Tag Archives: business

7 Reasons to Not Share Ownership with Key Employees

By Patrick Ungashick

Many business owners consider at some point sharing ownership of their company with one or more key employees. Sharing ownership can create powerful advantages—retaining employees for the long-term and incentivizing them to increase business value are usually top motives. Sharing ownership appears to elevate top employees into a true partnership with the owners in the ongoing effort to sustain company growth.

However, sharing ownership is not without downsides, some of which are immediately apparent. Obviously, sharing ownership dilutes the owner’s equity position. Consequently, sharing ownership can end up being the most expensive way to incent, reward, and retain top employees. Other potential problems and downsides create unwelcome surprises down the road.

Sharing ownership backfires more often than it succeeds. If it backfires, the business owner’s ability to successfully exit from the business one day may be jeopardized.

Sharing ownership can create powerful advantages—retaining employees for the long-term and incentivizing them to increase business value are usually top motives. Click To Tweet

Listed below are seven reasons to avoid sharing ownership with top employees, whether you are contemplating selling or gifting to them a piece of your company:

1. Top employees sometimes leave

No matter how loyal and trusted they are, it happens. Making matters worse, when top employees leave, they rarely switch industries. If they leave your company, likely they join or become the competition. Now you may have somebody competing with you who owns a piece of your business. To prevent this, you will need to have employees sign an agreement obligating them to sell their stock (or units, if an LLC) back to you should they leave. This helps avoid a competitor owning some of your company. But, you won’t like writing a check to a former employee in order to buy back your stock. That’s not fun.

2. Sharing ownership with top employees complicates legal governance

For example, sharing owners requires creating (or updating) legal documents such as a buy-sell agreement, which outlines decision-making and ownership-transfer rules among co-owners. One important issue that must be addressed is who has the authority to sell the entire company one day. You cannot allow minority owners to hold up a possible sale in the future. This buy-sell agreement therefore also needs to give the majority owner clear authority to sell the entire company, further complicating your exit planning.

3. Sharing ownership also complicates income tax planning

Certain laws regarding retirement plans—an important tax planning tool—require owner-employees to be treated differently for anti-discrimination testing. Also, if you have an S-corporation (a popular legal form) and you wish to make a profit distribution, it must be in proportion to ownership. Sharing profits proportionately with all owner-employees might not be what you had in mind. 

4. Sharing ownership changes the employer-employee relationship, potentially in an undesirable manner

For example, ownership of bestows rights. Employees who receive ownership typically gain the right to review the company’s financial information and records. You may not be crazy about employees seeing that level of financial detail. Once an employee has ownership, it’s easy for the line to blur between ownership and employment. It can become harder to manage an employee who also is an owner. Firing that person, if ever necessary, can become more difficult and expensive.

5. Sharing ownership with one or more employees creates a precedent

You intend your company to grow, and that growth in the future likely leads to additional valuable employees coming into the picture, either promoted from within or hired from outside the company. Those future top employees may want ownership too, given that their peers already have it. You will either have to give it to them, further diluting your ownership, or deny it to them, which risks alienating them perhaps to the point that they leave the organization.

6. With ownership comes potential perks and responsibilities that may complicate matters with your employees

Owners typically enjoy some personal expenses paid by the company, such as your vehicle, cell phone, meals, etc. Employees who receive ownership often expect to participate in such perks too. You will either have to include them, which increases costs, or you will have to temper their expectations, which risks alienating them. With ownership also come responsibilities, such as personally guaranteeing company debt. Top employees may be hesitant or unprepared to share in this debt and risk, further taking away some of the excitement and appeal of receiving ownership.

7. Sharing ownership expands the possibilities the company can find itself exposed to outside creditors

Occasionally, employees might do things that put themselves and their ownership in the company at risk, such as get divorced, get sued, or find themselves in financial difficulties. Sharing ownership increases the possibility that your company gets dragged into one of these situations.

Conclusion

Because of these disadvantages, business owners should attempt to retain and reward top employees without sharing actual ownership. Alternative strategies exist, such as “golden handcuffs” plans including phantom stock, stock appreciation rights (SARs), and executive compensation plans. Many of these programs can simulate business ownership, achieving the original goals without creating the inevitable potential risks and downsides. 

