Take a Breath and Think
You deserve it, and your business may require it. By Ben Molenda, Human Capital Advisor, and Todd Downing, Managing Partner at BEST Human Capital & Advisory Group Are you tired of “Work From Home,” “COVID Procedures,” and “New Normal” articles? This one is different. Instead of being advised on how to do something, the goal here is to experience thought. “THINK” is what Thomas Watson Sr., the legendary founder of IBM, would tell his people, encouraging everybody to be thinkers, from the assembly line worker and engineer to the salesperson and office admin. It was what would bind the company together and become the cultural cornerstone of one of the world’s great companies. Despite the immense challenges thrust upon all businesses during the pandemic, the Green Industry has experienced positive, and some would say unprecedented, growth. Other industries have not fared as well and are just starting to recover. The stresses you have responded to in running your business with an uncertain future, proper COVID health protocols, plus the volume of business experienced or lost, have left many leaders feeling reactive. There has been considerably less time to focus on strategy as much as they would like. And – a bit exhausted. The pandemic has also created profound change and impact on the people who make up your organization. Strategic Human Resource planning is a vital component to successfully navigating this business evolution. We are all searching for solutions to protect, stabilize, and grow our businesses. But how do you define solutions when your time and energy have been dramatically stretched? A helpful first step is to identify what the Human Resource challenges or opportunities are that require problem-solving. To support leaders in identifying Human Resource solutions, ask yourself a few of these questions to flesh out potential areas that will require change. You can then begin formulating solutions to address these challenges. WORKFORCE DEVELOPMENT Have you identified specific training or development investments to grow key employees? Are your employees cross-trained if a key individual leaves the team? Does each position have a career progression plan? Have you openly discussed it with the individual? Do you have silos between departments requiring increased collaboration? HIRING What are the current bottlenecks or challenges to your business, and what type of professional would you hire to solve these problems? Is your ongoing hiring process compliant with applicable employment law and producing the desired and necessary results for your organization? Are your HR-related marketing tools and company branding message aligned with the current strategic plan to attract the proper level of talent to drive these organizational directives? Do you have a positive company brand image on social media and sites such as Glassdoor to help attract top talent? TOTAL REWARDS – COMPENSATION & BENEFITS Have you updated or benchmarked your benefits and compensation packages lately? If yes, how frequently do you do so? Do you include perks like profit sharing, continual education, or health initiatives to better invest in your employees? What unique benefits do you offer that are attractive to potential new hires or increase retention? Is your compensation in line with your geographic region, cost of living, and other industries to attract top talent? HUMAN RESOURCE SYSTEMS & SOFTWARE Do you have an organized electronic system for classifying and holding all your employees’ documents? Do you have an up-to-date chain of command to report HR issues? Do you have the appropriate technology and tools to maximize efficiency and effectiveness? (i.e., HRIS, LMS, TS, ERP, and Payroll). Do these systems seamlessly integrate? Are your HR employees adequately trained on them? EMPLOYEE RELATIONS Are your employees truly engaged in the business or simply “punching the clock”? What is your retention rate or turnover rate? What type of leader would your employees communicate that you are? Has an appropriate investigatory process been put in place? Are your HR professionals trained to objectively implement such a process to resolve employee relations issues regardless of their severity or nature? HUMAN RESOURCE COMPLIANCE If your Human Resource policies and practices were audited, would you pass without a fine? Have current policies been recently reviewed and updated to conform to recent legislation, court cases, and executive orders? Especially revised regulations? Are Human Resource audits (internal and external) conducted regularly to ensure compliance with all employment laws? SUCCESSION & EXIT PLANNING When was the last time you took time away from your business as its owner or leader of a division? Are you able to take time away knowing you have a team to keep running the business profitably and efficiently? Do you know what you will do when you retire? Have you mapped internal succession paths, including your own, so you know where to recruit externally and where to develop internally? DIVERSITY Would your organization’s effectiveness benefit from someone with a different background, mindset, viewpoint, or values? Have you hired individuals from various backgrounds and educational backgrounds? Have you properly followed Equal Employment Opportunity Laws? Are you tracking appropriate diversity data regardless of whether you must file an annual report? OPERATIONS & PRODUCTION Are you struggling to achieve complete buy-in to LEAN principles or Health & Safety protocols? Do you have employee retention or engagement problems with your production team? Are current performance metrics or KPIs aligned with job expectations, job descriptions, and organizational outcomes? SALES & MARKETING Do you hire sales professionals based solely on knowing your product and customers, or have you taken time to identify and assess for successful sales or marketing behaviors? Have you worked with your sales, marketing, and production teams to understand and increase collaboration with one another relative to production capacity and sales growth? Are your customer-facing professionals a positive reflection of your company with customers and the industry? NEW PRODUCTS & MARKETS Do you have new products in the pipeline that will require hiring professionals with a unique skill set or knowledge? Have you identified new markets to enter that will require hiring professionals with the targeted industry knowledge? FINANCE
