Building Business Value | Corporate Management Strategies

Leadership Strategy - Who are you having for lunch?

Lets make a list of what most midmarket executives do for lunch each day. 

 

• Run down the street and grab a quick sandwich
• Drop off their clothes at the cleaners
• Catch up on email
• Pour over a proposal that is due to go out at 4pm
• Review sales forecasts
• Fill out their NCAA brackets
• Meet with a client
• Meet with the accounting firm to discuss the last months books
• Trade in your Treo for a Blackberry
• Shop for the three gifts you were supposed to buy last week
• Find out why project ‘Avitar’ is behind schedule …

We all get caught up in life’s fire drill activities that are certainly urgent, but rarely that important. 

A biological given is that we all have to eat.  Well, if you are like me, you miss a meal from time to time, but that is missing the point.  Just as everyone needs nourishment during the day, every midmarket exec needs to find more ways to evangelize the vision as well as continue to take the pulse of the organization.  Lets put the two together and see what we come up with.

Make a list of your next generation of leaders.  You know, the superstars that work for the people that work for you.  Not your direct reports;  I’m guessing you spend enough time with them.  Focus on the second level of your organization.  The program managers building your next new product are on the list.  So are the regional managers that rarely make it to the home office.  Don’t forget the recruiter or the sales rep or the accounts payable manager that may not really understand the purpose of the company. 

One-over-one’s

Once you’ve made your list, review the list with your direct reports and let them know that you are going to be scheduling one-over-one lunches.  Commit to twice a week lunches for the next 6 months.  Do your homework before you meet with them.  Find out what they do each day, what they do well, where they went to college and details of their family life.  Be prepared to give your best elevator speech but more importantly, be prepared to listen.

These sessions are called One-over-one’s because you are skipping a level in the organization. You are "jumping over" your direct reports.  You are making a very conscience effort to personally promote the mission, vision and purpose of the organization and your are making a commitment to listening to the folks in the trenches. 

 

A few rules to following when setting up One-over-one's.

• Don’t surprise your direct reports (their bosses)
• Never – ok rarely – miss a scheduled meeting
• Understand what each person does before you meet
• Prepare a few open ended questions
• Listen
• Commit to one or two things and always follow-up
• Follow-up with your direct reports (their supervisors) on any action items
• Commit to One-over-one's for the rest of your career
• Did I mention .... Listen?

So now you may be asking what this has to do with building business value.  I can absolutely guarantee that you are going to be amazed at what you did not know. You can probably come up with more but here are:

Five Benefits for Creating a "One-over-one" Program:

• You will have a great opportunity to motivate and inspire people that impact your company’s enterprise value
• Next generation leaders will get to know you and your passion for the business
• Opportunities for cost saving and revenue generation will be brought to your doorstep
• Retention will increase because your junior leaders will see the connection between what they do and the performance of the company
• Diverse work groups will align behind your vision for the company

Give it a try … One-Over-One’s might seem like a huge time commitment but if you build them into your lunch schedule you are actually accomplishing two things at once.  Nourish your body at lunch and nourish your company with One-over-one's.

Building Business Value ? Look in the mirror.

We all find it difficult to take a good hard look at ourselves.  We become indignant when others point out our flaws.  For example, you know you need to perform an exorcism on your lawn, but you’re not thrilled when your neighbor makes the suggestion.  You may also know you need to loose a few pounds, but when your spouse points this out, you feel betrayed.  You mean I don’t look the same as I did in college?

It can be threatening to look at yourself in the mirror and make an honest assessment.  Bonnie Raitt shared her thoughts on aging in her 1990 hit “Nick of Time”.

“No matter how you tell yourself, it's what we all go through
Those lines are pretty hard to take when they're starin' back at you ... Scared to run out of time”

We are all a bit frightened of the future, but I can assure you, it's not going to get any easier if you are afraid to look in the mirror.  

Think about putting your company in front of that mirror.

Evaluating how well your company is doing today will provide an important baseline for your future plans to honestly and methodically build business value.  A terrific side benefit is that it will also help you build a stronger leadership team. Your team is one of the keys to a successful analysis of your company’s current position in the market, and it will be crucial in increasing your company’s value. While this evaluation takes hard work, the benefits of having a cohesive leadership team that agrees on the current position of the company are priceless.

