Tag Archives: planning

Tsunami On Hold

In a recent article, “Six Reasons the Tidal Wave of Business Transitions Has NOT Happened,” Wayne Rivers of The Family Business Institute in Raleigh NC suggests why the huge predicted transfer of closely held business ownership and management has not occurred. He writes of delayed retirement, lack of specific vision for retirement, and inability to sell the businesses as key factors. The result is that the outcomes anticipated have been put on hold–but it’s still a question of when and not if.

We concur with Mr. Rivers’ assessment that most businesses are not ready for sale. Some do not generate enough top line revenues; others do not create enough earnings/profits. As we have mentioned in prior posts, a critical part of any business–be it a family-owned one or professional services firm, or any of a myriad of other combinations–is the executive acumen of the team leading the business. If too many decisions are made by to few people, the business is flat out worth less money. Since the person/people selling are planning an exit, what executive prowess exists prior to the sale either will not persist in the near term or soon thereafter. Any buyer studying this phenomenon would have to be wary of buying a controlling position or entire company under these conditions. The buyers, in most cases, do NOT want to manage the company; they want a qualified team in place who can manage it well on their behalf.

When privately held business owners recognize this major hurdle, they can begin to devise a way to leap over it. Often, the advice of a consultant or coach can help in multiple ways. First, by preparing the management team to grow in their authority and decision-making. (The team must, of course, be committed to stay as well.) Secondly, the senior and retiring leaders can be coached to build a new future for themselves that is challenging and rewarding. Finally, a plan can be developed that takes into consideration how to prepare the various stakeholders for the transition to come.

For those who prepare their business systematically for sale, there is better news on the horizon. Private equity groups have money to invest, are paying more than they have in four years, and are looking for opportunities to build a segment presence through roll-ups or narrowly focused portfolios. According to a mergermarket.com report last year, 19% of deals were in industrials and chemicals, 18% in services, and 15% in technology, media and telecommunications in the twelve month lookback period.

In the same mergermarket report, private equity executives said that inadequate management reporting was a top problem 47% of the time and management capability limitations 33% of the time. Shore up your management methods! Prepare to ride the tidal wave of interest in buying private companies as an outcome of the hard work you perform to get your leadership team up to speed to lead without you.

 

 

Super Blues Day

When we are in a presidential election year, the first Tuesday in March brings a flurry of primaries and caucuses that are a strong influence in the nomination process. Often, the candidate who does exceptionally well on that date is propelled into a position of strength at the convention due to the results. The other candidates can be left “singing the blues” if their candidacy is negatively impacted by their showing. In many ways, business performance has its own “Super Tuesday” impetus.

The budgeting process in professional services firms can be likened to the Super Tuesday effort. Once per year, strategic planning leads to goal setting and the development of the financial plan for the upcoming fiscal year. Decisions are made to invest in recruiting, professional development, marketing, client development, client retention, and the other line items that constitute the operating accounts of the firm.

Champions of the first five listed disciplines are almost pitted against one another in vying for limited “discretionary” funds. The opportunity to articulate a business case for greater investment in the category of one’s specialty is a beauty pageant “won” usually by the fortunate individual(s) whose programs align with where the executive committee is motivated to invest. Those who do not receive the funding they would like are similar to political candidates who do not win enough states–their careers are not over, but they realize that they have suffered a setback that is visible to all.

To avoid the “bluesy” sense of winning and losing, firms need to become more savvy in the way they approach the process. Many firms with less than 50 total employees don’t have the luxury of having full time staff for even one of these very specific roles. There may be a generalist who oversees multiple categories (e.g. an HR director, firm administrator, or combo marketing and business development person), but not specialists with an experience base as deep as the billable professionals have in their own respective fields. What’s a firm to do? How about hiring the expertise on a fractional basis? In this modern age of telecommuting, contract workers, and flexible work environments, chances are high that one could secure insightful contributors without having to provide benefits or create a new full-time position.

The bigger challenge, however, is not simply getting professional (in their own field) leaders, but changing the strategic planning process to become more inclusive. Having these leaders participate earlier in the strategic planning process can yield great results for your firm. It may very well be that they would bring competitive intelligence about what other peer firms are doing. It is likely that they can sharpen one another’s areas by hearing what is of concern and passion. At the very least, they become more actively engaged stakeholders in the decisions that are made with regards to goals, budget and direction.

Avoid the post-budgeting blues by changing the way you develop your strategic plan and goals. Professionalize the management of your firm through intentionally building a team of smart leaders in the “back office.” Create the culture where your firm looks forward to your internal Super Tuesday season as a way to coalesce and build momentum!

Business “Bracketology”

With the conference basketball tournaments in full swing, and the NCAA about to begin, hype about what teams will make it and which ones will stay home abounds. Not only do sport networks go into hyper-drive as “March Madness” begins, but the enthusiasm spreads to water cooler conversations, lunchroom TVs, frequent score checking on smart phones and computer screens, and office “pools” where real money can be made with a small entry fee.

