Executive Teamwork: Why senior staffs must play well together

“Teamwork” has forever been a buzzword in our business world. It seems that the importance of having employees work as a team has been promoted in every available piece of management literature. Nevertheless, we at the top have routinely had a hard time “playing well together,” despite the fact that the need is more pronounced now more than ever.

I used to work for a CEO who believed that the definition of a "team" was a group of people doing things his way. It'd be funnier if it didn't apply so well to so many...

Who cares?? Why does it matter, as long as I do my job and am good at it?? Some arguments for executive teamwork:

1. External Demands. Worldwide competition and changing financial markets make it necessary for the organization to be on the alert at all times – the pressure to innovate, apart from the company’s organizational health, are no longer the CEO’s sole purview.

2. Internal Demands. Diversifying businesses require differently-skilled managers leading varied business units. We can no longer be "all things to all people."

3. Succession. An executive team is usually – and naturally – the best selection pool for future executives, as individual members would have first-hand knowledge of the essential competencies of a potential top leader within our current organization.

4. Exemplary Behavior. In addition, top executives working well together sends a potent signal down the line. 'Nuff said.

So why, then, if we understand the need, do top executives often fail to form a team?

Consider the source: Managers who have climbed the ladder’s upper rungs are typically strong-willed, ambitious and are experts in their own right. These characteristics, though obviously allowing them to successfully rise in within an organization, may also pave the way for an unwillingness to show weakness, overprotective behavior for their functions, and viewing other executives as "competition" in their quest for the Holy Grail: The CEO's chair.

Personality and behaviors can be difficult to change once they are really entrenched, so forming a true executive team becomes a difficult undertaking.

Ultimately, the CEO must establish a climate that is favorable to developing an executive team. S/He can do this by:

* Selecting discriminately. Normally, "upper management" can be a big group, consisting of the CEO, COO, CFO, various heads of important functional areas, and other political savvy or otherwise valuable individuals. Limiting the number of members to 8-10 enables all to develop healthier relationships, to say nothing of the success of subsequent meetings.

* Communicating unequivocally. The CEO must ensure that all executive team members understand the vision, mission, strategies and goals of the organization in no uncertain terms. There can be no "highway" option here.

* Ensuring Commitment. If there is no involvement, there is no commitment.

* Clarifying Roles. The CEO must clearly set the mandate for each executive team member. This involves defining strategic responsibilities (not operational), areas of cooperation, interdependence, information-sharing and decision-making processes.

* Ensuring safety. Establishing an atmosphere where members can show their weaknesses, disagree and express their opinions openly without fear of losing face and authority can induce team creativity. It also promotes increased trust among the members.

* Emphasizing Shared Accountability. Rewarding solely individual performance undermines the formation of a cohesive executive team whose performance is supposed to be assessed collectively. Collective measures of profitability and other gains are crucial.

* Having Courage to weed out non-performers. It's perfect, of course, if all executives would deliver on their responsibilities – but, nobody’s perfect. If an executive hinders the team’s progress or is disrupting the team’s process, then it might be time to let that member go. Make that decision as certain as it would be if s/he were functionally incompetent.

I worked with the CEO of a large services company. A VP member of his senior staff was a brilliant P&L manager -- but entirely destructive to the team. We coached, cajoled, taught, pleaded and begged. This senior manager would not be swayed -- he was clearly "on the dark side," and wanted to stay. He wielded his P&L performance as a Kevlar vest.

The CEO fired him, and you could hear the air being sucked out of all the collective guts of the senior team. The boss was serious, and now the team was, too.

Creating a synergestic team of top leaders in an organization is tough work. Selecting, managing personalities and relationships, establishing and enforcing norms, and developing executive team members is a complex process – but it can be done.

The payback is huge. You know that, of course, if you took the time to read this whole posting. Stop looking for a magic bullet -- it takes effort and commitment, and in all likelihood, some tough decisions.

Let me know if I can help.

KB

Kevin Berchelmann
www.triangleperformance.com

Unions -- Wherefore Art Thou??

According to the DOL's Bureau of Labor Statistics, about 12.5 percent of wage and salary workers were union members this year, unchanged from the year before. Union membership rate has continued its steady decline, from a high of over 20 percent in 1983.

Some additional tidbits:
-- There are nearly 15.7 million union members
-- Over 70% of all union members are public/government employees, including civil service, fire, police, teachers, etc.
-- Private industry union membership remains less than 8%.
-- Black workers were more likely to be union members than were white, Asian, or Hispanic workers.
-- Men were more likely than women to be union members.
-- Workers in the public sector had a union membership rate more than
four times that of private-sector employees.

