Fire Your Customer!!

April 9, 2014

Have you ever considered firing a customer? Does this make sense?

A few years ago, I was having lunch with one of the owners of a large service organization. I do not know how the conversation turned to customers, but he started complaining that he has some customers who were calling in fairly often asking for advice or requesting some relatively minor additional work. The owner felt that the time involved was not significant enough that he could even bill for the services. Also, some customers had been with the firm for a long time and were not paying current pricing. And while my luncheon guest’s company had grown significantly, these customers’ businesses had not grown. When I suggested that he fire those customers, his first reaction was that he could not do this. However, he came back to me about six months later and told me that he had fired some – and it worked out well for both parties.

How many customers do you have who are calling often with minor complaints or asking for price adjustments? Or returning shipments? How many do you suspect are using other vendors for the same product and services and only come to you to get a better short term price or product or services that are currently unavailable from the other vendor? Is there one product or service you provide that they cannot get anywhere else but they do not purchase your other offerings? Do you have trouble getting paid on time? Are they calling just to “pick your brain?” Are they just rude or unpleasant to you and/or your employees?

The maxim is that the customer is always right. You would like for the customer to think that, but in reality that is not always true. At times you must protect your company and reputation by informing the customer that he/she is wrong. How many customers do you have who push that maxim too far?

Do you measure your profitability or margins by customer? These should be measured in dollars and in percent to sales. Are there some that always seem to be at the lower end of contribution? If so, you need to ask yourself why. There may be legitimate reasons: for example very large volumes. If you cannot gradually increase pricing to get them up to your company average, should you keep them? Are there long term relationships that are important? If so, they should be willing to pay you more.

An argument against firing your customers is that you cannot afford to lose the volume. Even if margins are lower for this customer, you may feel that their business is still helping to cover your fixed costs and hopefully adding some profitability. But you must also evaluate how much time you or your staff has to spend on dealing with this customer’s issues. Would their time be better spent on developing new customers or better serving other existing customers?

If you have decided to “fire a customer”, how should you go about it? An easy way would be just to raise pricing. But what if they agreed to your new pricing? Are you willing to put up with the other disruptions?

Another way to fire a customer would be to inform them that their business no longer fits your business goals. If you use this reason, you must be ready with a valid response if they ask for further explanation.

And the final way to fire a customer would be to be honest with them and inform them of the problems that their relationship has caused your staff and total business relationship. If may be that the owners or senior managers may not be aware of the way their employees have been treating your company. If this is happening to you, it probably is occurring with other vendors. Could this cause a change in their practices?

This is a very difficult decision and can only be made after serious analysis. Short term, there probably will be an impact on your profit results. However, in the long term profitability should improve and your employees will be pleased not to have to deal with a troublesome customer any more.

Hiring the Best

March 7, 2014

I have written about the importance of hiring the best employees for your company. Bradford D. Smart has developed a concept: Topgrading. Dr. Smart states that employees should be classified as A, B, or C, with A’s being the highest caliber. As you work to develop your organization, he recommends that hiring or promoting should initially be only for the top positions and the company should strive to hire as many A’s as practical. Then allow these managers over time to promote or hire their reports. His experience has proven that A’s tend to hire A’s. And A managers can develop some B’s and C’s to become A’s. While this will take a long time it is a 12 step process that will enable a company to hire employees where 70-80% of these hires will be superior performers but not all A’s. The process will upgrade all employees. Historically, only 25% of the new hires are superior performers for larger companies and much lower percent for smaller employers.

You do not have to go through his full process, although reading his work would be beneficial. These are some recommendation from him and other sources that you can start with today.

Does your company have a job description for each position? Not only should it have the tasks defined in detail, it should indicate how performance on these tasks will be measured and how often. Are there any of these skills that the prospective employee must have to be considered for employment? Which are trainable? If so, how will the training be accomplished?

Many hiring managers place primary emphasis on the resume, with some emphasis on the interview. And often the deciding factor was whether you liked the person or not. Resumes definitely should be downplayed, as recent surveys have found that 50% of all resumes include falsehoods. More people are using resume writing services, and these writers are very adept at highlighting only the best points. This is to be expected, and should be recognized as a given in the process. The resume has done its job when it gets the individual the initial interview. While they are important for the initial screening, they should not be a primary factor in the decision process.

