The Entrepreneur's Mentor

Look But Don't See

How many of us really know- I mean really know- what is going on our organizations?  I think of the beginning of the David Lynch movie "Blue Velvet" which shows a beautiful, serene green field. The camera moves in closer and closer and starts to show what is happening within the green grass. There are bugs and beetles at war, dirt being churned up.

Things can look beautiful on the surface. CEOs and other leaders need to be careful not to accept this view as their only data point. They need to both zoom in and zoom out.

Zooming in means digging beneath the surface to get a sense of what is really going on. Are your employees really engaged in the work of the company?  Does your company have best practices? Have you examined your processes lately to see if they are still working? Have you revised your metrics to fit the changing times? Is what you and company leaders are communicating being heard the way you intended? Being understood? Have you spoken with your customers about how your company is measuring up to their standards?

Zooming out means taking a step back and looking at the business from outside. How does what we do fit into today's world? Are we still relevant? What direction is our market going? Are we ahead of the curve or behind it? Is the economy good for us or bad for us? What about our competitors? Do we have to re-define who they are?

A company is multi-dimensional. One look, one view does not tell the story. True leaders know their companies inside and out, because they have taken the time to explore them from all angles. They have opened communication into all sectors and are willing to hear all views and give them credibility.

There is a lot to see if you only look.

Six Month Review

For some, the key landmark at this time of year is the summer solstice, which just passed; or the first day of summer. To others, it is the end of the 2nd quarter of the business cycle. Either way, the year is just about one half over. What can we learn from the first half?

What did we do right? What could we do better? And what are the critical success factors for the next six months? We are still in the depths of a bad economy, so we cannot expect external factors to be of assistance. Consumer confidence has not picked up, so we can't count on euphoria.

We can only count on ourselves. We have to do the right things. We have to examine what it is that keeps our existing customers or clients coming back and make sure we keep doing those things. If we are not doing enough, we have to do more. It is not just price. Service and quality are critical. Reliability is necessary. Flexibility counts. What else?

We have to remember that our employees are the ones that are responsible for our customer relations. Happy, engaged employees contribute hugely to customer loyalty. Even in the age of layoffs and benefit cutbacks, we can work hard to keep our employees as happy as possible under the circumstances. We can work to inspire them, to earn points for credibility, transparency, honesty and integrity. How we treat our employees is part of our brand- don't forget that.

We can cut cost and lay off employees, but it is rarely enough. We have to keep business coming in the door. We have to pay our suppliers. We have to ask for everyone's contributions- effort, ideas, teamwork and sacrifice.

Entrepreneurs need to ask of themselves what they are asking of their employees. If there is a general wage freeze or cut, the owner should be doing the same to his own wages. If he is asking additional hours from others, he should be putting them in himself.

If something is taken away from employees, they ought to be given an incentive of some sort to get it back. Employees ought to be able to earn back what they gave up if certain benchmarks are hit. This builds teamwork, morale, employee engagement and employee loyalty and gives the employer credibility if he ever has to ask something of the employees again.

Use the midpoint of the year to measure your accomplishments and your opportunities for improvement. Then do something with the information.

"Top Ten" Lists

Thank you, David Letterman. Your "Top Ten" list started it. Every leadership, motivational or other guru is serving up his or her list of something or other. It could be "the 8 steps to perfect contentment" or the "10 key competencies that a CEO must have."  They can be framed negatively like "The Five Dysfunctions of a Team" or positively like "The Seven Habits of Highly Effective People."

The bottom line is that lists make it easy to communicate with people in digestible bites. And many of us do well with information given to us in that format.

But, we cannot forget that there is much substance behind the items on the list. They are like the "sound bites" and headlines on the news. They give a brief glimpse at the story without giving you the story. We can work off of lists, but we need to know what the items really mean- their depth and breadth.

Measurement and goals are important. If we can check off action steps and goals, and work our way through a list, we know we are making progress that is measurable. But we also need to know why we are doing those things and where doing them is taking us. How many employees would be happy being given a list of things to do every morning without knowing why they are doing them and and what the big picture is?

A consultant may have her "8 keys" but the program better include an understanding of how those eight fit together into an understandable big picture of a positive future. An employer may give an employee a list of goals but they need to be backed by an explanation of what achieving the goals means for the company and for the individual.

