Tag Archives: Share

What are the Trade-offs of Becoming a Company Principal? Four Points

Situation: A senior employee is on a good growth track within her company. The CEO has stated that he believes that she has the potential to become a principal of the company in the future. What are the tradeoffs of becoming a company principal?
Advice from the CEOs:
• Becoming a principal involves both greater potential rewards than being an employee and greater potential risks. Create a chart with two columns. In one, list the potential rewards of having a stake in the company. In the other list the costs and potential liabilities. This will help to weigh the rewards against the liabilities.
• Areas to negotiate include voting rights, granting of options, understanding the perks of becoming a partner, and also the possibility of legal liability for any malfeasance that the company may commit.
• If you see liabilities that concern you talk to an attorney – your own, not the company’s – about how to address these liabilities in the terms of an employment contract as a principal.
• Evaluate the potential long term value of the ownership share being offered. Does the company have a buy-back policy for a principal’s ownership share and, if so, what are the terms?

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How Do You Improve Morale and Performance in a Professional Services Company? Four Observations

Situation: The CEO of a professional service company says that his employees have been through a lot of stress over the last few years. He wants to improve company morale to boost performance and is interested in how others have done this. How do you improve morale and performance in a professional services company?

Advice from the CEOs:

  • Manage Morale and Employee Feedback – In times of economic change and adjustment, it is important to have a good handle on what employees are thinking about their jobs and the company as a whole. The use of anonymous surveys administered via computer or a neutral 3rd party generally yields more objective and honest feedback than 1-on-1s with the CEO. They offer employees an opportunity to anonymously share their concerns, and to offer constructive feedback on how to boost company performance.
  • NOW is the time to act – whether the economy is positioned for a rebound or another dip. Employees have dealt with a lot over the last few years and may be starting to look at opportunities outside the company. Therefore, it is important, right now, to put programs in place to:
    • Retain high performing employees, and
    • Communicate to employees what the company is doing to position itself for growth so that they see a bright future for both the company and themselves as employees within the company.
  • Professional services are people-to-people businesses. Focus on relationship building to increase market presence. Recognize and reward employees for their efforts to build new relationships with clients. Use these as examples to inspire other employees.
  • Many more women have entered and become an important component of the workforce. Conduct group meetings to compare the experiences of male and female sales people in relationship selling situations. These will differ between purchase decision makers in different markets and situations where one gender vs. the other predominates. Sharing experiences offers the potential to learn from and to support each other as well as to improve performance. Ask employees how these meetings should be conducted and whether they prefer same or mixed gender meetings.

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How Do You Quantify Niche Market Potential? Five Suggestions

Situation: A CEO’s company focuses on a specialized niche market. One of his challenges is that there is little public or chamber of commerce information available on the size and characteristics of their market. How do you quantify niche market potential?

Advice from the CEOs:

  • Define the product / service very specifically. To narrow and refine estimates of market size look for the low hanging fruit.
    • What are the high growth segments of the target market?
    • What are the high growth industries of the target market?
  • To determine whether the market opportunity is $100M or $500M:
    • Define the company’s market more clearly – particularly the initial beachhead market where there is the potential to gain the most traction.
    • Recognize that there may be two markets: a high end market – relatively low gross sales dollars but high margins, and a low end mass market – relatively high gross sales but low margins.
  • Contact the originators of available market data to get their assumptions, comparative data and any other findings that may not be published but are beneficial.
  • Work closely with customers to build category / industry revenue estimates.
    • Segment the most active customers and increase the company’s share of their purchases.
    • Develop web site transaction capabilities to offer the company’s line as an adjunct to customers’ web sales.
    • Establish a Customer Council or Round Table to better understand the market dynamics and to differentiate the company within the market.
  • Sell the product and services’ features and benefits to the C-level, not just to engineers.
    • Sell to the CEO / CFO focusing on increasing shareholder wealth.
    • Determine a return rate for conversion to the company’s technology.
    • Reach out to professional segments that will naturally see value in the company’s process.
    • Seek an exclusive relationship with an industry leader to quickly launch new products.

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How Do You Make Hard Decisions on Employees? Four Points

Situation:  A company needs to adjust expenses to control costs. It’s largest expense item is payroll. They are evaluating three options to adjust staff costs to anticipated revenue. Alternative A – Cut everyone back to part-time. Alternative B – Cut a few employees, but keep retained employees busy. Alternative C – A balanced approach between these alternatives. From others’ experience, which is best? How do you make hard decisions on employees?

Advice from the CEOs:

  • The unanimous response from the group – for employees, Alternative B is the most positive approach. Extended cutbacks in hours has been painful for all and led to grousing. Once staff were cut it helped retained employees to focus on their work.
  • When it comes to vendors, use Alternative A – don’t pay everything that you want to pay, but pay what can be paid consistently and predictably. It is critical as this is done to make sure that promises are kept.
  • When it has been necessary to make cuts – how has employee morale been maintained?
    • In the short term, those who remained have been happy to have a job. Longer term, companies have had to do more than this.
    • One option is to set quarterly revenue and expense targets. When gross or net margin targets have been exceeded, companies committed to share some of the excess with employees.
  • Before making any decisions, have a meeting with employees and openly ask them what they’d like to see that will help to build company culture and enthusiasm.