Interviewing is absolutely critical, and you must recognize that, with all the pre-employment/interview training and coaching, these interviews can be faked. You can no longer just ask the interviewee to talk about his past job or jobs. Look for gaps in their employment which may not be on the resume or may be glossed over. Develop a set of introspective questions; ask the person how he/she dealt with some issue in the past; discuss some of their accomplishments and, more importantly, some areas in their history where they may not have performed as well as they could have. Find out what they like to do outside of work. During the entire process be aware of the non-verbal signals you are getting. If possible, don’t be the only person interviewing this individual. Have another employee(s) interview him or her even if they may be at the same managerial level in your company. You could consider team interviews, but they do have some issues.

If it is a critical position definitely consider some pre-employment testing. There are many good relatively-inexpensive tools that can be purchased on the internet which will give you an analysis of the individual that you can never get in an interview. I am a proponent of DiSC, but there are many others, including Myers-Briggs, Berke, and Chrysalis.

When you ask for references, it is a given fact that the references you are given are the best the prospective employee has. How do you get solid information, especially with the legal restrictions on the information that can be given by the individual giving the reference? Always ask if they would hire the individual again and pause after the answer to see if you get more information. Ask open-ended questions and pause to wait for an answer. Try to ask a few questions that the person giving the reference may not be able to answer. If that happens, ask if someone else may be better at answering that question. Talk with other people in the industry or local area that may know the individual.

One of the immutable laws of management is “Packard’s Law.” No company can grow consistently faster than its ability to get enough of the right people to implement the growth, and still become a great company.

Strategic Planning-Why and How?

January 29, 2014

It’s the beginning of a new year.  If you haven’t already done so, your strategic plan is due for updating.   Strategic Planning is critical for organizations.  Your plans should be updated at least once a year and more often if market conditions could have a dramatic impact on your direction.

Companies that consistently use strategic planning are more successful and are at the top of their industry.  Studies have proven that companies with plans are 12% more profitable, and 64% state that they do a better job of meeting their short term goals because these goals are fully aligned with the company vision.  Strategic planning helps companies to be more responsive to change, as the planning process and analysis helps them to anticipate various potential changes.

The plan takes quite a bit of time and involvement from many members of your team.  From the very start, the owner/president of your organization, or some other very senior person, should be in charge of the process.   Plans can be developed internally, but it is best to have an objective facilitator who has strategic planning skills.  This individual is only the facilitator; he does not develop the plan.

Generally, the team is made up of your senior managers, representing all major disciplines within the company.  There will be different perspectives.  The proper size of the team will be hard to determine.  You need sufficient members to get a good cross section, but the larger the team, the more difficult it will be to manage.

Ground rules must be established as there will probably be some tense discussions.   Never attack the person, only the problem or suggested solution.  Only speak when you are adding value to the conversation.  No outside interruptions of any kind should be allowed.  Also you will probably recognize that there are a few “sacred cows” where people have gotten emotionally involved with their product, programs, staff, etc.  Your team will have to get beyond those.  Subjectivity is critical and an honest perspective must be presented.  All the cards must be on the table.  An outside facilitator can be very helpful in getting through these types of issues.

Be open to any ideas. Give everyone a chance to list their ideas without any team discussion.  List all these ideas and each person should vote for his or her top three.  Consolidate the voting, present to the team the top ones that should be the focus of your strategic plans.

If you are doing the plan for the first time, the initial step will be to define the core values of the corporation:  the why you are in business (not to make money)-the heart of the company.  These should never change.

Next, a critical and important step is a SWOT (strengths, weaknesses, opportunities, and threats) analysis.  This must be brutally honest.  Where do you stand verses your competition?  What does the potential market look like?  If you do not answer these questions, you are wasting your time and your plan will be “junk”.

