Vision vs. Mission

By Mike Myatt, Chief Strategy Officer, N2growth

Today’s Myatt on Monday’s question was posed by a CEO who asked: “Can you define the difference between vision and mission?” What a great question…it’s always refreshing to me when an executive checks their ego and asks a clarifying question (a characteristic of great leaders by the way) rather than pretend they know the answer. The reason this is such a great question is that I’ve witnessed far too many executives confuse vision and mission in terms of both definition and application. In today’s post I’ll clearly explain the difference between vision and mission

As as a backdrop to answering today’s question, I want to share a simple organizational framework I developed several years ago to help executives gain a better understanding of leadership structure. Just like an algebraic formula, business also functions according to rules governing order of operations. My premise was that business logic is similar to the logic used in solving mathematical equations – if  you attempt to solve a problem out of sequence it will result in a flawed outcome. The framework goes like this: “Values should underpin Vision, which dictates Mission, which determines Strategy, which surfaces Goals that frame Objectives, which in turn drives the Tactics that tell an organization what Resources, Infrastructure and Processes are needed to support a certainty of execution.” (Mike Myatt, 1988) 

Let me be clear – vision and mission are not interchangeable. Confusing mission and vision in definition or in sequence of application will result in inconsistent leadership decisions, confusion among the ranks, and the inevitability of flawed outcomes. It’s important to understand that vision statements are design oriented, while mission statements are execution oriented. In fact, it is the corporate vision that should determine its mission. The vision is bigger picture and future oriented, while the mission is more immediately focused on the present. It is the vision that defines the end game, and the mission is the road map that will take you there.

Vision statements, as implied in the construction of the phraseology itself, put forth a statement of envisioned future. This vision, if successful, must be underpinned by core ideology and then expressed with clarity and conviction. A non-existent, ambiguous, or ideologically weak corporate vision is nothing short of a recipe for disaster…It would be akin to the proverbial ship without a rudder adrift without any direction or control. As noted above, mission statements should reflect greater focus on more immediate concerns that support the overarching vision. Mission statements tend to be more functional in nature dealing with a variety of touch points throughout the value chain.

In keeping with the mathematical analogies above, it’s important to note that both vision and mission should be viewed as variables and not constants. What I mean by this is both the vision and mission need to be kept fresh and relevant. If either your vision or mission become outdated and irrelevant so too will your business.  

Lastly, even though this is a discussion of the differences between vision and mission, don’t forget the first and most important step…basing everything upon core values. Don’t get caught up in attempting to develop something catchy to be encapsulated within a piece of framed artwork that hangs in your reception area yet never put into practice. It is much more important that your vision and mission be understood by company employees, and translated into the resultant authenticity of their actions. Your customers don’t care what you put on paper, but they care immensely about whether or not a company’s vision and mission are reflected in a fulfilled brand promise.

Please feel free to share your thoughts and comments below.

Executive Level Hires…

By Mike Myatt, Chief Strategy Officer, N2growth

Today’s Myatt on Mondays question comes from the president of a technology firm who asks: “I don’t have the best track record when it comes to making executive level hires. Do you have any specific suggestions that might help?” Since I have written often on the subject of talent management, and have covered the basics of recruiting in previous posts, I’m going to share a few secrets that can help separate the great talent from those that simply interview well…

We’ve all experienced the let down associated with someone who slipped through the cracks of the interview process and turned out to be everything except what they represented themselves to be. The reality is that most candidates interviewing for executive level positions will have strong resumes and will handle themselves well in predictable interviewing situations. This is why it is important to put potential C-level hires through a much more demanding interview process than management and staff level hires. While there are any number of interviewing nuances that can improve the odds of a successful hire, the following three suggestions will help you to quickly spot the posers from the players:

  1. Dispense with Typical Interview Questions: When it comes to executive level hires I tend to stray from the usual questions surrounding career history and job functions (hopefully this type of screening has been done long before a candidate reaches my office), and use questions meant to probe deeply for character, problem solving and leadership ability. I use situational questions that force them respond quickly to the toughest of real world experiences where there are definitely right and wrong answers…This is a no spin zone as you either get the questions right or you don’t…
  2. Conduct Interviews in Social Settings: Get the potential hire out of the office…Take the candidate out to a ball game, to dinner, for a round of golf or any other setting where they are likely to let their guard down and reveal their authentic self. While most people can present themselves well in a controlled environment, by switching things up on them you are likely to see signs of potential issues that may surface later as problems in the workplace.
  3. Include the Spouse in the Interview: Nothing keeps a person humble and honest like the presence of their spouse…If a candidate has embellished certain things in prior interviews you’re likely to see inconsistencies pop-up in conversations held with their spouse present.

Candidates that can pass the rigor of non-traditional interviews with flying colors are likely to become valuable members of your executive team that will thrive on the demands of real world business challenges. Lastly, remember to hire slow and fire fast…This is even more important with executive level hires.

Cutting Employee Churn

By Mike Myatt, Chief Strategy Officer, N2growth

Cutting Employee ChurnToday’s Myatt on Monday’s question comes from a CEO who asked: “Our employee turnover is higher than I would like it to be. If you had to point out one factor that drives employee churn, what would that be?” Few things in business are as costly and disruptive as having the proverbial revolving door for employees to exit from. Even worse is not knowing how to stop the door from turning. While an “employers job market” can certainly help slow the churn, it will not stop it. The harsh truth is that there are many secondary and tertiary items that can influence an employee’s decision to leave, in today’s post I’ll address the primary item; the one single factor that constitutes the overarching reason which drives a person’s decision to leave their employer.

