In tough economic conditions, every business goes through a review of operations and for many of them, they will have to let some people go. I have recently gone through this with my new business and there are some salient lessons that can be learned in downsizing.
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26Nov
Tags: Firing, Redundancy, Termination
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05Sep
The other day i wrote a post about politicians emerging where there is a leadership gap. (Click here to read it). In it i looked at some different types of people within a business and what happens when things change. The article identified 4 types of peope - worker bees, survivors, aspirants and politicians. Well the article stirred some discussion and Alain in Luxembourg wrote a great email all about the Worker Bee Politician Mutation. Here it is …
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04Sep
Working for a business takes up a significant part of every day and when you are travelling it can take up even more time however how often is it that you end up working with people that you just don’t get on with. Well i think a question that is important to ask yourself in any interview is “does this person pass the beer test?”
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29Aug
During my time with the REA Group we grew the business from operating in just one culture - Australia - to one operating across many different cultures - from Australia and New Zealand through to the English and European cultures. When we started a small office in Shanghai and acquired Squarefoot in Hong Kong, we further enriched the cultural mix.
Now the challenge i always had was do i change my style to adopt to the various cultures or do i maintain, as much as possible, my approach to doing business and help move the operating cultures in each of the countries to a more common culture. I made the choice that i would, where possible, adopt the second approach as i felt it was more important that we had a unique REA Group culture rather than half a dozen different cultures.
“How did you make this happen”, i hear you ask. Well first and foremost i lived the cultural values that i have written about before http://myceolife.com/2008/06/what-makes-great-culture/.
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27Aug
I had a great meeting with a guy in San Francisco yesterday. During the meeting we chatted about his current businesses and his aspirations for where he wanted to take them. What was interesting was the breadth of ideas that he was tackling all at once and it got me to thinking about how important focus is.
In any job there are always competing priorities. It doesn’t matter whether you are in sales, marketing, finance, HR, what ever, there are always 100 things you can do and only time to do 5 of them. What differentiates the effective people from the rest of us is that they decide what they are not going to do and this decision is based on the goal that they are striving for.
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24Aug
I have worked in a number of businesses and i find that employee ownership in the business is important to the long term success of that business. In talking to employees who have some sort of ownership in a business, they feel more engaged, are more understanding of the challenges of management and tend to go above and beyond far more often. Now the question is how can employees gain ownership in a business?
If the business is listed, then employees can of course buy shares on the market. Management can make this process easier by implementing a discounted share purchase plan. At the REA Group, we implemented a plan whereby employees could sacrifice a percentage of their salary to buy shares at a 15% discount to market. The company pays the difference and purchases the shares on the market for the employee.
Another approach is share performance rights. We implemented this for senior management at the REA Group. The share performance rights work as follows. At the beginning of a period, each employee is allocated a number of share performance right. For example they may be given $100,000 worth of share performance rights at the cost of $5 each (usually the weighted average of the period just before allocation). This would be 20,000 share performance rights. Now usually these have a vesting period of say 3 years - therefore the 20,000 share performance rights would vest in 3 years time. Now as they are performance related, they are usually tied to the long term performance of the business - the 3 year plan. At REA they were tied to the 3 year revenue and EBIT targets. Therefore if you hit the targets, then you get the performance rights and if you under or over achieved, then they were prorated up or down.
Yet another approach is to allocate options to employees with a vesting period. The number of options allocated could also be tied to the performance of the business.
Now i have a couple of thoughts on this.
Firstly, in uncertain times, share performance rights are probably preferable over options as they will always have a value. Options may not have a value if the share price is lower than the strike price.
Secondly, i wouldn’t tie the number of share performance rights or options allocated to the performance of the business as the value of them is already tied to the performance of the business. If the business is going well, they will be worth more and if the business is not tracking well, they will be worth less. Having the amount allocated tied to performance is almost double dipping. In addition, as the number of rights / options are tied to performance against a long term plan, you may have management making sub-optimal decisions, especially if long term investment or divestiture is required but it would affect the performance against the long term plan. Either they wont make these recommendations to the board or the business spends too much time adjusting the long term plan to keep it fair.
Thirdly, when you have rights or options that are tired to performance, it is important that the employee has control over the levers otherwise the whole reason for having them wont work.