The largest numbers of union members lived in California (2.4 million) and New York (2.1 million). Just over half of all union members in the U.S. lived in six states -- California, New York, Illinois, Michigan, Ohio, and New Jersey -- though these states accounted for slightly less than one-third of wage and salary employment nationally.

Texas, though having the second-largest number of employees, had less than one-fourth as many union members as New York, despite having nearly 1.5 million more wage and salary employees.

So, that's all good, right???

Though unions are certainly weakening in private industry, don't fall asleep at the wheel just yet. The news of their death has been a little exaggerated.

For instance: "Change to Win" is a new coalition of seven unions (UNITE HERE, Teamsters, Laborers, UFCW, United Farm Workers, Carpenters, and SEIU. The "Change to Win Federation" was created in late 2005 when those unions split from the AFL-CIO over disagreements in spending -- the AFL-CIO was focusing on politics and legislation, while the newly-formed Federation believes the focus should be on grass-roots, aggressive organizing, via targeted corporate campaigns.

The Change to Win plan of attack created at their recent convention in Las Vegas calls for an unprecedented organizing campaign aimed at "core industries" of the member unions. The Change to Win unions already represent workers in each of these industries, and include:

** Transportation
** Distribution
** Retail
** Construction
** Leisure and hospitality
** Health care
** Property services
** Food production and processing

The Las Vegas gathering created local multi-union teams that will work together to increase union density in each of these "core" industries on a local or regional basis.

This "Change to Win Federation" also announced multiple targeted organizing drives at the convention. According to news reports, these priority campaigns included a company-wide corporate campaign led by the UFCW against a meat packing company to compel union recognition at a pork processing plant in North Carolina. The union has twice been rejected by the employees at that plant in NLRB-conducted secret ballot elections, and thus the union is reverting this time to the corporate campaign strategy to force "top-down" organizing.

New Tactics

Given free choice on union representation, exercised via secret ballot elections, employees reject unionization almost half the time. Because of this, unions have turned to a "less-friendly" approach, called the "corporate campaign." Here, union organizers tries to pressure company executives to submit to the union's demands. They attempt to force recognition via a "card check" instead of the normal election.

Get a load of this: One UNITE HERE union official dismissed the democratic election process spelled out by the NLRB, saying that "there's no reason to subject the workers to an election." Another union official actually said, "we don't do elections."

Incredible. Simply incredible.

So, "they could never convince me to accept union demands," eh?? Some tactics they use include:

* Filing charges with the NLRB, Internal Revenue Service, Department of Labor (OSHA and wage-hour complaints), and other agencies that regulate the employer's business.

* Filing class actions and other lawsuits alleging various trumped-up violations, discrimination, etc.

* Pressuring banks and other lenders, and others within the financial community, with threats of union boycotts against those lenders.

* Picketing at the homes, clubs, private gatherings and offices of corporate executives and board members.

* Purchasing stock and attending shareholder meetings to challenge top executives and board members regarding various policies.

It can get messy. As always, an ounce of prevention is worth a pound of cure.

Regardless of dirty tactics, unions will only work for strongholds where they believe they can effect publicly noticable change. We can immunize ourselves by simply managing. Manage your companies well, including proper oversight of policies, procedures, and practices that directly impact your employees. Remember that "details matter" to rank and file employees, and not every economic downturn or business cycle needs to be placed on their backs. It means remembering that almost 90% of your employees live paycheck-to-paycheck, so small percentages really do matter.

Pay attention and manage your business. Though I don't subscribe to the axiom, "Companies get the unions they deserve," I do believe that good managers can prevent unions -- under any circumstances.

Stay focused...

KB

Kevin Berchelmann
www.triangleperformance.com

Manager Evaluations -- 360 & Subordinate

Should we use 360-degree evaluations to determine how well our managers are "managing?"

My answer will be brief, followed by some applicable humor (well, it's funny to me...)

Management efficacy should be evaluated by measurement, not popularity. Don't ask the question if the answers aren't actionable. In other words, if the manager is kicking butt on all measurable fronts, what would you have him or her change if a survey came back with suggestions?

The right answer, of course, is nothing.


Having said that...

What would you like to hear them say?

Three friends of Thibodeaux's from the local Cajun congregation were asked, "When you're in your casket, and friends and congregation members are mourning over you, what would you like dem to say?

"Jacque said: "I would like dem to say I was a wonderful husband, a fine spiritual leader, and a great family man.

Ovide commented: "I would like dem to say I was a wonderful teacher and servant of God who made a huge difference in people's lives.

