Your People and Planning for the Reset
There is an old African proverb called The Fable of the Lion and the Gazelle. To survive every day, the lion must catch the slowest gazelle. For the gazelle to survive, it must outrun the fastest lion. The message for both, “When the sun comes up, you’d better be running.” Regardless of industry and how positively or negatively positioned a company has been through the COVID-19 crisis, we face a new post-pandemic business normal to varying degrees. We defer to healthcare experts and government leaders as to timing, but as a business leader, you should be planning now for a successful restart of your company when the sun finally comes up. According to a recent article from McKinsey & Company, there are “five horizons” or 5 R’s that leaders and companies need to think about and act upon during this time and beyond: Resolve, Resilience, Return, Reimagination, and Reform. We are going through the Resolve and Resilience stages now (cutting costs, monitoring cash flow, retaining or transitioning employees, preparing to return, and planning to normalize operations). All of us have been inundated with content regarding the current situation. However, what about this new post-pandemic period applies to your people? As business leaders, our task is now to manage an efficient restart, a comeback in stages, and begin running toward a better future. The way to make that happen is to focus on your workforce through planning, communications, and deciding whom to bring back and when since it is your people who will determine the outcome. Planning for the Return In a recent survey by Fishbowl, 80% of workers across the country do not feel safe going back to work if their state were to reopen immediately. While the data varies by area, these are startling numbers that point out that there are still many unknowns relating to widespread testing and a vaccine. Regardless of the size of your company, you could also face litigation if any employment laws are broken. What is an employer to do? Returning after such an abrupt forced shutdown will be challenging, especially with a fearful and reluctant workforce. To overcome these hurdles, three areas of planning will be crucial: business and operational considerations, communications and timeline, and then a plan to return to the workplace. BUSINESS & OPERATIONAL CONSIDERATIONS Refer to plans that you may already have in place, such as your original business plan or strategic planning you may have engaged in before the pandemic to serve as a guide. Working with an HR consultant may help in developing Disaster Recovery and Infectious Disease Control Plans, as well as a plan for normalizing operations. Review your financials, develop a 13-week cash flow forecast, and determine your priorities by function and location. You may have previously had an annual 1-3-5 year plan for your business. Now, focus on a 30-60-90 day plan. If your HR Team has been working remotely, they will need to be one of the first back to the office to assist in staging the return of your workforce and ensuring compliance. COMMUNICATION & TIMELINE PLANNING Perhaps noted author, John Maxwell, put it best during a recent webinar addressing leadership during COVID-19: “The best thing we can do right now is not to do business, but just do relationships.” As a leader, continue to stay in touch with your people and keep them focused during this trying time. Communicating the return should be positive, but also respectful. In this phase, determine a timeline for bringing back teams in order of priority. Build a communication plan for employees returning onsite denoting the reasons why, work schedules, expectations, safety measures, and explore options for continued remote work if possible. While portions of your workforce may already be remote, or able to WFH, it will also be essential to address furloughed and laid-off employees. Each is a different category that requires a separate communication plan. Furloughed employees will be more accessible, as they never left your system. Laid-off employees you choose to bring back will have to be rehired, onboarded, and put back into your system. This period is also an excellent opportunity to top-grade your talent (more to follow). RETURN TO THE WORKPLACE & DAILY OPERATIONS Do you have the staffing to handle the process and administrative functions in your operation? This phase is where you can get detailed in terms of how your people will enter and exit the facility, temperature or other testing procedures (many mobile temperature check methods are available), having suitable PPE on hand, signs for social distancing, personal hygiene, and practices for overall facility cleanliness and sanitation. All are to reduce fear and meet new OSHA, CDC, and state requirements. Prior training and instruction on these new procedures will be crucial as your employees return. Reimagining the Future: Topgrading Your People The COVID-19 crisis will reveal problem