Growing in a Small Business
Growing in a Small Business

I was reviewing some business statistics today. I knew that small business was the backbone of our country but did not realize the extent. Did you know that there are 24.3 million ‘non-employee’ firms? There are 5.83 million firms with employees and ninety percent of those have less than twenty employees. Combined, non-employee firms and employee firms with less the twenty make up nearly ninety-eight percent of the business community.

As I reflected on these, I recalled the Greiner Model regarding the phases of growth in the lifecycle of an organization. I assume that many have moved past initial startup but have not matured or grown enough to surpass 20 employees. In many cases, I’m sure this is by intent and in other cases, I suspect it is the result of struggling to break through the ceilings and obstacles that are inevitable with growth.   The passion, creativity, and talent of the Entrepreneur can only lift a company so far before the challenges of things like complexity, too many priorities, people issues, department silos, communication breakdowns, fear of delegation and many others create a ceiling and we decide to live where we are or try the next salvational program.

As companies try to grow and encounter ceilings, the challenge is lifting our head long enough to identify the growth barriers and dedicate a portion of scarce time to working “on the business”. Leaders in a growing organization must:

  • Be astute at SIMPLIFYING COMPLEXITY and providing CLARITY of organizational direction. 
  • Get comfortable giving up control and authority by learning to effectively DELEGATEto those that have the skill and the will to grow.
  • Eliminate redundancy and chaos by gaining control over CORE BUSINESS PROCESSES so that they become sustainable and scalable.
  • Design an effective STRUCTURE with clear ACCOUNTABILITIES, not one based on the need for power or aggressive personalities.
  • Adopt an OPERATING SYSTEM that fosters the formation of clear direction, the institutionalization of the desired culture, and accountability for execution.

Thank you to the 30,000,000 Entrepreneurs who are the backbone of America and that took the risk to chase a dream. Every business leader has the desire to win; if you’re trying to grow by outworking the next guy, consider taking time to prepare a winning game plan to break through the ceiling that is holding you back. For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.

Performance Management – Again?
Performance Management – Again?

It is that time of year, time to do the annual performance review to make the Human Resource Department happy.  Many will begrudgingly go back and dig out outdated job descriptions and irrelevant goals that were set 12 months ago.  Others will send a blank form to their employees and have them fill it out for the manager to sign.  And others will hide from Human Resources for two or three months until the heat is off.  We have all lived it and understand that the exercise of doing a review at the end of the year is not creating value, but we do it anyway, sometimes.

This year, I encourage us to embrace a new mindset about performance management, a mindset that the practice of an annual review should be abolished unless it is coupled with value-creating principles of performance management.  A few valuable principles for your consideration:

  • A few important goals and expectations are collaboratively defined at the beginning of the cycle to align individual efforts towards what’s important for the department or company.
  • Simply performing tasks XYZ as outlined in your job duties is table stakes for continued employment.  Goals are about identifying changes one can affect that will yield improved results.
  • Reality happens, its called life or business.  What seems important today may be less important tomorrow based on new realities.  Conversely, something we don’t even know about today may become a top priority.  Goals must be flexible, reviewed, and updated regularly (monthly) to ensure consistent clarity about what’s most important. 
  • Development plans should focus on providing opportunities to develop the competencies, skills, or experience required to achieve the established goals or to prepare for future aspirations.  Training as a goal is not appropriate and should only be on a development plan if a lack of skill or knowledge is the barrier to performance.
  • At the end of a review period, an individual either meets, doesn’t meet, or exceeds expectations.  Anything more is too complicated.

As leaders and managers, we risk allowing the tyranny of the urgent to force us to lose sight that our businesses require us to deliver results and that this requirement demands the aligned efforts of the resources we lead.  If we don’t spend time establishing and maintaining clear goals for improvement, we don’t meet regularly to provide coaching and remove obstacles, and we don’t provide enriching growth experiences, then we are not effectively serving the long term needs of the business, we are just working hard. 

If we commit to the disciplines of effective performance management, we can achieve great things and the year-end performance review will be little more than a summary of accomplishments that you sign at the end of a great year.

For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.