"Then it was Boudreaux's turn to said somethon: "I'd like dem to say, "Look at dat!!!!, he's moving!"


Measure managers by results, not popularity or wishful thinking.

KB

Kevin Berchelmann
www.triangleperformance.com

Organizational Design

I'm working on a really interesting project right now... the organziational design and restructuring of a $750M distribution company. My primary client is a private equity firm (they are acquiring), but of course, I must work closely with the executive team at the operating company.

The organization is fundamentally sound, and quite profitable. My charge, then, is to add to those results through efficiencies, logical processes, and helping organize corporate and support functions from a very decentralized position to something that offers a little more continuity and standardization. Add to that the need for keeping their succesful commercial operations as the "true north" of our efforts, and it's quite an enjoyable challenge

Great project, lots of interesting twists and turns. Great bunch of people, too.

KB

Kevin Berchelmann
www.triangleperformance.com

Compensation -- Executive Comp in Smaller Companies

So, I have had several emails asking about executive compensation in smaller companies. Apparently, some can see the detail in larger companies, but believe that the issues are fundamentally different in smaller and mid-market firms.

You probably don’t want to hear this, but base compensation is what it is, and should be close-to-comparable for a given accountability. Regardless, for the most part, of company size. Incentives and perquisites vary, of course, but again, base compensation simply is what it is.

Smaller private companies have long faced these issues regarding competition for executive talent, particularly w/ compensation. Fortunately, many public firms are beginning to curtail their biggest draw — equity options — since FAS 123Rnow requires that they expense them. So, don’t just throw up your hands.

Realize that the way to deal with executive compensation is via a well-thought plan, not simply a “base plus bonus” scheme. What do the investors/owners want from the company? Increased shareholder equity?? Relative stability?? Cash flow?? Net operating income?? Identify this first, since it will be your critical metric. Every plan starts with a purpose.

The key to keeping execs on target is a well-designed executive compensation plan.

On average, about 50% of a private CEO's compensation is determined by how well his/her company performs within the chosen metric(s). The rest of the senior staff should still be north of 30%.

Consider, in addition to metric-based incentives:
** Modified gainsharing or goalsharing (for management)
** Deferred compensation (unfunded)
** Increased vacation/PTO
** Reimbursements for clubs, exercise facilities, etc.
** Conference attendance, with spouse allowance

There’s a ton more to do. Approach the effort holistically – you can’t get there with just a “base-bonus” philosophy.

Hope that helps some…

KB

Kevin Berchelmann
www.triangleperformance.com

More HR Budgeting

Well, I had several people ask additional questions about real budgeting for Human Resources. I'll try to expand a bit on my earlier post...

First, a microscopic finance lesson: Gross Profit is the total revenue or sales, less the cost of generating that revenue (COS or COGS). It tells you how much money a company would make if it didn't have other costs, such as most salaries, taxes, interest, etc., normally referred to as Operating Expenses and typically including S, G, & A.

Operating Expenses are those incurred by the business that are not directly related to revenue production, such as most utilities, salaries, office supplies, etc. Operating Expenses do not typically change significantly when the organization's level of production rises or falls -- they aren't usually "variable." Sometimes referred to as "overhead," "fixed," or "indirect" costs.

Here endeth the finance lesson...

Though HR expenses are typically an Operating Expense, direct value-add from Human Resources comes from Gross Margin contribution -- increasing revenue or decreasing the direct costs to produce that revenue. Cost-reduction strategies are usually outside of Gross-Profit, and can also have a significant influence on earnings. Assuming a company delivers 10% to the earnings or EBITDA line, it would take $10 of additional revenue to deliver earnings equal to your saving a dollar in Operating Expense, so don't throw away those last few Post-It Notes.

The real "meat" of strategic Human Resources, however, comes from a significant contribution to the Gross-Profit line through various methods. We'll discuss those in-depth in later posts.

Cheers.

KB

Kevin Berchelmann
www.triangleperformance.com

Compensation -- Gainsharing

For my money, a well-thought, well-implemented gainsharing effort is the holy grail of productivity and efficiency incentives: Paying for performance with money you never would have had anyway, without the improved performance. An incentive plan that funds itself.

For the unenlightened, "Gainsharing" is an incentive plan that, using etsablished, historical threshholds of performance, pays incentives for "gains" based on that thresshold. Usually defined in some fashio of a "split," such as 50% for the company, 50% for employee incentives.

