, encourage him to step back and look at the big picture of his new role.
- The CEO does not expect perfection from the start. He understands from his own experience that learning management takes time.
- However, he also knows that to become a new manager requires giving up many of the hands-on activities that one used to perform. The job is no longer to do these yourself, but to coach others to be able to perform these tasks to the standards of the firm.
- Initially, this takes more time than “doing it yourself.” However, this individual now has talented people reporting to him and they will learn quickly. In a short while, it will take less time to delegate than to do it himself.
- From a big picture standpoint, a manager justifies the higher salary and greater prospects that come with a new position by training his or her team to do what used to be “their job” at a lower salary than the manager’s current salary.
- In short, in the role of manager, the better one is at developing others who can take on the skills that they used to demonstrate, the more successful that individual will be as a manager, and the more value they will bring to the Company.
[like]
How Many Direct Reports is Too Many? Five Thoughts
Situation: A young company has been growing rapidly but hasn’t been growing its infrastructure to support its growth. The CEO now has fifteen direct reports. Things are getting hectic and the CEO wonders whether it’s time to make a change. How many direct reports is too many?
Advice from the CEOs:
- It is generally accepted that the largest number of direct reports that an individual can successfully manage is ten. Beyond this and even at this number, if the reports require significant supervision it is difficult to meet the needs of the individuals and to effectively direct their multiple activities.
- The maximum number of individuals that you can manage depends upon what you are managing.
- If the individuals are very independent, then perhaps ten can be managed.
- If the individuals require any significant levels of supervision and/or training, the number goes down rapidly.
- This is both a challenge and an opportunity. The challenge is determining the right number of reports for the CEO to manage. The benefit is the opportunity to start building a management team.
- The benefit will be that by adding managers reporting to the CEO, there is the opportunity to train individuals who can take on additional managerial responsibilities in the future. As the company continues to expand this will become critical to future growth.
- Another benefit is the ability to divide responsibilities among the teams.
- For example, one team becomes the sales team, a second the Client Services team, and a third becomes the back-office operations team.
- As the company expands, there is the opportunity to add additional subgroups to the sales and client service teams. simultaneously serviced by the existing back-office operations team.
[like]
How Do You Manage Company and Board Dynamics? Four Points
Situation: A company started as a collaboration of friends. Upon incorporation the leader became the CEO, and some of the original team became members of the Board. The CEO struggles with the responsibilities of being CEO while wishing to maintain the friendships that drive the company. How do you manage company and board dynamics?
Advice from the CEOs:
- While the company was formed as a collaboration of friends, once it incorporated the nature of the relationships necessarily changed. While away from work the CEO may remain friends and close to the others; however, within the company there must be one CEO who is responsible to the shareholders for operating the company according to that individual’s vision. If the CEO and company are successful, all will be rewarded.
- Shareholders are not partners – a partnership entity is inherently different from a corporate entity based on share ownership.
- Within a corporate structure, majority control is critical.
- While one should never trample on the rights of other shareholders, having 51% is better than having 47% ownership. Majority ownership makes it unnecessary to assemble a majority to drive the company in the direction that the CEO seeks.
- That said, it is important to encourage the ideas and creativity of minority shareholders who are also employees. There is an art to recognizing and incorporating the ideas of others while the CEO, in the end, maintains final say.
- The CEO’s job – and preferably within a small company as both Chairman and CEO – is to develop the CEO’s vision of the company and drive this through the organization.
- Having a key employee report to the Board rather than to the CEO is likely a mistake. Employees do not do well long-term reporting to a committee.
[like]
How Do You Avoid Payment Pickles? Five Options
Situation: A company has clients who are not paying on schedule for projects. If the company stops or delays work, the clients say this is why they aren’t paying. The CEO needs to find a solution that clarifies and codifies responsibilities of both the company and its clients. How do you avoid payment pickles?
Advice from the CEOs:
- Look at the contract templates and adjust them to better meet the company’s needs.
- Change the contract obligations – so that the company is not liable for failing to complete on time when the client does not pay.
- Increase the frequency of client payments so that the company is paid on a more timely basis.
- Document all payment promises in the contract, including clear penalties for untimely payment and the company’s ability to stop work if payments fall short.
- Look for an insurance product that insures the company for clients’ failure to pay – include the cost of this policy in the job quote.
- Always hold back something critical until the final payment is received.
- Rebrand the company to improve the business proposition.
- Highlight the founders’ credentials – use this credibility to differentiate the company from the competition.
- Expand the company’s presence in customized solutions, tailored to meet customers’ needs.
- Work the high-end solutions network to get to the high-end clients.
- Obtain D&Bs on clients before signing contracts.
- Find the founders passion and focus on this to build the business.
- Build what the customers want and deliver on schedule.
- Present multiple options to new clients – a basic option for a competitive price, with add-ons similar to car dealers who use add-ons to boost the value of the sale.
[like]
How Do You Free Up More of Your Time? Four Observations
Situation: The CEO of a successful small software company is snowed under by day to day tasks. She wants to focus more of her time on business and infrastructure development. However, the company’s departments are not strong enough to run without her supervision. How do you free up more of your time?
Advice from the CEOs:
- The first priority is to develop infrastructure that will allow the CEO to focus on strategic development.
- To build this the company needs the right people to do the work.
- Look at the daily task list and develop or hire new managers to oversee day-to-day non-strategic functions.
