How Many Employees do You Need to Have C-Level Execs?

I recently took the job at a small, but excellent, software company as the “President & CEO.” Pretty sharp title, don’t you think?  But to be honest, I have trouble with this title – not all of it, just the CEO part. 

I don’t think small companies need to have C-level titles such as CEO, CMO, CIO, COO, CFO, and whatever other C?O titles you can dream up.  I guess I believe companies that use it start acting like they are companies that need it, and they clearly don’t.  C-Level titles, in my humble opinion, are for big companies.  How big?  Don’t know, but much bigger than us.  But I think you know it when you see it.  If an organization has 4,5 or 10 VP’s of Marketing for various regions, maybe they should report to a CMO.  Makes sense to me.  But if you have 30 or 40 people in your company, who reports to the CMO?  Is it the guy making $35k a year doing email blasts in your marketing division?   Then I say that CMO is nothing more than a Marketing Manager with a fancy schmancy title at best.

And when you have a small company, and use C-level titles, how do VPs fit into the equation?  Can you have a VP and a C-guy reporting to the President?  Don’t know.  Sounds inconsistent to me. And the worst is when small company CEOs start acting like big company CEOs and only want to talk to other CEOs and do CEO stuff.  I’m not sure what CEO stuff is or looks like, but I’m told you only do CEO “stuff” with other CEO’s.  That makes sense to me.

So at my new company, I’m trying to get back to the good old days of President and Vice-President.  Not so easy when the history of the company has been the use of C-level titles.  Or maybe I’ll just go by the name the guy running IT calls me  – Boss Man.  I like the ring to that.  We can then have Vice-Boss Man or Vice Boss Lady.

What Color is the Elephant?

How does the expression go about the purple elephant in the room?  Or is it the pink elephant? Whatever the color, the expression is meant to imply something so obvious it can’t be overlooked.

It’s interesting when you apply this expression to a small company.  Have you ever worked for a company where the issues are so blantantly obvious to most, if not all, of the employees in the company, but the leadership simply chooses to ignore it? 

Sales are down, morale is a few feet below sea level, the software is about 10 years behind the competitors, but at the company meetings, all who speak simply choose to ignore the elephant and focus on the positives.  Don’t get me wrong – I’m all for seeing the glass half full rather than half empty, but there’s a healthy dose of truth needed for small companies to actually fix things instead of keeping the status quo. 

In order to move things forward and get rid of the elephant (pink or purple), the leadership of the company needs to acknowledge it.  At the next meeting, the CEO should say “Hey – by the way, has anyone else noticed that our software is old and about two technology cycles behind our competitors?  Oh, and while we’re talking about it, support sucks and our leads are 30% less than last year. Any comments?”  Now at least you can have a frank debate about it. 

Most people won’t call out the elephant for fear of reprisal.  Fair enough, but the CEO needs to take a hard look at the culture (there’s that word again!) and decide what kind of company she wants to run moving forward.

Transfer of Knowledge

I think one very simple way to tell whether or not a company is on the right track is simply to observe how many times the phrase “transfer of knowledge” is used with a given quarter. 

For those not familiar with this phrase, it means “to transfer all of one’s knowledge and wisdom regarding a given job to the person replacing you at said job.” I don’t know why, but this phrase makes me laugh every time I hear it.  It just seems to imply a person downloading all of their information to another person who will then upload it, and just like that, the transfer of knowledge is complete!  Sounds like something Spock might have done in a Star Trek episode. 

Back to the topic.  Lately, when I’m speaking to a certain friend about his job and the company he works at, the phrase seems to come up regularly.   I couldn’t help but say to him one day – “you know it just seems like all you guys ever do is this transfer of knowledge crap from one person to the next.”  And it wasn’t far from reality.  There is so much turnover at this company, that every few weeks, the mandatory transfer of knowledge needed to happen.  I laugh. 

Next time you hear that expression take note.  If you hear it too often, it may be time to send out the CV.

 

“It’s a Job”

I was at an indoor playground for kids, and while my 3 year old daughter was running around, I was talking to a friend of mine who is a lawyer at a prestigious law firm.

I asked him how his job was going, to which he replied – “It’s going well.” The look on his face was almost fearful, like he was saying “Why are you asking me, ask someone else, it’s a damn job ok!”

