Tag Archives: Engagement

New Small Business: Economic Development Catalyst

Small businesses are the backbone of the U.S. economy. This is a statement that is tossed out for public consumption on a fairly regular basis. What data backs it up? What might it mean for job creation and other key indicators of economic health that matter to the general population? In the November 2012 Business Dynamics Statistics monthly report from the Census Bureau, it was noted that hiring and job creation in small businesses (19 employees or less) with two years or less of operations was stronger than in larger companies that had been around longer.

While older firms only hire 25-33% of new employees for newly created jobs, young firms average about two in five (40%)! A substantial fraction of the job creation for young firms is due to the job creation that occurs in the quarter of starting up. However, there is substantial subsequent job creation as well as job destruction in the succeeding quarters in the first two years. The overall net job creation (the difference between job creation and destruction) is much higher for young firms than for older firms.

Small Business strengthThe other area in which startups excel is in worker churning (hiring in excess of job creation and the separations in excess of job destruction.) Job creation measures the employment gains from the expansion of existing establishments and the creation of new establishments. Job destruction measures the employment losses from contracting and closing establishments. The Department of Labor maintains that churning helps the matching of workers to jobs. Hiring and separation rates at young firms are seen as being unusually high. There is also a trend of a marked improvement in hiring and job creation in young firms since 2008 in comparison to established firms. 

The report, entitled “Job Creation, Worker Churning, and Wages at Young Businesses,” draws its conclusions from the U.S. Census Bureau’s Quarterly Workforce Indicators, which use federal and state administrative data on employers and employees combined with core Census Bureau data. On a less rosy note for employees in small companies, the study also showed that their earnings per worker are lower than at more mature firms. Since the wage premium for workers who choose to work for large companies has persisted, earnings growth–even during the most recent recession–is largely attributable to wages paid by larger companies. Some of this decline is accounted for by changes in the industry  composition of startups over the last decade, but the overall trend is downward.

Just before the 2001 recession, workers at new firms earned about 85 percent as much as workers at mature firms. By 2011, this earnings ratio had dropped to 70 percent. The earnings premium associated with working for a large employer versus a smaller employer also grew during this time period: Average real monthly earnings in small firms fell from a high of 78 percent in 2001 to a low of 66 percent in 2011. 

Churning rates are said to be “procyclical,” dropping during recessions as firms become cautious about hiring, and employees, with fewer jobs available, stay where they are. In both the 2001 and, especially, 2007-2009 recessions, worker turnover rates declined, but failed to recover to their previous peak after the recession ended. Churn rates for the youngest businesses recovered modestly after the most recent recession, but dropped slightly after first quarter 2011, perhaps reflecting eroding worker and business confidence, the study said.

What does this all mean? Here are the key takeaways:

  • Small businesses create more new jobs than large businesses
  • Pay at small companies tends to be less than at larger ones
  • Turnover is higher at smaller firms than at larger ones
  • Small business bounces back faster than big business after a recession
  • Startups are paying less now than they were a decade ago

 

 

 

Are You Doing it “To” or “For” a Prospect?

Many who aspire to increase the top line (revenues) of a business know that sales can seemingly cure a multitude of other problems. With enough money to spread around for paying bills and employees, plus some for marketing, customer service or maintenance, your company can improve morale and your ability to retain top talent as well as existing customers. However, in an effort to develop new business, our sales teams often do a very poor job. Conversion rates are low, so more leads are needed than would otherwise be necessary. In turn, more time is required, more overhead expenses thereby generated, and profits eroded. If we were able to improve the way we secure new clients, our organizations would be vastly more successful!

The biggest challenge a sales (interchangeable with “business development” or “client development” in settings wherein the word is anathema) professional faces is the distrust of the person on the other side of the table. Buyers are often afraid that something is being done to them, and dig in their heels or tune out their minds. Against this type of resistance, it can be extremely difficult to secure new accounts. The conversation must, therefore, disarm the buyer (in a genuine, sincere way) so that the perception changes to one of feeling like the salesperson is doing (well) for the buyer or her organization.

