Building Unified Financial Visions

Ken Gibson
December 21st, 2011 by Ken Gibson

CEO Summit

Last week I attended a fabulous event put on by Chief Executive Magazine in New York at the Stock Exchange.  It was a meeting designed to help CEOs connect with their peers and discuss the issues relevant to their roles in business right now, in this financial and political environment.  If you haven’t attended one of their events in the past, I would highly recommend doing so in the future if you lead a business.  Here are just a few highlights from the New York Conference, in no particular order:

Achieving Growth in a Low-Growth Enrironment

Bob Nardelli, CEO Cerberus Capital (former Chair and CEO at Chrysler and Home Depot)

  • Enhance the Core (drive innovation in core business)
  • Extend the Business
  • Expand the Market

Lynn Tilton, CEO Patriarch Partners

  • Break every business down to its variables
  • Companies that get left behind are those that don’t innovate
  • Companies are just people–you have to have the right talent
  • Create a culture of innovation
  • Create a culture of appreciation
  • Do what’s right; key quote: “Too often we’re thinking about our business interests instead of what’s right and wrong. Doing what’s right will more often than not serve our long-term business interests.”

Fred Hassan, Chairman Bausch & Lomb & Senior Partner, Warburg Pincus

  • Some companies get so good they forget to keep getting better
  • Look at your trust index; foundational customer question–”would you recommend this company?”

How to Grow When Markets Stall

Ram Charan, Author, Strategist, Former Professor at Harvard Business School

  • Put people before strategy–people need to know what’s required to be done
  • Remain sensitive to customer–need to be connected to the ground floor of the person that buys your product or service
  • Work from the outside in, not inside out–look at the need that must be fulfilled and then work backwards at what needs to be done to fill it
  • Devote disproportionate management attention to differentiation
  • Remember to pay attention to the basics–look at external trends; remember that the consumer experience is the key differentiator

Next week, I will share some more.  All for now.

 

 

Tags: , , , , ,
Posted in Business Growth & Compensation, Business Growth and Rewards, Key Talent Compensation, Managing Talent | No Comments »

Ken Gibson
May 3rd, 2010 by Ken Gibson

One Quarter of Your Highest Potential People Plan to Leave in the Next Year

That is not a VisionLink claim.  It’s the claim of Jean Martin and Conrad Schmidt, both of the Corporate Executive Board’s Corporate Leadership Council in Washington, DC, as reported in their Harvard Business Review article–May 2010 edition.  The claim is based on research done by the Leadership Council in September of 2009.  It’s a staggering statistic.

Following that claim, the authors proceed to delineate the six most common errors their research produced that  contribute to this outcome: 1) Assuming that high potentials are highly engaged; 2)Equating current high performance with future potential; 3)Delegating down the management of top talent; 4) Sheilding rising stars from early derailment; 5) Expecting star employees to share the pain, and; 6) Failing to link your stars to your corporate strategy.

That last mistake (not creating links between key people and strategy) is also the basis for three of the 10 core set of best practices  the article goes on to define for identifying and managing key talent.  It is likewise reflective of the central philosophy VisionLink espouses relative the development of World Class Compensation.  Creating great rewards strategies does not begin with a discussion of compensation.  It begins with a discussion of vision, strategy, roles and expectations.  Rewards should be an extension of that train of thought.

Here are three of the best practices identified in the article, and VisionLink’s observations about each.

  • Create individual development plans; link personal objectives to the company’s plans for growth, rather than to generic competency models.

    VisionLink Observation: Compensation in high performing organizations is one of the tools that forges this link and advances a unified financial vision for growing the business.  Employees will understand this connection (between personal objectives and the company’s growth plans)  if they feel a sense of partnership in their business relationship–financially (through pay) and otherwise.

  • Reevaluate top talent annually for possible changes in ability, engagement, and aspiration levels.

    VisionLink Observation: Performance is not static and pay for performance isn’t either.  A compensation philosophy should clearly define what a company will “pay” for and practices must bring that philosophy to life.  Evaluation tools should be employed at least annually to assess engagement and aspiration levels to determine the level of alignment that is taking place.

  • Offer significantly differentiated compensation and recognition to star employees.

    VisionLink Observation: This is the basis of a pay for performance philosophy and the heart of world-class compensation.  Star companies are fueled by star employees. If the business is performing above the market, premier talent will know that, and will expect to be paid accordingly.  If star performance isn’t being achieved, review the previous bullet point.