Your Exit Plan: The 3 Inarguable Reasons to Start NOW
What is Your Business Exit Plan? If you’ve ever done a business plan for the purpose of raising capital, one of the key questions is “What is your exit plan?” Many business owners think that question is self-serving, intended merely to let the venture capitalists figure when and how they will get their return on investment. In truth, however, that question is far more important. A business exit plan is a strategic plan with an end date. Putting a time frame on your plan, and defining the goals to be achieved by that date, creates a future-focused mindset for the owner. It controls and reduces your tendency to prioritize daily firefighting over long term thinking. It provides you with a yardstick to measure progress. Most importantly, it affects your thinking about almost everything in your business. Here are the 3 inarguable reasons why you should start your exit plan now. Reason 1: It’s Never Too Soon In my years of working with business owners, I’ve helped many transfer their businesses to family and employees. I’ve worked with others who sold their companies to a third party for tens of millions of dollars. Surveys show that many owners have regrets afterward. Others happily move into the next phase of their lives or careers. A few have seller’s remorse. On the other end of the spectrum, some come to the realization that they hated their business owner lives for years. The majority feel that they received a reasonable reward for monetizing their work of decades. None of them. NOT ONE of them has ever said “I spent too much time planning.” It’s likely that the sale of your business will be the most important financial event of your life. There are a few lucky owners who have wealth outside or beyond the value of their businesses, but for most of us monetizing those decades of effort is the culmination of our working careers. If your exit plan is to transfer to family, you can choose vehicles like Grantor Retained Annuity Trusts (GRAT) or Self Cancelling Installment Notes (SCIN). These may have to be in place for years to substantially reduce or eliminate taxable proceeds for you and/or your heirs. In a sale to employees, developing the documentation that shows their assumption of managerial responsibilities over time is a basic qualification for SBA loan approval. That, plus developing their “down payment” equity, punches the ticket for you to walk away with your proceeds in pocket on the same day that you cede control of the company. In a sale to third parties, the condition of the financial markets at your time of exit will decide the size of your multiple. Preparing your business with due diligence in mind, and understanding the different classes of buyers, allows you to better choose the time, method, and proceeds of your transition. Although it is difficult to time the stock market, shifts in acquisition multiples take much longer to develop. Being prepared allows you to enter the market while prices are at a peak. Five years is reasonable planning time. Ten years is better. There is no time frame that’s “too far out” to be thinking about your exit. Reason 2: It Changes Your Thinking It’s difficult to run a business without being reactive. Employee issues, customer problems, and vendor policies can shift your priorities on a daily basis. When your exit plan is in place, you have a broader perspective. Every decision you make is now in the context of “Does this support my bigger picture?” There are numerous examples. Hiring: If your exit plan is to pass the business on to your children, then hiring becomes a support function. You look for employees who can fill in areas where your offspring lack the necessary skills or don’t have an interest. If you plan to sell to employees, then you are looking for a Successor in Training (SIT). That is someone who shares many characteristics with you. If you are selling to a third party, you want a Second in Command (SIC). That is someone who compliments your strengths, and who can be contractually incented to stay on the job with a new owner. Securing a management team adds considerable value to any company. Lease vs. Buy: If your plan calls for selling to someone who is likely to relocate the company, or who already has your production capabilities, you may want capital equipment to be easily disposable. A competitor or much larger acquirer may want to leave the equipment out of the transaction. In a Main Street business, you may choose to have a strong tangible asset base for an entrepreneurial owner to use when obtaining acquisition financing. Real Estate: Should you own your building? Some buyers (say a publicly-traded acquirer) prefer to lease space. In that case, owning your building could provide a post-transition income stream in your retirement. On the other hand, a relocated company could stick the owner/landlord with a special purpose building that requires significant remodeling to be rentable. These are just a few of the decisions that are better made in the context of your long term plan. The decisions you are making in your business today all have lasting implications. Reason 3: A Plan is not an Action If you are taking a long trip, you likely determine the route before you start out. If it is complex, you may print out the directions. Nonetheless, you are still likely to use a navigation app to alert you to problems along the way, like traffic jams or construction. But everyone understands that printing out the directions isn’t the same as beginning the journey. You might take that step days or even weeks before actually getting into your car. It’s the same with your exit plan. Choosing your time frame and preferred method of transition isn’t the same as making it happen. Writing it down is a key component of preparation, but it shouldn’t be confused with implementation. Starting Your
