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RIGHTSIZING IN A DOWNTURN

As companies face the stark realities of the current economic environment, many are having to consider the need to “rightsize” and the best reaction to this need. There are numerous potential solutions and each has pros and cons. The actions a company takes right now will become part of the company history; employees, ex-employees, suppliers and customers will remember how a company dealt with adversity. And the actions taken will clearly demonstrate whether the company stuck to its core values in tough times or abandoned them.

TAKE CARE OF YOUR “A’s” AND “B’s” IN A DOWNTURN

Every CEO faces alternatives regarding rightsizing his organization, and the typical options include:

• Reduce staff, e.g. a 10% reduction
• Reduce pay rates, e.g. a 10% reduction
• Reduce hours, e.g. a 32 hour week

But the real question is not what to do, but how to do it. Do we take action across the board, i.e. all departments and levels? Or are we selective? If we cut heads, what happens to the remaining employees’ workloads? What tasks or functions can we stop doing?

The typical thinking is that to be fair, everyone and all departments should share equally in the pain. The problem with that thinking is that if we have differentiated our employees per Bradford Smart’s business classic, “Topgrading”, we know we have “A” player stars and “C” players who cannot be successful in their current jobs. What message do we send our stars if we lump them in with everyone else? And what will happen when times improve and “A” players remember how they were treated? “A” players can always find new positions, and with their exodus comes the potential challenge of trying to lead a company with an over-heavy concentration of “C” players.

Classic management of human resources has often theorized that, “everyone is in this together and we want to be fair.” There are leaders who truly believe that differentiating among people (topgrading) is unfair, but read Chapter 3 of Jack Welch’s latest book “Winning” for one of the best articulations of why it is not only fair but critical in organizations.

There is a contemporary stream of thought that makes a strong case for unequal pay and perks, based on sustained, demonstrated performance as companies rightsize. All positions in a company do not have equal importance to achieving the mission, and all people do not perform at the same level. The idea that our best people should suffer the same pain as our poorest performers may seem fair, but it is illogical in terms of the people who are most important to achieving results. As Richard W. Beatty, who teaches human resources management at Rutgers University observes, “Look, there are an awful lot of long-term employees who are poor performers who have locked-in high salaries through cost-of-living increases.”

As companies develop plans for reacting to the current economy, individual employee performance and topgrading become critical decision points for how to apply actions in the right way. Actions taken now must not only consider the realities of today, but also preserve the company core, ready for profitable growth coming out of this economic downturn.

Some good reading includes:

Making the Case for Unequal Pay and Perks, Michele Conlin in BusinessWeek, March 12, 2009

A New Game Plan for C Players (HBR OnPoint Enhanced Edition)

“A Players” or “A Positions”? The Strategic Logic of Workforce Management

 

I hear more questions and confusion about 360s than almost any other kind of assessment tool. So being a passionate advocate of the right kind of 360 degree assessment done for the right reasons, let me try and clear up some of the fog surrounding these, from a CEO’s perspective.

The right kind of 360 degree leadership assessment is a developmental tool that will help leaders identify leadership areas in which they could benefit from some focus and work. Since none of us are born perfect leaders, it is virtually always helpful to know how we are doing – not from our own, often rose-tinted self assessment, but in the eyes of the people around us who see us leading every day. In order to ensure that honesty drives the result, 360 degree leadership assessments should be anonymous from the participant standpoint, and from a recipient’s point of view, they should be seen as developmental and never tied to bonuses, salary increases or used in a punitive manner (i.e. to try and document a case for a termination).

360 degree leadership assessments demonstrate the message that “perception is reality.” A leader can choose to be defensive and argue with the results, but since these assessments are the composite view from an individual’s boss, peers and direct reports, regardless of what a leader thinks, their observers’ perception of observable leadership behavior is the reality. But perhaps more importantly, 360 degree leadership assessments should tie to business results for a company or organization – i.e. what are the critical leadership behaviors that senior leaders (and subordinate leaders to an increasing degree as they move up) need to be strong at, if the company is to achieve its strategic business objectives? 360s should not be done to “feel good”, to substitute for or to complement annual performance assessments.