As companies begin to emerge from the deep sleep imposed by the recent economic slump, they would do well to make sure they are avoiding the mistakes Jean Martin and Conrad Schmidt have identified.  Equally, they should ensure they are well poised to employ the critical components of a world class talent-development program.

Tags: , , , , , , , ,
Posted in Business Growth & Compensation, Business Growth and Rewards, Current Pay Trends and Topics, Recession Strategies, Uncategorized | No Comments »

Ken Gibson
June 16th, 2009 by Ken Gibson

Avoid the Temptation of Bad Profits

Difficult economic cycles can lead individuals and organizations to practices which, in better times, were unacceptable.  Most of the time, this isn’t the result of some overt change in the corporate value or mission statement.  Rather, it comes more often in the form of revised expectations that can only be achieved if something is given up.  Too often in such cases, what is surrendered are good profits. 

In his book The Ultimate Question, author Fred Reichheld (director emeritus and fellow at Bain and Company) explains it this way:

“Too many companies these days [especially during recessionary periods] can’t tell the difference between good profits and bad.  As a result, they are hooked on bad profits.

“…Whenever a customer feels mislead, mistreated, ignored, or coerced, then profits from that customer are bad.  Bad profits come from unfair or misleading pricing.  Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value…

“Good profits are dramatically different.  If bad profits are earned at the expense of customers, good profits are earned with customers’ enthusiastic cooperation.  A company earns good profits when it so delights its customers that they are willing to come back for more–and not only that, they tell their friends and colleagues to do business with the company.”  (The Ultimate Question, Fred Reichheld, Harvard Business School Press, Boston Mass., 2006, chapter 1)

How can effectively engineered rewards strategies help an organization avoid bad profits?

It starts with a philosophy statement that defines what kind of performance the company will reward.  Such a philosophy should lead the business to develop both short-term and long-term incentive plans that mirror the immediate AND  sustained results the organization seeks to achieve.  Metrics for both plans reflect the performance standards required for a sustained increase in shareholder value.  Short-term rewards create a sense of urgency now while long-term incentives keep the performance “honest”–so key talent stays focused on consistent, prolonged  execution that moves the  customer from awareness to acceptance to advocacy. 

This approach also allows the company to “flex” with the economic cycle it’s experiencing.  When the economy is soft, employees are told that annual incentives will likely be minimal if paid at all.  However, performers can be assured of increased value credits to their long-term incentives (typically not payable for three to five years or longer) if they perform in a superior fashion.  Ultimately, determining which incentive plan should be used (ones that increase shareholder value through sustained good profits) is a key CEO decision that will deeply impact the ability of the company to avoid the bad profit syndrome.

Using compensation as a strategic tool, then, becomes a critical way organizations reinforce vision, strategy, roles and expectations to their workforce.  Taking time to address these issues properly is key to generating good profits instead of bad.

Tags: , , ,
Posted in Recession Strategies | No Comments »

Ken Gibson
April 23rd, 2009 by Ken Gibson

Compensation and the Recession

The Seven Imperatives

Growth companies understand that economies are cyclical.  Times of surge and prosperity are countered by periods of contraction and downturn. Great companies plan accordingly. To flourish during difficult economic periods, business leaders in growth oriented companies must strategically address the role of their human capital and reward systems in meeting the challenges they face. The following Seven Imperatives should guide any business leaders thinking in such times.

1. Assess Your Talent Pool–

Know who your best people are and make sure they know what their role is in the future of your company, especially at this time.

2. Create a Pay for Performance Philosophy and Strategy–

Now is the best and most critical time to align pay with performance. This starts with identifying a philosophy that defines how the company will address rewards issues in good economic times and bad.

3. Focus on Strategy not Just Tactics–

Your long‐term vision for growth hasn’t changed just because the economy is hurting. Strategies drive growth, tactical changes manage costs.

4. Define Clear Performance Expectations–

Star performers want a clear understanding of the key results indicators they are responsible for and what their stewardship will impact.

5. Nurture an Ownership Mentality–

An ownership mindset permeates an organization when there is “line of sight” between the shareholders’ vision and strategy, the roles and expectations of key people, how those individuals are rewarded for generating those results and how well those rewards align with personal goals and objectives.

6. Build a Value Statement–

The best way for a key people to visualize their financial future with your company is to receive a statement that summarizes and projects forward the total value of that relationship if performance expectations are met–salary, short-term incentives, long-term incentives, 401(k), etc.

7. Cut Business Expenses First, Incentives Last–

Reward performers and reinforce the results you need to continue to achieve—don’t try to resolve the company’s financial woes on the backs of your best people.

Tags: , , , , ,
Posted in Recession Strategies | 2 Comments »