2014 National Women’s History Month theme is ”Celebrating Women of Character, Courage, and Commitment”, and “honors the extraordinary and often unrecognized determination and tenacity of women.”
I am honored to be one of the panelists sharing “My Story” on Wednesday, March 5th at this year’s Executive Leadership Luncheon held by the Women’s Business Development Center (WBDC) and the Women’s Business Enterprise Council (WBEC).
The Executive Leadership Luncheon links women business enterprises with women business executives, supplier diversity and purchasing professionals to gain access to opportunities and to build social and power networks.
One of our favorite clients passed away in November. Angela Wallace suddenly developed an infection in her brain and the world lost a bit of light. She will be missed. We extend our heartfelt condolences to Angela’s family and friends.
Angela was a long time proud member of the National Association of Professional Organizers. She served as NAPO’s national President from 2011 – 2013. It was Angela who knew to consider global trends when we were helping NAPO with its strategic planning. A selfless leader, Angela was an advocate for every category of member.
I always admired how Angela brought out the best in people. She encouraged others to grow and got a kick out of seeing other NAPO members shine. She was a mentor who built confidence and encouraged continuous learning.
Angela was one of those people who could imagine a better future without criticizing what currently exists.
The world will be better if we can all channel our “inner Angela.”
It is a $22 Mil/yr business. Some days it feels like “CONGRATULATIONS” are in order and other days “CONDOLENCES” might feel more appropriate.
Yes, they generate a net profit. In fact, their net is exactly the industry average. And yes, most customers would still give them a reasonably good evaluation.
But, a few key people are still working ridiculously long hours. The Controller still can’t get his arms around the budgeting process. The Marketing Department seems to always need more money but still can’t adequately measure results. There’s been a revolving door in the sales manager role and the President still has to close the big deals. There are more and more meetings, but folks still complain about a lack of communication. Despite the investment in software and training, the customer-focused departments are still dealing with scope creep, eroded gross profit, and tight project deadline.
Did you pick up on the word “still”? I think the word was used 7 times in the paragraph describing where things stand.
When team members use the word “STILL” … they are anything but STILL.
They are getting tired. Their jobs are draining their energy rather than fueling their enthusiasm. For a while, dedicated people keep on running. Most folks try to do their best. It’s unlikely that the Controller is intentionally trying to screw up the budget process over and over again. The sales managers who quit or were let go weren’t all coasting.
It’s ironic. A company that is on a plateau involves a whole lot of activity…lots of running…lots of fires being put out. But all of the activity can feel like running on a treadmill without losing weight or gaining muscle. Without progress people won’t run in place forever.
Give this some thought!
Is it time for you and your management team to be STILL for a few off sight get-togethers? Strategic working sessions? Is it time to figure out what “the next level” is for your business and start creating that… instead of doing the same thing STILL with no results.
What if your exit strategy is to sell your $100 Mil/yr firm in 5 years? Who are the key team members who would have helped you drive the profitable growth to reach $100 Mil/yr? What will each key player be accountable to produce during that five year journey? Have some scenarios been generated to project an optimum mix of base salaries, performance bonuses, and profit sharing? How much risk are you willing to take that one or more of those team members leave during those five years? Should some equity be involved to feed the voracious cash hunger that most rapidly growing companies have?
These sound like reasonable questions, right? The funny thing is, answering these questions can get out on the back burner as sales proposals are written, the IT infrastructure goes to the cloud, and measurement of customer net promoter scores get computed.
But imagine if your plan to grow to $100 Mil isn’t just organic. What if it involves some acquisitions or a roll up?
It you think conflicting business valuations can interfere with the success of acquisitions (which they do), try having fuzzy compensation formulas for senior people! Nothing will interfere with the successful integration of firms more than that.
When my growth consulting firm facilitated a 16 company roll up, the leaders of the primary client were reluctant to take the time to solidify their own approach to compensation before entering into negotiations with prospective roll up candidates. We have become much more insistent about this step since then because the first three deals (that should/could have worked) fell apart when key players felt disenfranchised, unappreciated, and inadequately protected. Once they paused, brought in “the comp. guy”, and took care of their own people, they could proceed with the roll up. By the third roll up participant, there was a comfortable philosophy behind compensation that would apply to all rolled up companies from that point forward.
Recently I heard a business owner bragging that his 15 year old company still serves their first client. That sounds pretty good. That statement implies that the business has high levels of customer satisfaction, repeat business, and referrals.
For some reason I started to reflect on my early years in business. Frankly, I wouldn’t want to still have the first client we were able to attract when my first business started out. If memory serves correctly, we made two cents an hour on that project! When I share that story in speeches for owners of startup companies, they laugh. But then it is interesting to watch their faces as I ask if they even know how much money they make (or lose) on each account. At least we knew we only made two cents an hour so we could change what we were doing!