Culture Matters
Culture Matters

The hidden asset that does not appear on the balance sheet.  Who you are internally will absolutely become reflected in who you are externally.  HOW we perform must be equally important as IF we perform.  Every company, whether they think about it or not has a culture and this culture is either strengthening or weakening business performance.  A great culture will unlock the talents of people and allow them to thrive.   A poor culture will send quality talent out the door or keep its contributions restrained.

To focus on culture, you first need to understand the current culture.  Far too many organizations spend two days at strategic planning to craft lofty mission, vision, and value statements, then have very nice wall hangings behind the receptionist, in the conference rooms and they publish them in annual reports.

To have an actively managed culture, you must first embark on a discovery process – ask people, observe, and document the current and the aspirational elements of culture.   Dedicate a week or two to cultural discovery and explore what is great that you should keep, what you wish you had, what you have that needs to be eliminated, and what you need to intentionally keep out.

Once you have gone through the discovery process, only then do you begin to document the core values and core principles, the attitudinal and behavioral expectations in support of the core values.  Surfacing these from the grassroots of reality will always be more effective than the traditional top-down approach which feels more like the ten commandments.

Lastly, documenting the culture words and phrases is not enough.  There needs to be a daily, weekly, monthly, quarterly pulse of reinforcement.  This pulse should result in the ongoing quest to explore the definitions of the principles, evaluate how well we are living the principles, and determine what we can do to improve.  Also, these principles become part of the hiring process, the performance management process, and even become part of the due diligence behind mergers and acquisitions.

Culture is not buying pizza and giving free coffee.  Culture is about relationships, communication, client focus, work environments.  Culture is an investment business leaders need to make to attract and unleash talent and separate their business performance from the competition. Culture is the asset on the balance sheet that is not measured and that the competition cannot easily duplicate. For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com

Enough talk, let’s build a culture that eats strategy for lunch…
Enough talk, let’s build a culture that eats strategy for lunch…

We all seem to intellectually understand the importance of a healthy organizational culture, but few businesses have a plan to intentionally define and institutionalize a culture that yields a sustainable competitive advantage.

Let’s start with the basics, a definition. Culture is a commonly held set of values and core principles that show up in the daily words and actions of the people; “the [insert company name] way”. I have a plaque hanging over my desk that says thoughts lead to words, words lead to action, actions become habits, habits shape your character, and your character defines your destiny. The culture of your company will define your destiny and your legacy. So, as we start our journey, we will focus on words and actions.

Before we talk about how, let’s discuss Why. Why does Culture matter, doesn’t the CEO have other important things to do? Four things to consider. (1) A healthy culture will yield a sustained differentiation in a sea of mediocrity. (2) A healthy culture will increase the ability to attract and retain the right people in an extremely competitive labor market. (3)Employees who are positive about their company will deliver better client experiences. (4) Companies with great people and strong cultures earn higher multiples or valuations.

Now on to how, and this is where we struggle. This cannot be a human resource initiative and it cannot be achieved with casual Fridays, more pizza parties, and gimmicks. Defining and institutionalizing a culture is a Sr. Leadership function. Let’s look at four specific actions:

(1) DEFINE. Too often, we create a few core values that are vague and meaningless. What we want to do in this phase is to identify 20-30 behavioral statements that define with specificity what you expect people to do. Do this by reflecting on questions like (a) What things if done, would create an amazing company (b)Which employees would you clone, why? (c)What behaviors make you crazy (opposite). Once you’ve created observable behavior statements, you can figure out a scheme to categorize them. Often, categorizing into core values can be effective, but avoid values that are aspirational (vs real) or generic table stakes (like integrity, honesty).

(2) TEACH. Everyone will read and interpret the statements in their own way. It’s very important to explain each statement in weekly increments. What does it mean, why is it important, how do we demonstrate. Create a weekly focus, incorporate into weekly meetings, talk about in weekly 1:1 meetings. Many things can be done, but the bottom line is to create consistent rituals. This is ongoing, year after year, but each year, the effort goes one layer deeper in the organization.

(3) MEASURE. What gets measured gets done. The best two ways to measure progress are (1) Build an organizational survey around the behavioral statements. Be prepared to receive the feedback humbly and expect leaders to be committed to being responsive. (2) Incorporate the behavioral statements into performance review systems and/or 360 assessments. Employees that cannot consistently meet expectations on at least 75% of behavioral standards must be addressed.