areas in your business, but also opportunities to improve. Perhaps the most critical ingredient to a company’s success in this new era will be the people we surround ourselves with as we embark on this journey. Consequently, we have been provided a painful yet unique opportunity to improve the quality of talent driving our business forward. The wife of one of our BEST Stakeholders manages a retail store in a local mall. She had the unfortunate task of laying off her people during the shutdown, but she has kept in touch with her team and intends to bring most of them back when they reopen. However, there is one who will not be invited back due to poor performance and bad behavior. For others, she will promote and increase their hours when they reopen. She has been topgrading her people. Topgrading talent is an interviewing philosophy that seeks out the highest quality workforce by ensuring that acquisition and development focus on the most talented, well-rounded performers, as well as those with a cultural fit. Click here for a useful article on how to “Topgrade your people for post-pandemic success.” While this challenging time may appear to be an
The Importance of a 13-Week Cash Flow Forecast
It is no secret that the recent pandemic has wreaked havoc on the global economy, pressuring businesses across all industries to take severe measures to “weather the storm” to ensure their survival. As businesses, both large and small, are forced to rapidly address their liquidity positions, we increasingly hear about actions aimed at preserving cash that has included asset sales, drawdowns of revolving lines of credit, site closures, employee layoffs, vendor negotiations, employee compensation adjustments, and furloughs. Given that cash is the “lifeblood” of any business, measures such as these are often necessary. However, through times of business expansion and contraction, we have witnessed organizations expending substantial time and resources developing tactics around either/or cash generation and cash preservation. As a result, we strongly recommend to our clients that they invest the time and resources towards developing a basic but often overlooked management tool: a 13-week cash flow forecast model (the “cash flow forecast”). In this summary, we will talk about the key components of a cash flow forecast as well as a few of its key benefits, namely in empowering organizations to make thoughtful, informed decisions that are data-driven in nature. The Forecast and Key Components The cash flow forecast is a real-time model that breaks down the cash inflows and outflows of a business into discrete parts, and it provides the most accurate depiction of a business’s financial health (or lack thereof) as well as valuable insight into the drivers of that health. It is important to note that the development of this model should incorporate the involvement of senior leadership that provides input into the underlying assumptions and is willing to provide potential ownership regarding the development and reporting of specific categories and/or line items. These owners need to change their mindset to one of “cash in and cash out” rather than “what hits the P/L” (example: sales mean nothing if they can’t be converted to cash). While the high-level components of a cash flow forecast are shown below, each of the key component buckets should be segmented into specific line item components labeled with sufficient detail in order to create period by period comparisons (for example, “Leases” may be a line item within Cash Disbursements). Key component buckets include: Beginning Cash Balance: Recommend calculating on a Book Cash basis and will require a Bank to Book cash reconciliation. Cash Receipts: Typically consists of both the collection (both amount and timing) of existing A/R as well as future sales and their associated collection (both amount and timing); segmentation by a key customer with appropriate DSO assumptions. Include miscellaneous sources of cash as well. Cash Disbursements: Break out into operating cash, investing cash, and financing cash disbursements (subtotals). Operating cash disbursements can be thought of as normal course payments for items such as payroll, supplies, rent, etc. Investing cash disbursements can consist of several different things, but the main line items we typically see needing attribution are capital expenditures. Financing disbursements relate to debt, equity, dividends. The most common relates to interest expense or principal payments on loans. The beginning cash balance adding forecasted weekly cash receipts less forecasted weekly cash disbursements can provide a real-time view of the organization’s liquidity. The analysis should then be rolled forward each week. While opinions differ on the appropriate time period, 13 weeks is generally considered a reasonable midpoint period; short enough to provide real-time visibility and accuracy (one calendar quarter) but long enough to give the business