Me being me, I pushed a little further, “That didn’t sound like it’s going too well?”  To which he replied, “It is going well, but it’s just a job.”

For the first time in my life, I’m uncertain what I want to do.  I’ve always started my own companies, built them up to a certain point, and then sold them.  Last fall, I simply couldn’t deal with the day to day stupidity of my last company (I think I’ll do a Top 10 list for fun) and left really quickly.  My departure was completely unplanned, which meant I hadn’t put any thought into what was next. 

7 months and a few false starts later, I’m still searching.  I realized I don’t want a ‘job’.  I never want to answer the question “how’s work going?” the way my friend answered.  Do I want to run a technology company as a CEO?  Do I want to start my own venture once again? Whatever I decide, the criteria of truly enjoying what I do will be at the very top of the list – yes, even above making money, which I never thought this capitalist would ever admit.  Waking up in the morning, and looking forward to starting your day is what it’s all about. 

Last week I had lunch with a friend/old colleague of mine.  He’s about 2 years into his new venture, has about 13 employees, works ’till 11:00pm many nights, and abosulutely loves what he does.  I look at him with envy, he looks at me with envy.  He’s trying to get to where I am in life, and I’m trying to get back to where he is.  We’ll both need lots of luck.

 

 

What is a CEO and When Do You Fire Him (or Her)?

Over the past 2 months, I’ve been working more and more with VC firms looking to replace the CEO in one of their portfolio companies. 

First, you should know I really hate the CEO or any “C” level title in small companies.  And by small I mean less than 150 employees.  I love it when I meet someone and they  give me their card with the CEO title and after 30 seconds of discussion you realize they have 4, 5, or 6 people.

What is the role of a CEO?  What “stuff” does a CEO do in small companies?  How much strategic work do you think these people actually do on any given day to justify their title?  I bet it’s close to the big goose egg. 

In my opinion, any person who has CEO on his card and is less than 150 should fire himself from that position, because it’s obvious they don’t get it.  The person at the top needs to do everything – from helping in development, to working the floors at tradeshows, to marketing the company at every opportunity.  The strategic stuff is part time at best. 

When I speak to investors, shareholders, or VCs about replacing their current CEO, they always have a similar message – We knew it needed to be done a long time ago, but we kept waiting because ______________  (fill in the blank with a ridiculous reason such as “we thought if she left, the company would be in big trouble.”)

The question/topic/discussion of whether a company can afford to let go of the chief comes up often.  What never ever comes up, is whether a company can afford to keep the chief?  Often, the CEO in question has missed targets, missed product dates, overspent – and keeps revising the goals downward.  And the board still hangs on even when it’s clearly the CEO’s plan to begin with.  So why doesn’t the other shoe drop?

 Most people seem to feel it’s a combination of guilt, fear, and anxiety that keeps the guy on top for months or years after it’s time for them to move on. 

In the last company I was at, the founder had been in place as the CEO since the company’s inception in 1997. In 11 years, the company has burned through over 10 million dollars, and has turned a profit one time in those 11 years.  So why is he still there?

I bet that if and when the other shoe drops, the board will say it should have been done a long time ago.  In spite of the information they receive each month on the company, and with all of the explanations about missed targets,  nothing ever changes.  My only guess is that the board is too close to him personally, or maybe they just can’t fathom that they made a bad decision by letting him stay this long.  

I just don’t get it.  If the chief needs to go, then the chief needs to go – and the sooner the better for everyone, especially the employees.

The Berlin Wall

I was talking to a buddy of mine this week, and he was telling me about how lousy the atmosphere was in the office he works at.  In this particular office, the “execs” are in the front, and the “people” are in the back.  There’s a 30 foot corridor leading from the front to the back.  He explained that it feels like there’s the Berlin Wall between the front and the back. 

Don’t the “execs” understand that the more they isolate themselves from the rest of the company, the more isolated the employees will feel?  Isn’t this obvious? If the culture is one of “us” and “them”, then building a cohesive team of people is not possible – forget it, no chance, no way. 

So,  for the sake of your employees and shareholders,  I implore the CEOs of the world,  “tear down this wall”. 

The Culture of Making Money

The professional services firm Towers Perrin has  just published a bi-annual Global Workforce Study calculating the “engagement levels” of workers and the impact they have on a company’s performance.