(4) EMBED. The final step phase is to embed all your behavioral differentiators into everything that you do. Build selection systems to hire people that “fit”. Build reward and recognition systems to reinforce. Build them into new employee onboarding processes.

Every company has a culture. Is yours by chance or by design? Don’t let a key driver of value in your company evolve by chance.

For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.

SOMEBODY sent to B.E.D.
SOMEBODY sent to B.E.D.

I recently had a conversation with a colleague.  He told me of a former CEO that had a life-size clown in his office.  The clown had a nametag, “SOMEBODY.”  We chuckled at length about all the mishaps that Somebody got blamed for.  He was so good at absorbing the responsibility for all that went wrong, we joked that we were going to hire a whole department of Somebody’s and call them the department of THEY.  Imagine, a whole department that can be blamed for all that goes wrong.  Now, instead of owning our own mistakes we can simply make excuses, deny responsibility, and blame THEM, write them up and never feel the sadness of not performing – BLISS!

A funny thing happens to companies that have employees named SOMEBODY and departments named THEY.  The individuals never take ownership, responsibility, and accountability for resolving the issues and driving the metrics that the internal or external customer cares about.  When that happens, the competitors that fired SOMEBODY and created cross-functional environments that are focused on the ultimate goal and own a shared responsibility for removing the obstacles that stand in the way of that goal pass them by, and they eventually go out of business.  

The challenge – eliminate the language of “Somebody and They/Them” and replace it with I, We, Us.  Focus the organization on the top 3-5 metrics your client cares about and challenge every team to see themselves in those metrics.  Empower people to remove the obstacles that inhibit their ability to deliver upon and improve those metrics.  Lastly, send Somebody to B(lame) E(xcuse) D(eny) and let your competition hire them!

For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com

Succession Planning
Succession Planning

In today’s economy, growing talent from within is essential – not a muscle we have flexed for a while.

When developing and deploying talent, we often fall prey to promoting high output performers based on past contributions.

To identify who to develop and promote, it is critical to define and evaluate potential as well as past contributions. Unfortunately, past performance is not the best predictor of future potential. Future potential is best defined by evaluating 6 elements.

Cognitive Horsepower
This is the mental ability to quickly look at and make sense of ambiguous and complex information.

Achievement Orientation
Motivation, beyond the desire for status & money, for advancement and achievement.

Culture Fit
Culture reflects its leaders.

Emotional Intelligence
Awareness of their own and others’ emotions. Ability to adapt and respond to complex & challenging situations with emotional control.

Learning Agility
The ability and desire to apply what was learned from past experiences to new and unfamiliar challenges.

Experience
Success in the new role will require different competencies and perspectives. Has experience provided enough perspective? Do their innate characteristics lend themselves to the competencies required for the new role?

For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.

Essentials of Strategic Execution
Essentials of Strategic Execution

Today, business moves very quickly. Strategy cannot be a political dance for resources or peanut butter spread of budget dollars. Strategy development and execution need to be adaptive and geared toward identifying the critical few priorities with an expectation of execution. Companies often fall into two camps concerning strategic planning. The first groups over-formalize the process, insert lots of complexity, and once it’s over with, shelves the hard work until next year. The second group is so immersed and enslaved to running the day to day operation, that the process isn’t strategic at all and may not even happen. Either path is dangerous.   There are four essential and simple elements for strategic execution:

STRATEGIC CLARITYSpending time to ensure the entire leadership team agrees on who you are and defining a core focus, a sweet spot, and where you are headed long term are musts.  This doesn’t require mounds of reports and a retreat, but an honest and focused debate on a handful of questions. The answers to these questions don’t change as rapidly over time and can be refreshed on an annual basis, but they serve as an anchor.  Strategic clarity comes from moving the longer-term strategies into one to five 90-day priorities, less is better. The quarterly priorities are established every 90 days in a quarterly strategy review.  If the strategic focus is longer than 90 days or the number of strategic priorities is greater than five, or progress isn’t measured, strategic efforts and execution will stall.