Finally, i think any employee ownership should be at all levels of the business, not just the management. It is important that you dont create class structures within a busness - especially if you want a great culture to grow. To this extent, we are in the process of implementing an employee share ownership scheme at Artshub - another business i am involved in.
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23Aug
Business always conducts employee satisfaction surveys in an attempt to find out just how happy their teams are. Often, when they revew the results, they are looking for downside risks rather than upside positives. In addition they will spend time reading the comments and trying to work out what the real issues are.
Now the problem with employee surveys is that not all employees believe they are anonymous and therefore dont tell you what they really think or they just don’t complete them. Therefore you need to look at what people are doing to get a better grip on the true feelings within a team.
The first measure i would look at is absenteeism. This is simple to measure and can provide very quick feedback on the happiness of the people in the business. I was talking to a senior person at a business recently who said they had recently noticed a sharp increase in the number of people who are taking sick leave. Managers need to watch this.
Secondly i would look at outstanding leave or accrued leave. A happy business tends to have high levels of outstanding leave as employees often dont take it as they are wrapped up in their jobs. In an unhappy work place, employees with always take their leave.
Thirdly, turn over of staff is a traditionally clear way to track an unhappy culture. However how do you know BEFORE HAND that people want to leave? Well in today’s world that is simple - just join linkedin and facebook and see what happens. Now i have been on linked in for ages and have hundreds of contacts. These contacts tend to be people that you have or are working with. Now when someone is thinking of moving on, they ask people to recommend them. The result is that by looking at the number of “recommendation requests” you can get a feeling for what the true culture is in a business. Now the problem is most senior people in organisations are Baby Boomers or Gen X and they dont embrace social networking sites. This is where they are missing a great chance to track the actions, rather than words, of those they work with.
OK … i am now off to answer all those recommendations requests
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22Aug
I have been thinking about the role of HR in a business and a question that goes through my mind is “do you really need an HR team”. Now i can hear the chorous of “of course you do” - however the question is what is it that HR does that a line manager cant do themselves?
Lets think through the key people issues of hiring, firing, remuneration, motivation, feedback, culture and development.
Hiring
Now this is the obvious area where a manager will say to an HR person “please find me a new sales person” for example. Well that is great - but the reality is if the successful candidate is not someone that the manager wants working for them, then the candidate shouldnt get the job. In many cases the HR team act as a gate keeper - a filter - the problem with this is that often only the people HR like get through and unless HR truly understand the business and the culture, the wrong people can be placed in front of the line manager to select from. When i was at McKinsey and Co, the consultants did the filtering of resumes, the interviewing and the selection. Like hiring like! Therefore an arguement can be mounted that at best, HR should act as a process manager for the recruitment process.
Firing
OK - a tough one. I know a number of managers who defer the firing of people to HR. Now this is a weak way of managing a business and the firing of people is something that should be done by the line manager. HR can be there to help and make sure that the correct procedures are followed, however they should not be any more than that.
Remuneration
In many businesses, HR is responsible for setting the pay scales. Well i dont agree with this. THe market should be setting the pay scales and people should be paid for performance not pay for position. When a manager is doing their budget, they need to think about the people, understand what the market is paying and then make recommendations within the budget framework as to what someone should be paid. The finance team can then look at the salary costs in total and make recommendations back to the line management as to what the overall salary line item should look like.
Motivation and Rewards
Well i think that this goes without saying. Often motivation is tied to culture and to the intrinsic rewards of the job. This is something that HR can not affect as only the line manager can. Line managers should also think about non-financial rewards as motivators - such as employee of the month, on the spot awards etc. Often these are overlooked by HR and it is the line manager who is best positioned to understand the effectiveness of these rewards and the awarding of them. Once again, the role HR can play here is a process one, of making sure that rewards occur.
Feedback
How often do you hear that it is “performance review time”. Well i think that if a line manager is really doing their job well, they will be providing constant feedback to staff members on how they are going and the formal review process is simply the documentation of this feedback. Too many manager dont provide constant feedback and use the performance review process as a way of unloading their issues all at once - often with unexpected results. The role HR should provide here is process management (again) in ensuring that there is consistent approach to performance reviews and that they get done. All of which an “on the ball” line manager can do themselves.
