Monthly Archives: December 2012

NACD, an Excellent Resource for Mid-Cap Companies

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If you are an executive, board member, or shareholder in a mid-cap publicly traded company, I encourage you to join NACD. Not only are their publications excellent, their training programs and conferences are well worth your time.

As a growth strategist/executive advisor, I try to fit the annual conference of the National Association of Corporate Directors (NACD) into my schedule because attendance is a very cost effective way to learn best practices, hear current case studies about the impact of changing regulations, compare responses to economic uncertainty, access analysis of trends, and observe the shifts in the roles of standing committees (audit, governance, CEO compensation, etc.). Since our client base has some challenges related to sustainability and risk management, this year, my NACD conference schedule emphasized those topics.

The candor of panelists at NACD general sessions is helpful.  This year, the Chairman of the Board, who was brought in following GM’s bankruptcy, provided examples about how they moved so quickly. A prominent member of McDonalds Corporation’s board of directors shared advice about managing succession. One CEO passed away suddenly only to have his replacement develop cancer.  They had 3 CEOs in a very short period of time. That could happen to any company.  Imagine if it happened to your mid-cap business.  A board member from FORD Corporation was very candid about the increased number of hours involved in fulfilling the fiduciary responsibility involved with board service today. Some speakers observed that Dodd Frank legislation is equivalent to “Sarbanes Oxley on steroids.”  Examples about how much information is now needed in proxy statements were discussed.  Some corporate boards are clearly struggling with investors who demand say on [executive] pay. Does publically-traded mean that a corporation must reveal EVERYTHING to the smallest investor, the media, and competitors?

The median size of a US based publicly traded company is around $450 Mil/yr.  For that to be true there must be an awful lot of relatively small publicly traded companies for every multi-billion dollar Fortune 100 corporation we read about all of the time.  IPOs in the tech sector (eg. FACEBOOK) garner more media attention, but mid cap service firms and distributors also appear on the NYNEX AND NY Stock Exchange lists.  The risks have increased. The stakes are high.  The examples of “good ole’ boys just saying yes to their CEO buddy” are fewer and fewer each year.  It is not coincidental that NACD just published a white paper on BOARD DIVERSITY with the emphasis on turning talk into action. Today’s corporate board needs a diverse blend of expertise, skills, perspectives, and experience represented at the board room table (or SKYPE video conference call).

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. Ambler is an experienced board member and earned certification through the National Association of Corporate Directors. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.    

New Department, Subsidiary or Separate Entity?

Although experienced attorneys can provide guidance based on laws, regulations and taxes, it is not always obvious when a growing business should establish a separate entity, a subsidiary or just a new department.  Ask yourself some relevant questions before you consult attorneys.

How different is the nature of the work being done?

We have helped a few dozen technology sector clients address the dramatic differences between their system integrators, staff augmentation unit, trainers, application engineers, tech support services and data base managers. The diversity of schedules, priorities, education, etc involved is enormous.  Most companies do not officially establish separate companies, but separate offices for such distinct business units are usually involved. Strong account management makes it work.

Will the “unit” provide products/services only to the existing company?    

Our expansion into executive search is illustrative. We know our clients’ strategic plans, cultures, and the composition of their executive teams. Several clients asked us to help them find, screen, and select executives for their teams. We continued to recommend industry-specific search firms and also reached out to people in our data base to look for possible candidates. We didn’t have to make the same kind of promises other search firms make. We weren’t expected to do as much.  If our additional outreach resulted in a great candidate, the client would compensate us for time and access.  As more and more executives were hired as a result of our network, we would consider hiring a search professional and establishing a department. A separate company probably wouldn’t be indicated if/until the search service would be offered to non-client companies.

Should the “unit” involve a different combination of leadership or ownership?

If only serving existing clients doesn’t move fast enough for an ambitious department head, decisions about that service unit would change. Should it become a separate entity?  The regulations, approach to compensation, and culture impacting strategy consulting and executive search firms are dramatically different. Can you imagine having only one commission driven service department head on an executive team?  Before you let that happen, you consider a separate entity, equity, pricing, and win/win coordination between the entities.

Do the laws, regulations, and potential conflict of interest cue separation at the onset?