Let me begin by stating that no company in the world has a 100% retention factor if measured over any meaningful length of time. However the question I want you to ponder is this: why do some companies have the ability to create excellent work environments leading to superior employee satisfaction and retention while others seem to fail miserably in their efforts in this regard. The answer is simpler than you may think…Organizations that display the healthy, dynamic, and positive culture that fosters a motivated and engaged workforce all have one thing in common…great leadership

There is an old saying that goes; “Employees don’t quit working for companies, they quit working for their bosses.” Regardless of tenure, position, title, etc., employees who voluntarily leave generally do so out of some type of perceived disconnect with leadership. Furthermore, while the accuracy of exit interviews are somewhat debatable, they nonetheless support the conclusion drawn in the previous sentence. The following list contains just five representative samples of the differences between solid company leadership and poor leadership…

  • Hiring Methodology: Great leadership teams use a values based hiring methodology. They hire slowly, carefully, and only to fill a defined need with a specific skill set. Companies with challenged leadership hire quickly, often based on how affordably they can fill a position, and many times in absence of a defined need.
  • Leadership Continuity: Great companies have a clear vision, mission, and strategy, which are evangelized by a cohesive leadership team. A crisply articulated vision, and continuity of leadership creates an engaged workforce that understands the business model and key objectives of the enterprise. Companies that have a fractured leadership team lose the confidence of line and staff. Employees that don’t understand what they’re playing for are very difficult to motivate and as a result are often disengaged and non-productive. 
  • A Planned Transition: Outstanding leadership teams set employees up for success and not for failure. They have an established onboarding process which puts forth an initial roadmap for a successful transition by clearly defining key performance indicators, business objectives, and other key metrics. Well honed leadership teams immediately assign an in house mentor to new hires to help insure a successful acclimation. Unsophisticated leadership teams usually have a sink or swim mentality with regard to new hires and have substantial voids in training and management processes in the early days of a new hire. Poor leadership teams have a lack of continuity in their training and development which breeds discontentment and dissatisfaction.  
  • Compensation: Great leadership teams understand the value of tier-one talent, and are not afraid to pay-up in order to attract it and retain it. They create a multi-tiered compensation plan that rewards employees at the top of industry scale when performance objectives are met or exceeded. Moreover they understand the value of non-compensatory recognition and apply it generously and judiciously. Companies with poor leadership often trip over dollars to pick-up pennies when it comes to compensation. Their compensation plans lack sophistication, creativity, and are engineered by default and not be design. People will often cite non-competitive compensation as an issue for leaving a company, but what they are really stating is that the company has an unsophisticated leadership team which is out of touch with both the market, and the needs of its employees.
  • Professional Development: Solid leadership teams challenge their employees by offering them a clear path toward personal and professional growth. Great companies create a career path that offers the successful employee the option of matriculating throughout the company based upon achievements, needs, and qualifications. Great leadership teams understand that in order to create a thriving and sustainable enterprise that a key priority is to develop talent to their greatest potential, and ultimately to create other leaders. Poor leadership teams don’t see the value in training, mentoring, coaching, and other forms of professional development. Their workforces are stagnant and not competitive, which places them a not only a competitive disadvantage, but also at risk for long-term sustainability. 

While today’s post was an extemporaneous highlight of just a few critical acknowledgements, I hope it clearly portrayed the value of leadership in employee retention and development.

Family Business

By Mike Myatt, Chief Strategy Officer, N2growth 

Family Business = Risky BusinessFamily Business…a quote from Charles Dickens sums up my feelings about family businesses: “It was the best of times, it was the worst of times.” Oh what a conundrum…Family business; should I, or shouldn’t I? Today’s Myatt on Monday’s question comes from an entrepreneur who asks: “Should I involve family members in my business venture?” In my opinion there really isn’t a right or wrong answer to this question…it is simply a matter of personal preference. When family businesses work, there is nothing that can really compare to the benefits and upside afforded with such a structure. The problem is that they don’t always work…I have observed extremely successful family enterprises that strengthen relationships and flourish across generations, and I have also witnessed business ventures that were responsible for the total destruction of what were previously very close families. Whatever decision is made with respect to bringing family members into a business, it is a decision that should not be taken lightly. In today’s post I’ll share my thoughts on the topic of family businesses…

Let me begin by sharing some personal history with my involvement in family businesses. In addition to advising numerous family held businesses over the years, I have personally been involved in three family businesses. I have witnessed the good that can come from helping family members grow and prosper, and I’ve seen the harm that can come when greed becomes more important than right thinking. While my experience with family businesses wouldn’t keep me from involving family members in business ventures in the future, I also wouldn’t be quick to rush into such a venture. That being said, the following five points should be kept in mind when considering inviting family members into your business:

  1. Think it Through: Family should be about unconditional love, security, and continuity of relationships. However business is often driven by conditional relationships, greed, and ego.  While business interests and family relationships can successfully coexist, the conflict of interest described in the statement above can often be terminal. If you cannot live with the possibility that things may not turn out on a positive note, and family relationships may be damaged, then I would strongly advise caution about including family members in your business venture.
  2. Seek Alignment Up Front: It’s easy to assume that family members should all have the same values, but that is not always the case. Don’t just assume you family members share your values; confirm it is so prior to their inclusion in your business. While it is certainly easy to involve family members in your business, parting ways is rarely easy, and usually comes with more than its fair share of emotional turmoil. Spend the time up front to align expectations and talk through all the “what ifs” surrounding family involvement in the business. Spend more time talking about what happens if things don’t work out rather than the upside of potential success.
  3. Document Everything: There is often a tendency to believe that since you’re dealing with family there is no need for formal business agreements…WRONG! Document everything when it comes to dealing with family members so that in the event of a dispute, sound business logic and prudent governance will prevail over emotions, revisionist history, or suddenly flawed memories.
  4. Don’t Give Anything Away: My thinking on this topic applies to responsibility, titles, compensation, and ownership interests. In general I have found that human nature is such that people just don’t value something that they have not earned (this can be particularly true of family members who can often display an undeserved sense of entitlement).  The goal here is not to make things unduly difficult on family members, nor is it to make money off of family members, rather the goal should be to teach them that along with the privilege of ownership comes requirements for investment, risk, responsibility, and commitment.
  5. Keep Things Close: While family should be family, this assumes value alignment, right thinking, and prudent behavior. The reality is that your chances for success in family businesses rapidly diminish the further removed you are from your immediate family. There are certainly exceptions to what I’m about to espouse, but the harsh reality is that your immediate family are much more likely to remain loyal in good times and in bad times than nieces, nephews, cousins or in-laws.   

The unfortunate reality is that conventional business logic often does not apply when dealing with family businesses. It is important to realize that even when you do everything correctly, things still may not work out when dealing with family businesses. The upside is that when things do work out well there are few things as rewarding as building something of value with your family at your side.

