Is Your Success Intentional or Accidental?

"It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things."  

                                                                                          Leonardo Da Vinci

I've recently begun using a word I learned from CEBI member Adam Landrum:  

Intentional  

Not that I didn't know the word - just that I had never before applied it to personal and business strategies.   Then there's its antonym:  

Accidental   

I started watching for examples of Intentional vs. Accidental strategies in business and in life, and I found a lot of them:   

• Investing -- Intentional investors, those who have a clear-cut set of investing strategies and policies, have continued to build wealth, even through a deep and long recession.  Accidental investors (the average retail investor) panicked and sold low, then missed a 140% run-up in the market.  They're now re-entering the market (buying high) and will again sell low upon the first major correction. 
     
• Sales Lead Generation -- Intentional strategies generate sufficient numbers of leads to fill the sales pipeline, and those companies enjoy long-term, steady and predictable revenue growth.  Accidental strategies include the fabled "word of mouth" - an idea which by definition fails to create a steady, predictable flow of leads.  Companies that say they get new customers by word of mouth are really saying, "We get our new customers accidentally." 
     
• Volunteer Membership Development -- In my volunteer life, I watch some Rotary Clubs grow, while others decline in membership.  The difference?  The growing clubs have an intentional strategy by which they do things to identify prospects, acquaint them with Rotary and bring them in as members.  Declining clubs use accidental strategies, such as, "Bring someone to a Rotary meeting if you happen to think about it."  
     
• Personal Relationships -- Intentionality applies here, as well.   Couples who plan time for themselves are happier, stay together longer and live longer.  Maintaining touch with friends and business associates requires an intentional, rather than accidental strategy.    
• Health -- Intentional strategies for health include regular checkups, exercise and weight control.  Flossing daily and wearing your seat belts won't hurt, either.
    
• Exit Strategy -- Perhaps the most accidental event of all for many business owners.  Failing an intentional strategy, many business owners are not ready for an exit when something happens in their life or their family and have to exit unexpectedly.  They lose a huge amount of value as a result, not to mention the emotional disappointment of exit under duress vs. exit on your own terms and timing.  

How can you tell the difference between an accidental and an intentional strategy?  If you can give a clear-cut explanation, including both actions and outcomes, when asked, "How do you......",  or "How do you plan to......", you have an intentional strategy.   If you want your business to be whole lot more valuable, start writing down your intentional strategy for each of your mission-critical business processes.   When you get writer's block (can't figure out what to say), you've identified an accidental strategy that needs some work.    
  
If you discover some accidental strategies that need work, or if you have some really great intentional strategies, click "Comments" below to share them with others.   

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Terry Weaver

Advisor

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Have a Group Health Care Plan? You're Probably Paying Too Much

The health care insurance landscape is upside down.   If your strategy is group health care insurance, you're on the expensive, limited options track.  Group health care insurance is going away, and you may be contributing to its short-term survival (at your expense).
 

Have you recently heard from your group health provider that you should accelerate your rate renewal to December?   Doesn't that raise some questions in your mind?  Why would they be doing that?   Important:  A rate renewal is just that - you can change your coverage at any time without penalty.  You're not committed to anything through the next renewal period. 

Here's an article that will blow your mind (written from employees' perspective):  Why an employee may ask you to drop health insurance

Yes, some of your employees (and you) may actually be better off without group health insurance provided by the company.  There are much better and cheaper ways now available to provide health coverage for your employees.      

In other cases, offering the minimum required coverage under the Patient Protection and Affordable Care Act (Obamacare) may neither protect them nor be affordable, but may be the lowest-cost option for the company.  Optimally, you could construct a plan whose pricing was such that your lower-paid employees would be eligible for very low-cost, subsidized coverage under an Obamacare exchange.  
 
Take the time to explore your options.   One you should consider is your own self-directed health care plan.  Give your employees the coverage they need, at a substantial savings.  Here's an overview of that option:    http://www.chiefexecutiveboards.com/105   

If profit dollars or your employees' own health care costs matter to you, have a look.   If not, don't worry about it.

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Tie Behaviors to Employees' Health Care Costs

 
It's completely legal to tie employee behaviors that affect their health, either positively or negatively, to their cost (premium co-pay) of health insurance.     

