Help your employees to grow through their position.

When we accept the work commitment from a person we hire, we make a pact with the new employee that often stops at agreeing to pay for service rendered and to provide a safe working environment.

There should be more than that.  With some people you hire, you know you are just renting their services as they pass through your organization, aimed at a higher calling.  Others want to know that they are signing on to a career, not a job, and expect to move up within the ranks or on to a larger company that can accommodate their goals.

A recent statistic I saw surprised me. But as I thought of examples of people I know, it Idea concept with row of light bulbs and glowing bulbseemed more accurate than I would have imagined. The average new college graduate today will work thirteen jobs in his or her career, in an average of five different fields.  Ouch!  What happened to a job for life?  How can employers expect complete loyalty if there is no clear upward path to the top for the best new hire?

[Email readers, continue here…]  The answer coming from the best of breed in corporate personnel management is to form a trusted bond with that openly-identified employee, helping that person to manage his or her career within and preparing to follow the company experience.  If a superstar agrees to work for you for a period while learning the ropes to move to a better job elsewhere, assuming that there is candor in the communication by the employee and a level of trust in and by the employer, it is perfectly proper to offer to help that employee succeed. The pact between employee and employer is that the employee gives the best possible service to the company, in return for the company helping the employee to grow in, and perhaps beyond the position.

Especially with young entrepreneurial CEOs, this feels to them like a stick up.  “Give me your money, and I will work only until I find a better job.”  And that attitude might be warranted if the employee just performs to the minimum required level, marking time to the next opportunity.  But if the person has skills and knowledge that the company needs, there is the basis for a fair trade of talent and time for a later organized, positive move to the next level outside of the company.

With that openly positive corporate attitude, you can celebrate the growth of the employee with a party as the person graduates, instead of either feeling anger when an employee resigns with short notice, or being suspicious that the employee will leave with trade secrets in tow.  Certainly other employees will see the supportive behavior, understand the company’s contribution to the career of this upwardly mobile employee, and celebrate not only the graduation event but the great culture of the company itself.

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Don’t manage with “what” without “why!”

Empowering your direct reports with the reasons for your orders gives them incentive to act, motivation to accept authority, and purpose behind action.  I try to teach this with the simple phrase that is the headline of this insight.

Think of the last time someone above you in your business or personal life gave you an order to do something that seemed either illogical or of low priority – to you.  If you accepted the authority of the person giving you the order, you just performed the task, probably either wondering if that person was nuts or whether you just didn’t understand the reason for the task.

What if that person had told you why it was important to be done, in clear terms that question-markrelated to that person’s priorities?  Wouldn’t you be more prepared to perform the task knowing the context?

[Email readers, continue here…]  I just spoke with an old friend who is in sales.  He lamented the fact that his boss recently layered several more sales reports on him to complete each week, reducing his selling efficiency.  How many times have we heard this complaint, especially from sales people?  I suggested that he go back to his boss and explain that it would be more than just helpful to know why these new reports are needed, that even though the salesman has no need to know, it would certainly make doing the work less of a chore.  And by the way, I offered, if the boss could not explain why, there might be an opening to advance the argument that the trade in time between completing the new report and reduced sales call time might be worth a revisit of the order.

How many tasks, reports, and rules hang around the necks of people throughout a more mature organization, which remain as “what” without anyone remembering “why?”   It is probably as effective a tool for the manager as for the recipient of the order, to explain why when telling what to do.

Your employees will appreciate the small extra effort, better understand the reason behind the request, and perform the act with more enthusiasm.  What’s not to like about that?

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Do you tell your direct reports HOW to do a job?

Unless your job is to teach, attempting to tell your direct reports HOW to do the job you’ve asked or ordered them to do will be a disincentive, will remove some of the authority you’ve delegated, and definitely reduce their motivation to act and lead.