insights that can be strategic in nature. The Benefits of Visibility in Decision-Making We subscribe to the theory that enhanced visibility into the go-forward liquidity position of an organization can be empowering and can result in thoughtful, informed, and data-driven decisions. Among the numerous benefits of a cash flow forecast are the following: Allow the business to identify and enhance cash systems and controls – numerous issues can be identified and addressed such as how cash disbursements are administered (process), how the business can understand the amount and timing of financing requirements, how sales are forecast with associated cash receipts and when the business may hit roadblocks that don’t allow it to fund key operating costs such as payroll. These are just a few of the benefits. Allows the business to address its sales and collection process – perhaps certain key customers (or profiles) don’t pay as timely as others, the business may not be invoicing correctly or in a timely manner, appropriate mechanisms, systems may not be set up to accurately record sales, discounts and importantly capture cash receipts. We have found on numerous occasions that businesses don’t actively monitor and aggressively follow-up on delinquent A/R or offer incentives (assuming make economic sense) to accelerate collections. Sales don’t mean anything if they cannot be collected. Allows the business to identify non-core assets and create asset disposition plans – in these circumstances, businesses are forced to address assets that are non-core in nature to key business operations. These may be real estate, inventory, certain business lines that may be unprofitable, etc. If assets are non-core to operations and they can be monetized, they should be, or at least there should be some consideration of this possibility. Not only does this allow a business to generate cash, but it also removes management distraction and time from administering these assets. Allows the business to address its vendors in a critical manner – with a cash flow forecast, the theoretical becomes actual, and a light can be shone on vendors regardless of the type that is bleeding cash from the business but may not be generating significant ROI. With a forecast, the amount, timing, magnitude of these disbursements can be readily understood, and this can lead to better processes on the front end in terms of identifying and approving vendors and vendor relationships. We have found on numerous occasions that businesses, regardless of whether they are in expansion or contraction mode, have seen the benefits of a cash flow forecast to be significant as it
The Rise of the Remote Workforce: Benefits, Behaviors and Best Practices
Once the domain of traveling sales and service people, this space is rapidly changing. In the last (5) years alone, remote work, or allowing professionals to work from home or outside the traditional office, has increased by 44% and shows no signs of slowing, especially in light of recent events. Currently, the number of remote workers is rising out of necessity, whether it be temporary or permanent decisions by companies to support a virtual workforce. With technology allowing us to take our lives with us anywhere we go, more people are requesting flexible working spaces. There are many reasons why remote working is increasing in popularity with both business leaders and their pool of labor. Not every company wants to allow employees to work from home. However, there are benefits of having a remote workforce. Not every person should work from home, thus, we will review the personal behaviors that best apply to this style of work and best practices for being a remote workforce manager and an efficient employee. The Benefits There are (4) key benefits to having a remote workforce: talent pool, cost reduction, happier work life, and health. Your talent pool becomes limitless. Hiring the right person comes with many challenges. The company needs to find a person with the right background, customer knowledge, behaviors, and nearby. By limiting the talent pool to around a 25-mile radius (about a 45-minute commute) a company is missing out on top talent. With remote workers, the world now becomes your talent pool. It saves the company and employees money. According to a ConnectSolutions survey, the average remote worker saves a company approximately $4,600 per year. Fuel, car maintenance, commuting time, parking, childcare, lunches are top employee considerations, and this is a good chunk of change most people would like to keep in their wallets. Having remote workers also reduces the amount of money the company has to spend on computers, phones, utilities, office supplies, and on real estate and office leases. A happier work-life balance leads to employee retention. According to Global Workplace Analytics, 72% of employers say remote work has a high impact on employee retention, and 90% of employees feel flexible work arrangements increase employee