Your next step should be to establish a BHAG (big, hairy, audacious goal).  That makes is easier to establish major long term goals (again only a few), which are broken down into shorter term and more specific goals that are achievable in some specified time frame.  There must be measurement points (Key Performance Indicators or KPI’s) where progress is evaluated at frequent intervals with numerical goals or, if the goals are more general, a % of completion measurement.  Responsibilities for implementation and separate measuring processes must be assigned to specific people who have authority in the organization.

You must identify the major opportunities or solutions to significant problems.  Keep these to a few major issues.  You cannot effectively deal with many.  Be sure they are well defined and, if possible, come up with a unique name or acronym for it, so everyone will always be sure of the subject you are discussing.

Once the goals are selected, the real work starts in developing the elemental steps.  Most plans are developed for 5 years keeping focus on the BHAG.  Once the longer term goals are established, the next step is to define the intermediate targets or subordinate goals that will be required to meet those goals.  These intermediate targets should cover three to five years and should use key performance indicators (KPI’s) to measure progress on achieving the goals.  The intermediate goals are further broken down into more specifically-focused annual goals and measurements.  The next step is to define quarterly goals and measurements.  And keep the number of goals limited.  KPI’s should be measured routinely to insure that the company is achieving its goals, especially for the shorter term goals.

Once your plans are completed, communicate, communicate, and communicate.

Strategic planning is a very critical process that is challenging and must be effectively managed.  It will lead to a more successful company.

How Can A Mentor Help Me?

December 9, 2013

We often read articles that strongly recommend that individuals/managers recruit a mentor to help them reach their maximum potential; to maximize their own success, as well as their organization’s success.  Many of our most highly respected leaders had mentors including:  Warren Buffet, A. G. Lafley (P&G), Brian Tracy, Steve Jobs, Jim Collins, Arthur Burns, and Richard Branson.   Branson states that his mentor pushed him very far outside his comfort zone and was the driving force in making Virgin a successful startup.  Mentoring has been documented since Ancient Greece:  Alexander the Great had Aristotle, and Homer’s Odyessy included the character Mentor.

An English study determined that entrepreneurs who had mentors had a 70% success rate with their start-up company after five years; compare that to the 35% success rate for those entrepreneurs who did not have a mentor.

“Mentoring is to support and encourage people to manage their potential, develop their skills, improve their performance, and become the person they want to be.” wrote Eric Parsloe, of the Oxford School of Coaching and Mentoring.  These personal improvements carry over to the management of their company.

The most effective mentors in business are individuals with a broad background of experience, often having been in cross functional roles, and with a full understanding of business practices.  They have been trained in the “school of hard knocks.”  And while it is not necessary, it is helpful if they have experience in the same or similar industries..  You will note that some of the previously mentioned individuals have had mentors outside their industry.  Your mentors will have a genuine concern for you and/or your company’s best interest, and will not influence you toward their own interest. They must be ruthlessly honest, and be able to adjust as situations may change.  They will hold you accountable by setting achievable goals and mutually agreed-upon expectations.  And most importantly, the relationship must be based on mutual respect and trust.

The mentor can teach you much faster than you can learn on your own.  The experiences, stories, and guidance they can provide will give you much more knowledge.  This knowledge you inherit will help you navigate through your experiences.  Everyone needs someone to bounce ideas off of.  You should be able to test your “off the wall” concepts with your mentor.

In addition, the mentor may be able to introduce you or your company to other people or companies that you would not ordinarily meet.  They can help you expand your network of influence and add customers to your company.

Mentoring sessions are informal sessions which are better “face to face” and over a sustained period of time.  A mentor is not a consultant:  the consultant is generally there to solve a specific issue; while a mentor will help you become a more effective person and leader, and will help direct your growth.

This is not a true partnership, as the mentor will push the mentee to become more self-aware, to explore new ideas, to challenge, and to insist that the mentee take responsibility for their personal direction and their company’s direction.  The mentee will be pushed outside his/her comfort zone.

The mentor cannot be a family member, someone with whom you have a direct business relationship, and generally not a friend due to the necessity of total honesty.  He/she should be from outside your company and/or circle of relationships.  In large companies, it is possible to have an internal mentor, but this person must be totally outside the circle of influence that relates to the mentee’s job.  And generally it does not work as internal politics become involved especially if the relationship is over a longer period of time.  In some companies, mentors are assigned to younger high potential employees, but this is actually more for training and development, because the relationship is often one-sided with the mentor in control.