There are many 360 degree leadership assessments available in the market, and most require a trained and licensed consultant to administer them. The instrument itself is critical, since many use a simple rating (Likert) scale, for participants to score the person being assessed on a number of leadership behaviors. The problem with these type of instruments is that it is very easy to “game” the questionnaire. If an observer just had a difficult interaction with the leader being assessed, it is very easy to just provide low scores, whether intentionally or subconsciously. For this reason, the best 360 instruments use a forced-choice question format, which takes the “gaming” out of the process. The observer has no idea which behaviors their answers go to, and they aren’t entering scores in any case, so the accuracy of the assessment is increased as well.

The last element of successful 360 degree leadership assessment is taking action. There is no point in doing 360s if there isn’t a clear path to taking action to improve one or two behaviors that could use some work. The best instruments provide documentation that walks leaders through a process of identifying behaviors they feel they should work on, and then sharing their plans with their observers, so there is some accountability to actually improve. The best side benefit of good 360 processes is to make discussions about leadership skills “safe”, i.e. since none of us is a perfect leader, we can all improve. With the feedback from my observers and the development of a personal action plan, I can also solicit help, and at the same time, if any of my observers see being sliding backwards, they can remind me of the commitment I made. Think of the power of an organization where talking about leadership skills isn’t done only behind closed doors and in whispers, but is part of a healthy dialogue about how leaders can be even better, to achieve even better business results. Where junior leaders clearly understand the behaviors that they will have to work on, in order to be considered for greater responsibility and to be part of the company’s succession plan.

The instrument I have used in all three public companies I led (and which I am now licensed to administer) is from a Portland, ME company called MRG. It is simply the best 360 instrument I have ever found, and below I have attached a link to their website. I have also included a link to an excellent whitepaper they have produced, that discusses why 360 degree leadership assessment must connect to business results and the bottom line.

When you are ready to identify critical leadership behaviors that are required to execute and achieve your strategic business objectives, consider a good 360 degree leadership assessment process as the path to follow.

THE SEVEN MOST POWERFUL WORDS FOR ANY LEADER

Many years ago, a boss of mine coached me to use seven words that would in the future have significant impact on my success as a leader. He believed it is all too easy for emerging leaders to try and answer all the questions that their subordinates pose to them, thinking such Olympian wisdom will somehow enhance their credibility and image. Actually, great leaders know that their role is not to be the “Wizard of Oz”, who in an all-knowing manner has all the answers.

I’m sure if you could track down the executive teams at the three public companies I had the privilege to lead, one of the things they would say about me was that “He never seemed to know anything.” This conclusion comes as a direct result of many of these executives, who were being paid handsomely, walking into my office and posing questions like “Jim, what do you think I should do about _____?” Over time, I learned that, for the good of those executives and the company, my best response was to never answer their question – but rather to respond “I don’t know; what do you think?”

As leaders, we all know that people will incessantly try to delegate things upward to us that they are accountable for. Asking for solutions to problems that they should be dealing with is typical, and if we allow it to happen, we are weakening them and the organization. Executives are hired and paid to identify problems and opportunities, weigh various alternatives, complete ROI evaluations and make recommendations regarding the best actions to take. When we provide answers in the misguided attempt to help, we remove critical accountability and growth opportunities for our subordinates.

It was amazing to watch what happened when they understood what their jobs really were about, and that my expectation was that they would bring recommendations and solutions – to watch how subordinates grew and became better leaders themselves. And when they did bring well thought out recommendations, I would always be willing to listen. It wasn’t easy to learn to bite my tongue and play dumb, and I’m sure some of them never did figure out that there was a strategy behind my response. However, even in those cases, they became better and stronger leaders, who understood that their real role was to be strategic thinkers who took accountability for solving issues and developing plans to take advantage of opportunities.

So where should you start you might ask? I don’t know; what do you think?

Have you ever read MacGregor, the outstanding story by Arthur Elliott Carlisle about one of the best leaders I have ever read about? Click on the link below and enjoy!

Arthur Elliott Carlisle’s article “MacGregor”

HEDGEHOGS AND PREPARING FOR A REBOUND IN THE ECONOMY

I have just finished an annual two-day strategic planning meeting with a company executive team; the third such meeting I have facilitated for them in the past three years. They are a several hundred million dollar, privately-held company that sells its products through various small to very large retailers around the U.S.