Think for a moment of sometime in the past where someone directed you to do a job, then launched into a lengthy explanation of how you should do it.  How did you feel at that moment?  I’d bet that you were either silently or openly angered that the person assumed that you didn’t know how to do a job even before asking if you did.  This has been true since we were kids, and dad told us to rake the leaves, and then launched into an Managing_forceexplanation of what tools to use and how to do the job.  If that happened to you in some form over the years, I’ll bet you pushed back immediately with something like “I know how to do that, Dad.”  You felt diminished by dad’s assumption that you didn’t know how to do the job.

[Email readers, continue here…]  The same is true in business, even if there is less drama and far less confrontation exhibited by the respondent.  It is perfectly logical for that person to ask for help, or to a lesser extent to immediately offer it without a request.  But it is a grand disincentive and personal affront to force upon a respondent a short lecture on how to do a job without being asked.

Most of us would think that it is just good management to provide another tool – teaching how to complete the task when asking for it to be done.  Not true. Remember dad’s doing that to you years ago.

It is a lesson in understanding human pride and dignity.  Don’t include “how” when you tell a person “what” and “why,” unless they ask for help.

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You are watched more closely than you think.

Ever had a manager above you who said one thing and did another?  At least once?  Or in a pattern of repeats?  Well, you’re not alone.  Did you think less of that person for it?  Would you follow that manager to the ends of the earth?  Well, almost everyone has had multiple such experiences with a senior manager.  And most people think less of that person than before.

On the other hand, think of the professional you most admire.  Do you know of any times that person has made promises to you and missed on delivering them?  The difference comes down to trust and respect.  We lose both when we catch someone, especially 2014-0329_OxyTEDx-0276someone above us, acting differently than his or her self-proclaimed rules, or even violating company rules.

[Email readers continue here…] It is one of the most vital elements of good management – restraining oneself when rank would ordinarily grant special privilege, and instead acting as one would expect a subordinate to act.

Black and white examples include taking supplies home, using company time to perform personal duties (if not permitted), and even traveling business class at company expense on short trips.  Larger and more important examples involve direct promises that are broken, such as review dates with implied raises, or promised follow-through on an issue of great urgency to person receiving the promise.

Everything you do as a manager is watched by one or many.  The very culture of the enterprise is shaken when someone in power gets away with bending or breaking the rules expected to be adhered to by all.  Why have rules, or a company handbook, or new employee orientation sessions if the actions don’t match the words?

And once violated, it is almost impossible to retract the action.  That should make us think twice before taking small liberties.

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Stay in touch with your investors.

Investors as a group have a common gripe – almost universal.  Information flows from the company irregularly, in fact most often when the company is urgently in need of more money.

Investment documents usually call for quarterly reporting by the company to the investors.  Less than a quarter of companies receiving early stage investment voluntarily fulfill this promise.  Usually, one or more of the investors is placed on the board as a requirement of the investment documentation.  The entrepreneur often expects that Raising moneyperson to keep fellow investors informed.  And sometimes the board member does perform the service.  But most often, the CEO or founder has a much better idea of the flow of quarterly activity than a board member meeting monthly or less often, and for a relatively short period of time.  More importantly, the investors want to hear directly from the CEO.

[Email readers, continue here…]  Many times, companies need another round of investment, and the first people approached are the same ones that invested the first time.  If they have not been kept informed about the progress of the company, and if they are surprised by the fact that the company has run out of money more quickly than planned, it is a much harder sell to obtain the next round than the last.

Rob Wiltbank, Ph.D., of Willamette University, is one of several academics who have followed multiple rounds of investment in a significant group of early stage companies.  The typical finding is that second round investments are not as profitable for the investor as the first round. So investors are more cautious as a result when approached for additional money if not kept in the loop between rounds.  If a company is meeting milestones and growing as projected, and if the CEO is diligent in keeping the investors informed, a second round is much more likely to be raised from the early investors.  But the studies include all second rounds, including those that were pulled from investors reluctantly to protect their first money in, skewing the curve away from more heavily weighting successful conclusions.

Keep your investors informed. Avoid late surprises. Plan financial needs early, and inform investors early of that plan.  Explain problems encountered and solutions undertaken.  You and they will benefit by this candor and communication.