You do not need to hire a mentor; it could be someone for whom you have a lot of respect and may have known for a long time.  It could be someone in your industry whose business is far enough away that there would not be competitive issues. And it cannot be stressed to often:  it is critical that this individual be totally honest and not afraid to ask the tough questions.

Being a mentor is beneficial.  By taking another bright person under your wing, the mentor will not only help the mentee, but the mentor will also find that they are learning new things.  Verbalizing their experience and pushing for results will refresh the skills of the mentor.  The mentor will also gain insights and perspectives from these future members of industry.

Tom Brady is a very successful quarterback.  How much of his continued improvement can be attributed to Tom House, his mentor/coach?

Your Competitor – An Ally?

November 20, 2013

Does this comment make sense or not?  We want to knock our competition out of the market so we can be more successful.  But, isn’t competition a good thing?

Competition actually improves the marketplace as it helps all the companies improve.  Those that do not improve will eventually go out of business.  Your competitor may create and innovate by coming up with new ideas, services, products, or marketing strategies that you may not have considered.  These actions should push your company out of complacency and suboptimal performance.

We should want to learn from our competitors.  Generally, we look for what our competitors do wrong and hope they will continue on that track.  With that mindset, we can become convinced that our company is better than the others.  We may become complacent and even arrogant. Our attitude is that we are the best and will remain that way.  But we need to ask ourselves: what are they doing better?

When we recognize that competitors are gaining ground on us, we should compare this to our company and determine what we must do to regain our market position and even grow it.  It is hard to admit that a competitor is better, but when we do, we are incentivized to improve.

While it is definitely easier to do competitive analysis in the retail environment, it is possible to do in any business.  In the early days of Wal-Mart, Sam Walton frequently visited competitors; he also required this of his managers.  His managers were to find one thing that the competitor was doing better than Wal-Mart.  This practice is still continuing today.  Sam Walton wrote in his autobiography that he probably spent more time in K-Mart stores than the CEO of K-Mart.

Why not take the ideas of your competitors and improve on them?  They may have become complacent and are resting on their current success.  If all of you have very similar products or services, step back and determine if you can really improve your service or product, and not just upgrade it with bells and whistles.  If you can reduce your costs, that’s an added bonus.  Always have your team trying to build the “better mousetrap.”

Is your interaction with your customers better than your competitors?  One way to get an indication is for you to call your competitors.  How do they answer the phone?  Is it a person or a machine?  How cheerful are they?  While this may seem insignificant, attitude can tell a lot about how a company deals with the customer.  One true example:  in a company I owned:  the production employees good-naturedly put a broom in our customer service manager’s parking space, because they joked with her about being a witch as she pushed them to meet customer deadlines and product quality.  The customers who visited the plant loved it.  They knew she would work for them.

When your sales team or customer service is meeting or talking with an existing or potential client, they should make note of information received about the competition.  Stay up to date with all trade information and publications. There is a great deal of information available without participating in illegal activity.

Do not worry about a competitor copying your methods unless they are using illegal tactics.  You should always be working to improve your products and services.  It is actually a compliment when you are copied; when this continues to happen, the market will recognize you as a leader.  No company can be exactly like another one.  People have different skills and methods.  Thus, your company will react differently in the marketplace. And you are never dealing with the same situation that someone else has encountered.

In the world of sports, competition is viewed as a challenge and not as a negative. Each team is pushed to excel and meet its full potential.  Teams learn and grow from this competition and this becomes a win-win for all teams as they all get better.  This also applies in business.

A competitor can be an ally.

Budgeting-An Improved Approach

July 19, 2013

Many companies do not prepare an annual budget, which is a mistake.  The preparation and use of budgets has been proven to improve the success of any business, especially when it is used as a benchmark throughout the year.  The budgeting process forces your organization to seriously look into the future and try to predict what impact outside market forces and internal business constraints will have on your company’s future.  This is something that should not be done “just to get it over with” or to satisfy some outside requirement – it is important.