That reflection caused me to have another conversation with that owner of the 15 year old business. Just out of curiosity I wondered if they had some magic sauce and had generated a solid profit from their first client’s first project and if subsequent requests from that client have worked out well too.
It turned out that, like the majority of owners of startup companies, they hadn’t analyzed how much money they had gained/lost from their first client 15 years ago. And unbelievably, they still didn’t know. Until 2008, their overall net profit seemed strong enough so they hadn’t drilled deeper to really look at client-specific or service-specific gross profit. Yikes! Talk about a ticking time bomb!
I heard from this guy again. Keeping the initial client hadn’t resulted in the many referrals he had hoped that it would. Plus it turns out that the client is rather unappreciative and takes his company for granted. But the worst part (readers may find this very hard to believe) is that the average gross profit generated from this client is – 300%!
That means that for every $1 this particular client pays, the company spends $4 to provide the service and then has to cover all of the operating costs without the benefit of gross profit to cover it and has to make up the difference from higher prices charged to other clients.
Your situation may be less dramatic, but if you are not changing the terms and expectations of long term clients that generate below a minimally acceptable gross profit level, you too could be bragging about retaining clients that no one in their right mind would want.
Who can help drive the growth in your company? Many fail to realize the key roles that Account Managers, Project Managers and Department Heads play in this goal. These are the people who keep the wheels running and making sure things get done. Take the below examples to help understand these roles in your own company.
A content management company with major corporate clients with competent marketing & sales people and sufficient programmers working on websites can grow for a while. But the plateau will be fairly stubborn if they don’t have great project managers. There are so many moving parts when it comes to content management for major websites. The left hand needs to know what the right hand is doing. Promised tasks must be completed correctly and in the right sequence. Requested changes must be acknowledged, addressed, and recorded. Without great project managers, the probability of uncontrolled scope creep increases by the minute and the company’s gross profit evaporates.
The growth of a global mobility services company can be driven by great account managers because the account managers stay in touch with several influential people and decision makers in their international corporate clientele. The company can be better prepared to prevent problems and propose new solutions because the account managers know where things are headed, learn about shifts in client priorities, hear about possible mergers and acquisitions earlier than competitors, and aren’t surprised when an executive is replaced.
An association management firm can handle multi-million dollar accounts if great department heads understand the factors behind gross profit and customer retention. They know that they serve both the internal and external customer
It pays to invest in these key people. More and more, we are being asked to review the compensation plans and performance metrics for project managers, account managers and department heads. That’s good. That means that more executives are recognizing who really drives the growth of their businesses.
Personally, I prefer compensation formulas that involve a set salary for the position which is paid if the person shows up, does the basic work, participates in meetings, provides reports, and isn’t a bottleneck. Increments (raises) can be based on increased cost of living, increased responsibility or span of control. And the lion’s share of variable compensation is performance based on key metrics like capacity optimization and gross profit for department heads, reduced surprises/prevented errors and account growth for account managers, and customer satisfaction, timely execution and project profitability for project managers.
Many factors affect the pace of a company’s growth and operations. Often times executives within a company differ on what they believe determines this pace. One side will believe that the market drives the pace, while on the other hand the ability and staffing of operations will make that determination. Below I will show how this decision can vary from one department to another and how they can all get on one page.
The Exec VP Sales, argues that their company should “at least match the pace of growth of the market.”
The COO, is equally forceful when he says that the company’s pace is “strictly a matter of how quickly the business can produce quality products and services.”
The CMO asks “why shouldn’t we try to outpace all competitors if we have the potential to do so?”
The VP HR values corporate culture and thinks that their pace of growth should be “fast enough to provide career advancement and learning opportunities for employees but not work them so hard that they feel taken for granted or consider leaving.”
The company’s CFO gets annoyed about what is perceived as personal preferences about pacing. “Our capacity to attract financing is the optimizing and the limiting factor,” he says flatly.
The R&D Director feels proud of their track record and reputation. “Our customers expect to see innovative new products from us. If they don’t see it, they’ll go elsewhere.”
Then the outsourced market researcher presents findings and recommends that the company should pick up its pace “to catch up” and observes that there is a window of opportunity.”
One of the most fascinating elements of a CEO’s role is facilitating the process among these participants to articulate the logic behind optimum pacing. What and who will lead? What and who will follow?
If “at least matching the pace of growth of the market or industry” is the premise or strategic driver, then the COO might have to find new ways to speed up the production of quality products and services…like acquisitions or joint ventures. If your competitive advantage is largely about the attraction and retention of top talent or innovation, the CFO may need to find new sources of financing to fuel an increased pace. And if hitting a defined window of opportunity is the defining principle, the deadline becomes the focus for everyone.
What determines the pace of your business? Is everyone on the same page with this view?