Stan Sloane, the CEO of SRA International, has done six acquisitions in three years. Sloane said that on average, he and his merger and acquisition team sort through about a hundred “frogs” before he finds one company that’s a “prince.” The hundred frogs are the companies that receive a subpar or par valuation. The prince is the one company in a hundred that commands the elusive premium value because it’s doing the hard work that the other companies in its competitive space are not.  

But before you can start thinking about any actions or transformational initiatives that will take your company from where it is to the place where it can become a real market leader, you’ve got to talk seriously with company leaders about where your company is right now. You need to look into the mirror and get everybody’s perceptions of the company as it exists today out on the table.  

This discussion will provide three immediate benefits.  

First, you’ll develop a baseline, a market position that will make all of you nod your heads and say, “Yes, that’s where we are.”

Second, this is the initial step toward determining what kind of actions or transformational initiatives your company needs to undertake to create a premium value.

The third benefit is the most important—it helps to connect people across the entire company.

Enterprises infrequently have company-wide discussions about what’s really happening on the ground. For example, your marketing people may seldom have any contact with the folks in engineering, and your sales force may rarely have any meaningful interaction with the people in corporate planning.

This exercise gives everybody a chance to have the kind of enterprise-wide conversation that almost never happens. Just getting the key players to talk about the same issues will be beneficial.

So pull your team together and position your company in front of the mirror. 

Those lines staring back at you are begging for change.

Five Mistakes to Avoid If You Want to Build Superpremium Value

Most companies sell at subpar or par value, meaning that their ultimate price tag is somewhere between three to five times EBITDA (earnings before interest, taxes, depreciation, and amortization).  Poorly run companies sell for a smaller multiple, while companies that are run about as well as their average competitors might go for four or five times their net earnings.  But just as superpremium ice creamscommand a higher price in the marketplace, some companies sell for a superpremium of nine to ten times EBITDA. It's like the difference between generic ice cream and Häagen-Dazs. 

So the questions are these: 

Why do some companies command that super premium price while others don't?  And if you are a C-level executive of a $10 million to $100 million enterprise, what do you need to be doing right now to prepare your business for an exit at a super premiumprice?

And just as important, what do you need to stop doing?

Here are five mistakes businesses make that practically ensure sub-par valuations when the founders or the C-level executives are ready to exit.  Keep in mind, building business value should be top-of-mind for every leadership team and is not just associated with an exit strategy. So, since building value is your number one priority, how many of these issues apply to your business?

1.  Your strategy is a secret.

You've got a new mission and direction as a result of your most recent offsite meeting. Great!  But how are yougoing to get the word out to your one hundred and twenty employees?  Are you getting posters designed to illustrate your new mission, vision or purpose?  Are you stuffing paycheck envelopes with a document thatlists the five new goals of the organization?  Most mid-market companies don't communicate these ideas verywell.  If a vision exists, the CEO fails to share it with others.  Or if she does try to get the word out, she does so using what the Reverend Bill Hybels of Willow Creek Community Church of Chicago calls the "Mt. Sinai approach."  Moses came down from Mt. Sinai with the two tablets denoting the Ten Commandments and while that top-down approach might have worked for Moses, it doesn't work in today's business climate.  Keeping the strategy a secret is a recipe for trouble.

2. Your business plans are ego driven.

Normally, a leader's greatest attribute is unbridled optimism.  As retired General Colin Powell says, "Perpetual optimism is a force multiplier."  You would rather have Colin Powell lead you into battle than Eeyore, but you also need to deal in reality.  The unbridled optimism that turned a business dreamer into a business leader has a downside.  It can keep executives from confronting the hard facts about their organizations. Sometimes leaders sweep so much bad news under the rug that they can hardly see their own desks. Optimism is terrific, as long as it is tempered by an ability to deal in reality -  a trait not all leaders have.

3. You’ve got the "I'd like to thank the Academy"syndrome. 

It's great when companies get awards - everybody feels good.  The problem is that the red carpet high can become an addiction for a CEO.  When business leaders get awards like “Entrepreneur of the Year” or "Top 40 Executives Under 40" or an invitation to the Young Presidents Organization or similar groups, they have an unfortunate tendency to believe that they single-handedly accomplished all of their company'ssuccess.  This is a sure way to alienate the team.  One suffocating ego is all it takes to destroy an otherwise successful business. 