Posted in Raising money, Surrounding yourself with talent | 4 Comments

The five “Whys” a manager should ask

This is a trick headline.  There can be three “whys” or twenty, depending upon the issue and the responses.  To make the point, the word “why” has to be one of the more powerful words in a manager’s vocabulary.  Asking the question forces the other person to think beyond the usual “what” that generated a response to “why.”

It sure is a way to get to the bottom of an issue.  “I just reduced the number of ad words we’re paying for.”  “Why?” “They weren’t paying off in enough revenue.” “Why?” “Well, all we could measure is dollars of revenue against cost for clicks.” “Why?” “Well, we have no
question-markway to know which other ad words might have done a better job of conversion into revenue.” “Why?” “We have no-one on staff with enough knowledge of marketing to distinguish words from phrases, or with experience to know how to capture clicks into conversions.” “Why?”  “We’ve never thought this to be an important part of our marketing effort.” “Why?” “We just don’t know what we don’t know.  Will you stop asking ‘why’?”

[Email readers, continue here…]  How revealing! There is no better way to get to the bottom of an issue than this.  In the case above, lack of performance was caused by lack of knowledge, and inability to find resources to help.  A good manager-questioner might conclude that a small expenditure with a consultant might pay off in great rewards, before abandoning the use of ad words entirely as a result of the comment from the subordinate.

Practice your listening skills with one or more attempts at the five “why’s” and see if you find insights into answers to problems that might not have been obvious without your queries.

Posted in Protecting the business, Surrounding yourself with talent | 3 Comments

Hire slowly. Fire fast.

New hires can shore up the weak areas of a business in ways existing employees cannot, if hiring is done to fill true needs.  Some employees lose their drive, or remain behind as the company grows, failing to gain the experience or knowledge needed to manage expanded processes or numbers of subordinates.  Sometimes, there is just too much work for one person, and a second is needed to continue growth.  And of course sometimes, a person leaves the company, creating a need to fill a hole.

There is a rule few follow.  Slow down and take more care in the hiring process.  Vet the candidates well, even though you think that you do not have time enough to do so.  HiringEA-9817 is one of your most important duties, a way to increase the quality and productivity of your company’s staff.  Every hiring opportunity is a window to improve the company.  Hire slowly, with the weight of that opportunity clearly in mind.

[Email readers, continue here…] On the other hand, we are all guilty of hanging on to marginal employees for too long.  It is humane; it is easier to do nothing.  It is less of a drag on your time to let marginal employees continue to plug along in their job.   We have all done this.  And yet, we have all looked back after a painful separation of a marginal employee, and thought that we should have made the move to replace the person much earlier.  We agree that the person would have benefited with a better fit, and the company would have surely performed better having hired the replacement earlier.

It is human nature to hire as quickly as possible, to reduce the time taken from a busy day for interviews and reference checking.  And it is human nature to hang on to marginal employees.  Both are opposite the best practices of good management.

Try to force yourself to slow down in the hiring process, and speed decisions you know will someday have to be made about marginal employees.

Posted in Depending upon others, Surrounding yourself with talent | 6 Comments

You may burn your first professional manager.

It seems to be a rule, not an exception. The first professional senior manager that an entrepreneur hires to share the growing workload does not last more than a year.   Why?

Entrepreneurs start businesses with a strong vision of what and how, involved in every process from buying supplies to hiring and directly supervising early employees.  The culture of the company is built day by day by those actions, often centering on the founder’s vision and management style with little room for deviation.

At some point, as the company grows, either the founder’s span of control is stretched to the limit, or investors enter the picture, often with a clear idea of how they would like to

Available at berkus.com and bookseller sites

Available at berkus.com and bookseller sites

scale the company to grow quickly.  This happens predictably, either voluntarily in the case of the founder deciding that s/he needs help at or near the top, or involuntarily when investors insist upon the addition of professional leadership.

