Category: Dear CFO

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Dear CFO,
Our department is hiring. I’ve been asked to write an ad and assist HR as they narrow down the resumes. How do I write an ad that will get noticed? Attracting the best job candidates and finding the right fit for the role is critical to our small team. Help me write an employee ad that sells!
Hiring in Harrisburg, PA

So, your company is in a position to hire? That’s terrific! Business growth is all about getting the right people in the right seats on the bus. You’ll want to attract team players who fit with your company culture, bring fresh ideas, and help shoulder the work.

Easier said than done, right? Strategic hiring begins by attracting the best job candidates, and attracting the best candidates starts with a great ad.

Odds are you know how to sell your company to a prospective client pretty darn well. When it comes to attracting the best job candidates, you may not use the same words or even the same tone. However, you still want to achieve the same objective: You want to sell the prospect on the idea of your company before they experience the product or service for themselves.

How to Sell Your Company to Potential New Hires

When a team member leaves or employment is terminated, the owner (or manager) has a choice. Should the newly open position be replaced, or do you need to redefine the role? If your company is starting to grow, you may also be in the position to hire, as is your case.

When you’re ready to hire, you’ll want to know where to source high-quality candidates to build your pool of potential employees.

Before you find your dream candidate, you need to know how to seek them out. Step number one is to write an employee advertisement that sells the candidate on your company before they ever step foot in your office.

How do you expect to sell your company and the job opening to your prospective employee? From my extensive hiring experience, the old fashioned process of “post the job description along with the minimum qualifications and hope for the best” doesn’t draw the best and brightest. So, how DO you go about attracting the best job candidates?

In the book You’re Not The Person I Hired!, the three hiring-expert authors suggest a creative plan:

  • Envision the ad as a sales tool. How will you appeal to the candidate you seek?
  • Consider the job posting a marketing effort from your company to the potential candidate; with that in mind, direct the ad to your target audience.
  • Use words to entice and interest. (How about the personal ads in Jimmy Buffett’s If You Like Pina Coladas?) Get creative!

Comparing Employee Advertisements: Old vs. New

How do you go about hiring the best job candidates?
via Pxhere

When writing your employee ad, keep in mind that filling a technical position may look different than filling a sales position. Here are two example ads, before and after considering the opportunity to market both the company and the sales position.

What’s the difference between these two headings?

  • Account Executive
  • Are you looking for a rewarding sales position with a great company?

Which headline draws your attention? Which company sounds more exciting to work for?

Now check out the full ads…

Both of the descriptions below give a real sense of what the job entails, but which would entice you more? Which position would you rather explore?

Original Version:

The Account Executive reports to the Vice President and is primarily responsible for the maintenance and growth of existing business and the development of new business. The selected candidate has demonstrated the ability to effectively call on low- to high-level decision-makers, identify potential opportunities, and secure business in a timely fashion. Additionally, candidates will possess the following:

A sound understanding of features and benefits along with basic sales practices and procedures used to generate and secure new contract business.

Effective communication and interpersonal skills are essential for both personal and team success.

  • Must be a team-oriented person motivated by money and success.
  • Strong customer support skills.
  • Solid sales experience with a proven track record of success.
  • Strong business development and closing skills.

REVISED Version:

The right person for this Sales Opportunity will desire income growth and career advancement potential in a dynamic organization. The ideal candidate will want to capitalize on existing customers and business partner relationships and will readily achieve their personal and financial goals.

If you:

  • View yourself as a Sales Professional, and not just a ‘salesperson,’
  • Want unlimited earning potential,
  • Take ownership of customer satisfaction,
  • Know how to question the customer into “Yes, I’ll buy,”
  • Want to be part of a fun and flexible work environment, and
  • Can mine a significant existing book of business…

…Then YOU are the person we’re seeking! In this position, you will have direct access to the President and report to the Vice President of Sales and Distribution while managing a local territory. This opportunity is not about putting in the time; it’s about achieving goals.

You can see the difference between the two ads. One offers the details and one “sells” the idea of the position. Creating an interest in your business and position requires creativity. Not all roles are “sexy” or easy-to-sell on the surface.

Think of the differentiators that set your office apart, such as a team environment, flexible scheduling, or dedication to your customers. What’s your unique selling point and how will YOU attract the ideal job candidate?

Where to Find the Perfect Employee

The concept of a “perfect employee” is an oxymoron when you think about it. Why? Because we’re all human! Perfection is impossible. What your team needs is a new hire who’s a good fit for your unique situation; this requires a careful approach.

Let’s be honest. There are many ways to fill a position. You may have heard “hire slow, fire fast” or “hire for attitude, teach skills.”

When it comes to hiring a new employee, everyone seems to offer different advice. But it isn’t about waiting for perfection to stride through the door. It’s more about grabbing the attention of as many qualified candidates as possible (by writing an appealing ad) and then choosing wisely from a high-quality pool.