There are a few situations where sharing ownership with top employees may make sense. The most common would be sharing some actual ownership now as one step within a comprehensive plan to eventually sell or transfer the entire business to the employees. Otherwise, in most cases, it is advisable to pursue a different course of action.

Patrick Ungashick is the CEO of NAVIX Consultants, a celebrated speaker on executive and business owner exit planning, and the author of A Tale of Two Owners: Achieving Exit Success Between Business Co-Owners. With his wealth of knowledge on exit planning, Patrick has provided exit advice and solutions to business owners and leaders for nearly thirty years. For more information on Patrick Ungashick please visit: www.NAVIXConsultants.com.

5 Critical Steps to Better Meetings

By Rich Horwath

Rich Horwath-meetings

Are your meetings creating valuable new insights for the business or are they a series of multitasking-filled monologues? Are they productive conversations about key business issues or a rehashing of the same stuff you’ve been talking about for months? Are your meetings getting better or worse?

Answer these five sample questions from the Strategic Meetings Assessment for the meetings you typically attend:

  1. Relevant information is sent out prior to meetings to avoid one-way presentations during the meetings. Yes__ No __
  2. Meetings start at their scheduled time. Yes__ No __ People are fully attentive and not engaged in multitasking (e.g., checking phones). Yes__ No __
  3. People leave meetings with a clear understanding of who is doing what by when. Yes__ No __
  4. I decline meeting invitations when the purpose and/or agenda have not been communicated. Yes__ No __

In this brief sample, a score of three or more “No’s” indicates an opportunity to dramatically improve the efficacy and productivity of your meetings.

A meeting can be defined as a gathering of two or more people featuring collective interaction and engagement using conversations to make progress toward a purpose. Note the use of the words “interaction” and “conversations” in the definition. If you find yourself in meetings and especially teleconferences on a regular basis where the format is primarily one-way presentation, there’s ample opportunity to improve your situation.

Effective meetings can be energizing forums to help your team set direction, make decisions, and unify efforts. Click To Tweet

Research shows that meetings consume about 40 percent of working time for managers. Key data points from research to consider:

  • Up to half of the content of meetings is either not relevant to participants or could be delivered outside of a meeting. 
  • 20 percent of meeting participants should not be there.
  • 40 percent of the meeting time is spent on information that could be delivered before the meeting.
  • 50 percent of meetings executives attend are rated as “ineffective” or “very ineffective.”

There are five critical steps you can follow to help your organization take a more strategic approach to meetings and teleconferences:

1. Conduct a meetings audit

Before a doctor prescribes a medication, she first diagnoses the patient’s condition. In the same spirit, before you prescribe new meeting guidelines, it’s helpful to first baseline what’s happening today. Look at factors such as the types of meetings you attend, the frequency of meetings, and the length of meetings. Then identify the reasons these meetings exist and if there are any meetings that are not necessary. Once the audit is complete, it provides a bounty of useful information to shape the future state of meetings.

2. Identify current meeting mistakes 

Meeting mistakes occur in three phases: pre-meeting, in-meeting, and post-meeting. They can also be categorized as either leader or participant mistakes. For example, a common in-meeting mistake by the leader is failing to rein in off-track conversations. A common in-meeting mistake by participants is multitasking, which conveys a lack of interest in the topic and/or a lack of respect for the person speaking at the time. There are approximately twenty-five mistakes to look for in the three phases to ensure that the group is not sabotaging their own efforts at improvement.

3. Educate managers on what good looks like 

Begin this step by collecting the current best practices being used by managers within the organization. Then look externally to see what principles and guidelines are being used by other organizations within and outside your industry as it relates to meetings. Examples of best practice principles include things such as “identify decisions to make in the meeting” and “create a virtual table of participants for teleconferences.” Use these best practices to compile a list of new meeting standards.