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How Do You Build an Effective Compensation Plan? Six Suggestions

Situation: A company hires and trains engineers from outside of their field. Their pay scale is typically below market for engineers in this field. Once the company trains them, these engineers are candidates for recruitment by other firms in the field that are considered premium employers. The CEO wants to address this situation. How do you build an effective compensation plan?

Advice from the CEOs:

  • In addition to compensation, a high-quality workplace and work experience are equally important.
  • Give the lead engineer or team compensation tied either to engineering charges or gross profit on successful projects. This can be a small percentage – but offers them a compensation upside that they are unlikely to find at another company.
  • Create a peer-recognition award like another company’s RAVE Award (Recognition, Achievement, Value, and Enthusiasm). On a regular basis – perhaps quarterly – the engineering team has the opportunity to select one of their members for this award. Components of the award may include a plaque, a free dinner or massage, or something that team members value. Ask them what they would like to see as rewards within the program.
  • A similar technique is a peer recognition box. Engineers nominate peers for recognition based on performance in a team project. At regular intervals, draw a name from the peer recognition box, with the winner receiving, for example, a gift certificate. The dollars are less important to the recipient than the recognition.
  • Focus on making the company “the place for talented engineers to work.” This can be as much a cultural situation as a place to make a great salary. The more that the company creates a fun and personally rewarding culture, the more it builds “stickiness” into the job. Ask the team for their input to shape the team and work environment.
  • Provide performance incentives for meeting quality objectives while exceeding time objectives. This beats existing cost estimates, so share some of the savings with the team working on the project.
  • Make special company celebrations a regular part of the company culture – for example, evenings out at premium restaurants and including spouses or significant others. By treating significant others well, the company creates a disincentive for the employee to leave.

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How Do You Improve Sales Skills? Four Points

Situation: A company is staffed by a team that is not made up of salespeople, per se, but individuals who have grown with the business and who understand the customer. The staff is divided into teams who serve the company’s customers but with differences in effectiveness. The CEO seeks advice as to how they can best increase their selling level. How do you improve sales skills?

Advice from the CEOs:

  • Comparing the teams, what are the differences in effectiveness in sales?
    • The individual with the most classic “sales” personality struggles with sales.
    • An individual with an HR background who knows the customer well is more comfortable with sales and is the highest producer.
    • There are instances of hoarding of information which could improve sales, but this is more frequent within teams than between the teams.
  • Dale Carnegie Sales Courses are a wonderful resource that can improve the skills of individuals both with and without a formal background in sales.
  • Engage in customer research to understand and know the customer.
    • Ask the sales leads in each team head up this research.
    • Their task will be to share their observations about customers and develop new strategies for approaching and meeting the needs of different customers.
    • This sharing should be both within the teams and between the teams.
  • Consider a sales coach.
    • Ask colleagues and search the Internet for a local resource.
    • Look for a consultant who specializes in working with individuals to overcome sales blocks, as well as to develop individualized sales styles that are effective for each person.

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How Do You Build Teamwork Across Account Teams? Four Observations

Situation: A CEO is concerned that there is a lack of teamwork across the company’s account teams. Often, they compete with each other rather than sharing knowledge and information. While some competition is good, too much can stifle growth. How do you build teamwork across account teams?

Advice from the CEOs:

  • It looks like the company needs to change its account management culture. There is a need to review the entire operation and rethink how the account teams interact with each other.
    • Schedule meetings with the full account staff – attendance required – describe the concern and encourage teams to share ideas and resources.
    • The commission structure drives performance. Tie financial incentives to collaboration. Reward the teams on collaborative efforts disproportionately to individual team effort – Y% commission for individual team effort vs. 1.5 x Y% commission for collaborative effort.
    • Increase monitoring of revenue and client acquisition – for the full group as opposed to individual account teams.
  • To keep a manageable level of competition among teams, group them into “leagues.” The leagues compete against each other for production and financial rewards. Encourage them to develop social interaction to build the league spirit.
    • A twist on this is temporary “leagues.” Shift team and league groupings from time to time to share best practices and resources. Measure the results. Track and reward the best league performance over time.
    • Be sensitive to the possibility that individuals may respond differently to league vs. individual team incentives. Those who respond more positively to the league concept can become the collectors and disseminators of best practices among the teams. This creates a status incentive to complement the financial incentives.
  • Consider the peer-programming model from the software industry. In this model, two people are occasionally teamed with one as lead and one as back-up. Let them learn from each other for a period and then return to normal operation. The same can be done with teams.
  • Does the company really have a problem? If the corporate competition leaves at 5:00PM but the company’s staff are working weekends to produce, maybe things are OK!