PEOPLEDoes the company have the right structure to execute the strategy and do clear accountabilities exist for each role. Often structures evolve to be overly complex silos with ambiguous roles and undefined accountabilities.  Are people in roles that fully utilize their strengths and abilities? Too often, organizations tolerate people that don’t fit because of their strong technical capabilities, and conversely, we retain nice people who struggle to execute. To accommodate, companies will often hire more people to fill the gaps and not deal with these challenges, escalating people costs. Without the right amount of the right people in the right seats, execution will falter. 

TRUST: As teams navigate strategy discussions assess people at all levels and process issues; difficult discussions must occur.  A culture of trust is at the foundation of a healthy team or organization.   As a leader, observe what happens when difficult issues surface. Does the conversation stay focused on the issue or does the subject quickly divert to something easier or migrate to an emotional place where some withdraw and wait for the storm to pass and others get loud and aggressive to get their way. If a team can identify, discuss, and solve challenging issues without emotion, trust is established. If trust is absent in the culture, the issues will not get addressed and solutions will not be effectively implemented.  Instead, a culture of blame and self-promotion will prevail.

DISCIPLINE: With quarterly priorities clarified, structure, and people assessed, and an environment of trust, discipline becomes essential. Regular and effective meetings are used to briefly update the status of the quarterly priorities and key metrics. Don’t discuss issues in-depth during the update, but simply move anything off track to an issues list for the team to tackle. Quickly prioritize the list of issues, then focus 60 minutes (no more, no less) discussing and solving the root cause of the #1 issue on the list – be careful not to solve issues that are symptoms of a root cause.  Once complete, move to the #2 item and continue processing issues until the end of the meeting.  Unresolved issues can carry forward. Often, teams struggle, and either they don’t meet at all or they meet and are an unproductive consumption of scarce time.

With strategic clarity, clear accountabilities, the right people in the right seats, a culture of trust, and discipline, organizations can expect to consistently execute 90% of their quarterly strategic priorities. With consistent execution of quarterly priorities that are rooted in long term strategy, progress toward the envisioned future is inevitable.

For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.

Beyond the Furlough
Beyond the Furlough

Throughout this challenging period, the decisions made by leaders and the actions taken by employers had to be quick and reactive. What we are doing now and most importantly, what we do next will leave an indelible fingerprint on the leadership legacy and the employment brand. Treating people, even those that don’t survive the transition, with human kindness, dignity, and respect is essential to maintaining a positive and trusting relationship with those that survive the transition. It will not be long until we are again fighting the “war for talent.” Even in downsizing, our employment brand matters as we try to retain the best.

Many employers have furloughed or temporarily laid-off employees to survive and many small businesses are maintaining payroll for an eight week coverage period under the Payroll Protection Program, hoping for recovery by July. Both options allow the employment relationship to continue temporarily. This historical period has left few, if any businesses, unscathed. I hope with all my heart that businesses open, employees return, and economic activity resumes and that this article is unnecessary. Unfortunately,  hope is not a strategy, and denial can lead to a lack of planning and costly errors.   

Unfortunately, some employers who took temporary action may soon realize that despite valiant efforts, when operations resume, the number of employees needed to operate the business will be substantially fewer than before.

Employers must prepare for the possibility and create plans to manage separations as furloughs, temporary layoffs, and payroll protection employment become permanent reductions in force or permanent layoffs, ending those employment relationships.

Who Will Be Laid Off?

Whether ending employment with temporarily laid off, furloughed, or active employees, the same legal and human considerations apply. For example, assume that an employer needs to lay off a certain number of employees who hold the same position or work in the same department. The employer will need to determine and document nondiscriminatory selection criteria (can be multiple criteria) for deciding which employees will be let go, apply that criteria consistently to the entire population, and document the outcome of applying the selection criteria in determining who is terminated.

In my experience, employers often resist the idea of this exercise because they just want to pick and choose who they want, regardless of consistently applied selection criteria. Doing a fair and thoughtful reduction in force requires time and safeguards to eliminate implicit bias from infecting the process. Even after applying the criteria, review the demographics of the chosen group (i.e. age, gender, ethnicity, race) to determine if there was an adverse impact on any protected group. If there is, consider applying alternate criteria. 
Legal experts agree that this is a moral imperative as well as a legal one.