4. You’ve fallen into the success trap.

In business today, conditions change so rapidly that what worked yesterday won't necessarily work today.  But tell that to an executive who is so enamored of his own past performance that he can't see how the world has changed.  For example, fifteen years ago, technical service companies could make handsome earnings by augmenting staffs and building custom business applications for clients.  Today, however, those firms make a third of what they once did on the same deals with business going to places like RentACoder.  Serving your customers and staff, however, never goes out ofstyle. 

5. You’ve got the "Fat and happy" syndrome.

A CEO who develops a reputation as a turnaround specialist is likely to be wooed by other struggling companies to accomplish the same magic for them.  This often leadsto the CEO "putting the band back together" - going out and rehiring the team that made the first turnaround so successful.  The problem is that a lot of those executives may well be fat and happy by now - they made their money on the first deal and no longer have the fire, the energy, or the desire to work those sixty-hour weeks all over again. Putting the band back together might work for the Eagles.  But in the business world, people often end up singing an unhappy tune.  

The Internal Press Release

A number of years ago I interviewed Bill Shrader for a book my colleague Bob Blonchek and I were writing (“Act Like an Owner”, Wiley 1999). Bill was then the CEO of the high-flying internet service provider PSINet. One of the excellent tools Bill used to keep his team informed on how the company was performing was his weekly email. Bill had certain rules for the communique. He kept it brief ... less than a screen shot so you would never have to scroll down to see the full message. He always related inside events to the outside world with the idea that he would keep the staff focused on serving their customers versus being internally focused. It is an effective executive communications tool. More recently, Leo Fox, CEO of Tenacity Solutions suggested further compacting the message so those that read email on their phones won’t have to hit the option to download the remainder of the message. Good thought.

Another great communications tool leaders can use is the Internal Press Release. The press release has been used for decades to inform stakeholders about new products, senior appointments and earnings announcements.  A great deal has changed in the world of PR and press releases. Before you go too far, check out "The New Rules of Marketing and PR" by David Meerman Scott for great ideas on external press releases.

But let's get back to Internal Press Releases idea. It seems like every mid-sized company I visit struggles with how to keep the staff informed. Employees always want to know the latest company information. Everything from product launches to team lunches, from training to time-off policies, and virtually everything in between. Develop an approach to ‘press releasing’ newsworthy items for internal consumption. Segment the releases by some sort of logical breakdown (office of the president, marketing, sales, distribution, HR,etc) and then make sure everything ties back into a central repository like the corporate portal, FAQs or the company blog. This provides newcomers a chance to get a sense of the culture and at the same time find an answer to their questions.

Consider this Mantra

I’ve always lived by the mantra that leaders have to go home at night sick and tired of communicating. On your drive home, if you don’t say to yourself “I can’t talk to another person today” … well, you just haven’t done it enough! Use the Internal Press Release as one tool to help you keep your team informed.

Optimizing the Value of Your Off-Site Meeting: Five Tips

Why don't all business owners and C-level executives focus on value creation as job one?  In my experience working both as a C-level executive and as a consultant who has worked with a number of mid market companies, the answer is obvious:  it's hard to think about the future when you've got so much to worry about today. 

Most leaders function in an atmosphere of juggling crises.  They step off a flight to 116 new e-mails and have to devote their most precious resource⎯their time−to figuring out what needs to be handled immediately, what can wait for a few hours, and what can wait until tomorrow. In today's hyperfrenetic business climate, it's all but impossible for leaders to indulge themselves in the ultimate luxury⎯uninterrupted time devoted to thinking about and planning for the future. 

The typical solution for harried C-level executives is an off-site meeting, but such meetings typically devolve into extended bull sessions in which people utter a lot of high-minded, well-intentioned platitudes about the future but rarely figure out how to translate those impressive sentiments into action items.  You know the feeling, that "off-site euphoria" you experience as you wrap up the meeting with optimism and energy. But that feeling is soon replaced by the harsh reality of the daily grind as the wave of missed deadlines, extended due dates, and lack of follow-through on the meeting’s action items becomes apparent.  The reality is that everybody gets in a few days of golf, but then it's back to the office, with nothing changed.

    So how can you optimize off-site meetings?  How do you extend off-site aspirations and strategies into achievable goals that withstand daily business challenges?

   Try these five tips to keep that offsite momentum moving.