Lists are great- if they have substance behind them. Look at the substance first. Buy into that, and then use the list as mileposts on the way to success.

Keeping Your Wits About You

Times are tough- of this there is no doubt. And they are going to get worse. Many people live from paycheck to paycheck, and for them, a layoff would be disastrous.

Many entrepreneurs, especially those in the early stages of their business, are also living from hand to mouth. They have put everything into their business, and if things go bad, they lose all.

It would be easy to panic. It would be easy to roll into the fetal position and moan. But if the leader does that, what will the employees do? They will panic and that can bring a quick end to a business.

Employers need to keep their wits about them. Now more than ever, cool heads are required. Every move becomes strategic. Each decision needs to be geared toward the survival of the business in the best shape possible. Whatever cuts are made, the business still needs to do business.

And here is where the leader must be a communicator. Employees need to know what is going on, what the thought process is and what it means to them. They do not need evasion or lies. When there is a lack of information, rumor and falsehood move into fill the void. This is not a time for the grapevine to do damage. It needs to be pumping out a positive message based on leadership's communications.

It is easy to panic. But it is better to seek calm. It is better to get good advice than to run around in circles screaming "the sky is falling, the sky is falling." Some of that advice could come from employees; some from customers; and some from outside advisors. Don't sit on your hands until it is too late.

Act- calmly, positively and in a communicative style. Be true to your vision and values. Do the best you can and do it with a clear head.

Tough Choices

What to do now? You have been cutting cost everywhere you can and you are still losing money. If you are going to make it, you have to do something more. You have never had a layoff before, and you don't want to now, but what else can be done?

This is a tough scenario, one that many will face soon, if they haven't already. No matter how employee oriented a business owner is, there may come a time where this hard choice must be made.  So, how do you do it?

It might be worthwhile taking a moment and reviewing your company strategy and values. You want to act consistent with your values. People will remember any major inconsistency after all is said and done. Your stated values may give you a clue as to how to act. The idea of a layoff is to keep the company running as well and as lean as possible until things pick up. So those who remain behind must be providing valuable services for the company and the customers.

Some options, with associated pro and con arguments are:

• A cut in benefits across the board as a first step.
  • This could be a good stopgap measure but when employees have to pay their own medical insurance, car insurance, etc. they will be reminded of what they have lost and they will feel the impact in their checkbook.
• A cut in everybody's hours or pay rate.
  • This has the advantage of keeping everyone working (at least for now). If your workforce is a true team, they may appreciate this one and rise to the challenge.
    
  • It has the disadvantage of making everyone unhappy with a pay cut. A few unhappy characters can be toxic in the workplace and turn everyone sour. Gratitude for keeping their job becomes a memory, replaced by anger at having a pay cut.
• A straight percentage cut across the board in each department.
  • This shows "equality" of treatment and the employer's willingness to lay off even in "favored" areas.
  • The problem with this method is that it does not take into account where the company needs to maintain its strength. In retail it may be customer facing employees, in a service business it would be those providing the service (unless they are sitting on their hands because there is no business)
• Using a first in first out policy.
  • Offering early retirement to long time employees is an option. This clears out any "dead wood" that may have accumulated. It cuts what might be the highest wages. It makes room for the younger, aggressive employees to move up.
  • The down sides to this method are major. First, is the possibility of an age discrimination lawsuit. Second, you may be ridding yourself of organizational knowledge that does not exist elsewhere in the company. Do you have a sufficient knowledge base that you can afford to lose your old timers? Can those left behind carry on the company business with sufficient expertise?
• Using a last in first out policy.
  • This may seem like the most logical to many people. The newest get cut first. Termination costs will be relatively cheap. Entry level positions are typically held by young people who theoretically have less to lose and perhaps an easier time finding some kind of job. The company is giving up less institutional knowledge.
  • On the down side, you are leaving the higher earning employees alone, so you have to remove many more new employees to get to where you want to be. Does this leave you the right people to get everything done? Will the higher earning employees be willing to perform all of the required lesser tasks? You might be losing youthful enthusiasm and innovation.

There is no right and wrong. Each company may have a different solution. Consider what steps can be taken before a layoff is considered. Take them first. Then choose how you want to handle a layoff in a way that you and your company can best live with.