4. Utilize meeting tools

One of the keys to leading effective and efficient meetings is aligning the goals of the meeting with the appropriate tools and processes to get there. For instance, if you’re leading a strategy development meeting, there are more than seventy different strategic thinking tools you can choose from to help your team think and plan strategically. The key is to select the handful of tools that make the most sense based on the context of the team, business goals, competitive landscape, etc. Be clear on your meeting goals and then choose the process and tools to get there.

5. Develop meeting checklists

Research in the social sciences on habits shows that in order to effectively change someone’s behavior, it’s helpful to provide physical or environmental triggers. One highly effective trigger is the use of meeting checklists. These physical reminders ensure that teams across the organization are aware of the basic meeting principles, techniques, and tools to optimize their meeting time. However, the checklists are only valuable if they are accompanied by the corresponding discipline to utilize them on a consistent basis.

Effective meetings can be energizing forums to help your team set direction, make decisions, and unify efforts. Ineffective meetings can be anchors that weigh people down with irrelevant information, didactic presentations, and unclear priorities. Which type do you attend today? Do you think it will be different tomorrow?

Rich Horwath is a New York Times bestselling author on strategy, including his most recent book, StrategyMan vs. The Anti-Strategy Squad: Using Strategic Thinking to Defeat Bad Strategy and Save Your Plan. As CEO of the Strategic Thinking Institute, he has helped more than 100,000 managers develop their strategy skills through live workshops and virtual training programs. Rich is a strategy facilitator, keynote speaker, and creator of more than 200 resources on strategic thinking. To sign up for the free monthly newsletter Strategic Thinker, visit www.StrategySkills.com.

8 Steps to Transform your Corporate Culture

By Magi Graziano

Magi Graziano-corporate culture

The engagement level of your workforce expands beyond the limits of offering tangibles such as a great benefits package, competitive market rates, flexible work schedules and challenging projects. Your company culture is truly your competitive advantage.

Most leaders are intent on shaping a constructive, collaborative and innovative workplace; however, accomplishing this eludes most. The following 8 steps are tried-and-true advances to creating a great place to work. 

1. Understanding That the Organization is a ‘Human’ System

The human system is made of people and poses a higher degree of competency from all those who operate inside it. A human system requires much more cultivating as a living and breathing system is made up of many different people with thousands of perspectives, thoughts, beliefs, points of view, preferences, etc.

Each person involved and engaged in shaping a constructive corporate culture needs to understand their specific role. Click To Tweet

In a highly functional human system, such as a constructive corporate culture, the functionality of the system as a whole empowers individuals to fully participate with one another outside the limits of personal agendas and ego and inspires people to collectively collaborate and contribute to the group cause.

Understanding the realities of the human system allows you to become responsible for intervening in the ‘drift’ and consciously shaping a culture that operates outside the automatic, normal human conditioned patterns.  When leaders of organizations understand the fundamental human operating mechanism and how thoughts work, they can proactively intervene and intentionally create an experience for people operating in the human system to thrive.  This intentional experience is a constructive corporate culture.

2. Getting Curious About What Is So

When you take the time to peel back the onion and analyze the current condition of the human system in your organization at a macro level, it gives you insights into the root causes of labor disputes, stifled workforce productivity, unwanted employee turnover, and lack of employee engagement.

It is imperative that you inform your people what you are up to and why. When you do reach out and let them know that you want to have a conversation or send a survey about culture, share the purpose behind your curiosity.  If you are unclear about your reason and purpose for learning more, wait until you are filled with purpose or compelled by a real business need to move forward.

Before you begin your inquiry process, ask yourself what you really want to learn and what will you do with the information once you learn it. As you are speaking to people and reviewing the results of the survey, embrace your most curious, non-judgmental, non-reactionary, authentic self. Staying in the neutral zone during your conversations allows you to sense patterns and discern systemic organizational themes. 

3. Acknowledging the Unworkability

Every executive has an image of how the ideal organization operates. The first step in any positive organizational change effort is getting real—the acceptance of what needs to change and what needs to happen to have the change last.