Changing Times

By Mike Myatt, Chief Strategy Officer, N2growth

Change Equals SurvivalAs the old saying goes, “The times they are a changing.” For those of you who are not regular readers of the Myatt on Mondays posts, Monday is the day that I often set aside to answer questions from readers. However in today’s post I’m going to switch things up a bit and ask you to answer a question posed by me. While I have given frequent counsel about how to successfully navigate the many challenges posed by these uncertain economic times, my question is this: “In the last 90 days what proactive changes have you made within your business which have placed you in a better position to survive the changing economic conditions that are presently vexing many a CEO?” In the text that follows I’ll give you a few places you might want to look at if you haven’t already…

A mantra that was drilled into me during my days in the military was “Adapt, Improvise, and Overcome.” Whether on the battlefield, or in the boardroom, your ability to change in accordance with the demands of the times will often determine your ability to survive. Changing times demand fluidity on the part of successful CEOs. If you’re not changing both the strategic and tactical approach in which you do business in this market you will live to regret it. Standing still in a rapidly evolving world will only result in your competition running you down. Savvy CEOs have likely already made many of the adjustments mentioned below, but it’s not too late to jump on the bandwagon if you’ve been slow on the trigger:

  1. Cost Centers vs. Profit Centers: Slowing economic conditions require a greater emphasis on growth in revenue and profitability. Reallocate financial and non-financial resources to marketing and sales activities to prime the funnel. Look to reduce commitments to business units, departments, and headcount that don’t significantly impact contribution margin.
  2. Go Shopping: Tough times create opportunities to acquire companies and/or other assets at discounts over normal pricing. The best deals are not made when multiples and trailing 12’s are at all-time highs, but rather when true value is unlocked as a result of recognizing market opportunity created by adversity.
  3. The Talent Advantage: Weed out the lower echelons (the bottom 10%-20%) of your work force and seek to replace them with higher caliber talent looking for a better opportunity during tough times. This is an employer’s market with a dearth of talent available without having to pay the signing bonuses of old… 
  4. Get Help: If you’re a younger CEO and this is your first economic downturn, get help…Find a coach or mentor who can help guide you through to the other side. As the old saying goes: “You don’t know what you don’t know.” 
  5. Add to the War Chest: While the capital and credit markets have eased-off the frothy pace of the last few years, there is still an abundant supply of smart-money looking for a home. Underwriting and due diligence may be a bit more painful these days, but don’t let that stand in your way. Work every level of the capital structure and create as much operating leverage as possible at the lowest blended cost of capital.  
  6. Don’t Forget the Customer: This is a time to not only remain close to your key accounts, but to also aggressively go after your competitions key accounts. Remember that if you’re not talking to your customers someone else will be.
  7. Don’t Miss the Boat: Change, disrupt, innovate, disintermediate, and generally unleash havoc in the marketplace. More wealth is gained, and more dominant brands are established in declining markets than in advancing markets. Smart CEOs aren’t looking for safe harbors, rather they understand that waning economic conditions create a significant window of market opportunities…
  8. It’s Not About the Risk: Don’t manage risk, exploit opportunities. Put incremental gains and process engineering on the back-burner as these types of initiatives won’t carry you through tough times. Cost cutting is not a business model, and it alone (especially the wrong kind) won’t save you. Invest your precious resources where you can create leverage, velocity, or economies of scale. Don’t trip over dollars to pick-up pennies.  

As the old saying goes, “it’s better late than never.” Only the most arrogant, or the most foolhardy CEOs don’t recognize the need for rapid change in reacting to today’s slowing economic conditions. 

The Hierarchy of Knowledge

By Mike Myatt, Chief Strategy Officer, N2growth

Knowledge Matters...Today’s Myatt on Monday’s question comes from a CEO who asks: “what is the best way for me to synthesize the overwhelming amount incoming information I receive while making the best decisions possible in a timely fashion?” While I have written often on the subject of decision making, today’s question is a bit more narrow in scope asking for advice surrounding the filtering of various inputs. In today’s post I’ll address what I refer to as the hierarchy of knowledge which will provide an answer to today’s question…

Understanding that a hierarchy of knowledge exists is critically important when attempting to make prudent decisions. Put simply…not all inputs should weigh equally in one’s decisioning process. By developing a qualitative and quantitative filtering mechanism for your decisioning process you can make better decisions in a shorter period of time. The hierarchy of knowledge is as follows:

  • Data: Raw data is comprised of disparate facts, statistics, or random pieces of information that in-and-of-themselves hold little value. Making conclusions based on data in its raw form will lead to flawed decisions based on incomplete data sets.
  • Information: Information is simply an evolved, or more complete data set. Information is therefore derived from a collection of processed data where context and meaning have been added to disparate facts which allow for a more thorough analysis. 
  • Knowledge: Knowledge is information that has been refined by analysis such that it has been assimilated, tested and/or validated. Most importantly, knowledge is actionable with a high degree of accuracy because proof of concept exists.

Even though people often treat theory as knowledge, and opinion as fact, they are not one in the same. Making executive decisions in today’s world has never been more complex, and when under extreme pressure I have seen many a savvy executive blur the lines between fact and fiction resulting in an ill advised decision. Decisions made at the data level can be made quickly, but offer a higher level of risk. Decisioning at the information level affords a higher degree of risk management, but are still not as safe as those decisions based upon actionable knowledge.

Another aspect that needs to be factored into the decisioning process is the source of the input. I believe it was Cyrus the Great who said “diversity in counsel, unity in command” meaning that good leaders seek the counsel of others, but maintain command control over the final decision. While most successful leaders subscribe to this theory, the real question in not whether you should seek counsel, but in fact where, and how much counsel you should seek. You see more input, or the wrong input, doesn’t necessarily add value to a decisioning process. Volume for the sake of volume will only tend to confuse matters, and seeking input from sources that can’t offer significant contributions is likely a waste of time. Two other issues that should be considered in your decisioning process as they relate to the source of input are as follows:

  1. Credibility: What is the track record of your source? Is the source reliable and credible? Are they delivering data, information or knowledge? Will the source tell you what you want to hear, what they want you to hear, or will they provide the unedited version of cold hard truth?
  2. Bias: Are there any hidden and/or competing agendas that are coloring the input being received? Is the input being provided for the benefit of the source or the benefit of the enterprise? 