Virtually every Chief Executive Boards International meeting includes some ideas on mitigating health care insurance costs.  The most profound of these ideas several years ago resulted in the CEBI Medical Expense Reimbursement Plan referral program, which is currently saving CEBI members an aggregate of half a million dollars a year.

Years earlier, in 2004, CEBI had its first Executive Briefing at a National Summit on Health Savings Accounts.   In the meantime, many members have adopted hybrid strategies combining these ideas as appropriate for their situations.      

Further, courts have now held that it is, in fact, OK within certain guidelines to incentivize employees for "healthy lifestyle" behaviors, which would, of course, include disincentives for "unhealthy lifestyle" behaviors.    Here's an interesting, thorough article on some of those considerations.  These plans tend to be most successful if supported by some "coaching", usually provided by a third party or perhaps your insurance carrier. 

One interesting side effect of such programs is that your company becomes more economically attractive as a place to work for healthy people and not so attractive for unhealthy people.   That self-selection process alone could be an astonishing long-term driver of cost and productivity.  

In a recent CEBI meeting, a member mentioned something that has nothing to do with premium co-pays.  Instead, he's offering a direct (pre-tax, of course) contribution to an employee's HSA account based on wellness habits, such as participation in a company wellness plan or gym membership, not smoking, etc.   He will contribute up to $1,150 per employee annually, based on those criteria.  

If you have used incentives, successfully or unsuccessfully, to incentivize wellness habits of your employees, click "Comments" below and share them with others.   

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Measure Intentional Activities, not Outcome

I had just left a conversation with a volunteer group about attracting more members. We were talking about a more intentional, rather than accidental process of creating a prospect list.

Minutes later, I heard an NPR broadcast about how some pro basketball teams are tracking a new "non-official" statistic, "deflections". For those of you like me to whom this is a new term, a deflection is any time a player does something defensively to change the course of the basketball. It's a not-yet-official statistic that's not a turnover, not a rebound, assist or steal. It's just an indication of defensive engagement and pressure on the offense that may or may not result in an outcome.

The commentator said, "If a pro basketball team has 35 deflections in a game, they have a 95% chance of winning that game." Pretty good odds, and easy to explain to the players what you want them to do.

I was talking with a sales pro later at lunch, and related this to him. He said, "You know, I saw a sales person one time who finally stopped focusing on his sales revenue and just focused on activities that generate sales. Suddenly he found all kinds of sales opportunities beyond the core products he was trying so hard to sell.

Sometimes it's best to measure activities people can control, especially if they're known to drive the desired outcome. Number of appointment-setting calls. Number of new prospect appointments. Number of face-to-face demonstrations.

Of course, you want to make sure the activities you're measuring actually have a known connection to the outcome (in this case, orders). And you want to have some checks and balances in place to prevent padding the numbers with non-contributory activities.

Have a look at your metrics and see if you have enough focus on success-generating activities that lead to the ultimate outcome you want. Perhaps you're not getting the results you want because your team isn't doing enough of the things that eventually produce results.

 
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Terry Weaver

CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Check Your Phone at the Door

Mobile phones, smart phones and tablets in the workplace have moved from convenience and luxury to productivity killers, security threats and liability creators. Companies are beginning to enact significant restrictions on use of smart phones at work, with one Chief Executive Boards International company deciding that employees' phones be kept in their lockers during work hours.

Why?  Well, the productivity, distraction and safety impacts are irrefutable. Employees aren't producing when they're making personal calls, checking personal email, web surfing, making or reading Facebook posts. Arguably, these distractions can cause process failures and, at the worst, accidents. An hour a day of lost productivity is conservative.  Mobile devices that bridge outside and corporate networks pose data security risks that are almost impossible to assess - a mobile device could become an open conduit to your network without the user's knowledge.

Beyond that, however, smart phones have the ability to record photographs, video or audio of workplace activities that could be a significant security or competitive threat. A disgruntled employee could easily find things to photograph or record that could later become a problem in an employment dispute. Confidential or trade secret information is at far greater risk if it can be photographed and electronically transmitted beyond your office or plant.