- For example, offload payroll and back-end accounting to a bookkeeper.
- Look at the gaps between where the company is now and where you, as CEO, want to be in terms of your time and responsibilities:
- In addition to a bookkeeper, hire an experienced executive assistant – to keep you focused as CEO.
- The company is growing rapidly. It is time to hire a human resources manager.
- The company’s cash flow projection for the coming year indicates a substantial surplus.
- Use this surplus to hire infrastructure.
- In front of key clients, keep the impression that you are available to them; however, this is primarily for client relations. The CEO doesn’t have to do all the work demanded by clients.
- Use the lawyer / rainmaker model. The rainmaker maintains key client relationships; however, the rainmaker has staff do 90% of the work.
- The 7 States of Enterprise Growth Model indicates that the company is now in what’s called a Wind Tunnel. The critical activities in a Wind Tunnel are:
- Letting go of methodologies that no longer work and acquiring new methods that do work, and
- Hiring and training additional staff.
[like]
How Do You Transition to New Management? Four Insights
Situation: The CEO of a small technical company is in the process of handing off responsibilities to a new President who lives in another state. The CEO and President have known each other for a long time and have a strong relationship. The CEO will hand off several key responsibilities immediately, while retaining financial and HR because of the President’s location. How do you transition to new management?
Advice from the CEOs:
- Most of the current hand-off plan concerns non-technical areas. The next logical area to delegate is Customer Support.
- Establish a trigger process for new requests for support that keeps key parties informed and meets customer needs on a timely basis.
- Think about bumping up Customer Support to a more proactive Customer Relations function. This is important during economic downturns when trade show attendance is low.
- Next in line are Installation and Installation Planning, since the new President will already have Installation Support.
- Think about Technical Support. This could be combined with Customer Support and makes sense because many customer support questions come through technical support.
- Beef up the financial function to support future growth. Growth brings new complexities into the picture. Consider handing this off to a part time professional who can provide regular updates of the company’s financials. A professional can also look at the structure of the books and suggest changes that will provide more insight into company operations, opportunities for savings, and sources of funding to support planned growth.
[like]
How Do You Prepare for a Difficult Conversation? Three Suggestions
Situation: The CEO of a family business faces his most difficult conversation. One brother, who makes more than anyone else, is not living up to his responsibilities. A long-term key employee currently handles most of this brother’s responsibilities at a modest salary. The CEO is intimidated by this task. How do you prepare for a difficult conversation?
Advice from the CEOs:
- Call a meeting of the three brothers and the key employee. Propose putting all four into a pool. The key employee is treated like a brother. Ask: what is a fair way to split the pie and to build incentives so that each makes what their father, who built the company, made? Make it clear that all four members of the team want the same earning potential and that one team member is not more equal than the others.
- Prepare and script this meeting ahead of time.
- Don’t allow the under-performing brother to play the others off against each other.
- Know what must be said if this brother says he will leave.
- The CEO must stick with the message. If the underperformer doesn’t like the message, he is not indispensable. A replacement could be hired for far less than he is currently being paid.
- What are the key points for the conversation?
- Turn the question around – the brothers all joined a company model that no longer works – the three brothers, combined, make less than their father made.
- Ask the underperformer – what are the proper incentives? What is fair? Is it fair that for years, he has made more than anyone else?
- It’s time for each member of the team to work together to figure out how to make what their father made in this business.
- The brothers have supported the underperforming brother for years. Any old debts that were owed have been paid.
- Ask the underperforming brother for his voice in how to expand the company and make it more profitable.
- This is a new game. If all members pull together everybody wins.
[like]
What is the CEO’s Job? Is It for Me? Four Recommendations
Situation: A CEO wants to significantly grow his company, either to prepare for an IPO or to become an interesting takeover target. However, he struggles with delegation. When responsibilities are delegated, the job isn’t done to the CEO’s satisfaction and he ends up doing the work himself. He asks: what is the CEO’s job? Is it for me?
Advice from the CEOs:
- In
order to grow the company to the desired level, it is necessary to hire
competent people and delegate. The most important position will be a COO with
deep experience organizing people and functions.
- The CEO’s role is to provide the vision and strategic objectives for the company. The COO’s role is to assure that the right people are in place or hired to do the work necessary to realize the vision and operational objectives.
- The CEO-COO relationship will be pivotal. If there are specific ways that the CEO wants to see things done, these must be clearly delineated in discussions with the COO.
- The role of the COO will be to organize the company to reach the growth objective.
- Hire
a competent, talented HR person to plan the organizational development road
map, and the positions that must be filled in stages to reach the goal.
- The growth plans of the company are ambitious. Absent significant change, growth will be limited to a fraction of the current objective.
- Working with the COO and HR person, build the organizational chart for the size company that the vision imagines. Fill the chart with current personnel where the fit is appropriate. Determine where the gaps exist and build a plan to hire these people in stages.
- The E-Myth Revisited by Michael Gerber provides an exercise to accomplish this.
- Hire a high-level assistant to help in areas where the CEO finds it difficult to let go. This will be another key relationship and will be important to learning how to let go.
- Hire
a CEO coach.
- This will likely be an individual with significant experience who has achieved the growth envisioned by the strategic plan.
- The CEO Coach will help to draw lines between delegating and micromanaging and will help the CEO to learn to effectively delegate to qualified people.
[like]