With the  combination of easily accessible information via the Internet and increased competition via globalization, it is incumbent on sales teams to keep their products and services from becoming commodities whereby the only means of competition is price. This objective can best be accomplished through consultative conversations. One of the leading minds on the topic of consultative selling is Mahan Khalsa, author of Let’s Get Real or Let’s Not Play (aka Helping Clients Succeed.) Helping (prospective) clients succeed should be the goal of every sales effort, but rarely is. In fact, hard line sales methods don’t seem to to take the client success into consideration as all, so long as the selling organization’s goals are met. 

Khalsa writes often about two key concepts: “getting real,” and developing an “exact solution.” To be real is to be authentic, truthful, expressing clear intent, and speaking from values. It is a paradigm wherein the seller doesn’t accept the first response without asking clarifying questions–the purpose is to break down false pretenses, move past fears, and to get to core issues as comfortably as possible for all parties concerned. While no solution is perfect unto itself, the goal of creating an exact one is to have a strong urge to leave few stones unturned in order to reduce ambiguity and partner on both identifying problems and the methods of resolving them.

With the right mindset, a salesperson can overcome the following (* taken from Let’s Get Real, chapter entitled “We Both Want the Same Thing”)  inhibitors of client success:

Our issues:

  • we don’t listen
  • we make assumptions
  • we have preconceived solutions
  • we need to make the sale
  • it takes too much time
  • we don’t understand their business
  • we know what they need better than they do, and
  • we don’t talk to the right people.

Client issues:

  • they don’t know what they need
  • the can’t articulate what they need
  • they don’t agree on what they need
  • they won’t give us good information
  • they don’t let us talk to the right people
  • they are unrealistic about time, money, and people needed
  • politics count more than business sense
  • they procrastinate, and
  • they can’t make decisions.

Taking time up front to either determine (jointly with client) that a solution does not exist or create a solid business case is critical for better sales success. When we match client expectations to those of our organization with regards to the people, time, and money needed to achieve success with regards to a given opportunity, we demonstrate shared interests and feasibility. Knowing how decisions are made, by whom, and the timetable removes guesswork and allows us to offer a solution that exactly meets the client’s needs.

Implementing Your Turnaround Plan

A turnaround plan presupposes that someone will be around to implement it. A lack of execution or inappropriate one (timing or lack of adaptation) will quickly undermine all earlier efforts that went into drafting the plan. Control over operations is therefore a must–no single part of the business should monopolize the company’s attention and efforts.

Controlling Operations

Motivation

The motivational skills of a “take charge” leader can enhance job performance in many ways. Many employees complain they are not being used effectively because they don’t have enough to do or their efforts are being applied inappropriately. Management that makes the most of employee work efforts has a knack for spotting actions that, if performed immediately, will have a tremendous, positive impact on company success.

Efficiency

To ensure that operations are monitored and controlled correctly, the individual who reviews system reports must make decisions based on indicators of company efficiency. For example, if variance reports show (project or product) costs exceeding budget, action must be taken immediately to prevent further overruns. Similarly, if non-payment has a vendor worried, the top financial manager must find a way to keep the vendor on board so a return to profitability can occur.

Sound management is exhibited when field operations or internal reports require responses to abnormalities. For example, a business owner in the midst of a turnaround had a new hire (< 2 months) supervisor request on Thursday to take Monday and Tuesday off to pursue some personal matters. The business owner was not in a production crunch and was short on cash, so he approved the time off–particularly since the supervisor was not using vacation (paid) time to take leave. When the supervisor strode onto the job Monday late morning, the owner was surprised. When he requested to work the balance of Monday and all of Tuesday, the owner declined the request, citing that she had to make other arrangements that inconvenienced others and that last-minute notice would not be accommodate in this or future instances.