Think about it. Can your company afford an "anything goes" policy with respect to handheld devices? Would it be better to establish a policy where if someone needs to contact an employee, they do so through the switchboard, and employees leave their phones in their cars, lockers or purses? Perhaps you might want to establish a job grade cutoff for such a policy, if you need your managers to have phones where they can be reached throughout the building.

Here's an article on how some companies are coping with this new threat to productivity, confidenitality and data security: http://am22tech.com/s/22/Blogs/post/2011/08/03/SmartPhones-Are-Eating-the-Productivity-At-WorkPlace.aspx


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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Routine Will Set You Free

In the recent CEBI Strategic Planning Workshop, facilitator David Rippe said, "Routine will set you free." Counterintuitive, perhaps. What he meant was that any part of your business you can turn into a routine business process that operates pretty much on auto-pilot completely frees you from supervision, followup, decision-making and intervention. Those are four of the things that keep many business owners "too busy" to work on their businesses -- they're too busy as the "go-to" guy or being the decision-making bottleneck in their day-to-day operations. If you want more time away from the business, or more time to work on improving the business, your first priority should be business process definition.

It's like Groundhog Day, where Bill Murray is "having the worst day of his life ... over, and over".  Ever feel like that in your business?  It's self-inflicted -- a spiral you've set up for yourself due to your unwillingness to step back, get a team together and create business processes that have built-in checks, balances, metrics and exception reporting for when they (hopefully seldom) go off track.  Or perhaps it's your emotional attachment to being the "go-to-guy".   "My employees won't make decisions themselves", you say?  Probably of your own making, as well. See: Want Your Employees to be Independent Thinkers?

There's a huge difference between 5 years of experience and 1 year of experience repeated 5 times. 

Business processes that are well-defined, thorough, current and disciplined make day-to-day operations routine, reliable, productive and profitable.  A "boring operation" that consistently generates cash.  Isn't that what you want?  If you're serious about that, the answer is creating a Process Culture -- a company culture where the way the business works, the way sales are generated, the way orders are handled and the way problems are handled is a routine, well-defined, well-oiled machine.  Routine (well-documented and practiced business processes) will, indeed, set you free.

If you're ready to start this journey to freedom, here are 7 Steps Toward a Process Culture....
 

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

5 Key Principles of Incentive Compensation

Most business owners get incentive compensation wrong.  There are several reasons for that.  The leading cause, I think, is that they pencil-whip it.  They don't really think about changing behavior.   They don't think about how employees might "game" the incentives.  Rather, they pay for virtually accidental outcomes that happen to match their wishes.   

Another approach?  Design the incentives to drive the behaviors you want, based on behaviors the employees can control.  This excellent example came up in a Chief Executive Boards International meeting last week.  It's a classic. 

A contractor was having a problem with employees not showing up.  If an equipment operator no-showed, 3 other guys were standing around with nothing to do, since the equipment wasn't available.   His solution?   Brilliant.    

He went to all his field crews and said, "Guys, if everyone on the crew shows up every day, on time, for a month, everybody gets a $50 cash bonus."   Simple.  Effective.  Something they can control.  Something they can influence among themselves.    

What happened?  The first month only one crew collected on the bonus.  He handed out the $50 bills, with great fanfare, making sure everyone knew that one crew got the bonus.  What happened next month?   Every crew got the bonus.  They called the guy they were worried about every morning to be sure he showed up.  For almost no money, he solved an endemic problem and attitude that was costing him a lot of money.  That simple solution improved productivity dramatically.   

This is the essence of an effective incentive program.  You want to design around some core principles (SMART):   

1. Simple -- Easy to understand -- something anybody can grasp.
                     
2. Measurable -- It's easy to determine whether it's accomplished or not.
         
3. Achievable -- It's something that actually can be done -- by ordinary humans.
        
4. Relevant -- The incentive causes a behavioral difference in your company that matters.
          
5. Time-Based -- A time horizon that people can visualize.  A week.  A month.  A quarter.   Put the carrot close enough so people can see it -- not so far over the horizon they can't see it at all.

Examine your incentive compensation design.   Is it "SMART"?   If you have great incentive compensation strategies that work, click on "Comment" below and share them with others. 

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

4 Steps to Eliminate Process Failures

Things go wrong. You get upset. People get reprimanded. And then it happens all over again - either the same problem or a different problem. This comes up in CEBI meetings all the time. Why is that? 