The preparation of budgets is not an easy task, as they take a lot of time and should include many employees.  If you do not involve others, the budget will not have any “buy-in.”  Budgets should be built from the bottom-up by getting those individuals who have specific responsibilities to prepare their forecasts for the coming year.  Budgets developed and sent out from the top never work well.

One of the reasons people use to justify not budgeting is that during the year situations change and that the budget will no longer be valid.  This is not a reasonable excuse, as many of the assumptions you made when developing the budgets will still be valid and the exceptions can be explained.  One changing situation does not make the budget totally wrong.

If you often have changes in your budgetary assumptions that is a major indicator that you did not look far enough into the future, or that you did not have a realistic perception of your current reality.  In developing budgets, you should talk with your significant customers and suppliers to get their input for the coming year.  And if you are considering new product or service introductions, remember that they never proceed as fast as you project.

Another issue with static budgets is that the company often divides the annual budget by 12 to get the monthly levels – another mistake.  Your budget should reflect any seasonality in your operations.  If in the first few months conditions change and your performance is significantly off budget, some companies just revise the budget to push these changes into subsequent months.  For example, if sales are off 25%, this amount is just added to the next month’s budget.  These actions are never correct and indicates that they budgets really are not used for any true performance measurement.

In the current economy, assumptions may be changing rapidly.  The organization may have limited control over these changes.  Because of this, companies have developed the rolling forecast, which is redone during the year when there are significant changes in the assumptions or market conditions.  This may sound like a waste of time, but it is important to get your team together when you recognize these changes and implement new plans to adjust.  Do not just bury your head in the sand and claim that you can do nothing.  Adjusting your tactics for change is critical.  You are not just changing the numbers in the budget – you are adjusting your business tactics to meet current realities.

What are rolling budgets?  Some of the more progressive companies have been using rolling budgets for quite a few years.  These companies include American Express and Unilever, and many smaller companies have initiated rolling budgets in the past few years.  When the budget for the year is developed, management will modify the budget on a monthly or quarterly basis to reflect major changes from the initial plan, and then forecast forward.

While the traditional budget normally is developed for the current fiscal or calendar year, rolling budgets should always be for at least one full year from the date of the modification.  If you have to change budgets in June of this year, the new budget should be extended through June of next year.  As examples, you may have to make modifications in sales forecasts, pricing on supplies or services may go up or down significantly, interest rates may change, or you may have to get additional funding for a new piece of equipment to stay abreast of the market.  Change may indicate that you may need to conserve cash as much as possible, or that you will have additional cash to pursue other opportunities.

While some of the larger companies will make changes on a monthly basis if conditions warrant, you may only consider changes on a quarterly basis.  Modifying budgets does take additional time, but the effort to step back and look at the impact of these new conditions will allow you to more adequately address the changes that are needed in your business plan.  And your team will spend more focused time on adjusting your business tactics to achieve the best results.

Rolling budgets may require that there be some modifications in the software you use.  It may be necessary to develop some additional reporting capabilities (hopefully within your current system) to better track performance.  Developing specific benchmarks which can be reflected in your reporting is quite helpful.

Budgeting is a critical activity in a well-run company and the rolling budget concept should be strongly considered.

Make The Decision

April 12, 2013

During my many years of working with or in companies, I am often aware of individuals who are very reluctant to make decisions.  Decision-making is not easy, but not making these decisions generally leads to continuing problems in the company and sub-par performance.

The Latin word decido has two meanings.  It can mean “to decide” or “to fall off.”  Plants called deciduous have leaves that fall off.  “Taking the plunge” suggests relevance for both meanings.  Making the wrong decision provokes the fear of falling.  Maybe this second meaning drives indecision–we are afraid of falling or failing.  Or maybe we just don’t think the problem is big enough to require making a decision.  Yet delaying decisions normally makes the situation worse.

