Incentives to Keep Key Managers

There is a key role for incentives in managing and retaining key executives for the company. Here are some reasons for and examples of how to structure effective incentive programs for management.


1. You want to retain key management personnel for a number of reasons. High turnover destabilizes the company and can have severe effects on moral of employees and the bottom line.
2. You want to retain high performing managers to enhance your own company’s growth potential. Keep key managers from moving to competition.
3. Good managers don’t expect a bonus without achievement but don’t set the bar so high as to be unachievable. That becomes a disincentive to achieve.
4. Set goals that help improve your bottom line; achieving new sales records is not a priority if the costs exceed the benefit. Sales executives should be just as concerned about profitable sales as the CFO.
5. Pay executives for overachieving by sharing profits. As profits goals are exceeded rewards can continue to be major incentives if shared fairly. Reward contribution.
6. Be competitive but unique and allow key employees to participate in goal setting. When they are part of setting the goals they are more likely to increase efforts to reach the bar.
7. Conduct periodic reviews to ensure all incentive participants know where they stand. Let’s not have surprise results announced at year end….good or bad.
8. Be completely transparent. If goals are profit based show actual revenue/profit results so that there is a clear understanding of achievements.
9. Roll plans forward and allow incremental bonuses for achievements in consecutive years. That’s a great way to keep a key person from leaving; that extra bonus for additional achievement may be too juicy to walk away from.
10. Stock options are often used as a tool for key employee retention. The chance to be a part of ownership can be major motivator. However recent issues in corporate governance have tended to dilute and weaken some incentives. Try to strive for balance without risking responsibilities to shareholders.

Incentives are important tool to maintain a motivated and dedicated management team and a well-designed plan can bear fruit over the long term.

Those are a few on my thoughts. Let me know what you think.
Gerry@polarisgroupmc.com

Are you a Successful Leader?

Leadership is learned behavior that becomes stronger over time. The process of making decisions comes from an accumulations of experience. The most successful leaders are instinctual decision makers who are more tolerant of pressures associated with decision making and leading the business.

Here are a few traits of successful leaders:

1. Allow subordinates the opportunity to speak freely.
Leaders sometimes intimidate colleagues and subordinates with their position and power when they enter a room. Successful leaders deflect attention away from themselves and encourage others to voice their opinion. They are always approachable.

2. Make Decisions
Successful leaders are expert decision makers. The facilitate dialogue and empower colleagues to reach decisions. They “make things happen”

3. Communicate Expectations
Successful leaders are great communicators particularly with respect to performance expectations. They clearly communicate organization core values and mission statements so that objectives are properly executed.

4. Measure and reward Performance
Great leaders have a strong pulse on the business and on those individuals who lead with strong performance. Successful leaders never take consistent performers for granted and always reward performance appropriately.

5. Use talent effectively.
Successful leaders know their talent pool and how to use it. They facilitate growth in individuals and deploy their skills to maximize their contribution to the business.

6. Avoid Procrastination
Successful leaders tackle issues head-on and know how to get to the core of the issue. They don’t procrastinate and move quickly to solve problems or empower colleagues to make decisions.

There are a few examples of traits successful leaders demonstrate; there are many more. I hope as business leaders your colleagues see these traits in your leadership.

Know your Competitive Advantage?

It is important in building your business to understand your strengths and where you can increase your competitive advantage and produce better results.

What gives you a competitive advantage?
It is your ability to bring together every attribute of your business, to work seamlessly to deliver a standard of excellence your competitors cannot achieve.

How can I assess my organization's competitive advantage?
Check your pulse by asking yourself key questions about your products vs competition; your market share, ability to attract key contracts and customers.

Are you ahead of or lagging competition?
If ahead, you want to maintain that gap and if lagging you want to close the difference in performance. One major way to improve and stand out is to ensure your key brands or services offer unique attributes that competition cannot offer.

Strategically it may be time to invest in a positioning review. A great source to help you through this process is Ed Roach, The Branding Expert. I highly recommend his service.

Contact Ed at:

Ed Roach
ed@thebrandingexperts.ca

Do you have a handle on the finances of your business?

Keeping up with all of the day-to-day demands of operating a small business can cause owners to lose sight of the company’s overall fiscal situation. Owners should be proactive with company finances; here are a few tips that may be useful:


• Benchmark
Know where you are and what your targets should be. A plan is useful and need not be too formal. As milestones are reached know how you are going to get to the next level and what financing may be needed.