In this instance, the owner did what was necessary to maintain control over operations. Though it may have ruffled the supervisor’s feathers for a few days, it demonstrated the importance of setting policies and commitments–and living by them. It was also to the owner’s advantage not to have to pay the supervisor for work that had been reassigned to someone else. Proper planning was used to make sure that someone would be able to supervise the work. Additional follow-up was necessary to make sure no problems were slowing down production for those two days. Had the owner failed to exercise sound management, proper planning, or follow-up, she would have lost time, money and credibility with others due to one employee’s circumstances.

Focusing on Common Objectives

Getting employees to focus on common objectives is a difficult task. Executives an managers who are able to motivate their workers to avoid distractions, do their jobs effectively, and remember to follow the turnaround plan do so with tremendous skills/abilities.

Employee Problem Solving

Employees can best avoid distractions and aid in the turnaround process by quickly resolving issues in which they have innate skills and referring all other issues to appropriate personnel. Additionally, employees should report any persisting problems or confrontations to the executive team.

Problem-solving should be a relatively painless process, requiring only that he or she utilize skills learned on the job and “do what seems best” based on prior experience. If an employee has little or no experience in the problem area , she should not hesitate to find someone who is experienced. It is far better to admit a need for help than to take a chance on behalf of the company.

Employees should be reassured that involving others is not “shirking” or “dumping” work into another’s lap. Rather, this process is a way of relieving employees of the likelihood of error in making an uninformed decision. However, employees are not absolved from making sure the problem is resolved. Make it a habit of celebrating when employees help one another out to build camaraderie.

 

The House on the Sand Went Smash

As a youngster, I remember learning a Vacation Bible School ditty about the wise man and the foolish man. In the song, there was a great rainstorm. One builder had built his house upon a rock, and that house stood firm. The other had built his house upon sand and the house fell down (went smash!) The morale of the story is to make a sure foundation before beginning an endeavor whose outcome is important.

Most businesses know that they need to do some business or strategic or turnaround planning. Planning is vital to creating shared mission and eliciting commitment from stakeholders in the outcome(s). Most executive teams, however, underestimate the value of educating employees to prepare them to execute the plan and achieve the desired results.

We all want employees and managers who maintain a cool head and concentrated focus. What is our role, however, within executive teams, to help our people become prepared? We would assert that our role is to lead and influence through empowerment. Empowerment enhances employee engagement and reduces the likelihood that only executives will be expected to take responsibility for outcomes. 

Skilled employees are usually made, not born. Therefore, key employees deserve professional education and job training. Be constantly grooming your staff to take on more and more responsibility. Much like a second-string player on a sports team, a second generation of managers should be in waiting, ready to step in when called. This intentionality is also very useful in succession planning, because those who vacate their positions already have trained backups who would be ready to perform the role should their predecessor no longer be able or willing.

Grooming Effective Managers

Continuously analyze employees for management potential through an interactive process of interview, observation, and written response. Be on the lookout for employees in all areas who posses strong analytical and evaluation skills, combined with the emotional intelligence to handle changes effectively and appropriately. Give your people the opportunity to prove themselves worthy of consideration for grooming.

When evaluating management candidates, leaders will often try to determine, through an employee’s actions or words, the employee’s perceptions about the company’s mission. A demonstrated commitment to the mission shows promise. Using individual interviews and feedback sessions, leaders can determine whether employees understand chain of command and critical success factors for business success. Asking employees how to improve the productivity of their part of the business, their own execution, and corporate profitability can reveal (through their responses and actions) whether they understand the key levers of management.

Education and Training

Those who can consistently make recommendations for company improvement should be considered for management positions and be given an opportunity to refine their skills through education and training. The employee development need not be formal; the one-to-one mentoring of high potential employees can yield significant results. Formal workshops and continuing education offered within your industry or organizations serving people in key roles can sharpen skills, focus, and performance.

