Congratulations. You utilize a range of best practice techniques to find and select the right person for a key position. You use instruments like the Predictive Index® or Caliper®. You use a combination of team and individual interviews that includes the Top Grading® method. You have a highly experienced HR department or professional recruiters. You utilize Accolo® or other cloud sourcing. Your job descriptions are clear. The performance metrics are spelled out. Coaching and/or mentoring are in place. A meeting rhythm is consistently followed.
But, you STILL end up with a key executive who works too slowly, avoids making important decisions, or talks a good game but doesn’t deliver.
Despite the relatively high rates of unemployment around the country we are STILL seeing executives of midsized companies accepting mediocre performance, being suckers for potential, waiting too long to let someone go. In every situation, the executives involved KNEW early on that the newly hired team member was the wrong choice. He/she didn’t fit the culture. He/she wasn’t trying hard enough. He/she didn’t seem to understand the urgency of the situation. And yet the executives didn’t speak up, express their concerns, or exercise provisions in their employment contracts (like probationary periods).
Yes, it is expensive to recruit, screen, select and train an executive.
But it is far more expensive to retain “the wrong person in the wrong seat on the wrong bus.”
Not only is the performance of the company compromised, tolerating poor performance from one key role is a disincentive to the other members of the team. Plus continued tolerance of mediocrity reduces the credibility of the top executive.
Excuse my ranting here…I do understand giving folks a chance…but a great deal is riding on the FIT…the effort…the pacing…the performance…the results.
Ask yourself IF and WHY you STILL have “C” level performers on your executive team at a time when so many very capable people are available.
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. 2013 is Ambler’s 9th 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.
Often successful entrepreneurs become interested in investing in other companies. Not just the stock market. They are curious about the role of private investor or angel investor. What would it be like to be a member of the board of another company and have some “skin in the game” but NOT have to run the business on a day-to-day basis? The process of screening potential investments, learning new roles, doing due diligence, and taking some chances is very enlightening for entrepreneurs. Becoming an outside investor is a career change for some. You aren’t just evaluating the companies, you learn about yourself, your security/risk ratio, your skills to influence decisions, etc. Many never realized the complexities involves with board service. Some, who thought they knew a great deal, start to recognize the limitations of their experience having only led one midsized company.
Here’s an excerpt from an email I recently sent to a client who is venturing into the world of “private investor.” See if any of the questions I posed for him resonate for you:
Apparently, you can see that XYZ is well positioned for growth, is in a rapidly expanding industry, and their products/services provide superior value. Your emails suggest that your primary questions, at this point, are more about how an investment in XYZ should be structured.
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. 2013 is Ambler’s 9th 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.
Kind of a funny topic, huh?….when so many companies are not growing during these uncertain times. But the majority of the readers of this blog ARE growing. You are the companies that get on and then stay on the INC 500 list of the fastest growing privately held companies. So how is the pace of growth set for you and your company? Maybe…fast growth just happens to you and you feel like you are constantly drinking from a fire hose!
One of my strategic planning clients recently executed a management buyout. Congratulations! They aren’t waiting for something to happen TO them. Like many financial deals these days, a significant portion of the funding for loan repayment must come from increased net profitability of the company. The strategic planning team took another look at the math to determine if their existing plan’s pacing would adequately fund the management buyout. This company already had an aggressive growth plan based on market dynamics, their desire to attract top talent, a need for upgraded technology, and their readiness to go after much larger accounts. In their case, the pacing needed to fund the management buyout is compatible with the growth needed to serve their other goals.
But what if the various dynamics that drive growth (desired ROI, market demands, competition, advances in technology, capacity to attract/retain top talent, meeting the terms of a joint venture, funds needed for product innovation, etc) are not congruent? That is the more typical scenario.
Another strategic planning client’s production department cannot keep pace with the company’s marketing offer, sales promises, and investor commitments. Despite their preference to “go it alone”, they are now in merger and acquisition negotiations. Sometimes, another company with superior production capability is needed on your team. It is not OK to just accept whatever your current production team can deliver or hear “we are working on it” any longer.
Although there are usually several elements that drive the pace for growth, there is usually one dominant premise that takes the lead. Does every member of your executive team know which factor defines the pace of growth for your business?
What is the premise behind your pacing?
Accountants. Architects. Consultants. Designers. Engineers. Counselors. Speakers. Trainers. You know the list…companies who sell time, expertise, advice, analysis, guidance, etc.
Typical Numbers:
Imagine that the typical billing multiplier in the market place has been running around 2.5 so an average billable employee with a compensation package totaling $75,000/yr could be reasonably be expected to produce $187,500/year in fee related revenue. The average hourly price for the professionals would need to average $150/hr and the professionals would do billable client-related work 60% of their time for those numbers to result. Since fees often constitute as much as 80% of a service firm’s gross revenue, a $5 Mil/yr firm would have about 21 billable professionals producing $4.0 Mil/yr in fee revenue. A firm like that would probably generate 40% gross profit which could fund $1.5 Mil (30%) for operating expenses (business management, marketing, and overhead). The owners could end up with a 10% net operating profit of $500,000/yr. There would be as much as $900,000 available to cover salaries for a few managers, a marketing coordinator, a small accounting department, and maybe an administrative or IT professional. That’s 28-30 employees.
A similar series of metrics could be run for distributors. The difference is: by the time a profitable distribution company reaches the 25-30 employee mark, they are typically generating closer to $10 Mil/yr in gross revenue.
In general, are service firms that generate $5 Mil/yr in revenue with 25-30 employees (or distributors at $10 Mil with 25-30 employees) positioned for growth, a plateau, or free fall?
Does the well-known phrase “5 MILLION DOLLAR WALL” answer that question?
A stubborn plateau often occurs at 25-30 employees…and it happens across a wide variety of industries. The managers have become tired. The complexity of dealing with that many people becomes too difficult. The amount of money available for management salaries is too small to encourage the business leaders to hire more non-billable employees. The need for additional departments becomes evident, but the time to deal with re-organization doesn’t exist. Account profitability often starts to slip backwards at the 25-30 employee level as experienced people delegate and lack the time to provide sufficient training. Systems used by a core group of 10-12 employees are still in place but no longer work.
Ironically, we are helping a client with 175 employees that is experiencing the same kind of span-of-control plateau faced by $5 Mil/yr companies and 25-30 employees. It’s just their 7th wave of change.
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. 2013 is Ambler’s 9th 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.