• Liquidity
How liquid is the business? Having immediate access to cash can reduce borrowing costs. With funds available you are able to make the most of capital-intensive business opportunities.

• Profitability
If sales are growing but there seems too often to be a cash shortage after bills are paid, the business may have profitability issues. Monitoring profit margins instead of gross sales will help determine what the business is actually earning.

• Stay involved
Business liquidity, profitability and other key ratios are important to evaluating the business – but only if owners spend time reviewing the information. It is necessary to schedule time every month to actually review the data.


While it is not necessary to review financial data daily, consistent reviews are the only way to know if the business is improving or regressing. Owners owe it to themselves and to shareholders to stay aware of the financial health of the business.

I hope the tips are useful, let me have your thoughts.

gerry@polarisgroupmc.com        
               
       

Avoid those killer start-up errors

Are you planning to start a new business?  There are many hazards that might be faced and avoiding these can help improve the chances of success.
Here a few hazards new entrepreneurs should try to avoid.

1. Under financing: lack of sufficient funding is probably the most common reason new businesses fail. Many entrepreneurs fail to assess the burn rate of the capital they have. Often the most costly step is hiring too many people. Try paying people with equity rather than salary, you will end up with a much more committed team and preserve cash. Don’t overspend on equipment and technology you really don’t need to get going.
Also, many start-ups fail to realize that few customers pay promptly; this can severely impact cash flow.

2. Starting without a plan: enthusiasm over a good idea is over-rated. An idea is only an idea and without a well-developed business plan chances of success are minimal. It is also very difficult if not impossible to raise financing without a plan.

3. Fear of Failing: It is natural to have some fear that the business will not succeed and certainly problems will arise and challenge your business acumen. However, if the concept is strong and validated you should not let fear of failing stop you from trying to live your dream.

4. Inflexibility: with start-ups you have to be prepared to change on the go. Rarely does the plan get executed without a hitch. Marketplace dynamics, competitive behaviour and economic conditions can dramatically impact the plan. Ability to react and change plans may be a key to survival.

These are some hazards you may face in starting a business. There are others but avoiding these may help improve your chances of a successful start in business.

I hope this helps you get underway. Let me know.
gerry@polarisgroupmc.com

How do you measure your Financial success?

How do you measure the success of your company? Many small-business owners rely on two traditional financial reports: the balance sheet the income statement. The first tells you what your business owns and owes at a particular point in time, and the second tells you what profit you’ve made over a period of time.
Although both are important here are a few other controls to monitor the health of your business:

• Cash Flow. Are you generating sufficient cash to operate? Is bank financing required to help fund growth? Ever wonder at the end of the year where all the money went? This will provide the important tracking.
• Accounts receivable Collections: Cash flow is dependent on timely collection of receivables. As receivables grow cash flow is stretched thinner. Slow collections can affect liquidity and your ability to cover short term obligations.
• Average sales per customer. As overall sales grow it is important to maintain growth with existing customers. This is often easier than finding new business and a measure of your success in gaining repeat business.
• Margin. Don’t become too focussed on net revenue and become content if this increases yearly. It is important that revenues don’t cost more to generate each year. Operational efficiencies are important to monitor continuously.
Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.

These were just a few considerations. Please let me hear your thoughts.
Gerry@polarisgroupmc.com

Do you have a crisis management plan?

Is your organization struggling to deal with a crisis or plans to ensure the business exposure to a crisis is minimized?  It is not uncommon to see this paralysis because managers often prefer not to deal with the situation.
Let’s look at some steps that can be taken to help build a safety net.

1. Maintain sensitivity for even minor events. Some could have the potential to develop into major issues that could be a blow to the business.
2. Plan ahead with a look to long term strategies as a guide. Work out best and worst case scenarios to help prepare for unseen events.
3. If a crisis arises act quickly; procrastinating rarely improves the situation.
4. Create a crisis management team with a mandate to identify potential problems and empower them to enact changes to protect the business.
5. Provide effective training to key employees and take steps to eliminate small issues so they don’t erupt into major problems.
6. Explore optional solutions and look for new ground to operate from if standard solutions prove inadequate. Think outside the box for solutions.
7. Don’t panic in a crisis situation. As the leader employees want strength. Keeping a cool head may facilitate focussing on the issues and getting a solution right.The key to avoiding or minimizing the impact of crises that may arise is to be proactive ahead of adversity.

I hope these tips provide insight into ways to fight through any situation that may arise with minimal damage to your business.