Make a list of the areas uncovered in the data collection process (interviews, focus groups, surveys) and prioritize the highest impact areas. The highest impact areas are highest because if improved, they would glean the highest return on time, money and effort invested.  Next connect the underlying behaviors, operating values and organizational processes or mindsets that intentionally or unintentionally constrain the overall engagement, performance, collaboration, and innovation among your workforce. Once you believe you have a handle on what is not working, it is important to allow the impact of this unworkability to move you into action.  

4. Owning the Impact 

Like it or not, the most senior executive is the ultimate guru with regards to how the organization operates. They decide what behavior is tolerated and how people treat each other.  Introspection and self-awareness allows you to get real with yourself about what is really going on in the organization. If you are able to let go of self-judgment and defensiveness, you are much more able to see yourself as at the source of the unworkability.  It is not about accepting blame or feeling guilty and taking responsibility for the problem; rather it is about seeing how you as the leader set the tone and create the space for constructive or destructive behavior to exist in the workplace.

5. Creating an Inspiring Vision 

A mission statement is meant to guide the way for people to know and understand how to behave, act, react and work in sync with one other to accomplish the collective goal.  In the absence of a grounded, motivating mission, human beings naturally focus on their individual experience and personal goals. The power and detriment of personal thinking in a human system is that it produces silo mentality, unnecessary competition and friction throughout the organization.  

6. Enrolling Others

Enrollment creates the possibility for others to feel connected and inspired in the workplace.  Once you gain clarity of your mission and vision, communicating the message to the workforce is essential.  Communication is often where messages break down. Realize that every person in your workforce has a unique perspective and way of listening, and target your message to the greater population and the varying degrees of listening. When crafting the message discern the impact it will have on the people hearing or seeing it.  

7. Designing and Following a Road Map

Once you have inspired the troops and promised a bright future for all who lead and follow in the organization it is time to formulate a specific action plan.  A cultural alignment road map includes desired outcomes, initiatives, programs, training, projects, people, and timelines. 

Each person involved and engaged in shaping a constructive corporate culture needs to understand their specific role, the amount of effort required outside of normal responsibilities, goals, and the desired organizational outcomes.  Laying out a plan for what comes first, second and third as well as who is ultimately responsible for keeping the overall action items and constructive culture initiatives on track is necessary to move forward.  As with any major organizational improvement, meeting regularly, tracking progress and publishing results is what empowers forward movement.

8. Measuring What Matters

Now that all the groundwork has been established, you know the why, what, how, and who, it is critical for success that you measure the benefits of the systemic changes you are making.  Many organizations utilize the balanced scorecard approach as a framework for setting the right metrics.  Additionally articulating and tracking the key result areas impacted by shaping a constructive culture gives insight and information that tells people in the organization what is working and what is not, what needs to pivot or realign, and what needs to stop. Without system-wide accountability from the top to the bottom and everyone in between, the organization won’t flourish.  A core component of a constructive culture is an achievement. When you measure what matters, people pay attention. Through accountability and transparency, people get to see their impact, how the team is doing and how the culture improving is elevating the organizations’ operating effectiveness.

In Conclusion

The eight steps to transforming your corporate culture from the inside-out are not difficult to walk through. They are not revolutionary. These steps are simply a common sense approach to bringing out the best in people in the places they work.  

Magi Graziano is a speaker, author, and Chief Evangelist for KeenAlignment, a global people optimization consultancy firm and Inc., 5000 award recipient. Her book, The Wealth of Talent, was written from over twenty years of real-world, hands-on experience. Those who experience Magi’s programs, on average, reduced operating expense 8 percent, improve net profit 5.6 percent and increase revenues by as much as 200 percent. For more information, please visit www.KeenAlignment.com.

Cheap, Fast or Good—How to Pick the Two That Are Best for You

By Matt Baird

Matt Baird-fast or good

Would you expect someone to give you all the time in the world to deliver an average product, while letting you charge as much as you want for it? Sounds absurd, right? This scenario is just as pie in the sky as getting something cheap, fast and good. Rarely, if ever, do you get all three

The Trilemma

Known by many names, such as “the triple constraint” or “the business triangle,” the general rule is that you can have it cheap, fast or good, but you can’t have all three. Yet picking only two is a choice most don’t want to make.