You have business processes. I hope they're documented and people refer to them, at least occasionally. If that's not the case, you have a problem that we'll cover in another article.   

Even with documented business processes, something goes wrong. That's a business process failure. What separates great organizations from good organizations is their response to a business process failure. 

Many good organizations, after the reprimand, say something like, "Don't let that happen again." And then, of course it does. That's due to a lack of an important business process of its own -- the process of responding to a process failure. Here's a rough outline of what should happen in the case of a process failure:

1. It's documented -- there's actually a written report of what happened. This can be a simple template on a shared drive or knowledge base, and the process failure reports can be saved in a similar location.
        
2. It's analyzed to its root cause. This is not a toss-off answer, like "Failed to follow the process." The Japanese say, "Ask WHY five times." For example:
   -  Order got shipped to the wrong customer
   -  Why?
   -  Jack wasn't here, and Jim did the shipping
   -  Why was that a problem?
   -  Jim doesn't know the shipping process
   -  Why?
   -  He hasn't been trained
   -  Why?
   -  He's not Jack's backup for shipping
   -  Who is?
   -  Actually, it was John, who quit last month, and we didn't train anyone else
   -  So what's the root cause of this problem?
   -  We don't have a clear-cut list of backup people for critical business processes like shipping
       
3. Once the real root cause is identified, then the important final step kicks in -- Corrective Action. The corrective action can take a lot of forms, such as:
   -  Creation of a checklist that doesn't exist
   -  Posting of a checklist that didn't get run in a place it's easy to find
   -  A process improvement to an established business process that broke
   -  Creation of a new business process to replace an informal handoff of knowledge
        
4. Implement and test the Corrective Action. Make sure it works, and make sure everyone who's supposed to be trained in the new process actually is. 

A business owner once said, "We don't seem to have a consequence for not following our business processes." I said, ""Why not make the consequence fit the misbehavior? The person who fails to follow a business process is required to do the process failure analysis and write up the corrective action."

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Terry Weaver

CEO

Chief Executive Boards International
http://www.chiefexecutiveboards.com/

TerryWeaver@ChiefExecutiveBoards.com

Prepare for the Greying of Your Workforce

Only a few years ago, we were concerned about the departure of the Baby Boomers from the workforce and the "brain drain" of experience that would go out the door with them. What happened? Nothing. They can't afford to retire.

One questionably positive outcome of the market gyrations of the Great Recession has been the wake-up call for Americans on their retirement savings. Unfortunately, many investors made the classic mistakes of retail investors, selling into the panic of falling equities markets and then failing to capitalize on a 100% runup in the same markets over the past 3 years.

But the problem is not about those who "lost" retirement savings. It's about those who never had any to begin with and aren't on track to have a meaningful amount - ever. According to the Employee Benefit Research Institute, of those Baby Boom and Gen-x households in the third quartile (50%-75%) of income, only 50% have retirement savings adequate to maintain a lifestyle at 70% of their current income if they retire at age 65. Extend that retirement age to 75, and their odds improve to only 60%. Extend retirement to age 85 and it's barely 70%.

We are likely to see an age of retired Americans living in poverty, compared with their current standards of living. Why? Because they don't understand their current situation and are running out of options to resolve the shortfall in their retirement savings and investments.

Their only option? Keep working. Or return to work after they see their net worth evaporating much more quickly than they imagined. There's good data on the likelihood of this. As defined benefit plans were winding down, many workers received lump-sum payments of their accrued pension benefits. Most of those spent all that money in 3-5 years.

As employers, we're going to be seeing Baby Boom and GenX employees staying in or re-entering, vs. leaving the workforce. Most of us don't have very good strategies in place to cope with an elderly workforce and all the costs and issues that come with it. You'll have more sick leave, more "forgetful" mistakes and probably more accidents as workers pass 70, 75 and perhaps even 80.

If you have ideas or suggestions on this topic, please click "comments" below and share them with others.

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Terry Weaver

CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

The Cloud, The Tablet and The Smart Phone

  
America is in decline. We've lost our way. We're no longer the leaders and innovators of the world. We've shipped all our jobs offshore.