Now that you’ve written your ad, you may be wondering, “Where’s the pool?”

Post your dynamic, eye-catching ad in the spots most relevant to your industry. School and college job boards, as well as alumni networks, are fantastic for finding entry-level recruits. Higher-level searches may require the assistance of an executive search firm or recruitment agency.

Keep in mind, most employment agencies charge a significant fee for their services. That said, they offer valuable insight, vetting, and screening assistance as well as access to a vast network of potential recruits. This reach makes an agency a fitting choice for multiple hires or specialized industries.

Consider where you’ve hired employees before. Where did your top talent come from? Don’t underestimate your network, either. LinkedIn and other professional connections may put you in touch with excellent referrals.

Online job boards are also an option to consider. Post job ads on websites directed toward specific geographies, technical expertise, or niche groups. Most online job boards charge a fee, but it’s worth the investment to find the best job candidates.

Narrowing Down the Pool

To effectively narrow your high-quality candidate pool, start by reviewing each candidate’s resume
via Pxhere

You’ve written an ad that SELLS your company to prospective employees. You’ve identified superb candidates by networking and looking in the right places. Now you’re wondering, “what’s the best approach to narrowing down the worthy candidate pool?”

In my own experience (over 30 years in management in multiple industries), narrowing the field and finding the best possible candidate fit for an open position is a challenge. But that doesn’t mean it’s impossible.

Inevitably, some candidates look great on paper, but may completely blow their interviews. On the other hand, there are those whose resumes don’t look so hot, but they’ll really wow the interviewer in person. Occasionally you get a candidate with a good resume and an excellent interview performance, but when you hire them –  End of story! You’ll find yourself wondering what the heck you were thinking as you’re whipping up the termination paperwork.

What a waste of time and energy! I bet you’re wondering how you could avoid hiring mistakes.

I wish I could give you a magic hiring key, but on a serious note, there’s no foolproof method for finding the right person. HOWEVER, there are a few ways to lessen your chances of hiring the WRONG person and making a costly mistake.

The Key to Vetting a Resume

To effectively narrow your high-quality candidate pool, start by reviewing each candidate’s resume.

  • Does the resume make sense?
  • Do the timelines align?
  • Are there explanations for gaps in employment?
  • Does their experience match the requirements of the position?
  • Is the layout clean, and free of careless errors?
  • Are there easy-to-avoid grammatical mistakes?
  • Have you checked their social media profiles?

Most businesses—especially small businesses—look for people who figure problems out on their own, put two and two together, or stretch to complete the job. If a candidate doesn’t provide a top-notch resume, you may not want to talk to them. Take the hint: The type of person who hands in a shoddy resume is likely the type of person to hand in shoddy work. If a candidate can’t locate a sample resume online and ask a friend to proofread, how good of a job do you think they’ll do once hired?

Once you’ve narrowed the candidate pool down to 3 or 4 candidates, it’s time to start the interviewing process. You’ve carefully written the ad and taken the time to review the resumes. Rest assured you’ve carried out your due diligence to hire the best job candidates possible.

Best of luck as you prepare to on-board the new team member in your department!

Featured image and post image licensed for use via Pxhere.

Is your team falling apart due to conflict at work? Here are the most common workplace conflicts, resolutions, and ways to build your team

Dear CFO.
As the Head of Accounting, it’s my job to keep our team productive, focused, and on-task. Lately, there’s been a lot of conflict at work amongst our department. It seems like there are personality differences, petty arguments, and bad feelings everywhere. What would you recommend I do to smooth things over and build a stronger (more cohesive) team?
Conflict in Camden, NJ

Conflict at work wreaks havoc on moral! No one wants to be part of a team that’s falling apart. I sympathize with your problem—personality clashes and petty arguments are tough to resolve but addressing the conflict and building a stronger team will help.

As much as we’d all like to avoid conflict at work, conflicts are sure to arise between coworkers from time to time; it’s human nature. When conflict is ignored or poorly managed, resentment and mistrust build until productivity is compromised.

In any business with more than one employee, success depends on teamwork. As Vince Lombardi said, “The achievements of an organization are the results of the combined effort of each individual.”

In business (and in football), a team is held together by great leadership. Resolving conflict—or better yet, avoiding it altogether—requires clear communication and a conflict management strategy to deal with situations as they arise.

“It’s All Your Fault!”

One of the most common conflicts at work stems from a lack of accountability (in other words, the blame game). Conflicts often spring up between departments or coworkers who depend on each other to complete tasks. Every link in the chain, from marketing, sales, service, and delivery, is critical to good customer relations. If one link fails, the entire process collapses.

Conflict at work between coworkers will only hinder communication and team strength
via Burst

Finger-pointing is common between coworkers and departments when a situation goes awry. After all, no one wants to shoulder the blame for a misstep, especially if they can pass the buck onto someone else. If you notice every problem is someone else’s fault, it’s a sign your business is desperately in need of conflict management.