The Foundation of Everything
Take a step back and look at your company. Do the people seem genuine? Do you feel as though they are making significant progress in reaching the organization’s goals and ambitions? Do you believe in your people, your process, and your mission? How do you foster trust within your company, especially during a crisis like COVID-19? Trust has three foundational components, like a 3-legged stool. Each leg is essential and depends on the others to work together. If one leg breaks, everything collapses. The same goes for trust if one of the components begins to wobble— trust is in jeopardy. The three foundational pillars of trust are authenticity, logic, and empathy. Authenticity “A true leader is one who is humble enough to admit their mistakes.” – John Maxwell Did you ever experience being in a conversation at work and feeling that the person you were talking to was not being completely honest with you? Our human nature can quickly zone in and identify those not being real with us. To avoid a problem with authenticity, BE YOU – ALL THE TIME around EVERYONE – Voice your thoughts and opinions, respectfully. Pay less attention to what you think people want to hear and give more attention to what you need to say. For companies to emerge from this crisis successfully, all ideas need to be explored to reimagine and decide the best strategy. Leaders need to allow the office to be a safe place for everyone to speak when creating a culture of trust. A leader is not expected to know all the answers— welcome comments and ideas. Allowing an environment for fresh perspectives helps build an authentic team and ultimately leads to trust within the organization. Logic “When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.” – Dale Carnegie Most problems concerning logic are not about the quality of the logic, but about the ability to communicate the reasoning in a decision-making process. Likely, we all have sat in team meetings where one person dominates the time by taking us on a long journey through their experience and often is interrupted and never makes a definitive point. Many people like to tell a long story before getting to the point. To communicate logic clearly, start with your point in a crisp, clear sentence and then make your supporting statements. This approach allows for greater clarity and prevents you from being interrupted before making the critical point you needed to make. If everyone in an organization has clarity on the decisions, real progress can be made, and trust becomes foundational. Empathy “Empathy is simply listening, holding space, withholding judgment, emotionally connecting, and communicating that incredibly healing message of you’re not alone.” – Brené Brown Would your employees say that management is listening to them? Not just hear them, but attentively LISTEN. The best listeners provide eye contact and lean forward in the conversation with no distractions (put away the cell phone). Listening is critical for building empathy. For most companies, this is the leg that “wobbles” due to demanding schedules. However, during a pandemic, this is a critical time to listen. Each of us is experiencing this crisis differently. We are all facing unique circumstances and challenges. Listening to your team to better understand them and their situation fosters a healthier relationship to build trust. Trust is the foundation of everything we do. It can be earned and built. It can also wither and break. If a company develops and operates in a culture of trust and transparency among all stakeholders, it can make unprecedented progress in reaching its goals. With a foundation and culture of trust, companies experience better productivity, enhanced morale, lower staff turnover, ability to handle challenges, willingness to take risks, enhanced creativity, optimism, teamwork, higher client satisfaction, better company reputation, and higher profitability. Be real, start with your point, and know you are not alone. It works, trust us. Does your organization want to learn more about building a culture of trust that can help you to unprecedented growth? You’re not alone, and we are here to help. SOURCES: Unleashed: The Unapologetic Leader’s Guide to Empowering Everyone Around You, By Frances Frei and Anne Morriss (Authors) The Five Dysfunctions of a Team, By Patrick Lencioni (Author) The 21 Irrefutable Laws of Leadership, By John C. Maxwell (Author)
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
Salary History? Don’t Ask and Don’t Tell