WARN Issues

Many employers with over 100 employees did not have to provide notice under the Worker Adjustment and Retraining Notification (WARN) Act when they first furloughed or temporarily laid off employees because they reasonably believed that the actions would last for only for a few months and not six months or longer. This reasonable belief is key in determining when the WARN Act is triggered. As we confront the possible future, separations extend, and beliefs change, so may our responsibilities under WARN. 

Generally speaking, an employer may have a duty to provide 60-day advance notice under WARN if 50 or more full-time employees will be laid off at a single site of employment in a 90-day rolling period. Even if employers do not have to provide notice under federal WARN, a number of states (State Requirements) have lower triggers, have mandated severance requirements, have longer notice periods, or other requirements.

Insured Benefits

Many employers worked with insurance providers during the temporary chaos to extend eligibility in the group health and other insured benefits plans.  However, this extension, while governed by the plan document, generally does not extend more than 30-60 days.

As temporary situations extend or become permanent, the ability of an employer to continue eligibility in the benefits plans will end. Employers with more than 20 employees will need to provide employees with COBRA notices regarding the loss of coverage in any group health plan. COBRA notices or notices of conversion or portability rights may also be required for other insured benefits such as Dental, Vision, Life, or Disability insurance.

Forty states have enacted “Mini-COBRA” laws that apply to employers with fewer than 20 employees. 

PTO Benefits

If employers did not require employees to use paid-time-off (PTO) benefits while they were on furlough, those employees, depending on company policy or state laws, may be entitled to some PTO benefits upon termination. This ordinarily routine process may be complicated by the current circumstances presented by the pandemic.

There may be some disputes as to whether and when employees have used PTO benefits while on furlough or temporary layoff. There may also be questions whether PTO continued to accrue while on furlough or temporary layoff. To minimize the potential for such disputes, employers may wish to communicate, in the notice of termination, the number of hours paid, show the calculation (accrued-taken = balance), and invite employees to share any questions regarding the accuracy of the calculation.  

Severance Pay and Benefits

Employers will need to determine whether they have an obligation to pay severance under an existing severance plan or policy. But what if the employer cannot afford the potential severance obligations and/or would need to lay off additional employees to fund it? Depending on the circumstances, an employer may have the right to modify—or even terminate—its severance plan or policy to take into account current circumstances.

Employers that do not have a formal plan or policy and want to extend severance may wish to consider developing and applying fair and consistent guidelines to minimize the risk that ambiguity or inconsistency will expose the employer to litigation.

Severance pay and benefits are often given as consideration in exchange for a separation agreement whereby employees waive certain rights to sue in exchange for the severance benefits. State and Federal law guide what rights can be waived, what information needs to be provided to allow the employee to make an informed decision about their rights, and govern specific language that should be included in a separation agreement. If you wish to offer severance as consideration in a separation agreement, consult legal counsel for a legally compliant severance agreement.    

Agreements

In the case of union employees, employers will need to find out what the collective bargaining agreement says about the layoff process and the pay or benefits that an employee may be owed upon layoff.

Employers also will need to check employment agreements they may have with individual employees. These agreements may provide for severance in the event of a termination without cause. For these purposes, do not forget to check offer letters that may include negotiated severance with or without a release.

Notice of Termination

Ideally, an employer should speak personally and compassionately with each employee who is being terminated. This is where reputations and brand images are won or lost. I recognize that depending on the size of the layoff and the employer’s resources, this may not be entirely possible.

Even if not required by state law, employers are well-advised to send a letter or e-mail documenting the terms and conditions of the separation. The letter should address final check date,  PTO payments, 401(k) distributions or loans, health and welfare benefits eligibility and contacts, and any severance pay (see paragraph on severance pay as consideration).

If written notification is the first notification, the employer may wish to acknowledge that it would have preferred to have had a personal call first, explain why this was not possible, and be genuinely apologetic. These employers may want to consider having a conference call as a follow-up to the written notification, providing transitional support (i.e. outplacement), and establish contacts for ongoing support.

Even in a pandemic, acting with fairness and in a manner that maintains respect and human dignity is critical.


For questions or more information pertaining to this article, please contact Scott Smith at scott@mostellerhr.com or info@mostellerhr.com.