For the last two years they have pretty much continued down a path of filling in a very broad product offering (“an inch deep and a mile wide”) so they could be known for a rather complete brand in a specific segment of their market. As one would expect, some categories and products had relatively minor volume and impact, contributed little and were a distraction from the several core products that they are known for and best at. So as usual, it was a case of thinking that they had to dominate by breadth. The resulting workload, however, caused too many priorities, “widow-maker” executive roles and unacceptable quality at times.

In their strategic planning meeting, they really got into the strategic direction issues and alternatives to “an inch deep and a mile wide”. The team did a great job probing their direction from a number of different perspectives – with the full support of the CEO, who encouraged the vigorous debate and potential changes in direction. He had developed a product roadmap that showed for the first time the wide proliferation of products, and how that complexity could become a barrier to their profitable growth.

To their great credit, the team acknowledged that they could not be everything they were trying to be and generate the profitable growth and quality they were all committed to. They set a new path to segment their categories into two parts. Firstly, a few core ones that will be an “inch wide and a mile deep” and will get intense focus, investment and management. Secondly, those that will be maintained but not invested in, and may help fund the core group. This decision will have significant implications on the organization chart of the future, the manufacturing and systems capabilities and capacities required, and how the executive team will lead the company. But what a breath of fresh air and excitement, stepping up to the plate and realizing they had to say no to certain things in order to be really good at the most important ones. It was great watching a group of very talented leaders deal with the toughest issues and decide they wanted to be more like hedgehogs than foxes. I will enjoy watching them become a great company in future years.

The real takeaway for me was wondering how many CEOs are truly preparing their companies for the economic rebound that will certainly come. Asking those tough questions that no one else does is the key; even while things are still challenging, volumes are down and margins are under pressure, great CEOs are already preparing for the turn. They challenge strategy, upgrade bench strength, and rationalize locations and non-performing products – all with an eye on how to best position the company to take unfair advantage of the upturn. To not just ride the economic wave upward, but gain market share at the expense of weaker competitors and gain business without having to buy any other companies.

Great CEOs constantly mine the talent pool, courting and subtly wooing the best executive and managerial talent long before there are any openings at their company. As David Packard and Bill Hewlett often said when they started HP, when you find an “A” player executive, hire him or her! You can never have enough “A” player executives, and fortunately these caliber people can often lead many different functions in a company.

So how much time are you spending planning for today vs the future, and how have you positioned your company to take advantage of a strengthening economy? Measure your own “today vs future thinking ratio” as a check on whether your focus is in the right place.

 

Who wouldn’t want their company to have a culture of innovation, trying new things, embracing untested solutions, constantly probing to find breakthrough initiatives that will drive revenue and profit? There are some significant barriers to creating an innovative culture in an organization, however.

Barriers to innovation:

• Leaders and employees alike may not naturally bring innovative behavior into the workplace,
• Companies with a culture of tight expense control rarely stimulate innovative behavior,
• Companies seldom have role models for what innovative behavior looks like,
• Companies often confuse product development with research and development.

Some people just don’t bring those “innovation genes” with them, so it is hard for them to feel comfortable and get good at innovation. Assessment tools can readily determine an individual’s proclivity to think and act innovatively. I use a great 360 degree leadership assessment tool that measures a leader on 22 behaviors (one of which is innovative) as observed by the leader’s boss, peers and direct reports. “Innovative” is one of the behaviors that usually shows up as really important, but also one that rates the lowest for leaders individually.

Innovative behavior implies that some things will not succeed, yet in most companies, failures are not recognized as learning experiences. When budgets are tight, people are often criticized or put into the “penalty box” when something goes wrong. If the proper due diligence has been done, business cases have been developed and approved and the implementation plan created and followed, a quick failure probably deserves recognition and treatment as a learning experience that supports an innovative culture. Great leadership teams regularly dissect such failures, both to learn from them and to institutionalize future behaviors to assure a better chance of success.