Are you kidding me? Are you just not paying attention? Are you listening to the TV news?  Apparently you haven't been in Chief Executive Boards International meetings lately.  Ninety percent of our members are expecting 2012 to beat 2011 - some by a wide margin. 

The facts:

America is producing more manufactured output than ever before. Yes, it's doing it with fewer people. Almost everything (goods, as well as services) in America is increasing in output, with fewer hours of labor expended. We call that Productivity -- the units of output divided by the labor hours needed to produce it. I've heard, "all we're creating are hamburger-flipping jobs." Not true, but guess what? Even that industry is producing more hamburgers with fewer minutes of labor per burger.

I just watched the boarding of a 150-seat airplane managed by a single gate agent. Just a few years ago, there would have been 3 people involved in that process. Most passengers showed up with boarding passes they printed themselves - either at home or at self-service kiosks. They paid for their tickets without another human being even involved. Contrast that with 20 years ago -- you had your assistant call a travel agent, and set in motion a process that was probably personally touched by at least a dozen people, including the driver who hand-delivered the printed tickets. Is that a "highest and best use" of a human being??

So what's the "next big thing"?

Brian Wesbury, my personal favorite economist, says the next wave of economic growth and productivity improvement is a revolution of computing, moving off the desktop and into the airwaves. A 20-year long trend of accelerated productivity improvement is continuing, in large part fueled by Information Technology.

If you have a library of old company newsletters from the 70's and early 80's, you'll find countless articles exhorting employees to improve productivity. Despite all that print, productivity didn't move a lick. Companies fought for 1% and 2% productivity gains. Reason? Nobody had any new tools by which to do anything much better.

Late 80s -- personal computers. Control of computing resources moved from the high priests of the corporate computer room to the desktop of the branch and regional office. Early 90's -- the Internet. Suddenly the branch and regional offices could communicate and collaborate, whether Corporate liked it or not. And they started performing better. A lot better. Suddenly productivity started improving across all kinds of businesses by 4%, 6% and 8% per year. And so it has been for the first 20 years of the Internet era.

During the recent recession, productivity soared -- yes, on less output, but with even fewer labor hours.

This wave of innovation is not originating in China or India or Europe. It's originating in America, where it always has. In the Post-Japan world economy, Americans are the ones on the leading edge of applying Information Technology to deliver almost everything better, faster and cheaper. The rest of the world benefits, but largely follows, rather than leads.

So, whether you're making bets on investments or tooling for your company, look to the "cloud" and look to mobile devices. Look for ways to put more information tools in more hands in smaller packages. Tablets for the sales force. Tablets on the shop floor. Smart terminals on the belts of the warehouse staff. Smartphone apps tailored specifically to your business, your processes and your workflows. Look for ways to take elapsed time out of everything you do. Get the information on to the next process step, even before the material arrives.

Think about it.

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Terry Weaver

CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Questions Down, Answers Up

  
"What would you do about that problem?" Good question, asked most every day in most companies. One Chief Executive Boards International member says it's usually asked by the wrong person. He says that question ought to be most often asked by the boss, not the subordinate.

Think about it. How often do you, the boss, become the "go-to guy", where your subordinates are asking you for answers? If your answer is, "most of the time", it's because you have it backwards. Instead, you're the one who should be asking your subordinates, "What would you do about that problem?"

Try inverting the information flow in your company, such that you're asking most of the questions and your subordinates are providing most of the answers. In other words, "Questions down, answers up". Give it a try, and you'll find yourself becoming steadily less essential to the day-to-day operation of the business.

Also check out:  Want Your Employees to be Independent Thinkers?

If you have some other ideas on how get your employees to think and act on their own, please click "Comments" below and share them with others.  

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CEO

Chief Executive Boards International
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TerryWeaver@ChiefExecutiveBoards.com

Just Say "Yes"

 
Nancy Reagan's answer to the drug problem in the US was, "Just Say No". Not bad advice for young people thinking about experimenting with drugs, and not bad advice for parents and business owners, on occasion. 

Probably not a good idea for sales or sales support people who are answering customer questions about a product or service. Technical people have the worst time with this. A customer says, "Can your product support 10 different users simultaneously?" Chances are he's been coached to ask that question by your competitor, who knows that your base offering supports only 8. And you know the average customer actually needs only 2 or 3. This is "killer feature" marketing -- your competition hammers away at fringe "features" where he believes he can divert a prospect's attention.