Culture
Now dont get me started. A fish rots from the head and therefore it is the senior management and line managers who must take responsibility for managing and developing the culture. Employees watch everything that a manager does and this gives them signals as to what is right and what is wrong in the organisation. The role an HR team might be able to play is in surveying the staff to understand attitudes across a business however these often get unweildly and provide little true insight into the business. Perhaps the best thing to do is just go and chat with the staff - it is amazing what they will tell you.
Development and Training
The final area is development and training. Well the requirements across a business for this are many and varied and it is only the line manager and the employee that truly knows what is important for their long term development. The line manager should take on the responsibility for developing their people and use the training budget allocated to them. Perhaps the role that HR can play is to ensure that compliance training - like OH&S - are undertaken. Once again, this is something that is very process driven.
I guess having written this, the answer that i come to is that there is a role for HR in the business however in top businesses it is probably more process management and clearly in support to the line management. I think it is up to the line managers to truly take control of the HR and people management part of their business.
The more a line manager uses HR as a crutch, the more they lose touch with their number one asset - their people!
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21Aug
In many of my discussions with staff over the years, there seems to be an inbuilt expectation that a business is going to actively train and educate you with your long term career in mind. Well i hate to break it to you, but that is probably not the case. If a business is offering training and education, it is probably because they have an immediate skills shortage or they have a statutory obligation to ensure that everyone has good OH&S training (for example).
So what should you do? Well the first step is to take charge of your career. Perhaps a good way to think about yourself is as a business. So what are the things a business needs to be successful? A vision of where it wants to be, finance to make sure it gets there, the right skills and capabilities to achieve the vision, good sales and marketing of tyhe business, and of course a great product.
So lets apply these to yourself. What is your vision in life? When they are chiseling your tombstone, what will they write on it? The vision may be to have a lasting impact on those around you or perhaps something far greater, to change the world. What ever that vision is, that should be your guiding light and everything you do should be building towards delivering that vision.
Now to achieve the vision, you need a product to sell - you. When you think about a product, what is the product that you are offering a potential employer? How do you package it up and how do you continue to improve it? That is where education and training come into play. You need to actively think about what improvements are needed and then just do it. It is always good to package them into something that is attractive to the business and try to get them to fund it but at the end of the day, you just have to do it - even if you have to pay for it yourself!
Now the last thing i want to talk about is how you market yourself. Now this is an interesting topic. Firstly - this is NOT about being political. That is just about short term gains - does anyone know of many politicians that truly stands the test of time?
So this is about how you market yourself (the product) externally and internally within an organisation.
External marketing is important as you want to make sure that you are constantly on people’s radar in case they are looking for someone just like you. This is where sites like linkedin and facebook are excellent. Recruiters today are scouring them for great candidates and it is important that you manage your brand on these pages.
Internal marketing is about getting on and doing your job, delivering each and every time, making sure that you lead where you can and most importantly making sure you, the product, shines through. Internal marketing is NOT about politics, sucking up, taking credit for other people’s work, big noting yourself and so on - you will be found out!
The bottom line - its your career - take charge and make the most of it!
More tomorrow
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11Jan
I received the following question the other day
“Would you say there was one single concern that topped the list of concerns for CEO’s of large companies (e.g., Fortune 1000 size)? In other words, while I know there are a lot of issues, and they vary depending on company, industry and location, but would you say there was one challenge that of all the CEO’s of large corporations face that is greater than any other?”
The first thing that popped into my head was all about finding and retaining great people. Then after thinking about it for a while, i still came to the same conclusion.
I dont think it matters how big or how small the business is, hiring great people and then keeping them in the business is always the greatest challenge.
Hiring is all about getting the marketing message right. The product is the business and its culture and the best way to market the opportunity to join the business is by targeting where the employee is and then getting the offer right. We have a person in our business who is specifically tasked with poaching staff from competitors. We know their organisation structures, their staff and most importantly who is good and who is not.
When retaining people, we implement a balance of salary based initiatives (shares / cash etc) and other benefits. We offer programmers a day a week to work on their projects. We offer education and training based on the development plan put in place for an employee (by the employee) and we work hard a creating a culture that is hard to say good bye too.
The bottom line - an employee is a customer. Most businesses dont get this simple message.
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