Companies regularly try to encourage an innovative behavior culture but often don’t have one single leader who naturally acts this way. Who is the role model for leaders to act innovatively? Very often in certain types of companies (engineering, process industry, etc.) people have grown up and been hired precisely because they know how to avoid mistakes that could have real exposure for their company. If a leader’s entire career and job performance is based on minimizing errors, how would they even know what innovative behavior looks like? Team assessments can often be helpful in determining whether innovative behavior is a natural strength in any team member. If it doesn’t show up as a strength, then perhaps the next hire on the leadership team needs to be assessed for this, to ensure they bring that strength.

To me, R&D means throwing ten things against a wall and having one or two “stick”, i.e. become commercial successes. Most companies cannot afford this failure rate, however, so when they talk about having an R&D culture I wonder at their definition. Most companies do PD; product development, rather than true R&D. Driven by customer input, competitor product introductions and/or just incremental product evolution they develop new products with a high chance of success. This is certainly innovation, but usually not at the breakthrough level. Funding some “skunk works” or allowing leaders to try something that has a less clear business case for success but could result in breakthrough revenue and profit growth can make sense – as long as it utilizes intelligent risk.

So assuming that you want and need innovative behavior to grow your organization, have you recognized and addressed the four barriers described above?

An excellent article on Collaborative Leadership appeared in the July-August issue of the Harvard Business Review: Are You a Collaborative Leader?

 

EXCEPTIONAL SALES – WITHOUT MORE REPS, COST OR RISK

What CEO doesn’t want to increase sales? The challenge isn’t usually whether to grow sales or not, but how to do it without adding significant cost and/or risk. All too often growing sales results in making sweeping changes to staffing, commission plans, territory alignment and/or processes. CEOs far too often buy into the need for overhauls rather than tune-ups – either on their own initiative or by acceding to the recommendations of their sales executives. Long before radical steps are required, some simple, basic tweaks can make significant improvement in sales results that can drop profit to the bottom line.

Most sales improvement programs are like high-risk heart surgery – when what is really needed is physical therapy. Continuous small steps, implemented in the right order, enable companies to minimize disruption and grow better – both today and tomorrow.

SALES MYTHS

How often have CEOs heard from their sales executive and/or sales force that the following are either current issues, or required to increase sales:

• We need more sales reps
• We need higher compensation
• 20% of our reps will always generate 80% of our sales
• We need a new commission plan
• We need more leads
• Great sales reps are unique and cannot be managed

The four areas that have both the greatest impact on sales and the ability to be tweaked without radical or risky steps are:

• Balance – not accepting the 80/20 rule
• Performance to Expectations – expecting all reps to meet their quota every month
• Consistency – sales are generated throughout a period, not bunched at the end of a month or quarter
• Forecasting – accurate forecasts are produced for planning by the rest of the organization

There are three focus areas that when addressed together can have significant impact on sales results. Ask yourself the following questions to assess each area:

Sales Process

• Do you have a defined sales process?
• Does the organization maintain sales tools for each step of the sales process?
• Do you monitor each step in the sales process?
• Is the sales process understood by the organization?

Alignment

• Do your sales reps have a compelling value proposition and target market?
• Do the executive staff and sales organization use the same compelling value proposition and target market?
• Do you monitor selling of your compelling value proposition to your target market?
• Is your compelling value proposition and target market understood by the entire organization?

Accountability

• Are individual sales reps’ expectations defined and communicated?
• Are individual sales reps held accountable for forecast accuracy?
• Do you monitor individual performance against defined expectations?
• Is the entire company held accountable for supporting sales process execution?

WHERE DO YOU START?
If the answers to the above three sets of questions were not a clear and resounding “yes”, then there are some key initiatives that you can begin in your organization:

• Develop and enforce a sales process
• Create clear alignment between company business objectives and sales department objectives
• Define clear expectations for each sales rep, and begin holding them accountable for performance against those expectations
• Initiate monthly insights from sales reps

To instill and start to reinforce the kind of behavior that leads to increased sales on an ongoing basis, have your sales reps answer the following four questions at the beginning of every month – without fail:

• What was my biggest accomplishment for the last month?
• How did I do against last month’s quota?
• How do I look for meeting this month’s quota?
• What is the most significant hurdle I have in meeting this month’s quota?

Download and read the entire whitepaper on Exceptional Sales