Here’s a simple example: Adam wanted to buy an ultra—HD TV in time for the Super Bowl. He didn’t need top—of—the—line, but was determined to go big and wanted the best bang for his buck. Unfortunately, he waited until two weeks before the big game and found that the great deal he’d been eyeing was on back order. He couldn’t get it in time and was left with three choices:

To get it reasonably cheap, fast and good, you’ll need to decide how much of each you’re willing to give up. Click To Tweet
  1. Order an in—stock, lower quality TV (fast and cheap)
  2. Order a comparable in—stock TV that wasn’t on sale (fast and good)
  3. Wait for his dream TV to be available (good and cheap)

Although purchasing a TV is worlds apart from running a marketing campaign, designing a website, or buying a service, the trilemma is still the same. And whether you’re a Fortune 500 company, a tech—savvy startup, or a local mom—and—pop store, the cheap, fast or good rule holds true for everyone.

So how do you pick the right two? Adam had to choose what was most important to him—what he valued most: price, quality or speed. Here are some things to consider to help you make the right choices.

Do Your Homework

If price is a priority, then preparation is key. By planning as far ahead as possible and building in a lot of lead time, you’ll be in a better position to bargain with vendors. Early preparation also allows you to develop a clear picture of your goals and communicate them. The better they understand what you want, the better they’ll be able to deliver.

Say, for example, you’re building a new website to coincide with a product launch. You want to go live simultaneously in English and Spanish, but you spent all your energy on the English site and didn’t leave sufficient time for the translation. This often leads to one of two outcomes: high cost or low quality.

Doing your homework also means understanding each step in the process. Make sure you’re working with professionals who are experts in their field. The last thing you want is to find out that the vendor tasked with translating your website is outsourcing to an inexperienced translator.

Don’t DIY

The internet is full of people proclaiming that you can have your cake and eat it too, that you can get it cheap, fast and good . . . if you just do it yourself. In the end, you’ll often find that the time you spent trying to be something you’re not could have been devoted to developing your core business.

Others offer tempting yet misleading ways to get services for free. Sticking with the website scenario, automated translation apps and plug—ins are a perfect example. You might think you can simply plug in your copy and translate your website in minutes. And you can. But will it be good? Machine translation is far from cracking the code of human language and all of its nuances. The Spanish speakers who land on your website won’t be impressed, let alone stick around very long.

Bend The Triangle

The trilemma isn’t always a zero—sum game. You can bend the business triangle, but only within reason. Being smart in one area can often pay dividends in others. If you’ve planned very carefully in advance, you can save your vendor time and get what you need while keeping costs down. Also, less expensive doesn’t automatically equal cheap. Perhaps you can find a quality product with fewer bells and whistles—less good, so to speak, than more expensive counterparts.

The caveat here is “within reason.” To get it reasonably cheap, fast and good, you’ll need to decide how much of each you’re willing to give up.

It’s About Value

You’ve likely heard the old saying: “You get what you pay for.” But that only tells half the story. The trick is not to think in terms of price but instead in terms of value. Ask yourself: Is it mission critical or simply nice to have? Will fast and cheap end up doing more damage than good? Most of the time, you are going to sacrifice quality unless you come to the table with a lot of time or a lot of money. But maybe that’s okay—maybe you’ll still end up with the added value you need.

You really can’t have it all. But if you treat the trilemma as question of value, you’ll be able to focus on the two aspects of it that are right for you.

Matt Baird is a professional German—to—English translator and copywriter specializing in marketing and communications. He also serves as a speaker for the American Translators Association, which represents over 10,000 translators and interpreters across 100 countries. Along with advancing the translation and interpreting professions, ATA promotes the education and development of language services providers and consumers alike. For more information on ATA or translation and interpreting professionals, please visit www.atanet.org

Prioritizing Opportunities Using Four Levels of Focus

By Dr. David Chinsky

As leaders formulate and fine tune their strategies, it is important for them to sort through and prioritize the often bewildering array of opportunities that compete for their attention. One of the biggest traps you can fall prey to is the belief that everything is “Priority One”. The problem with this is that if everything is Priority One, then nothing is Priority One.