1.    Make sure your stated goals for the off-site meeting are clear. 

Get the leadership team involved in early planning and have them prepare for the offsite meeting agenda prior to their arrival.  Preparation is the leading indicator for success.  An old adage about speeches goes like this:  there are only three kinds of speeches - one you plan to give, the one you give, and the one you wish you gave.  Like speeches, preparation for off-site meetings will ensure that you can meet your objectives and motivate your leadership team to take action.

2.    Develop a full script for the offsite meeting. 

Just as you would if you were writing a screenplay, orchestrate the offsite meeting with your objectives in mind.  If you plan to add a team-building element, consider the appropriate time. If you've developed exercises to tackle an organizational need, develop a flow that will lead to positive outcomes and outputs.  If you think you can “just wing” the facilitation of the meeting, you might just as well stay on the golfcourse.

3.    Write everything down. 

Adopt the mantra, “if it’s not written down, it never happened.”  I can't tell you the number of times that I've asked for off-site meeting documentation to find it doesn't exist.  Meeting documentation will give you a transcript of your decision making process and most importantly keep the organization accountable for commitments made during the meeting.

4.    Establish clear communications on action items. 

Build in time to follow up on the creation of action items or initiatives that have substance. Assign a team to each initiative and be clear on who the leader is and how and when the team will have to report progress.  Make sure each initiative team knows how each initiative will add business value to the company.

5.    Include initiative updates as part of your operations. 

Far too many companies do not have a “culture of execution” and allow great ideas to fall through the cracks.  Integrate the initiative updates into your normal operations meetings and hold leaders accountable for the results.  Consider including initiative results in your future incentive plans.  No excuses.

Can Incentive Plans Really Motivate? Ask the Rice Farmer!

I had a conversation recently with Ray Schwemmer, CEO of CollabraSpace. Ray and his COO Shawn Davis have been working on a number of new corporate initiatives and as is often the case, the conversation drifted toward incentive plans and did they really motivate the kind of behavior leadership was looking for.

We talked about the new Malcolm Gladwell book, Outliers: The Story of Success.  One of the fascinating stories shared by Gladwell was the work habits of the typical Asian rice farmer.  Having grown up on a dairy farm in Pennsylvania, I was keenly interested in this idea of work ethic and the farmer.  In a nutshell, Gladwell suggests that work can be rewarding to the individual and beneficial to the organization (or society) if it is:

•    Meaningful – a clear connection between effort and reward,
•    Complex – the problem set was sufficiently challenging and
•    Autonomous - decisions are made on your own and coordinated.

So I suggest that any mid-market leader attempting to build incentive plans while ignoring these simple rules does so at his own peril.

Meaningful

Make sure your team understands that the extrordinary effort you are asking for will be fairly and perhaps handsomely rewarded.  Don’t scrimp on this.  Make the reward clear, straight forward and as close as possible to real-time.

Complex

Mundane work will numb the brain.  Innovation suffers in an enviroment where the rules can be overbearing.  Old market rules that once applied will be followed until either the market dries up or you are run out by the competition.  Always encourage your team to be creative in their approach to your business challenges.

Autonomous

Bob Blonchek and I wrote a book called Act Like an Owner with a central theme of creating an ownership culture.  Stephen Covey’s The Seven Habits Of Highly Effective People calls out six levels of initiative with the final being the ability to act on your own.  Teach your leaders the rules of your business and allow them to surprise you.

By the way, if you haven’t had a chance to read Outliers, it should probably be your next book purchase.  Right after you’ve updated your incentive plans !

The Organigraph - How Organizations Really Work

One of the trickiest jobs of a leader in the mid market is making significant structural changes.  Organizations just seem to grow or morph and become an entity onto themselves.  What may have once seemed like a great idea is now a defunct process or an inefficient division.  Structural or organizational changes made during the dot com era or an earlier stage of your development may not longer apply.  A terrific tool for helping you manage large organizational change is the organigraph, which was originally developed by Henry Mintzberg and Ludo Van Der Heyden of the University of Toronto.

How the organigraph works.

The organigraph shows how companies really work. It uses symbols like stars, funnels, tubes, links and chains—in all, there are six specific symbols that represent how a company actually works.  You can also make up your own symbols.  Organigraphs are a very useful ways to show how a company works, showing critical interfaces between people and processes.

Executives can use organigraphs to help choose among strategic options much as an explorer would use to find alternatives through tough terrain. The beauty of the organigraph is that it removes personalities from the process. It is “personality-independent.” It’s easier to embrace the idea of change if you don’t feel personally threatened by it.  Paper and approvals can take weird routes through organizations. The organigraph documents how companies really work.