The schedule for the 68-team tournament is depicted in the form of a master bracket, with four regional brackets that produce winners through single elimination games who eventually play one another in the Final Four and, ultimately, the two team national championship game. (Sorry for the details, but they are pertinent to the business world as will be discussed below.) The projections as to which teams will make the tournament, and their “seeding” (#1-16 in each region, with a four team play-in “First Four”) has been described as the “bracketology” process. Prognosticators great and small try to anticipate who will be selected for the tournament, who will make the Final Four, etc.

In the business world, companies develop marketing strategies that result in targeted prospects, hopeful “finalists,” and “winners.” It can be argued that the process of identifying prospects, analyzing the likelihood that they will matriculate through a given business development process, and ultimately become customers is strenuous in top sales organizations, yet chaotic in others. What type of approach does your organization take?

Are you a part of a company that waits for the phone to ring from random sources, or do you target those from whom you’d like receive new business? Adding intentionality to the mix can yield championship caliber results. Some things to consider:

  • Prepare a list of your best customers
  • Pull your team together and think about what makes them best
  • Brainstorm about other companies that are similar to your “best” list
  • Use databases to help you flesh the lists out
  • Incorporate the principal of six degrees of separation to determine who knows whom inside the target companies
  • LinkedIn may be helpful in building the relationship bridges
  • Analyze commonalities among subgroups of the list and build marketing plans for each subgroup
  • Assess performance against plan and determine how to increase the number of prospects that become customers

Hopefully, your bracketology will be more accurate than the NCAA prediction process!

 

Firms Outperform Industry By 22% With Design, Develop Deploy Approach

Would you like for your firm to be a market leader? Who wouldn’t, right? Yet, are the firm leaders willing to do what it takes to distinguish themselves from the crowd? If you are the managing partner, practice group leader, executive committee member, or key client group leader, you set the tone for culture and performance.

McKinsey found in a 2010 study that organizations who rank in the top quintile in talent management outperform their industry by 22%. By talent management, we mean grooming professionals throughout their careers to enhance competency, contribution, and performance–regardless the yardstick. However, traditional talent programs often fall short because they do not incorporate the best practices of organizational development.

Layers for Development

Organizational development components are more holistic and  include organization design, business development, work generation and management, and strategic business model communication.  The OD spectacles view recruitment, nurture, and retention of  legal talent as an expression of firm values, identity, vision, goals, strategy, and essence.  As Jim Collins in Good to Great describes the importance of helping the right people find the right seat on the bus, it is important inside firms to develop a system for aligning talent management with firm management.

The graphic to the right depicts the need for a cascading set of goals whereby organizational goals are broken down to team/practice area/section goals, and further still to individual goals. As firms find a way to chart a career development path that includes a competency model and clear role maps, the members of the firm and the teams on which they serve become more proficient in serving client needs and reaching business objectives.

Clarifying responsibilities for client acquisition, project management, and client retention guides the development of assignments that groom not just the technical, but also the soft skills necessary for achievement.  Competencies such as self awareness, self regulation, motivation, empathy and social skills  can be developed as a vital part of an overall career development plan that intentionally aligns experience, assignments, and mentoring needed with the exigency of getting billable work done.

  • Design your organization for success
  • Develop your people for greatness
  • Deploy human capital to serve meaningful client needs

One-man rule vs. One-man band

Businesses often can be managed by a strong leader who seems to be involved with every significant decision. In some cases, this type of one-man band is almost unavoidable (e.g. a company with less than five employees, four of whom are in support roles.) However, in organizations that have been fortunate to grow, add management teams, and have complex issues, the controlling leader can either be an icon or an albatross. When is it good–and when is it bad–that the proverbial “buck” stops on one person’s desk?

art by Eldon Doty

 

Chief executives who make decisions without the input of colleagues engage in one-man rule. This practice is a two-edged sword. While few will argue that group management can slow progress and that one can move more nimbly than many, there is always the latent risk that decisions that are made lack depth, insight, and the benefit of buy-in. The biggest travesty of the urge to “go it alone” is that it undermines management succession by depriving others from the opportunity to make meaningful choice on behalf of the enterprise.

Management depth is always in the list of prime characteristics of best managed companies. Management change then, by default, becomes a disorderly process, at times exacerbated by recession or prosperity. The entire organization is often thrown into chaotic operation and often requires a turnaround thereafter.

Instead of putting one’s peers–and, perhaps, one’s own retirement via earnout/sale–at risk, better to avoid one-man rule and seek to engage others. This concept holds true in may of the sexy technology start-up models as well, wherein the “one-man” is equivalent to the group of initial founders who can function as to inhibit the contribution of successive hires. Often, these top executives are extremely bright and have a very high IQ, but lack the EQ (emotional quotient = emotional intelligence) to build out the model and achieve the important milestones due to an unwillingness to invite the input of others.

More to come on how to build out the management team and empower them to make meaningful contributions…