morale. It is no wonder then that 45% of remote workers have been in the same position for (5) years or more. Remote Workers are healthy. Even before many schools, companies, and even whole countries were put on lockdown in an attempt to stop the spread of COVID-19, research showed that remote workers on average take fewer sick days and can stay productive longer. It has become a lifestyle, with many companies such as Google, Microsoft, and Amazon encouraging work from home– as well as many others who are less tech-centered. Plus, in this new age of social distancing, it is much less likely that an employee will come in contact with any germs around the office. The Behaviors While remote work provides many benefits, both to the company and the employee, it doesn’t mean everyone in your company is ready for this lifestyle. On the contrary, this new work arrangement takes a person with a particular set of skills and behaviors. As we conduct candidate interviews for remote positions, we assess the following behaviors that make for a successful and productive remote worker. These are: Strong Connector and Communicator Enjoys sharing expertise and ideas proactively with other professionals. Prefers and enjoys team projects. Proactively taps into all available knowledge and support resources. A Go-Getter Confident and self-assured. Seeks independence and enjoys due recognition. Driven to high levels of accomplishment. Passionate High stamina and endurance— one who doesn’t count hours on the job. Maintains focus during work activities. Active hobbies and involvement. Integrity Honesty and integrity are hallmarks of how they conduct themselves in all they do. Refuses to cut corners or over-promise. Represents their company judiciously. Astute Skilled in self-appraisal. Quickly sorts the critical from the superfluous in prioritizing – street smart! Acts appropriately— is tactful and knows what NOT to say. The Best Practices As with any mode of work, there are managerial and work practices that lead to success. We have identified six key best practices for remote work: Communicate early and often. Because an employee is not working in the office, communication is one of the essential tools they can use. In a traditional office setting, it is easy to talk to an associate in person if questions or concerns arise. Efficient telecommunicators understand the importance of this trait and use it to work effectively with the rest of the team. Be proactive in your communication with your coworkers and clients. Managers also need to communicate effectively with daily calls or video chats. Daily routine and consistency are a big part of working from home. When working in a traditional office setting, this routine could consist of waking up around the same time each day, taking a shower, making coffee, and commuting to the office. A person who is taken out of the office should still try to do these same things each morning and to keep their regular office hours. This will set the tone for the day. Instead of feeling like you are just staying home, it will make it feel like you are getting ready for work. Managers should also set up routines and consistent check-ins (phone or video) with their remote teams. Set schedule and prioritize. Remote work provides more flexibility but has the potential for a lot less structure. Set a plan of action to make sure that time is productive. When working from home, utilize company calendars to stay updated on office events and meetings. Keep to your regular work schedule hours and agenda while holding yourself accountable to these, as your manager would. Create a separate workspace free from distraction. It is almost impossible to produce high-quality while household distractions abound. TV, walking the dog, and the laundry can wait until after work. Create a separate office area or room, similar to if you were working in an
Exit Planning: It can wait until tomorrow, right?
When asked about succession or exit planning, have you given one of these responses? “I think I will leave my business in three to five years.” “The operation still needs me.” “The business is not ready to be transitioned.” “We are too busy to worry about succession.” “I will easily sell it in a few years and walk away.” “I am just not ready yet.” Or perhaps you know someone who has given one of these answers when discussing their potential exit from the business and retirement? Like starting an exercise program, exit planning can easily wait until tomorrow. However, for the Baby Boomers, tomorrow is here. Business owners born between 1945 and 1964 make up 25% of the population but own over 60% of the small businesses. The high ownership levels result from their surge into the job market in the 1970s and the lack of room in corporate America to absorb a much larger and better-educated employee population. From 1975 until the mid-1980s, Baby Boomers opened new businesses at a rate never seen before and not duplicated since. Today, over 