Good luck and good decisioning…

Transitioning the CEO

By Mike Myatt, Chief Strategy Officer, N2growth

Transitioning the CEOToday’s Myatt on Monday’s question comes from a board member who asks: “Our current CEO is underperforming against expectations…How does the board know when it is time to transition the CEO?” While it is refreshing to hear a board member paying attention to CEO performance, the decision to replace a CEO not only requires a complex analysis, but the wrong decision will have far reaching consequences. In today’s post I’ll share my thoughts on the right reasons to transition the CEO…

The first thing to understand is that transitioning the CEO should only happen as a result of a sound succession plan. Spontaneous or surprise changes in leadership are the worst possible scenario, and should be avoided at all costs. In collaboration with the board of directors, it is a CEOs obligation to identify and develop successor leadership (a recent article in Fortune points to the successful transition of A. G. Lafley and is worth reading). Nobody knows what the future holds…whether the CEO is called upon to resign, or decides of his or her own accord to pass the baton, a company that has developed a strategic process surrounding the succession planning of key executives will transition more smoothly than those entities who wing it…

Before I address the question at hand, for contextual purposes, I believe it’s important to actually define the role of the board of directors. While there are certainly a variety of opinions as to the roles and obligations of a company’s board of directors, from my perspective they can all be boiled down into four simple responsibilities:

  1. Shareholder Accountability: A board member’s primary responsibility is to act in good faith as a fiduciary in representing the long-term best interests of shareholders. A board’s actions and decisions must be able to pass the litmus test of public scrutiny (legally, morally, and ethically), rise above personal agendas, and always place shareholder interests above all else;
  2. Corporate Governance: A board must insure that the corporation’s charter and by-laws are adhered to. Moreover a board must use its best efforts to hold executives accountable for insuring that corporate actions fall within other legal, financial, regulatory, and compliance boundaries. Ignorance and apathy are not the traits of a good board. Great board members are proactive, involved, supportive, consultative, experienced, and savvy. They know the rules, play between the lines, and do the right things.
  3. CEO Oversight: It is the board’s job to select the CEO, provide the CEO with support and guidance, and to hold the CEO accountable. Good boards exercise great care and prudence in profiling CEO candidates, recruiting the right CEO for the job, providing the CEO with a clear job description, successfully onboarding the CEO, and holding the CEO accountable for meeting a set of clearly defined expectations. Good boards do not attempt to micro-manage a CEO, rather they understand their highest value in being a value added resource for the CEO focused on helping the CEO become successful.
  4. External Visibility: A key responsibility of the board is to serve as an external champion of the corporate brand. Board members should have a clear understanding of the corporate vision and mission, and where prudent, evangelize the message for the benefit of the corporation. Whether this requires providing networking assistance, investor relations support, or engaging the media, a highly regarded and active board can add substantial value to the enterprise.

Let’s turn our attention back to the original question…In the text that follows I’ll offer several points that will help a board evaluate whether or not they have the right CEO for the job:

  • Tenure: In a previous post entitled “CEO Term Limits” (a must read for board members) I stated that there is no such thing as a standard shelf-life for a CEO. No rules of thumb apply when evaluating whether a CEO has outworn his/her usefulness purely from a chronological perspective. I’ve witnessed CEO’s where the company has outgrown their skill sets, and/or abilities within a year of hire (a bad hire…), and I’ve also observed many instances of CEOs that have successfully guided companies for 20+ years. The question is not how long a CEO serves, but rather what he or she does while serving. Whether age 32, or age 72, a board must ask themselves, is our CEO doing the job, and perhaps the better question is, are they the best CEO for the job?
  • Performance: The topic of performance is a multi-faceted issue. A CEO’s performance should be benchmarked against a variety of key performance indicators which are clearly spelled out in the chief executive’s employment agreement. When evaluating performance, a board must evaluate whether a lack of performance exists across all areas or in a single area, whether the lack of performance is a short-term aberration vs. the likelihood of it being a burgeoning problem, and whether the CEO can be coached through the performance gap or whether the lack of performance is an irreconcilable issue.
  • Ethics Violations: The character of the CEO is often synonymous with the brand of the enterprise. Once a chief executive has violated the public trust, or made a gross or negligent error in judgment which could taint the corporate brand, a board should move swiftly to restore the integrity of the corporation. Many things can be spun, justified, rationalized, or managed, but a lack of ethical behavior on the part of the chief executive is not one of them.
  • Loss of Confidence: Once the board, the employees, the capital markets, the press, or other key constituencies have lost confidence in the CEO, the board must replace the CEO. A CEO cannot lead, motivate, or inspire without the trust and confidence of those they serve.
  • Lack of Development: The corporate enterprise and the business world in general, are dynamic, fluid, and evolving environments. Therefore great chief executives cannot be static in their personal or professional development, or in their strategic and tactical approach to doing business. A CEO that does not exhibit the ability to change, innovate, and grow with the world around them is someone who will likely need to be replaced.

In the final analysis, the board’s decision as to whether a CEO should be replaced is a decision that should be made within the framework of managing risk and opportunity. The board must weigh the transitioning a CEO against the financial costs, the impact of the business disruption and lack of continuity that can come with replacing the CEO, the market reaction to a change in leadership, and whether the decision is ultimately motivated by right thinking.


Effective Compensation Plans

By Mike Myatt, Chief Strategy Officer, N2growth 

Compensation Plans“Can you provide any tips for modeling a winning compensation plan?” is today’s Myatt on Mondays question which was asked by a CFO of an Internet marketing company. While certainly a great question, I must admit that I have been reluctant to address the topic of compensation in previous posts as compensation theory is not only complex, but it often varies greatly based upon the situational realities of different workplace environments. That being said, there are definitely key elements which serve as the foundation for any well designed compensation plan which I’ll cover in today’s post…

As critical an issue as compensation is to a company’s health and well-being it is not something that should be assessed solely on its own merits. Compensation is interwoven into the core of a company’s culture and has many touch points across the enterprise. Moreover the best compensation plan in the world will not make up for a lack of leadership, a poor product or service offering, a lack of integrity or any number of other more important corporate characteristics and values. As an example, if you have a best in class compensation plan, but a low quality product offering you won’t attract quality clients or quality talent. Rather you’ll just attract mercenary employees looking to exploit a compensation plan and who will disappoint clients that will in turn seek solace from your competitors.