Last July, Illinois Governor J.B. Pritzker signed into law a bill that prohibits employers from asking a candidate for their previous job salary history. Illinois is not alone. In the U.S., there are currently 17 statewide bans and 19 local ordinances that have acted against discussing salary history. With more states adopting these practices in the next 6-12 months, the question of “why?” comes to mind. Some municipalities, like Philadelphia, are choosing not to follow this mandate, arguing that taking away this question was inhibiting an employer’s First Amendment right to free speech. The fact remains that asking a candidate for their salary history allows for discrimination and does not always provide the top-quality candidate that companies spend thousands of dollars trying to find. As business leaders, hiring managers, and recruiters, we have to ask ourselves— is knowing a candidate’s salary history all that important? After all, we have a set compensation range (low-mid-high) that we have budgeted for an open position. If a candidate meets and exceeds the requirements, qualifications, and behaviors for the role and fits within the compensation range, does it matter? After all, both the employer and candidate win. Maybe the employer doesn’t get the “deal” they wanted or lower their expenses by getting the candidate for less than the compensation range. The candidate may also get a lot more in compensation than they received in their last position. Is that an adverse outcome? Or could it have the effect of engaging and motivating the new employee to increase his or her performance? Think back to your last interview. You were probably a little nervous being the center of attention, knowing that one key answer could land you a job or send you back to the drawing board. You did your research on the role and knew the range a prototypical person in this position would make, but the company has not divulged their compensation range for the job. Then they ask the dreaded question, “How much are you currently making, or what did you previously make?” Most employers assume these guided questions are to measure compatibility between past and future positions. However, for many candidates, this question feels like a trap. If the current salary is too high, the candidate could be pushed aside for being overpriced or overqualified. Indicate a range that is too low, and the candidate might receive less than the value of the job. There are also ethical questions at work. Shift the Conversation When examining questions regarding salary history, there is an opportunity for labor compliance violations. This question allows for disparate impact, which unknowingly discriminates against a group of people, especially women when compared to men for the same position. According to Business Insider, a Hispanic woman makes 53% of what a white male makes in a given year. These statistics vary by state, as some have enacted policies to close the wage gap, but the average data shows that this gap is still very much alive. Assigning a salary based on past employment earnings continues errors of the past rather than righting a wrong and determining the adequate compensation based on the position and responsibilities it brings. By creating laws prohibiting employers from inquiring about salary history, many states feel they are taking a step toward complying with the Federal Equal Pay Act of 1963 and attempting to close the wage gap. How do we move forward and continue to find ways to make sure the candidate matches the role if salary history is now out of the equation? Carolyn Cowper, V.P. of Performance and Rewards with The Segal Group in New York City, advises, “Shift the conversation to the candidate’s salary expectations rather than salary history, then move on to focus on the candidate’s skill set and qualifications for the role.” Recruiters now feel it necessary to ask the candidate what they think they are worth — taking a net worth of all their talents, experience, and assets that they will bring to a new position. For example, one person could make twice the salary of another but only have half of the work ethic and drive. When you take a deep dive into the backend of the hiring process, we see that salary history tells us very little. In a study done by Workplace Culture, they reported that 86% of millennials would take a pay cut if it meant working at a company with a better company culture. Work-life balance, a culture of advancement, and education reimbursements are often more important than compensation to today’s candidates. As a business, it is in your best interest to find people that share similar values and goals to help grow the company into the future. The Market is Speaking Many states agree that it does not matter how much you made in your past job. You should, instead, be getting paid the market price of the current position. Candidates should take it upon themselves to research the standard salary rate before going to the interview, and employers should also monitor this as well to see if they’re competitive. There are many online sources for these statistics (Salary.com, Glassdoor, and PayScale). Company leaders, hiring managers, and recruiters should ask the question by taking a “Total Rewards” approach: What is your desired base salary? Bonus? Benefits? Vacation? Other rewards (for example, educational reimbursement) and then let the discussion progress from there. As record low unemployment continues, and there are less skilled workers available for more increasingly skilled open positions, there are already hiring and employment trends happening that would have been unthinkable just 5-years ago — retention bonuses, extraordinary counteroffers, and even limiting background checks. Even Non-Compete Agreements are on the block. They are already not enforceable in 4 states (including California), and resistance is growing with a Senate bill introduced last year looking for a nationwide ban. In such an environment, it stands to reason that asking for a candidate’s salary history and other employer-favored actions will become history. Be prepared.