5,000,000 Baby Boomers are preparing for retirement. Just as when they all went to college, started new businesses, and became prolific consumers, they will create a flood of small business sales in the United States. So, what is exit planning, and why should you do it? Also, how do you do it, and when should you start? Exit Planning: What is it and Why do it? When a business broker creates an “exit plan,” it usually involves listing the business for sale to a third party. An attorney’s planning focuses on the legal documents that allow the transition of a company’s assets to new ownership. An accountant or financial planner will look closely at tax and inheritance issues, and an insurance broker offers products that reduce the risk of interruption or disaster. It is logical then that exit planning is quickly becoming a significant focus of the legal and financial communities. Although boomers are healthier than prior generations, they all have to retire eventually. Tens of thousands of professional advisors are positioning themselves to provide tax, risk management, wealth management, and contract preparation services to this flood of sellers. You may be in your 40s and 50s and maybe thinking that this doesn’t apply to you. After all, you have plenty of time. However, the answer to that question is another question: then why buy life insurance? Anything can happen to any of us at any time. Exit planning is another form of insurance— just as you are making sure your family is being cared for, don’t you want the same for your business and employees? There are many additional benefits to starting exit planning early— the process of getting your business transition ready means making it more attractive to investors. That includes, but is not limited to: maximizing revenue, lowering expenses, increasing efficiencies, eliminating owner-centric processes, getting the business modernized, up-to-speed, and more profitable. All of these will have tremendous benefits for you and your company regardless of your exit timing. Examining the strengths and weaknesses of the business, IT systems, management team, and customer base are good continual improvement practices that make the company more profitable in the short-term and make it much more attractive for a potential buyer. How to Plan Your Exit? A successful transition starts by determining the planned date of exit and the post-tax proceeds required from the business to satisfy the owner. The target proceeds should be achievable in the chosen time frame. If they are not, you can extend the time frame or reduce the financial goal. After determining schedules and financial information, there are essentially three options on whom will take over as an owner: a family member, an internal team sale, or a third-party sale. Discussions with accountants, attorneys, financial planners, and others likely feel similar to a complicated maze that makes you not even want to start the process. A trained advisor will help initiate the process and will engage in constant communication with all of the parties listed above, with your control of the process remaining intact. The most effective and efficient approach to exit planning is to select a single professional who can manage all the others involved. Creating new entities or sale agreements is pointless unless the tax implications are first understood. Planning to reduce the impact of income taxes may be rendered moot if a company is not in a position to sell. Putting the company up for sale may be a disaster if an owner doesn’t understand what buyers are looking for and how much they’re willing to pay. Not only will this process determine the best options for your eventual exit from your business, but it also provides a screenshot of the company. It helps to identify areas of the organization that can be improved and what we can outsource to others to achieve the highest sale value possible. Eventually, the planning also leads to a smooth transition, operationally, so that your business continues to be run in the best manner possible by new leadership. When to Start? Retiring Boomers will outnumber GenXers reaching ownership age by 4,000 a day! Studies show that the generation reaching retirement age is 2.5 times more likely to want to own a business than those in their 30’s and 40’s. Thus, this severely limits the small-business buyers in our economy today. It often takes a minimum of 5 years to develop most succession and exit plans—a more realistic number might be as much as ten years. Time and potential buyers will likely be the two most significant challenges for you in this process. Once you have a plan in place, you can implement it whenever you chose. Why wait until it is too late? Get the conversation started with the correct parties now. Are you ready? The single largest transaction and transition of your life deserves special attention. Are you planning to exit
Lessons from the Tank: Can Your Employees Be the Next Scrub Daddy?