CPA firms must be very careful when it comes to their auditing services.  Of course, they shouldn’t audit their own work. Financing is similar.  Of course any private investment activity would be separate from strategy consulting.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

A Technique to Screen Business Investment Opportunities

Lots of very bright people get burned by the assumption that every business owner who has learned how to make decisions about his/her own company can objectively evaluate the potential of someone else’s business.

If you are regular reader of this blog or one of the 200,000+ business executives who view weekly broadcasts of The Growth Strategist® peer to peer talk show, you are familiar with our tagline ACHIEVING ACCELERATED GROWTH WITH SUSTAINED PROFITABILITY® and you may also already know that the secret to success lies in reversing the phrase.  Know what drives your profitability, do what is needed to sustain it, then growth strategies (like acquisitions, new products, or geographic expansion through franchising are relevant)…then you can step on the gas to accelerate.

OK. So what if you used that tagline as a technique to screen potential investments in other peoples’ companies? It takes some practice, but it does help.

Can you tell what REALLY drives the profitability of a business?  The answer is fairly evident for some companies.  Innovation comes to mind for APPLE®.  But it’s not so clear with other companies.  What has driven the profitability of H&R Block® all of these years?  Being able to train people quickly? Flexible staffing?  An understanding of taxes?  Simplification?  See, the answer is not always so obvious. That is the first question when you consider investing outside your core business.

In my recent interview with Eric Shepocaro, the CEO of TelX, it became clear that their focus on how large clients can benefit from leveraging TelX’s technical advances has driven their profitability.  It is not just about creating new technologies, building new data centers, or going to the cloud for the sake of going to the cloud.

Once you have your arms around what drives profitability, analyzing what is involved with sustaining that factor is critical.  What could interfere with APPLE®’s innovation? What could slow down H&R Block’s ability to simplify and replicate? What could distract TelX from its focus on customers’ leveraging their technology?  The profitability of businesses that are based on helping companies comply with laws, regulations, rules, and quotas can be compromised by the slippage in ethics during recessions.  Profitability won’t be sustained if the government or justice system can’t follow through on enforcement.  You would clearly need to dig deeper before investing in a business built around compliance.

If you become convinced that the answers to the first two screening questions (criteria) are sound, then you can decide if the proposed growth strategies serve those answers well enough (are congruent). 

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Is Your Leadership Team Suffering from Analysis Paralysis?

When it is time for the leadership of a company to consider significant shifts such as business model, ownership, organizational structure, and/or mission it is wise to do sufficient research before diving into the implementation of new strategies.  On the other hand, it is also important to focus and complete the research step in a timely manner. A team that is susceptible to perfectionism or a leader who tends to worry or just hectic schedules can stretch the research out too long.

Why is that a problem?  For one thing, the world is changing pretty fast out there. Taking too long to complete research just generates outdated information.

Plus, when research goes on too long, it invites doubt within the leadership team and skepticism at the mid management level. A team that could/should be excited about its future can lose confidence in their abilities to lead change.  When research takes too long, the challenges involved with the proposed changes grow larger and larger in the minds of team members.  By the time research reports and proposals are presented, a leadership team will have become disinterested or disillusioned and wonder if change will be possible. A tired leadership team can become tempted to settle for simpler strategies, choose what is familiar and comfortable, and forget the compelling reasons they were even considering and researching significant change(s) in the first place.

I’ve seen bright, capable people freeze from analysis paralysis.   Our team has been called in to help dozens of leadership teams recover from analysis paralysis that resulted from bringing in the huge consulting firms or just letting their own research go on too long. Research develops a life of its own sometimes.

In one company, the development of analysis paralysis helped the owners see that they had the wrong President.  The leadership of another firm experiencing paralysis scheduled a “do over” of the last strategic planning session to revisit the premises and proposed strategies now that they had so much more information.  They recommitted to the new strategies but also had to do some focused problem solving about how to prevent analysis paralysis from happening to them again. The leadership of a third company quietly met with one another to fess up that they no longer have much ambition for the company and are more ready for retirement than they had thought. So they increased the emphasis on succession planning to make the proposed strategies possible…since the strategies were fortunately still relevant.  A fourth leadership team chose to deny that they had analysis paralysis, reduced their to do lists, and tried to coast… only to face dramatically increased turnover of bright ambitious managers over the next several months.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.                 

 

 

[video] Is Your Leadership Team Suffering from Analysis Paralysis?

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