Taking note of the above referenced caveats, it has still been my experience that if you desire to effect change or influence culture within a corporate setting the most effective catalyst is a well engineered compensation plan. A fully integrated comp plan built upon sound underlying business logic is one of the very few strategic management tools available to an organization that can lift company morale, as well as have a simultaneous, dramatic positive impact on both the top and bottom line.

In order to thrive in today’s ultra-competitive marketplace, it is essential that companies invest in processes that reward profitable behavior, align groups (i.e. teams, business units or operating entities) and meet the strategic goals of the enterprise. Realizing the direct correlation that a properly designed compensation strategy has to operational and financial performance, it is mission critical to implement an integrated compensation model that is fair, rewarding and profitable for the both the company and its employees. In order to be effective for all concerned parties, an integrated compensation plan must provide the following benefits:

  • Create a better alignment between strategy, efforts and results;
  • Create the proper relationship between fixed and variable compensation overhead;
  • Grow revenue by quickly adapting to changing business conditions and competitive threats;
  • Increase profitability by cutting administrative costs and tying compensation to variables that keep compensation overhead within industry norms while advancing business initiatives;
  • Serve to focus corporate culture and behavior on revenue growth and profitability;
  • Serve as a leverage point for recruiting and retention efforts;
  • Create goal congruence between the employees and the company;
  • Serve as a foundational catalyst for change management across the enterprise;
  • Preserve continuity of equity/ownership;
  • Provide long-term wealth creation for key employees without disrupting continuity or creating a funding hardship for the enterprise;
  • Maximize tax advantages for the company and its employees, and;
  • Enhance the overall quality of company benefits plan by providing a wide array of meaningful benefits to employees at all levels.

Before diving in and re-engineering an existing compensation plan, careful consideration should be given to both the current dynamics and future goals of the enterprise. In assessing the various options for the architecture of an integrated compensation plan the following items must be taken into account:

  • The organizational and operating history of entity;
  • The compensation history surrounding the entity and its employees;
  • Current compensation of employees bench-marked against national standards, local competitors, current production, and future business goals;
  • The duties, responsibilities and current risk exposure of employees, and;
  • The employee’s current and future role as team members of the company.

Let’s take a look at some of the building blocks available to management when considering different compensation options. The following items are all viable options to be included in a fully integrated compensation plan:

  • A Competitive Salary and Benefits Program;
  • Executive Perquisites (company car, use of corporate jet, club memberships, housing allowance, expense accounts, etc.);
  • Commission and Override Structures;
  • Defined Benefit and Defined Contribution Plans;
  • Deferred Compensation Plans;
  • Incentive Stock Options (ISO’s);
  • Non-qualified Stock Options (NSO’s);
  • Employee Stock Purchase Plans (ESPP’s);
  • Employee Stock Ownership Plans (ESOP’s);
  • Phantom Stock Ownership Plans and other Non-qualified plans;
  • Profit Sharing Plans;
  • Bonus Pools, and;
  • Project or Initiative Based Incentive and Participation Plans.

As noted above the implementation of a compensation plan in and of itself will not heal an otherwise ailing company. However a fully integrated and well designed compensation plan rolled out in a healthy corporate culture based upon quality, integrity and character will have a dramatic positive result.

First Time CEOs

By Mike Myatt, Chief Strategy Officer, N2growth

Don't just roll the dice as a new CEO...Today’s Myatt on Monday’s question was posed by a new CEO who asked: “Do you have any tips for first-time chief executives of a start-up company that would allow for a faster and more effective transition?” Virtually all of the advice and counsel I provide to CEOs is just as applicable to first-time CEOs as it is to tenured executives. Moreover, while start-up and early stage companies certainly have unique issues, great executive leadership is really not life-cycle centric. While I could suggest you buy a copy of my book, or read other posts contained on this blog (not bad suggestions by the way), I thought it might be interesting to see how other CEOs would answer the question. In the text that follows, I have provided a variety of answers to today’s question, which have been put forth by a number of different C-level executives and directors… 

“Take a very critical look at your product, how competitors will respond, and why customers are going to give you a chance. The high tech landscape is littered with companies that had great ideas and were even first to market, only to be crushed. Netscape is a great example, along with countless PC companies, dotcoms, and yes even wireless companies. Patents in theory are great, in reality they are easy to get around and expensive to defend, so you can’t hang your hat on that. The bottom line is that founders are rightfully proud of their product, company and strategy; and this often blinds them to the competitive threats in the market place and the challenges of entering/penetrating the market and gaining market share. The best question to ask is why.”
CEO of a Service Company

“Retain a CEO Coach…someone who’s been there before and knows how to avoid the land mines that you would undoubtedly uncover if left to your own devices”
CEO of a Technology Company 

“All that matters when you are starting is funding. Period. If you don’t have the money backing you, the best laid plans in the first 100 days, or rallying your troops to support your efforts won’t matter. Number one priority should be an excellent member of the team who is LOCKED into the venture community that has done this before.”
   ~ CEO of a Technology Company

“Build a customer value analysis spreadsheet or table that succinctly quantifies the value to a potential customer. If you can demonstrate an overwhelming or compelling customer benefit (e.g. X months payback, Y percent IRR [internal rate of return] etc.), then investors will be intrigued. It’s not the technology; it’s the value it creates for customers, and your ability to defend your unique intellectual property, through patents and trade secrets, that should be emphasized.”
Senior Executive of an Energy Company

“I cannot overemphasize the importance of having a skilled and trusted finance professional on your team from day one. I would recommend that you not even make the first phone call to a VC or Angel without this person in place (either a full time or trusted contractor/CFO for hire type). Second, you must get referenceable customer traction (installs and most importantly revenue, however little) as soon as possible. Third, from day one, make sure you build a workable/trusted alliance with the founders and that they are in agreement that you ’are‘ the CEO both outside and inside the company.”
CEO of a Software Company