One of the most popular and interesting reality TV shows today is Shark Tank. For over ten years, it has been the show where wealthy, mostly self-made, business professionals help a small business owner achieve their entrepreneurial dreams. There have been many successful products introduced to the consumer market after appearing on Shark Tank. Take the Scrub Daddy®, for example. The concept is simple (a smiley-faced, reusable sponge in which the texture and function change with water temperature), but it has sold over 10 million units, and the growth continues. To date, the Scrub Daddy® is one of the most successful products to ever appear on the show. But where would Scrub Daddy be today if it wasn’t for the investment from one of the Sharks, Lori Greiner? According to Forbes, before Scrub Daddy was introduced on Shark Tank, it struggled to make $100,000 in over 18 months. Scrub Daddy has now made over $75 million in sales thanks to a $200,000 investment from Lori Greiner, including her time and considerable marketing muscle. Since then, Scrub Daddy has dramatically expanded its facilities and released several new products. As business leaders, we talk a lot about investing in our people, especially in this age of low retention and high turnover. So, what happens when we invest in our employees (time and dollars) the same way the Sharks invest in these companies? We continue to see several recurring trends in today’s job market. For instance, a steady paycheck, bonus, and PTO are no longer enough to satisfy employees. Employees want to feel like they are a part of something bigger than just an office job, and something bigger than themselves. The feeling that they are a part of a team that values them as an individual and respects their ideas. They want someone to invest in them. As the Millennial and Gen Z generations continue to make their imprint on today’s workforce, the “job for life” mentality of their parents and grandparents is becoming non-existent. The younger generations are focused on the concept of belonging to a team that creates value, not merely working for a paycheck. When employees don’t feel challenged, or fully engaged in the work they are doing, employee turnover rates skyrocket. As Richard Branson, the CEO of Virgin Group, has popularly stated, “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.” The discussions around employee engagement have become so prevalent in recent years that you would think it’s second nature by now. It is also no coincidence that in study after study, increasing employee engagement is now the top priority of most CEOs. After all, research proves that investing in the talents and capabilities of your employees is one of the best and most cost-effective ways to increase employee engagement and instill loyalty. The same holds for the investors on Shark Tank. For example, when you look at something as simple as a sponge, you might not see much potential return. However, when you add a little ingenuity, time, and care, you can produce a multi-million-dollar product line. It is the same with your employees. Invest in them, and they will invest their time, energy, and passion back into the company and produce a higher return. When sourcing and interviewing for a new hire, you are putting the candidate in “The Tank.” The investors are Human Resources, Supervising Manager, Project Leader, and the Owner/CEO. The candidate’s resume is their pitch outline, showing a base overview of their strengths, skills, past experiences, and successes. Throughout the interview process, the candidate will begin showing you their behaviors and talk a little more in-depth about their past and what they aspire to in the future. Based on this pitch, the investor can decide if they want to invest in the candidate or keep looking for a “million-dollar candidate.” Investing in your employees also doesn’t have to be a Shark Tank-sized investment. In a study conducted by PricewaterhouseCoopers, the results showed that the top qualities that Millennials look for in a job are opportunities for career advancement and learning and development programs. With that in mind, employee engagement can be as simple as having an immersive and detailed onboarding program for new hires and continual training for existing employees. In a study conducted by Axonify, they noted that only 31% of employees receive formal job training. As Carol Leaman, the CEO of Axonify, states, “If employees don’t have the correct training to perform their jobs properly, they will disengage. This, in turn, will result in work quality, productivity, and customer satisfaction issues.” In the same study, 80% of workers state that it is vital to receive regular, frequent training, so they don’t forget the information, up from 73% in the previous year alone. “Training should not be a dull, isolated event, as employees loathe sitting in long, boring sessions and immediately tune out,” added Leaman. The one thing that all generations in today’s workforce can agree on is that people want training anywhere and at any time, but keep it short and offer rewards upon completion. Yes, more PTO and “fun stuff” are great additions to your workplace and may attract employees to apply, but to get them to stay and produce meaningful outcomes takes more. Views of work continue to evolve. The number of positions and companies that a person will work for in their lifetime is increasing. Investing in the capabilities of your employees by providing experiences and creating mobility ensures that they are building a lifelong career, not just a pit stop for some experience before they move on to bigger and better things. Move towards being bigger and be better by investing in your employees to increase retention, the same way Lori Greiner invested in the Scrub Daddy: provide them the resources, time, and support they need to achieve their dreams. Like the Scrub Daddy, they will, in turn, be flexible, grow, and provide you a high rate of return. SOURCES: wheniwork.com/blog/reduce-employee-turnover industryweek.com/onethird-of-us-employees-dont-receive-formal-job-training