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How Do You Change the Company Structure to Support Growth? Ten Points

Situation: A CEO is concerned that her current company structure may not be set up to support envisioned growth. She is not sure how to differentiate managers from developers. She also seeks guidance on how to evolve the CEO role. How do you change the company structure to support growth?

Advice from the CEOs:

  • How do you differentiate and select managers versus developers?
    • Use an organizational development process to facilitate this selection.
    • First, outline the organizational structure that will evolve as the company expands. Share this with key staff and listen to their input.
    • Next, with key staff, determine the metrics. For example, what revenue or net profit before tax milestones will trigger the addition of managerial staff.
    • For each managerial position create a position description and a list of talents and skills that a candidate for that position should possess. Review these with staff and adjust with their input.
    • Let the company know the plans for the organization, and the positions that will be created as the company hits the milestones that will trigger growth. This will prompt anticipation of the opportunity and professional growth for staff that will accompany expansion.
    • Schedule a 1 or 2-day planning meeting with staff to discuss how to develop and improve both the organizational structure and operations. Continue this discussion in staff meetings at least quarterly.
  • The CEO’s role within the company.
    • The first question to ask is “what do you enjoy?” Is it being CEO, or is it leading the development teams? These are different roles.
    • Look at immediate needs. If the CEO is doing the books, it may be time to either choose or hire a COO – someone who can handle accounting, HR, and all the back-office functions.
    • Up to this point, the company has had a flat organization. The difficulty with this is that the first real crisis will take up so much CEO time that the company will fall behind in key areas currently overseen by the CEO.
    • Maturing the organizational structure is the right way to go. It will remove CEO from a “doer” role and allow the CEO to take the “leader” role – moving from working IN the business to working ON the business.

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How Do You Develop Current Managers to Support Growth? Six Suggestions

Situation: A CEO is concerned that the current management team is not mature enough to support planned growth. Sales skills are necessary to start an office, but there is a wide range of business acumen and people skills among the managers. How do you develop current managers to support growth?

Advice from the CEOs:

  • Company policy requires manager candidates to demonstrate competence in at least three of five areas: sales, technical skills, customer management, customer management, and business acumen. A coaching or mentoring process from senior management would be beneficial.
  • A minimum number of clients is required to start an office. There are important differences in the skills needed to grow and sustain an office. More evaluation of the managerial skills of manager candidates will help.
  • Another CEO shared story of a regional office with a manager who was technically competent but had poor business development skills. This created a growth issue. Clear, mutually agreed upon, written goals helped. Office growth requires good administrative performance as well as technical or sales skills.
  • Frequent group meetings with managers and a deliberate agenda help. There is merit in allowing the field people to contribute to the agenda, having a “round table” type of review, and peer dialogue. In addition to current individual weekly telephone conversations and quarterly operations reviews, there is an opportunity to modify the format.
  • Sometimes there is a double loss in taking a good individual contributor and making them a poor manager. For example, of a good salesperson may turn out to be a bad sales manager. The transition may not play to the person’s strength. A more rigorous selection process will help.
  • Another CEO shared a story of one of his plant managers who reached the limits of his competency and could not continue to grow the plant. He was moved to a support position and a new plant manager was hired. The former manager found new satisfaction in the support role and was successful sharing his knowledge and skill with the new manager and a broader audience within the company.

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How Do You Create an Incentive-based Compensation Plan? Seven Ideas

Situation: A CEO wants to build additional incentives into the company’s compensation plan. The objective is to add group incentives to the pay mix – to focus more attention on group performance rather than just company goals. How do you create an incentive-based compensation plan?

Advice from the CEOs:

  • The best policy is to be upfront, open, and transparent as the plan is presented.
  • Communication is the key to success, including the following bullet points:
    • Pay starts at a base which is 75th percentile – a generous base in our industry.
    • Group bonuses, which reflect the results of the group’s efforts, allow you allow to reach the 90th percentile or higher.
    • On top of this, profit sharing enables the addition of 10-20% of your base.
    • Altogether, management thinks that this is a generous package. The difference from the old system is that employees will be rewarded for making decisions which will benefit the group as well as the company – and you will be generously rewarded for this.
  • Once plans are communicated to employees 1-on-1, reinforce the message with a group presentation and open discussion at monthly company meetings.
  • Consider: significant changes in compensation may be best taken in small rather than large increments. Start with small incremental adjustments. If these are effective proceed to larger increments on a planned and open schedule. This is particularly true if the historic culture has been that we all win or lose together.
  • A downside of rewarding by team is that some will get rewarded for producing minimal results. Consider some percentage of discretionary payments to recognize and reward effort instead of pure parity within the team.
  • Consider longer-term results within the payment scheme – not just quarterly results.
  • People need to know that they are accountable. Let them know that a 75% base is reasonable but that the significant rewards will be for producing results above this level.

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