“You need to take some fast actions on low-hanging fruit to show the organization and team that you are quick on your feet and a decisive leader. They (your new team) all know the low-hanging fruit, pick some. And as the CEO, you are responsible for the Corporate Culture, so make it clear early on what type of culture you are driving.”
CEO of a Telecom Company

“Talk to everyone in the organization and in the industry as soon as possible; deliver bad information immediately (and don’t try to ’spin‘ it); and remember to breathe!”
CEO of a Consumer Services Company

“1. If you haven’t already, draft a ‘first 100-day’ plan.
2. Start-ups and early stage companies are fun to run; but you need to move quickly….constantly work at creating a higher sense of urgency — even when you think things can’t possibly move any faster.”
President of a Media Company

In the start-up operation, it is very important that you do the ‘SWOT’ analysis (Strength, Weakness, Opportunities and Threat). Moreover, a pilot run based on a predetermined period would unfold all the problems related to your start-up operations. Isolate them, and find solutions and alternative methods to address the same and move forward. The key is to have a positive cash-flow at the end of the first year.”
President of an Apparel Company

“Surround yourself with trustworthy people as quickly as possible. With so many decisions to make in a short amount of time, you will often have to move forward without having all of the information you would want. This works best when you can tap into people who have relevant, specialized expertise and are not afraid to challenge your thinking, while at the same time have demonstrated a commitment to making the overall business successful (not just about themselves). Then you will be more likely to make fewer critical mistakes.”
Senior Executive of a Biotech Firm

“Understand the culture and the current people who play in that culture. I found that some have hidden agendas that will undermine what you were brought in to accomplish.”
Senior Executive in the Food and Beverage Industry

“You need to be a good listener. Hear what your people have to say about what is working and what is not. Make them feel that they are part of the change process and you will have their buy-in along the way. Create an action agenda that outlines clearly where the company is going and what needs to get done along the way to achieve the desired results and continue to keep people updated on the company’s progress.”
Senior Executive of a Pharma Company

“Make sure you have a clear understanding of the priorities of your Board of Directors, both individually and collectively, and establish good frequent dialog with them. No matter how brilliant your action plans and strategies, you must be in alignment with your board’s expectations and priorities to be successful as CEO.”
Managing Partner, Private Equity Firm

“Take some private time. Don’t let the job define you.”
Senior Executive of a Telecom Company

“One sure way to win respect and loyalty is to find out what the key priority of the team was that was dismissed by the former CEO. If there is any kind of consensus that the company was being held back in an area by your predecessor, you can look like a hero; show that you listen to and value your subordinates’ ideas, and there is a good chance that they are right and the company will pick up in performance.”
CEO of a Marketing Company

“Leadership is the key attribute for ensuring success as a CEO; and leadership, in my opinion, is very much driven by one’s ability to manage expectations of the numerous constituencies a CEO must deal with — employees, board members, investors, strategic partners, community, industry associations, etc. To accomplish this requires clear and precise communications with all, combined with the ability to adjust your/their expectations as critical information is obtained, assessed and addressed.”
~Senior Executive of a Financial Services Firm

“My advice would be to develop your personal networks while in the CEO position, to have a support system outside the company, and to develop a net in the event that the position does not work out to your expectations.”
~Director of a Phara Company

“It is all about expectations! Or, more to the point, the difference between expectations and reality. Try as we might to control the reality of our surrounds, it is far easier to control (or at least moderate) the expectations.”         ~ CEO of an IT Consultancy

“If possible, a few days before you actually start, have the HR person or CFO hold a short meeting of all your direct reports to be; the person controlling the meeting asks, ‘What do we want to know about John/Jane Doe?’ The second question asked is, ‘What do we want him/ her to know about us as a group?’ The third question is, ‘What do we want him/her to do for the company?’ The fourth question is, ‘What do we want him/her to do for us as a group?’ The responses are noted and presented to you when you first take the chair. It can be quite surprising what comes out of these questions asked when you are not there and may never know (at least for sure) who asked what, unless the one raising the question tells you.  The one critical point is that when you reconvene the group to give them your answers, to be done within 72 hours of your start, you are totally honest and candid, as you will be measured against your initial statements. This does not mean that actions cannot be flexed from the initial statement but do them with recognition of what you said and give comment as to why, so all can understand; it helps the trust factor significantly. Obviously the objective is to shorten the learning period in a structured way, and for me it has always proven beneficial.”
CEO of a Manufacturing Company

“1. Meet with your board members individually (typically over lunch or dinner).
2. Find a very good mentor.
3. Stay calm, stay cool, stay collected.”
CEO of a Bank

“It is all about making money! Nothing more, nothing less. You’re in because they made a bet that you will make them more money than the other guy. You’re out because you did not make very much money for them. Don’t ever forget that.”
CEO of a Professional Services Business

“What is success as a CEO? It’s simply this: Living life without fear in your gut (living with peace) and looking back and being proud of yourself for the positive impact you made on people, both high and low in rank. You see, it’s all about your attitude and how people see you. What’s inside can be contagious.”
CEO of a Manufacturing Company

“Do not hesitate to make a decision. Hesitation or being indecisive will become rampant in the organization. Do not be shy about laughing at yourself in front of others. Never compromise your personal ethics and beliefs. Finally, know when it is time to go home. It is a job.”
President of a Manufacturing Company

Affordable Employee Benefits

By Mike Myatt, Chief Strategy Officer, N2growth

Today’s Myatt on Monday’s question was posed by a CFO who asked: “What is the best way to manage the rising cost of employee benefits?” While the escalating cost of benefits is something that all companies deal with, for small and middle market entities the prices and complexities are nothing short of staggering. In today’s post I’ll address one of the best and most often overlooked option for minimizing HR related expenses and maximizing HR opportunities…  

Hard dollar expenditures are just part of the benefits debacle, as soft dollar costs associated with management often act as a silent but very lethal killer. As a business grows, so does the brain damage associated with managing HR related initiatives. Scaling your workforce means spending more time setting up and administering employee benefits, overseeing details like payroll, and making sure the business is in compliance with an ever burgeoning list of employment-related laws and regulations. The aforementioned tasks can create a painful time-suck for executives who now must spend time hiring and managing human resources staff on top of everything else…