There are many various methodologies that can be used for decision making:  Pareto analysis, Kepner Trego, and PEST Analysis, for example.  Most of these are based on the following steps:

  • Define the problem or state the decision to be made.  This may be a simple issue, as when you obviously need to hire a new employee.  But if it is a more complex issue, you first need to define the problem and then try to understand it.  Define the problem by answering these questions:  where, how, when, and to whom it is it happening?  But the most important question to answer is “Why is this problem happening?”  If it is a complex problem, it may have to broken down into smaller segments; rank these according to severity.  It is often helpful to discuss the problem with someone else to verify that you understand the problem, and to solicit different perspectives as to where, how, when, etc.  This also helps clarify each person’s role in the problem.
  • Look for potential causes by not only making a list of your ideas, but also collecting information from other associates in private meetings.  Be sure to write these down.  After performing this analysis, develop a final list which defines all of the collective issues and/or the necessary criteria.  Prioritize these issues by determining which most likely has been the greatest contributor to the problem.  When deciding to add a new employee, get others to suggest the necessary job responsibilities needed for this position.  Then develop the job description for this position.
  • Identify the alternatives.  With most issues, you should include others in the process.  Brainstorm for solutions.  At this point do not make any judgments on each, just keep the list. This way you will collect as many ideas as possible.  If it is an employee acquisition decision, and it is appropriate to include other employees in the process, list the candidates. Now compare your solutions or candidates to the priority lists that you have developed. You may find it helpful to put a numerical ranking on each, with the higher number being the most important.
  • Now you should be able to narrow down your alternatives.  If you are using the numerical rankings, put an additional value on how well each alternative will address the issue.  Again the higher number is the most critical.  By multiplying the “importance” factor times the “effectiveness” factor, you should get a mathematical indication of the solution.  If you do not want to do this, use your judgment to rank each solution or individual.  Once you have identified the best alternative, test it by asking these questions.  Will it solve the problem for a long time?  Is it a realistic answer?  Do we have the resources?  Is it affordable?  And finally, what is the risk with each option?
  • Put the decision into action.  List the steps necessary to implement.  Does it change processes or procedures?  If so, define the changes.  More importantly, communicate the changes and define who will be responsible for each.  With personnel issues, it usually is just hiring the new employee. Although it could include terminating another employee.
  • Having made the decision, it is often easy to ignore this critical step:  monitor the results from the decision.  Are the changes on schedule?  Am I getting the results I expected?  Do I need to make some modifications?  If it is not working as expected, reevaluate.  No one makes perfect decisions all the time.  If we were wrong, do not be afraid to admit it.  Carefully review the process, the basis for the first decision, and make another decision.  Mistakes can be helpful when they lead to new learning and effective action.
  • Has the problem been solved?  Can we resume normal operations and not have to be concerned about the issue recurring?
  • And finally, what did we learn?  This analysis should help avoid similar problems in the future.

Remember, the only really bad decision is one that is never made

Buying Help at Discount Pricing

April 11, 2013

Everyone knows that you get what you pay for.  Few companies operate that way. More ironically, few businesses follow the rule “the systems run the business, the people run the systems.” Without good systems, better people are required. Because many smaller businesses have not yet developed good systems, they should compensate for that by hiring a strong staff.  Yet, it is these same operators that do not want to pay the market rate and definitely not a premium rate.  So they buy the help at discount pricing.

There are many reasons for this.  One is that CEO’s have occasionally gotten a bargain on an excellent employee; because of these occasional successes, they use a “bargain basement” pay strategy. This intermittent reinforcement has led them to believe that it is possible to get good people cheap. Conversely, many have had the negative experience of realizing that they are giving premium pay to employees who don’t measure up to expectations, so they fear that they may waste money by paying people more.

This process starts at recruitment. Good people can not be consistently recruited for low wages.

Real-life example

Sally prided herself on her bargain hunting ability. This spilled over into her employment searches. When Sally needed an administrator, she thought to herself, “This is an easy job.  It really isn’t much more than a glorified clerk.” Sally figured she could get a good person for $8/hour. Sally did find a “qualified” person for $8/hour. Training the new employee took a bit longer than Sally figured, but hey, she was filling a $12/hour position for $8/hour. Over time, the administrator became an important resource for Sally. However, the administrator’s attendance became spotty.  Sally was frustrated that whenever she needed the administrator the most was when she missed work.  Sally felt like firing her administrator, but how could she find someone else for only $8/hour?  Therefore she tolerated the spotty attendance. Eventually, the administrator took a job for $12/hour at another firm. Sally was forced to raise the pay of the position and retrain.