Personnel files should document employee attendance at educational programs as well as innovative solutions they have offered to real problems. These files serve as the basis for performance reviews as well as management development. Difficult work assignments containing known problems offer the high potential employees to contribute on  meaningful decisions. If unsatisfactory decisions are made in these situations, the employees can be coached and mentored through what should have been done differently and learning will occur.

Adapting to Change

Over time, employees will learn to adapt to changing events in the operating environment. The first few times a managerial candidate faces unforeseen circumstances, it may be difficult to revise the game plan to suit the conditions. With effective coaching and a sprinkling of successes, however, the new manager will learn to handle tough situations without the need to involve a higher up.

Every business has its share of unpredicatable events that can influence performance. While these events cannot be anticipated exactly, they can be expected and planned for in a hypothetical sense. As employees become more flexible in the way in which they carry out their responsibilities, they will be able to aid the business plan execution by adapting to change more quickly and accurately.

 

SCARF Up Some Change

In an HBR blog post about organizational change this morning, Walter McFarland draws in the role of the brain in defining whether change efforts will meet with success. Some of the casualties of failure to adapt to changing market conditions he mentions include Sunbeam, Polaroid, and Circuit City. While each of these formerly strong companies is no longer in business, proponents of organizational change struggle to define why some are able to reinvent themselves and others are not, other than the nefarious “human element.”

Organizational change as a field of study has long maintained that change can be defined in linear, sequential terms and processes. What we are discovering, largely through examining principles of neuroscience, is that change is neither. Instead, McFarland, the board chair elect of the American Society of Training and Development (ASTD), argues that modern business dynamics would suggest that it is chaotic. It is the chaotic nature of change that creates the need for greater research. We live in a time when the need to constantly change is critical to competitiveness. Neuroscience may be a key to helping us steer organizations through adaptation more effectively.

Thompson and Luthans wrote that typical reactions to change “can be so excessive and immediate, that some researchers have suggested it may be easier to start a completely new organization than to try to change an existing one.” While industrial psychologists refer to this as “human resistance to change,” very few who study the phenomenon have identified how to lower the resistance consistently and pervasively. 

At the NeuroLeadership Summit, being held in New York this week, a panel discussion with senior executives and experts from The Conference Board, the Association of Change Management Professionals, Change Leaders, and Barnard College will explore the connection between neuroscience and organizational change, understanding how we can effectively deal with the human resistance to change. 

A new organizational change model is being proposed that takes into account how successful change functions in a modern organization, where work is conceptual, creative, and relational, and talent is portable. According to McFarland, activities that have contributed to the continuing poor performance of change initiatives include:

  • Perpetual underpreparation: change is always dreaded and a surprise to employees
  • A perceived need to “create a burning platform”: meant to motive employees via expressed or implied threat
  • Leading change from the top of the organization down: only a few individuals are actively involved in the change and either under communicate or miscommunicate with others

Top-down change (the traditional model) can trigger fear within employees because it “deprives them of key needs that help them better navigate the social world in the workplace. These needs include status, certainty, autonomy, relatedness, and fairness” — the foundation of the SCARF model. 

  • Status is about relative importance to others.
  • Certainty concerns being able to predict the future.
  • Autonomy provides a sense of control over events.
  • Relatedness is a sense of safety with others – of friend rather than foe.
  • Fairness is a perception of fair exchanges between people.

SCARF is a summary of important discoveries from neuroscience about the way people interact socially and is built on three central ideas:

  1. The brain treats many social threats and rewards with the same intensity as physical threats and rewards (Lieberman, & Eisenberger, 2009). 
  2. The capacity to make decisions, solve problems and collaborate with others is generally reduced by a threat response and increased under a reward response (Elliot, 2008). 
  3. The threat response is more intense and more common and often needs to be carefully minimized in social interactions (Baumeister et al, 2001).

Since organizational change is a significant social interaction in the marketplace, it is important to minimize perceived risk. Understanding how people tick, empowering them to vocalize their ideas, and creating better systems to engage them in the change process is best practice. More organizations need to get on board.