One of my favorite solutions for companies ranging in size from as a staff of 5 employees to as many as 2,500 employees is a Professional Employer Organization (“PEO”). Essentially, a PEO provides one-stop shopping for employee benefits and human resources services. When a company decides to contract with a PEO, most or all of the company’s employees actually go on the payroll of the PEO. You determine who gets hired, what they’re paid, how they’re managed and who gets fired…The PEO takes care of the rest…

PEOs manage your company’s health benefits, paid time off (PTO), retirement savings plan administration (401k, 403b or deferred compensation plan). Through the PEO you have access to a variety of health care partners to choose from offering your employees a range of affordable plan options, including HMOs and PPOs, dental and vision insurance, life insurance, AD&D insurance, and short term and long term disability insurance. PEO plan choices also typically include flexible spending accounts, health savings accounts, an employee assistance program, a legal assistance program, and several other innovative wellness programs. 

The PEO also takes on responsibilities such as payroll taxes, workers’ compensation coverage, and benefit and employment compliance responsibilities in areas such as the FLSA (Fair Labor Standards Act), FMLA (Family Medical Leave Act), HIPAA (which governs health-care privacy) and COBRA (which allows employees to continue group health benefits under certain circumstances). PEOs can also assume a wide range of other administrative functions, such as employee file maintenance, unemployment claims processing, workers’ compensation claims management and employee handbooks.

The advantages of PEO’s are somewhat obvious. You no longer have to deal with human resources issues directly. That means you can say goodbye to the days of maintaining payroll records, negotiating health insurance plans, and mediating workers’ compensation claims. This frees up time for you and your office staff to concentrate on growing your company…there’s an interesting thought. 

The bottom line with PEOs is that they afford companies the benefits of increase the quality of benefits offered, lowering costs, transferring risk, saving time and generally improving the efficiency of HR related functions…If you want more information on PEOs please contact us.  

Keyword Analysis 101

By Mike Myatt, Chief Strategy Officer, N2growth

Today’s Myatt on Monday’s question comes from a marketing executive who asks: I hear a lot about keyword optimization, but what is this specifically, and how important is it really?” If you want to be successful on the Internet, understanding how to leverage Keyword and Keyword phrases is imperative. While understanding the art and science behind keyword analysis is only one part of search engine optimization, it is nonetheless a critical component. In today’s post, I’ll provide an overview that will help readers understand how keywords impact search engine marketing…

Your keywords serve as the foundation of your Internet marketing strategy. If they are not chosen with great precision, no matter how aggressive your marketing campaign may be, the right people may never get the chance to find out about it. So your first step in plotting your strategy is to gather and evaluate keywords and phrases. Search engines (Google, Yahoo, MSN,, etc.) use algorithmically based programs referred to as “search-bots” or “spiders” to crawl your website reading meta-data. Your keywords and keyword phrases comprise a subsection of your website’s meta-data. If they do not exist, are improperly selected, and/or not correctly supported by on page content, your website will be virtually invisible to the search engines, and therefore virtually invisible to those potential purchasers of your products and services.

Put simply, search engines are the vehicles that drive potential customers to your websites. But in order for visitors to reach their destination – your website – you need to provide them with specific and effective signs that will direct them right to your site. You do this by creating carefully chosen keywords and keyword phrases. Think of the proper keyword optimization as the key ingrediant in the secret sauce of the Internet. If your keywords are not relevant, incorrectly structured, too general, or too over-used, the possibility of visitors actually making it all the way to your site – or of seeing any real profits from the visitors that do arrive – decreases dramatically.

You probably think you already know EXACTLY the right words for your search phrases. Unfortunately, if you haven’t followed certain specific steps, you are probably WRONG. It’s hard to be objective when you are right in the center of your business network, which is the reason that you may not be able to choose the most efficient keywords from the inside. You need to be able to think like your customers. And since you are a business enterprise, and not the consumer or end-user of your products and services, your best bet is to go directly to the source.

Instead of plunging in and scribbling down a list of potential search words and phrases yourself, ask for input from as many potential customers as you can. You will most likely find out that your understanding of your business and your customers’ understanding is significantly different. The consumer is an invaluable resource. You will find the search terms you accumulate from them are words and phrases you probably never would have considered from deep inside the trenches of your business.

Another great source of keyword information is to look at the competitive websites that rank highly under coveted keywords.  Simply conduct a keyword search for a keyword or keyword phrase that you would like to indexed under. Click on the top organic listings of the websites that comprise the top returned searches. When you land on one of the competitive home pages, right click your mouse, and then click on view source which will reveal the source code for that webpage. Near the top of the page you’ll find the sites meta-data including a list of all their keyword and keyword phrases. By reviewing the keyword structure of competitive websites that rank successfully, you will have better clarity of what you should do on your website in order to be competitively positioned.

Only after you have gathered as many words and phrases from outside resources should you add your own keyword to the list. Once you have this list in hand, you are ready for the next step: evaluation. The aim of evaluation is to narrow down your list to a small number of words and phrases that will direct the highest number of quality visitors to your website. By “quality visitors” I mean those consumers who are most likely to make a purchase rather than just cruise around your site and then take off for greener pastures. In evaluating the effectiveness of keywords, bear in mind three elements: traffic, relevance, and intent.

Traffic: Popularity is best guaged by traffic. If a search term produces no traffic it has little value. Traffic is the easiest to evaluate because it is an objective quality. There are many tools (free and paid) that will rate the popularity of keywords and provide search counts for phrases.  Tools such as WordTracker will even suggest variations of your words and phrases. The higher the number this software assigns to a given keyword, the more traffic you can logically expect to be directed to your site. The only fallacy with this concept is the more popular the keyword is, the more competitive it is, and thus the more difficult it will be to attain a high organic ranking, and the more costly it will be to compete for paid placements. The bottom line is that if you don’t have page one visibility on search engines for important keywords, you really have no visibility at all.