[Email readers, continue here…] If this new executive hire is the first for a founder or founding partners, and if the person is expected to relieve some portion of the that  executive workload, there is a predictable and great risk that the first person hired to do so will last only a short time at the company.

I’ve seen this happen so many times, it is almost a rule for me.  I warn the entrepreneur to be careful in the interview process, to expose the candidate to people at all levels of the company for buy-in, to be absolutely sure that there is a culture fit.  But most important of all, I warn the founder that s/he must be ready and able to let go, to delegate clearly, and to establish metrics for measuring the performance of the newly hired executive – but not to interfere with that person’s day to day management unless absolutely necessary.  I urge the founder to coach, but not to expect the new executive to be a duplicate in style or perceived ability.

It is an unhappy but common occurrence: the recently hired and trained professional manager is let go, and a new search started.  Luckily, in my experience, the second person hired for the job often is much more successful – usually not because the person is better at the job, but because the founder is more willing to delegate, expecting less a duplication of self.

If this is so common, is it not possible to be aware of the probability, and condition yourself to be more tolerant of someone else’s different style of leadership?  It might be a learning opportunity for the founder, often coming from one more experienced in the position and in growing company leadership.

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Be an Adaptive Business Leader.

The title of this insight happens to be the name of a CEO roundtable organization I belong to, and have been a member since 1989 (Adaptive Business Leader Organization – or ABL).  The organization, like Vistage, manages roundtables of CEOs meeting monthly in small groups, where they discuss their mutual challenges and help solve each other’s complex problems, acting as an informal board of advisors.  Unlike other groups, ABL members all belong to either healthcare or technology industry-focused roundtables.  There they not only discuss their business issues, but significant business-changing trends

Available at berkus.com , Amazon Kindle, or any online bookstore

Available at berkus.com , Amazon Kindle, or any online bookstore

facing their industry. Since I am chairman of the Technology side of the Organization, I attend more than one ABL group each month, and estimate that I’ve now attended more than four hundred half-day roundtables over the years.

Why would I spend so much time networking with other CEOs, discussing mutual problems and solutions?  The answer is that I am the recipient of many insights from fellow CEOs that sometimes strike like lightning bolts when least expected.  It was an Internet CEO roundtable in early 2000 where it became obvious before the public was aware, that the bubble was just beginning to burst for such tech businesses.  And it happened again in early 2008, as CEOs reported the first evidence of order slowdowns and issues with customer payments – right before the ‘great recession.’

[Email readers, continue here…]  But most importantly, it is the constant hearing of stories by these CEOs of how they were able to adapt to changes in their environment and alter the course of their leadership, adapting to external influences that had changed in their industry or the economy.

At each session we hear one of the dozen or so members present in depth, requesting feedback from each member of the group in response to a list of concerns that is explained during the presentation as background for the help hoped for from the group.  I contribute my two cents of advice, as do the others in the group.  As an active, professional angel investor, often I can help in areas not familiar to the others, when fundraising issues are on the list.

There’s the story of the member-CEO who saved her company during the great recession by dismantling its fixed overhead, sending everyone home to work virtually, and building a new culture to successfully support over one hundred workers from home.  Her recruiting business survived and flourished even as others closed their doors during the recession – and have remained shuttered.

Ten years ago, a young entrepreneur joined one of the roundtables, and we followed his progress with his issues, many of them directly related to fundraising, as he grew his company from a raw start-up to an initial public offering on the NASDAQ exchange, followed by continued growth in revenues and stock price.  During the early years, he often asked for advice about funding, comparing various sources and offers, threading the needle between the wishes of the investors and his judgment as to how to grow the company.

Somewhere along the way, as he grew his company to a size larger than any others around the table had ever managed, we became the students, listening to a set of concerns that were often stunningly beyond any we had experienced.  With a small stake in his company, and monthly contact through these roundtables, I happily find myself the former teacher, now the student.

The theme of these roundtables is “adapt” – to be ready for and embrace change quickly and efficiently in the light of opportunities and changes that might be missed by other CEOs without trained antenna-like skills.