Technical guys, by and large, fall right into this trap. They'll answer this question with, "No, but if you needed to do that, we recommend an expander product, available from a third party." What does the customer hear? "NO", just what your competitor hoped he would hear. The solution offered, in technical circles, is known as a "workaround", and sometimes the technical guy will even say "we have a workaround", which perhaps even reinforces "No".

In a former life running a product business, I watched this happen, even in "command performances" in a headquarters Customer Briefing Center. We'd fly prospects in on private jets and then have a technical guy fall right into a "killer feature" trap our competitor had armed the customer with. I needed a fix for that problem, and one that was easy to train and propagate.

The fix was simple. Before the next Customer Briefing, I met with the technical guys who were going to participate, and explained the problem. These were bright guys -- they weren't trying to mess up. I said, "Guys, when those kinds of questions come up, I want you to give them the same answer -- just delivered a different way. Instead of starting the answer with "No" and then following "but" with the workaround, say, "Yes -- The way you would do that is...... and then explain the workaround"". Exactly the same information, and it has the added advantage of being true. The difference is in the customer's perception. So, the answer to the multi-user question is, "Yes -- The way you'd do that is with an expander, which you can add if you ever need that many simultaneous users."

They had no clue their native response was a problem. And they had no problem with the new script. Technical people won't misrepresent a product. Nobody should. What they will do, if coached, is present it in its best possible light.

This lesson isn't specific to technical people. Scripts are important -- in almost every job in your company. Don't expect people to "make it up on their own". When it's important what people say to customers and prospects (and it always is), script it. People will say and do the right thing if you define what the right thing is.

"Script the critical moves" is a change management principle brought to us in the book Switch, by Chip and Dan Heath. They say, "Don't think big picture -- think in terms of specific behaviors."  Here's a Book Review of Switch.

If you have examples of where you have (or should have) developed and taught scripts in your company, please click "Comments" below and share them with others. 

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Terry Weaver


CEO
Chief Executive Boards International

http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com


 

5 Tips for Making New Year's Resolutions Work

The core of a New Year's resolution is changing something, right? Change is hard, whether it's yourself or your organization. But it's manageable -- that is, if you recognize that it's not the new behavior or outcome that's the problem, it's changing what got in the way of it in the past.

CEBI members who joined us on the Fall 2010 Executive Retreat in New Mexico had a look at a new book, Switch - How to Change Things When Change is Hard, by Chip and Dan Heath. Believe me, in almost every case, change is hard. They offer a straightforward 3-point framework (not 12 steps) by which to plan and execute a change in your organization (or your life). Briefly, those are:

• Rational - Find things that are working, be specific about the behavior changes you want, and make the destination clear to everyone
• Emotional - Find a feeling that makes the change worthwhile, and break the change down into achievable parts (reduce the size of the change)
• Install Systems - Put business processes, systems, checklists, habit triggers and small "wins" in place to ensure compliance and cooperation

Of course, 3 bullet points don't do an entire book justice. The book is filled with ideas, suggestions and examples of accomplishing huge changes, one step at a time. I just received their newsletter, directly applying those ideas:  5 Tips for (Finally) Getting Your New Year's Resolutions Right. I hope it's useful to you on its own, and that it's intriguing enough to prompt you to pick up their book.

By the way, if you'd like to use this in your company, here's a CEBI PowerPoint Book Review, all ready to go (big file -- allow some time for it to open). 

Happy New Year and all the best in 2011 from CEBI!!

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CEO
Chief Executive Boards International

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TerryWeaver@ChiefExecutiveBoards.com


 

A Mantra for Change -- Tell and Show

 

"A leader with no followers is just a guy out taking a walk" says Harry Loyle, Managing Director of Cybeck Capital Partners. Harry presented an Executive Briefing at a recent Chief Executive Boards International Summit. Harry's leadership and change management mantra is "Tell and Show". We learned in grade school how to "Show and Tell". This is different.   
 