When leaders view any opportunity as an opportunity worth pursuing, they can set up their organizations for continuous demands that cannot possibly be met. It is important to realize that not all opportunities are created equal. Some opportunities, like many shiny objects, may serve merely as distractions from what is most important for you to be focusing your scarce time and resources on.

Once you’ve established the mission, vision, and values for your organization, and have committed to a set of strategic goals, you can be proactive in selecting those opportunities that will best contribute to your success in both the short and long-term.

The Opportunity Board, a tool best utilized every ninety days, will help you organize your opportunities into four distinct levels of priority. The first step in creating the Board is to identify all of the potential opportunities you might pursue. These can be your own personal opportunities, your team’s opportunities, or organization-wide opportunities.

This list or inventory of opportunities that might be pursued over the next ninety days need not include your daily tasks or to-dos. Rather, you are looking for the bigger projects you might undertake in the next calendar quarter that move you and your organization closer to meeting one or more of your strategic goals.

Your opportunities might include achieving a specific level of sales; completing the development of a new product or service, or at least succeeding in achieving some specific level of progress toward that new product within the next ninety days; mentoring one of your direct reports; writing a new policy; etc.

Your list of opportunities often represents a mix of short and long-term projects. You are not just looking for opportunities that you can complete in ninety days. You are also looking for projects that need to be started in the next ninety days even if you need to continue working on them into successive ninety-day periods. This is important to remember so that you don’t end up only listing low-hanging fruit on your Board. There are always going to be opportunities that will take longer than ninety days to finish, and if you exclude them from your list, you will likely never start working on them.

Once you have identified your opportunities, you can begin to sort and prioritize them, and move to a clearer understanding of where to focus the efforts and limited resources of the organization.

If everything is Priority One, then nothing is Priority One. Click To Tweet

Here are the four levels of focus—or priority—represented on the Board. Each of the four concentric circles represents a different level of priority, as follows:

Bullseye

These opportunities align with one or more of the organization’s key strategies, and rise to the top of your list of opportunities you want to pursue in the next ninety days. When executed properly, these opportunities result in target markets being profitably served and/or projects yielding great benefit for internal and or external customers.

In the Ballpark

These opportunities are close enough to your “bullseye” to warrant your attention and evaluation. While not necessarily in your “sweet spot”, these opportunities deserve your serious consideration once you’ve completed opportunities in the “bullseye” of your Opportunity Board.

Opportunistic Focus

These opportunities sometimes come only once in a lifetime and may trump an opportunity in the “bullseye” or “in the ballpark” sections of your Opportunity Board. Other opportunities placed in this portion of the Board are opportunities you cannot begin before securing the funding, enabling legislation, additional staffing, etc. necessary to begin the project.

Off the Board

These opportunities are actually on the board itself, and they’re referred to as Off the Board to indicate that they are the last opportunities you might pursue while you work through the other three areas of the board. Keep these opportunities in this fourth section of the board so you don’t forget them. They are your “someday or maybe” opportunities.

The Opportunity Board has many uses. It can be utilized as a personal planning tool to organize your own opportunities into the various sections of the Board. It can also be utilized by a leadership team to check for alignment. If each member of a leadership team completes a Board and then presents it to the group, individuals on the team might begin to see why others are not addressing certain issues on as timely a basis as they’d like.

The above team exercise can reveal misalignment around the table with regard to priorities, giving the team the opportunity to create a collective agenda and reorient members of the team around that common set of priorities. Some organizations have even used The Opportunity Board to do annual strategic planning to help them sort through the most viable and important strategies they wish to implement.

How will you utilize The Opportunity Board to sort through and prioritize opportunities competing for your attention?

Dr. David Chinsky is the Founder of the Institute for Leadership Fitness, a celebrated speaker, and author of The Fit Leader’s Companion: A Down-to-Earth Guide for Sustainable Leadership Success. After spending nearly twenty years in executive leadership positions at the Ford Motor Company, Nestle and Thomson Reuters, he now focuses on preparing leaders to achieve their highest level of professional effectiveness and leadership fitness. For more information on Dr. David Chinsky, please visit: www.FitLeadersAcademy.com.