You may feel like you are getting a bargain when you:

  • Pay less than the market rate for the position
  • Pay a good person less than they are worth to the company
  • Slot moderately qualified people into moderately underpaid positions.

And, for the short term, you are getting a bargain.  But there are several long-term downsides:

  • The company needs to have great training because it is starting with poorer caliber people.  Training takes time and effort – do you have the resources necessary to train and re-train?
  • If the organization does not pay market rate for good people, it will often get bad ones. When an organization is filled with mediocre performers, good performers will not want to work there. Winners attract winners.
  • A tremendous amount of energy will be spent training mediocre people and turning them into good performers only to have them leave for more money. The company will be relegated to being a “farm team” for other companies.
  • Here is the most important point:  the CEO’s time is the most valuable time in the organization.  His time is being wasted on “trying to make a silk purse out of a sow’s ear.”  It should not be tolerated.  A business can only move at the speed of the CEO.  This is keeping the company from achieving its potential.

Solution

Rate the existing staff.  Prepare evaluations for each, identifying their strengths and weaknesses; give them a chance to improve within a specified time.  The company may have poor performers who will never improve.  If so, start the upgrade process. The poor performers will have to be replaced with better ones. Pay what is needed to get the talent that is required.

You may also have some “jewels in the rough” who are turning into good employees.  You may want to increase job responsibilities or increase pay to ensure that you don’t lose their services.

Don’t pay the poor performers more, in hopes that they will improve.  They are already being paid enough to not quit, so don’t waste the money on them.  The company will most likely be able to reduce headcount.  One terrific employee can do the work of two to three poor ones.  You must get the best employee for your money, not the cheapest.

 

The Art of Delegating

April 10, 2013

Delegation is one of the most important management skills.  As your company grows and/or has to deal with challenges, your responsibilities as an owner and/or manager increase.  You will have a very difficult time coping with the growth and/or the challenges if you have not developed the techniques to delegate well.

Please be aware that delegation is a two-way process.  As the senior manager, proper delegation will result in benefits for you as well as for your company; as the subordinate, assuming a new task or responsibility will ultimately increase the success of the company as well as increase your skills.  Delegation will develop both the manager and his/her people, not just free up the time of the manager/owner.

Good delegation saves time, grooms a successor, facilitates succession planning, and motivates the staff.  People develop their skills, and those seeking promotions are provided with encouragement.  As the recipient increases their experience and understanding of the task, they will have the opportunity to learn the skills of “managing upwards” by suggesting improvements to the process.  Your staff will gain the experience needed to take on higher responsibilities and be promoted.  As the giver of the tasks, you as the manager must be sure the delegation is successful; this experience will help you learn to be a better delegator and improve your managerial skills.  You can never be a successful manager if you do not develop the people around you.

On the other hand, the lack of delegation will cause frustration for both parties.  The subordinate may lack motivation, and may even be confused by mixed messages.  You will be overworked.  And the goals you are seeking for the company will not be achieved.

The basic steps of delegation are:

  1. Define the task – Confirm that the task can be delegated.
  2. Select the individual or team – What are your reasons for delegating to the person or team?  What will it do for you?  For them?
  3. Assess the person or team – Is the person or the team capable of performing the task?  Do they understand the task?  If not, you cannot delegate and you will have to first train the person/team.
  4. Explain the reasons – You must explain why the task is being delegated to that person or team.  What is its relevance and importance to the company?  Where does this fit in the company’s strategy?
  5. State desired results – What must be achieved? Clarify to be sure that the person/team understands the task by getting feedback from them.  Be sure they know how you will measure the results.
  6. Consider the resources desired – Discuss and agree on what is required to get the job done.  Consider people, equipment, money, materials, other related services and activities.
  7. Agree to deadlines – When must it be finished?  If it will be an ongoing routine, when are the checkpoints?  If the task is complex, what are the interim checkpoints?  If the task has multiple parts, there should be priorities?
  8. Support and communicate – Who else needs to know this is going on?  Involve these people to determine if they can see beyond the current task.  Be sure the rest of the organization knows about the new responsibilities of this individual or team, as this could cause dissension within the company if not properly communicated.  Inform the individual or team of any political issues, or if there is a protocol to be observed.
  9. Feedback – It is essential to inform the person/team of how they are doing.  Keep an open door, so that these individuals can come to you to discuss issues and report progress.  If you determine that the results you expected are not being achieved, take corrective action.  If the task fails, it is your fault, not theirs.
  10. When this task is complete or sufficient progress has been achieved, be sure to give them the credit.