 The creation of the organigraph allows executives to draft a list of what’s working and what’s not, which in turn leads to the creation of a list of incremental transformational initiatives.Things you may need to change to build value in your company.

When You Have to Make Big Changes

So a tool to consider when getting an honest assessment of how your company really works, try the organigraph.  I've  used this tool many times and it never fails to shed great insight and give you, the leader, a chance to make significant organizational changes that will exceed your objectives.

The 5-15 - A Great Communications Tool

After the Boeing Company acquired Conquest in the spring of 2003, I became the managing director of a business unit creatively named Maryland Operations.  We went through the normal integration pains and once we got it through our heads that a  $100M business unit was not going to change the policies of a $50 Billion company, the adjustments actually became easier to swallow.

But this is not a discussion about the challenges of merger integration; this entry is about more effective ways for your leadership team to communicate.

Much of the culture of being a leader at Boeing was at odds with my personal leadership style, but one of the great tools I took from the experience was the 5-15.  The 5-15 was a tool used by Boeing to keep everyone informed on weekly (and normally tactical) activities going on in the company.

Each leader takes 15 minute to create a status that should only take 5 minutes to read.

Here is how it worked.  Each Tuesday night, my direct reports would spend 15 minutes creating a short status on what went on last week and what they are planning for the next week.  Then every Wednesday morning, I would take about 30 minutes to read each status (I had 6 direct reports) and would then create my own 15-minute status and send that to my boss.  My peers around the country would do the same. The drill continued up and down the organization with the objective that everyone in a leadership position would have a good sense of what was going on.  In an environment where time, schedules, geography and good intentions got in the way of solid communications, it was a simple, yet very effective tool.

The Benefits of the 5-15

Making the small investment in time allowed us to partner more effectively, share resources on timely basis, lower the risk of missing project deadlines and gaining insight on critical performance issues.

Each week, I made it a point to write a personal thank you note to a staff person whose project was referenced in the 5-15.  It gave me great insight into the organization from a 360-degree perspective.

Three Rules

For maximum effectiveness, follow these three rules.

1.    NEVER take more than 15 minutes to create your status.
2.    ALWAYS submit your report on time.  No excuses.
3.    READ every report each week.  It only takes 5 minutes.

Make it a part of your leadership culture. Throw the term around early and often so your team understands the importance and effectiveness of the tool.

Visioneering

"The greatest danger for most of us is not that our aim is too
high and we miss it, but that it is too low and we reach it."

 - Michelangelo

The absolutley toughest challenge for leaders is to change the way we think.  Specifically, how can we get better at creating that 'vision thing'.

Visioneering

Definition:  An exercise to help leaders visualize how to get to the place where the company wants to be.

You'll want to paint a picture that gets people excited and shows them just what their company can become.

The question right now is not about how to operationalize your vision—it’s not about how many plants or how many people you’ll need in order to make the simplest and most obvious (and most necessary) items happen. Instead, you want to come from the future and see just what your company can be.  Later, you will worry about how to turn this vision into a reality. You cannot create a new reality until you first create a new vision.

Companies frequently lack alignment between what people are doing and where they really want to go.  John Kotter of the Harvard Business School defines leadership as a three-part process—establishing a vision, creating alignment, and motivating and inspiring.  Visioneering is part one of that three-step process.

Test both sides of your brain.

Linear-minded folks like finance people or engineers sometimes struggle with this, so have them draw images that paint a picture of the future. Typically, people will draw pictures of bridges, rivers, mountains, and even spaceships hurtling through galaxies to depict the direction a company is taking, the means by which it will travel, and what roadblocks and obstacles it will face.

The exercise demonstrates some of the attributes of the future state of affairs, which everybody needs to see, because the company’s not there yet!

One company created I know created a graphic of the United States back when the interstate system was being built during the Eisenhower administration. Where was the company at that point? On the East Coast. They group knew they’d have to cross the Rockies, ford rivers, go through dangerous territories on their way to the Golden Gate that symbolized the American West on their map. This didn’t necessarily mean that the company was starting to market its products in California. It was just a visual metaphor for the idea of growth.

With a metaphor in mind, it becomes easier to discuss questions like what does it mean to be nationwide?, what does it mean to be global?, and what does it mean to have this new product set?

Somehow, a picture makes ideas more real.