Let me cut to the end – less than 25% of respondents feel they are “engaged” in their work.  Additionally, the companies witht the highest percentage of “engaged” employees had the highest operating incomes and EPS. 

Disengaged employees feel they can do much more, but that the company doesn’t give them the opportunity to do so.  These people aren’t lazy (at least most of them aren’t), they’re just not into their work and not into their company.  This translates into less hours worked and less productivity.  I see this way too often. 

When a Promotion is the Wrong Decision

My friend John was a very successful Account Manager when they promoted him to Partner Account Manager.  He failed miserably. 

If you’re not familiar with the Peter Principle, you should be – it applies to you and I, and everyone else in the business world.  John failed because he was setup to fail, and John’s only mistake was that he was too naive to know it. 

When an employee is performing well, most managers or owners feel that person should be promoted.  Herein lies the issue.  The new job, with it’s bigger title and better pay, usually requires different skillsets and competencies than the job they’ve been performing successfully.  And unless the boss recognizes this and is willing to put in place the conditions for success, said employee is destined to fail – usually in a very painful way. 

Why an Employees Problem May be a Huge Opportunity…

Everything I’m about to write may sound terribly self-centered, impersonal, or even greedy.  I guess it could be any or all of those, but it depends on the Employer.

 Here’s a true story without all the unimportant details.  A relatively low-ranking employee is in a bind, partly for his own actions, and partly because the company he works for wasn’t very thorough.  In the end, the employee was tight for cash, and when a customer needed some technical work performed during off hours, the employee volunteered to do the work for what I’ll call overtime pay, even though the company didn’t pay overtime.  This deal was agreed to by his manager and the CFO. 

The time came, he performed the work, and asked shortly thereafter to be paid.  The response from the CFO was to treat the overtime in the same way as the Company treated commissions – “you get paid from us when the Company gets paid from the customer.”

Many weeks went by before the customer paid the company, and when the customer finally paid, the controller called the employee to tell him the good news and that it would be put through on his payroll the following day.  The following day, when the employee noticed the extra $200 was not on his paystub, he promptly called the controller, who was equally surprised with the news.  It turned out that the CFO was really treating the $200 like a commission, which meant not only paying the person when the company was paid, but paying only at the end of the month – and this was a mid-month payroll.  No need to tell you the employee’s reaction,  is there?

Employees are not straw hats

If you’ve ever been in a position to hire people, ask yourself how many times you’ve heard one of the following phrases:

a)  Let’s see how much we can get him for.

b) She’s making $75K now, do you think she’ll settle for $65K?

c) Let’s give her $60K now, and we’ll move her up to $75K next year.

Employees are not straw hats being sold on the beaches of the Bahamas.  On the beaches in the Bahamas, you negotiate for the lowest dollar possible.  It’s part of the fun of buying in locations like that.  The seller says $5.00, you say $3.00, you settle on $4.00 and everyone is happy. 

Not so in the world of employee hiring.  Here’s the deal – pay people what they’re worth, REGARDLESS of what they were making somewhere else.  If an employee prospect was making $50K, and you know that person is underpaid by $20K, offer them $70K.  You heard me correctly – offer them $70K even though they may have joined you for $55K.  Does it sound absurd?  Here’s why you should do it.

1)  The new employee will feel important and appreciated.

2) The employee will see you as a fair employer right out of the gate, which buys you a lot of goodwill. 

3) Sooner or later, most employees figure out how much they are worth in the market, and if you’re grossly underpaying, they will either demand more money or quit. 

You might be saying at this point, “if I can get away with paying them less for 6 months or a year, why not?”  The answer is simple – it’s just not worth the price.  Let’s do some simple math.  Let’s use an example where you are underpaying someone by $20,000 ,  and after 6 months they demand a raise so you agree to an increase in their salary to $65,000.  $15,000 divided by 2 (half a year) is $7,500 in savings to the Company.  Here’s the cost of that $7,500:

– Little to no loyalty

– Little incentive to put in extra hours

– Little to no credibility in the eyes of the employee

– Higher turnover

In my experience, that normally adds up to a lot more than the savings you achieved by underpaying on the salary.

Finally, the reverse is true as well.  If you want to hire an employee that was overpaid, then you should offer that prospect what the market dictates, and no more, even if it’s less than he was previously making. 

So next time you feel the need to negotiate, book a trip to the Bahamas and send me a straw hat.