A leader must first articulate what it is he wants. Exactly what it is he wants. In Harry's words, "Clearly articulate the change, and quickly follow with examples."  In the words of Chip and Dan Heath in their best-seller, Switch, you have to "script the moves". Put the dots so close together your followers can't help but connect them. So, first figure out how to clearly tell them what you want, and specifically what you want them to do.

Then show them. Sometimes a leader has to pick up a weapon and fight with the troops. This isn't the same as working in your business full time. This is working on your business by clearly demonstrating the behaviors you expect from your followers by showing them how to do what you want done. Then step away and make sure they can do it on their own without you.

So, when driving change through your organization, remember Harry's advice, "Tell and Show".

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com


 

Newton Was Right -- Yet Again

 

Since commerce began, CEOs and owners of businesses have struggled to get their workforce to understand the financial side of the business -- why we need profit, why we can't distribute all of it, where the money goes, etc. In fact, some owners have trouble themselves when they get past the income statement. A P&L is pretty straightforward. In fact, I talked with a person whose business failed this past year, and he said, "I understood my P&L pretty well. What I didn't understand was my Balance Sheet -- I think that's what did me in". PS: He's right about that.  

I recently needed to explain the relationships between the P&L and the balance sheet to a group of senior and middle managers, and was looking for a metaphor that might "stick" better than just walking through the numbers. Here's what I came up with, and I'm hoping it might be useful to you in explaining the same thing some day.

There's an amazingly direct relationship between aviation and business. Flying an airplane is a whole lot like running a business, if you understand the correlations. What are some of those?

• Direction = Strategy -- We're making good time. Are we going to end up where we want to be?
   
• Airspeed = Revenue (sales) -- What keeps an airplane flying is air rushing over the wings, providing lift. In fact, lift is directly proportional to airspeed. There's also a critical airspeed at which the airplane stops flying -- the stall speed.
   
• Altitude = Available Cash -- The game-over point in flying? Premature contact with the ground, otherwise known as a crash. Altitude = 0. Same in business -- game-over occurs when cash = 0. You only get to run out of money once. You can come close to running out of money lots of times.
   
• Rate of Climb = Profit (or more accurately, cash flow) -- If you're losing altitude, recovery requires either of two things -- more airspeed (sales) or reduced weight in the airplane. Lift stays the same and you gain altitude. How do you reduce weight in the airplane? 

Throw the luggage overboard (jettison expenses). They have stores where you're going, and you can buy more clothes. 

If you're carrying mail, throw that overboard (eliminate non-essential activities). Those people will get over it -- they'll just send those letters again. 

Pick a non-essential passenger and throw him overboard. Not pleasant, but could mean the survival of the rest of the party. You can figure out that part of the metaphor.

There are a couple of other ways to solve an airspeed problem, such as more thrust. More energy applied to the business. Or more energy applied directly to Revenue generation. You could also reduce drag -- eliminate mistakes, outsource non-core activities, increase productivity or automate.
 
The most useful part of this metaphor, I believe, centers around the most critical tradeoff in flying. That's the tradeoff of altitude for airspeed. When airspeed slows, lift is reduced, rate of climb becomes negative, or if you try to maintain altitude, you'll stall. So, you point the nose down and let gravity help you maintain airspeed above stall speed. Business equivalent? You settle for less profit, or even a loss to maintain airspeed. This will work for awhile. How long? Until you run out of altitude (cash). When altitude = 0, game over.


The important lesson, well known by old pilots, is this:

If you're losing both airspeed and altitude, you've got to come up with ideas -- usually pretty quickly. The best recent aviation example of ideas overcoming loss of airspeed and altitude is the "Miracle on the Hudson" -- the story of Flight 1549.  In that story, Captain Sullenberger maintained critical airspeed, sacrificed altitude, and came up with an amazing number of ideas, just in time to become a hero.   


If you have metaphors or word pictures you've used to help your workforce understand the business, please click on "Comments" below and share them with others.


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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

"You never want to run out of airspeed, altitude and ideas all at the same time"

8 Questions to Ask if Your Incentive Comp Plan Isn't Working

Some business owners believe incentive compensation plans don't work. Many don't, and the reasons vary.  In some cases, employees are just not money-motivated. In most cases, however, an incentive plan that isn't working is a poorly-designed incentive plan.  In a recent meeting of Chief Executive Boards International, one member said his "discretionary bonus" had become a Christmas season entitlement. Several members contributed good ideas on how to construct an incentive plan that works, whether for sales, operations, shipping/receiving, etc.