An example: Company has historically spent $2.00 for every widget it produces. Under a gainsharing plan (oversimplified here for clarity), if the employee effort resulted in making widgets at $1.50 per, then the $0.50 savings, or "Gains," would be shared equally between the company and employees.

Their are keys to an effective Gainsharing effort:

1. Get it right. Determine the critical lever(s) involved that the gainsharing will apply. These are likely the final productivity measure, e.g., cost per lb., hours per process, waste, rework, etc. Do not use simple payroll dollars. And use a recent trend data point (1 yr, 3 yrs), not some arbitrary "goal."

2. Keep it simple. If you can't explain it to the lowest level impacted worker in less than 5 minutes -- so they really understand -- it's too complicated.

3. Communicate. You cannot overcommunicate with a gainsharing effort. You must be open and free with sensitive financial data -- if you feel you cannot, don't use gainsharing.

4. Educate. Participants must be able to "connect the dots" between today and "better," and they need new knowledge tools to do that. Financials, process, etc.

5. Reward. Timely payouts are a must. Monthly for typical blue-collar, perhaps quarterly for more sophisticated workers. You may have to prime the pump at first.

Gainsharing is not a "template" compensation scheme where you can take someone else's and fill in the blanks. Things like holdback/reconcile, thresholds, buy-downs, etc. all need to be determined, to say nothing of the original pland design.

If done correctly, however, there is nothing better.

But that's just me...

KB

Kevin Berchelmann
www.triangleperformance.com

Span of Control

What's the optimum number of direct reports? How many people should a single manager have working for them?

What we are referring to, of course, is "Span of Control," and though there can be unique situations in some organizations, their are also decent historical guidelines.

Span of control isn’t simply dependent on individuals; it’s a basic limitation of all managers as it describes only their direct reports. Though any manager can control any number of people if there are enough levels in between, not so when it comes to direct reports.

Research (mostly military-based) has shown that a leader can directly control about three to six persons effectively. Additionally, the "relationships" among those supervised are as important as their actual number.

Managing four people who interact constantly might be harder than supervising five or six who work largely independently.

Generally, an executive (someone managing managers) should supervise a maximum of four or five people.

In real practice, you don't have to be an expert to know if you're in trouble with span of control. If you have more than half a dozen people reporting to you, it’s probably too many.

Even six could be too many if those six have consistent dealings with each other. The reason of course, is that in addition to managing relationships with each subordinate, managers have to get involved to an extent in their relationships with each other.

In simple terms, going from four to five direct reports, each with four direct reports of their own, potentially doubles your effective workload while increasing your output (productivity) capacity by only 20 percent.

If the people you supervise don't interact, you can handle more of them.

Remember, too, that I'm discussing managerial span of control -- managers managing managers. The numbers can increase significantly when managing individual contributors, particularly if highly skilled.

Just some thoughts...

KB

Kevin Berchelmann
www.triangleperformance.com

I Believe...

After 20-something years of Human Resources management, many of those at the senior-most level, I've developed some beliefs.

For example, I believe:

...that HR is, sometimes, too important for human resources professionals. It ain't about party-planning, tranascations, and rote compliance. If that's your emphasis, it isn't necessarily bad, it's just not HR leadership. If you aren't part -- and integral part -- of an organziation's future success, you should be outsourced. Or something equally painful.

...that HR isn't really changing much, but it should be. HR leadership should be about aligning HR strategies, efforts and resources directly with organizational goals. Can that be done by a "non-" HR person? Maybe so, but a better question is, "Should it be??" A competent senior-technology executive MAY be able to lead a progressive HR shop, but a competent senior-HR executive SHOULD be able to. Where's the disconnect?

...that not all HR can be "strategic," in the common definition. Face it -- block-and-tackling is what day to day functional work is all about. Transactional HR can be a part of HR's strategy, but it can't be strategic HR. Finance can be strategic, but they still have to close monthly and quarterly. Nothing strategic about calling an Ops Manager and asking why an invoice was coded as is. Strategic is merely properly aligning with business objectives; it's not a lofty, unreachable ideal.

...that competent senior Human Resources leaders can make great business leaders, as long as the business believes they can lead. That requires risk-taking (personal and professional), incredible accountability, and in-depth competence in business. And finally, it requires successful alignment with HR efforts and business strategy. In other words, the work must matter.

Oh, well, just felt the need to ramble. Too often, we get caught up in matters of little importance (and perhaps this fits there also), and wanted to just take some time to put words to what I think regarding the profession.

But, that's just me...

KB

Kevin Berchelmann
www.triangleperformance.com

Exceptions vs. Precedents

Human Resources needs to get past this, "Do it for one, must do it for all" mentality. It's just not true, and a lousy way to help a business succeed.