Delegation is not easy as there are varying levels of freedom.  The more experienced the individual(s) are, the more freedom you can give.  If the task is very critical, you will need to be cautious.  Be sure the team/individuals are comfortable with the responsibilities.  They must have the training and tools to accomplish their task.

Proper delegation is not easy. It takes time, planning, and a commitment of both the organization and the individual members of the organization.  Successful delegation will result in multiple rewards for you, the individual or team, and the company.

 

How Do You Learn Leadership

April 3, 2013

Many managers, entrepreneurs, and founders have never pursued any leadership training. This is a mistake.  It is a skill that you cannot learn on your own. Good leaders generally are not born with special leadership powers.  Even if they have some of traits that characterize good leadership, they will fail without additional development.

There has always been the question of whether leaders are born or made.  The Center for Creative Leadership (headquartered in Greensboro) conducted a study by asking 361 senior executive this question.  The results were mixed:  52.4% are made, 19.1% are born, and 28.5% believe they are equally born and made.   The mades believed that experiences (46%), training (34%) and traits (20%) were the criteria that created better leaders.  The borns were traits (41%), experiences (38%), and training (21%).

Recently the University College of London along with Harvard and the University of California may have found a genotype, called rs4950, which appears to be associated with the passing of leadership ability down through generations.

No matter where these executives stood on the survey or the recent study at the College of London, leadership is a skill.  They all believed that leadership development was critical and it was best to take concrete steps to grow the leadership in your company by looking within, rather than hiring from the outside.

Studies have proven that organizations with a mindset toward development of leaders consistently out-perform those that do not focus on development.  Leadership does not just come from time on the job.   The time on the job must include having adequate access to development experiences, coaching, mentoring, training, and other leadership experiences (i.e., special assignments). Studies indicate that companies that give limited attention to development start the process about 10 years after the individual has become a manager. By then most of the bad habits are already developed.

Leadership is learned and can often be taught through actual experience.  One good example of this starts with youth activities.  Scouting is an excellent opportunity for kids to be put in situations where they must work together to accomplish a goal; the program develops specific individuals to become leaders.  The Eagle or Gold Award is a great example of teaching boys and girls to become leaders as they must choose a project and manage other scouts on their team to accomplish the task.  Many sporting activities teach kids to become leaders on the team either formally or informally. These young people have leaders or coaches who help develop their skills.

Talking with individuals who have become good leaders can add insight.  People have natural attributes that impact their leadership skills, but it is much more important to learn by analyzing their challenges and setbacks, and to learn from this self-reflection.  They will unlearn old habits, develop new assumptions about working with others, and adopt new behaviors.

Learning can be developed through observation of proven leaders, but there is a very large gap between seeing and doing.  Mark Zuckerberg recognized very early that he lacked leadership experience.  When he was starting his company, he surrounded himself with smart people and brought seasoned individuals to his board.  He started asking questions, shadowing the best leaders he knew.  He did not shy away from admitting that he did not know everything and he asked the tough questions even if, at times, it may have made him seem dumb to others.  Many of these people were very strong mentors to Mark.

Unfortunately, there are people in organizations who have experience as executives, but are not adept at developing other leaders.  They think they are great leaders, but really only have massive egos.  These are not the people for you to emulate.

There are some very effective organizations and coaches that work with leadership development.  And much of this comes not from classroom education, but role playing with business situations or actual situations in the workplace where you are evaluated by experienced coaches who guide you through development.  Having a mentor or senior manager or associate who is a good leader is quite important. People become excellent leaders in large part as of result of their experiences.