If you want to redesign or install an incentive plan for your business, it's important to get it right -- the first time, if possible. To help you with that, here are 8 key questions to ask about your plan design:

• Is it Meaningful? -- If the employees do what you want them to do, is the reward at stake enough to get their attention? This is a failing of many incentive programs. Employers put microscopic incentives on top of comfortable base salaries. Employees quickly conclude, "So, if I show up I get paid well. If I knock myself out I get paid scarcely more." If you want more variable pay, you may have to reduce base pay.  Here's an article on one way to fix that "not meaningful" problem...
   
• Is it Achievable? -- If Superman couldn't ring the bell, your employees won't try to, either. The moment they figure out the goal is unachievable (at least by ordinary humans), the incentive value is lost. Design in some flexibility, such as reward thresholds that are set annually, in response to market conditions. Then you can move the carrot within reach.
   
• Is it in sight? -- Business owners love annual payouts -- they're simpler, happen only once, and smooth out ups and downs over the year. Few employees can keep their eye on a reward a year away. Most are living paycheck-to-paycheck, and the idea of an annual payout is simply beyond their attention span -- perhaps beyond what they visualize as their future with your company. The carrot is so far away, it's beyond the horizon. Think quarterly, even monthly or project-by-project in your plan design.
    
• Is it clear what you want? -- Can they connect the dots between the result you want (the measure/metric of performance) and specifically what you want them to do? The connections between their actions and cost reduction, waste reduction and productivity improvement are clear to you. Don't expect those connections to be clear to them.  You might test this by asking exactly what they're doing to get to the goal.
   
• Is it within their control? -- More importantly, do they see exactly how their own behavior, effort and accomplishment directly connects to the incentive? I contend that incentive comp plans tied to "overall results" or "company profitability" or even "department performance", if the department is big, hardly ever work. The average employee just can't connect the dots between what they do and the overall result -- it's just a big squishy idea that they can't get a hold of.
  Instead, tie incentive pay to something they can relate to -- units produced, cycle time, inventory reduction (turns), Accounts Receivable (DSO), etc. depending on what's within the workgroup's direct control & visibility.
   
• Is it fair? -- Can the good things I do be undermined by poor performance on the part of others? Sales compensation, for example, that ignores market conditions causes sales people to get rich when things are booming and starve to death when demand slows. A commission structure with annually-adjusted quotas is a lot more flexible than something cast in stone. Here's a way to incorporate that idea...
   
• Does it pass the Martini Rule? -- Can the employee explain it to their spouse over only 1 martini?
   
• Is the reward something they want? -- Perhaps money isn't their objective (believe it or not). For many people, time off is a lot bigger motivator than money. Here's an article on that topic...

Once you design the best incentive comp plan of all time, lay it out on the desk, and move to the chair on the other side. Then, put on your employee hat and figure out how you would game the system to get the maximum reward with the least amount of effort. That done, rework the plan with caveats, adjustments, etc. to head those games off at the pass. Rinse, lather, repeat.


If you have some views on incentive compensation, please click "Comments" below and share those with others. 

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com

The Best Thing Isn't Necessarily the Easiest Thing

A Chief Executive Boards International member made a profound, yet simple observation in a recent meeting. In commenting on another member's uncertainty of his own priorities, he said, "The best thing for you to do isn't necessarily the easiest thing to do." Worth some consideration -- there are usually dozens of ideas, strategies, initiatives or activities you could be working on.

It's not uncommon for the easiest or more comfortable choice to get priority vs. the thing that could be most important or most significant to your business. Why? Because that is sometimes the HARD thing to get done. Perhaps hard in several ways:

• Unfamiliar -- Something you or the organization have never done before
• Uncomfortable -- Terminating an employee, a tough collection action with a customer
• Expensive -- Spending money on people or things that are important long term, but painful short term
• Unpopular -- Taking actions that customers, suppliers or employees don't like

Are you putting off doing something important because it's hard? Have a look at the priority list of your own strategies and see if there's something that you need to just grit your teeth and do.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com