You, too, can be an adaptive business leader, if you spend time with your ear and nose to the ground, listening and looking for signs of opportunity and change, then acting quickly to accommodate or take advantage of limited windows in time.  It is a skill that can be taught.  More importantly it is one requiring that you spend some amount of your time looking for signs of change.  Many of us are locked in the daily grind of our business, and default to managing events and reacting to incoming stimuli, such as emails and internal requests for assistance.

An adaptive leader seeks out change and embraces the opportunity to take advantage of trends early in their cycle, or to reconstruct a business in response to early signs of trouble or weakness.

Start by paying more attention to indicators of change within and outside your organization. Gather information to support your observations. Then act when appropriate to secure the advantage or protect the enterprise.

Seek out a roundtable organization if you can, to find a group of fellow executives ready to share and solve your problems of the month, or share theirs with you to better inform you of those you might otherwise miss in your management life.  It is certainly worth the time and effort to hone your skills at becoming an adaptive business leader.

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If it can be counted, the CFO owns it.

There is a simple way to define the responsibilities of the chief financial officer.  And it extends beyond the usual interpretation of the CFO position in many companies. If it can be counted, the CFO owns the responsibility for controlling it. The CFO should question and control the number of anything, including the number of chairs to be ordered.  That may seem extreme to many a CEO, but it serves a purpose. It is the ultimate control over

Protecting your Business - available at Berkus.com and Amazon among other booksellers

Protecting your Business – available at Berkus.com and Amazon among other booksellers

rampant spending or uncoordinated purchasing.

Looking at it that way, there is a check and balance for all departments and individuals ordering materials of any size that affect the cash position and profitability of the company.  Further, the CFO should speak up in executive meetings and when invited into board meetings, making sure that any major issues are vetted by the group.

[Email readers, continue here…] I was an early angel board member of a company that subsequently raised over $30 million in venture money following the angel rounds, which themselves amounted to $6 million.  I remained on the board through the life of the corporation, a witness to some surprises along the way that were, at the least, instructional.   First, the VC’s ordered that the company ramp its burn rate (monthly losses in cash) to over $800,000, which I could not fathom.  But it was their money and they must know what they were doing, I thought, as I watched what I thought to be all-or-nothing spending.  The CFO dutifully followed the VC commands to spend, and managed the spending process well – even if it exceeded reasonable standards of control over the ever-increasing inventory, headcount, and fixed expenses as the infrastructure grew.

But the CFO let the spending rate continue to increase out of balance with the board-approved budget which projected revenues to ramp, reducing the monthly cash burn.  In one four hour board meeting with all in attendance, the board spent almost an hour with the CFO analyzing the financial performance of the company.  We never saw, and he never mentioned the balance sheet and cash position.  It was eight months after the latest $11 million round and no-one thought it worth focusing on cash, since the position should have been over $5 million in cash and starting to grow – if on plan.

A week after the board meeting, the CFO emailed the board that the company was only weeks from having no cash in the bank.  Can you guess the board’s reaction?  The CFO was immediately fired.  I performed a forensic audit on behalf of the board to determine if there had been any fraud or theft; but there had been none. Spending had continued out of control, much of it for inventory and assets – neither of which appear on the income statement. So those expenditures were not reviewed by the board which had not been given a balance sheet to examine.

The moral is simple.  A CFO is responsible for all phases of cash deployment and preservation.  Failure to manage to plan, and failure to inform the board of dangerous excursions, caused this company to fail as the VC’s decided ultimately not to continue to pour money into the investment.

Maybe the CFO could not have saved this company; but he surely could have slowed the flow of cash, informing the board, and giving the board and CEO the opportunity to pivot the plan, to reduce inventory, to reduce spending, or to consider looking for a strategic partner or buyer.

Especially in companies where the CEO or founder is not a financial expert, the CFO is expected to be knowledgeable, willing to confront as well as inform, and to find early warning metrics that help in the process of effective cash management.  That person is not a bookkeeper, counting the past, but an expert at forecasting and control.

Posted in Protecting the business | 2 Comments