I regularly tell people this about precedents: "Yes, I'll likely do the same thing, given the exact same circumstances, in the future."

For example, if I allow an extra week of protected FMLA for a stellar employee in production with 6 years with the company, I may very well agree to do that same thing for the next "stellar employee in production with 6 years with the company." Change a single parameter and the precedent doesn't exist.

But even that isn't the right answer, since decisions need to be made based on current business needs. I'm not trying to create a social system at work whereby all receive identical treatment. They won't. I'll do those things necessary, including making nondiscriminatory employment-related decisions, as the business needs dictate.

There's all this talk about HR's "seat at the table." Want to get "kicked off the table" in a hurry? Adopt the inflexible, "Do for one, do for all" mindset. It has no place in business, in my opinion.

Cheers,

KB

Kevin Berchelmann
www.triangleperformance.com

Top HR Issues for 2006

So, given that Human Resources eeems to be getting a lot of media attentioon recently -- some posive, some not -- I figured I'd offer a few things to really think about in 2006 (and beyond)...

My top 5 for 2006 (and somewhat beyond):

1. Management talent acquisition, development, and planning. This includes accurate hiring, and effective skills development, succession, etc. This is the #1 HR impact area, by a positively stupid margin.

*** BIG GAP BETWEEN #1 & #2 ***

2. Continued employee productivity gains.

3. Driving value-added initiatives while reducing the cost and impact of administrivia.

4. Effectively managing benefits design, delivery, and costs.

5. Planning for the changing demographics of employees.


My farrago list, in no particular order:

a. Better utilization & development of women in management.

b. Strategy for developing entry-level/low-skilled workforces from mediocre secondary education.

c. Strategy for utilization of post-retirement workers.

d. A serious focus on the discipline of HR planning, budgeting, and forecasting.

e. More emphasis on organizational effectiveness, less on 'human resources.'

f. Developing and managing workforce 'metrics that matter.'


Just a few off the top of my head...

KB

Kevin Berchelmann
www.triangleperformance.com

Budgeting That Matters for Human Resources

Real, strategic budgeting for Human Resources must done from three perspectives:

1. Internal, expense-based management of the function itself, including headcount and required resources for day-to-day management as well as planned initiatives,

2. Operationally, pushing out potential budgeting numbers to operating units, and

3. Organizationally, allowing the entire firm to complete budgets based on planned Human Resources initiatives, interventions, and planning.

The first of these is entirely tactical and functional, with emphasis pointed inside the human resources shop. The second shows meaningful synergies within the organization, while the third perspective is where Human Resources can have appreciable, strategic impact for the organizations planning, budgeting, and forecasted performance.

Internal budgeting is simple, and simply requires a determination of how much the discrete HR function will “spend” during the budgeted period. Headcount payroll, benefits burden, task vendors, some outsourced efforts, and paper clips. Much of this data is readily available, as prior budget “actuals” have historical spending patterns. Those may be used as a “go-by,” but any accurate budget – and all support functions, in my mind – should be “zero-base.” In other words, start with “nothing,” not with last years’ actual spending. Build the budget from the ground up.

Operational budgeting pushes some human resources costs out into the operational world. Frequently, many hiring costs such as testing, travel, etc., are charged directly to the gaining operation (not human resources), so sharing an idea of how many potential candidates may have to travel to interview, relocate, etc. is useful information. Other categories could apply here, also, including specific HR staff travel to an operational location, unique efforts for a single operation, and so forth. Sharing this operational budgeting information allows the organization to work together to roll up a more accurate estimate of true costs.

Organizational budget considerations are “the real deal.” Here, human resources leaders have to make a commitment, and prepare to held accountable for the results. If we say that, through our negotiations, we intend to reduce the Benefits Costs Per Employee by 8%, then the organization should plan on it. Further, if we are spending money and effort to increase real productivity through various means (training, hiring, performance management) in specific operations, those increased productivity numbers should be reflected in the period’s budget. Further, joint efforts should be reflected here as well.

At one company, I spearheaded a “Tiger Team” that was mobilized whenever we opened a new facility or had serious performance issues needing a turnaround. As the champion for that cross-functional effort, I was accountable for determining the financial value (ROI), and distributing that value correctly throughout the organization for budgeting and forecasting.

All three of these perspectives may occur somewhat seamlessly, but should be purposeful nonetheless. It’s another area where we can move the human resources effort from simple functionality to an integral part of the organization’s success.

Cheers,

KB

Kevin Berchelmann
www.triangleperformance.com