Relevance: Popularity isn’t enough to declare a keyword a good choice. You must move on to the next criteria, which is relevance. The more specific your keyword is, the greater the likelihood that the consumer who is ready to purchase your goods or services will find you. Let’s look at a hypothetical example. Imagine that you have determined that taffic rankings for the keyword “automobile companies” is very high. However, your company specializes in bodywork only. The keyword “automobile body shops” would rank lower on the traffic scale than “automobile companies,” but it would nevertheless serve you much better. Instead of getting a slew of people interested in everything from buying a car to changing their oil filters, you will get only those consumers with trashed front ends or crumpled fenders being directed to your site. In other words, consumers ready to buy your services are the ones who will immediately find you. Not only that, but the greater the specificity of your keyword is, the less competition you will likely face making your search initiatives more affordable and efficient.

Intent: The third factor is intent or consumer motivation. Once again, this requires putting yourself inside the mind of the customer rather than the seller to figure out what motivation prompts a person looking for a service or product to type in a particular word or phrase. Let’s look at another example, such as a consumer who is searching for a job as an IT manager in a new city. If you have to choose between “Chicago job listings” and “Chicago IT recruiters” which do you think will benefit the consumer more? If you were looking for this type of specific job, which keyword would you type in? The second one, of course! Using the second keyword targets people who have decided on their career, have the necessary experience, and are ready to enlist you as their recruiter, rather than someone just out of school who is casually trying to figure out what to do with his or her life in between beer parties. You want to find people who are ready to act or make a purchase, and this requires subtle tinkering of your keywords until your find the most specific and directly targeted phrases to bring the most motivated traffic to you site.

Once you have chosen your keywords, your work is not done. Your on page content must be written around the keywords and keyword phrases that you have selected. The algorithms’ used by the search-bots assess both the relevancy and redundancy of your keywords. You main keywords should be represented in the URL, the page title, Alt and image tags, at the beginning of the first paragraph, 5 – 7 times throughout the page itself, and should be linked to other pages within your site. This is the killer combination that makes everything come together.

You must continually evaluate performance across a variety of search engines, bearing in mind that times and trends change, as does popular lingo, and the search engines are constantly updating their algorithims as well. You cannot rely on your log traffic analysis alone because it will not tell you how many of your visitors actually made a purchase. Luckily, some new tools have been invented to help you judge the effectiveness of your keywords in individual search engines. There is now software available that analyzes consumer behavior in relation to consumer traffic. This allows you to discern which keywords are bringing you the most valuable customers.

This is an essential concept: numbers alone do not make a good keyword; profits per visitor do. You need to find keywords that direct consumers to your site who actually purchase your products and services, fill out your forms, and download your information. This is the most important factor in evaluating the efficacy of a keyword or phrase, and should be the sword you wield when discarding and replacing ineffective or inefficient keywords with keywords that bring in better profits.

Ongoing analysis of tested keywords is the formula for search engine success. This may sound like a lot of work – and it is! But the amount of informed effort you put into your keyword campaign is what will ultimately generate your business’ rewards.

Columbia University…Round 2

By Mike Myatt, Chief Strategy Officer, N2growth

Today’s post is a follow-up to Friday’s blog regarding Iranian President Ahmadinejad’s invitation to speak at Columbia University (If you didn’t read the original piece start here).  I hadn’t intended to follow-up on Ahmadinejad’s speech yesterday, but the combination of inquiries and post debate fall-out has inspired me to do just exactly that.

You see the reality of the situation is that you didn’t need to view Ahmadinejad’s speech yesterday to know where he stood on issues. There are significant amounts of readily available content accessible to most people (at least those who reside outside Iran) that cite chapter and verse his record of deceit, delusional beliefs, human rights violations and terrorist activities. Okay sure, it was amusing to hear him deny that homosexuality doesn’t exist in Iran, or to listen to him attempt to state that incontrovertible historical facts are to be looked at in the same fashion as scientific theory (last time I checked there was a very definable difference between fact and theory), but there was a huge price that we all paid for being entertained. Columbia University President Lee Bollinger’s grand standing and face saving attempt (while I agreed with the positions he espoused) did far more harm than good.

Again, nobody can deny that it was certainly interesting to watch Ahmadinejad “bob-and-weave” however it was clear to anyone with a discerning eye that he is not a credible person. Therein lies the problem The Iranian people won’t see what we saw yesterday. In fact, there have already been clips released on Iranian TV showing very tightly edited pieces making Ahmadinejad look very credible while Columbia President Bollinger comes across as attackingly rude and arrogant. At the end of the day I fear all that happened yesterday was to accomplish what I thought would happen if Ahmadinejad was allowed to have a platform to speak He is now in possession of media clips and sound bites that he can strategically use as unifying propaganda pieces amongst the Iranian people.

Where Bollinger got it wrong was this had nothing to do with free speech or public discourse and everything to do with poor decisioning by Columbia University to give a terrorist a prestigious platform to use for his evil purposes that will continue to place American lives at risk. As I said above this isn’t about first amendment rights, but rather it is a case of just doing the right thing.

I do believe very strongly that there is a clear existence of “right and wrong” in this world. I am willing and capable of forgiving wrong doing where there is contrition, acceptance of responsibility and a sense of remorse. Building rapport and closing gaps in philosophical or ideological differences in these situations is what I believe we should rightly expect of all human beings. However this war on terror goes far beyond simple philosophical differences. I believe it is nothing short of foolishness to blur the lines of common sense with politically correct thinking when you’re dealing with someone who has blood on his hands and is publicly engaged in attempting to take American lives.

As a nation we need to be able to understand and draw a distinction between “good vs. evil” as I believe there is a clear difference between acts of wrong doing and acts of “evil”. Evil has always existed in this world and regrettably I believe it always will. I don’t believe this is necessarily a question of “flags” as there is an element of evil residing in every culture. Simply wishing evil doesn’t exist or wanting to look past its existence does not mean that it is not ever present. Evil shows no remorse or contrition Evil does not discriminate and evil can strike at a moments notice as we witness on the news each and every day. It is evil that I see as everyone’s enemy and that I choose (it is clearly a choice) not to seek common ground with or to build rapport with.

You cannot negotiate with evil as evil is not trustworthy and will not honor commitments and promises. I don’t mean to come-off as cynical or jaded, but I simply believe in dealing with the reality at hand (at least as I see it). We are at war and need to wake up to that fact…

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