To help your teamwork through the issue, start with the basics: identify the source of the problem. Where did the link break? How do you ensure the issue is resolved for the long term? Running a trouble-free business environment requires strategic thinking, trouble-shooting, and organization. Address problems at the source and lead the team to a permanent solution. The biggest mistake is one you don’t recognize as a learning and growing opportunity.

While a lack of accountability seems to lead to the most frustration, there are many other common conflicts at work as well:

  • Breached agreements and broken promises. Team members not completing work as promised (also related to accountability).
  • The wrong skillset. Because of a lack of cross-training or mistakes during onboarding, someone lacks the right skills. This results in other team members picking up the slack.
  • Lack of information or misunderstanding. While this is often a highly resolvable conflict at work, it’s a common issue. Tasks and deadlines should be clearly defined and reasonable. The process should be in place with the information necessary to complete tasks.
  • High-stakes competition. While a little friendly competition is healthy, cutthroat practices that pit departments or coworkers against each other are destructive.
  • Discrimination, bullying, or harassment. A corporate culture that doesn’t prevent and explicitly forbids illegal harassment is toxic to business.
  • Competition for resources. When departments are reduced to scrabbling over resources due to a strained budget and cash flow issues, conflict is inevitable.

Leadership Sets the Bar: Resolving Conflict at Work and Building Your Team

Team building and communication are the keys to nipping potential conflict in the bud and ensuring greater harmony down the road. It’s vital to promote an atmosphere and company culture where everyone has a voice. Encourage workers to come forward with concerns before they become problems. Different types of conflict may require different handling.

Individual Conflicts

There are times when conflict will arise because someone isn’t following a process. These conflicts are easy enough to head off, but if left unchecked, it can lead to the blame game, breached agreements, and broken promises.

Resolution of individual employee conflict may require individual action
via Burst

Resolution of individual missteps may require retraining, setting limits and deadlines, or making job expectations clear and straightforward. Start by meeting with the worker to discuss the process and why it is beneficial to the rest of the team. You may discover a reasonable explanation of why a person is not following the protocol; for example, they may not fully understand a new responsibility. In that case, additional training may turn the situation around.

Flexibility resolves most minor transgressions. Is an employee late to work due to family obligations? Could you resolve the situation with a more forgiving schedule, say a 15-minute leeway in the morning, shaved off a one-hour lunch? Small concessions increase employee satisfaction, reduce the level of stress in the office, and impact retention rates and productivity. Remember, everyone is human with lives outside of the 9-5.

Conflict Between Two People

It’s unfortunate but common—most conflict exists between two people. One person doesn’t get along with the other. Someone offended or hurt someone else. One team member feels put-upon, while the other has his or her head in the clouds.

Resolving a conflict between two people is a big job for team leaders. Skillful resolution requires negotiation skills and diplomacy. If it’s practical, bring the parties together to talk it out and find an answer. Clarify the facts of the situation and give each person time to talk without interruption. You may find the company policies and procedures offer a solution. You may also find company policies are lacking in this area and need an amendment. Remember, if it happens once, there’s a strong chance it will happen again.

Conflict arises when someone oversteps a peer’s boundaries. To resolve this kind of dispute, clarify what those boundaries are and give your team a verbal signal to let teammates know when they are crossing the line. Encourage everyone to take a moment and cool off before re-engaging. In my company, we had a code word that people could use when someone was getting close to boundaries. The word “paperwork” signaled that we didn’t want things to go any further as it would then require formal paperwork.

Some conflicts are rooted in personality differences. These are often the most challenging to resolve. Different people use varying styles of communication. They may clash with others, or they may prefer an independent work environment. Communication is truly the key to personality differences. While coworkers may never become best friends, they can learn to communicate with each other respectfully and effectively, no matter their style. We used DiSC to identify personality communication styles and keep top of mind awareness allowing the “S” to let the “D” know what communication works best for them.

In the workplace, as in the population, some people are unpleasant, unreasonable, demanding, or mentally unstable. If the situation is beyond your control because a person involved is beyond rational discussion or decision making, you may need to call in an HR consultant. Sometimes the only answer is to remove negative influences from the team before they drag the whole team down.

Conflict Between Departments

Occasionally, “team spirit” ends up segmenting the office into different parties pitted against each other. This type of conflict is especially common in environments with high-stakes competitions or a lack of resources. Departments and teams become competitive and cutthroat.

The resolution to workplace conflict is encouraging collaboration between departments.
via Burst

Any time there’s a dip in sales, marketing loves to blame sales and sales loves to blame marketing; this is a universal truth in business. The resolution to this workplace conflict is encouraging collaboration between departments. Keeping departments separate and secretive—or worse, in direct competition—can cause a breakdown in productivity. Again, communication is critical.

The best advice for resolving conflict is to avoid it in the first place. Stable company protocols, clear expectations of performance, and open lines of communication will help you keep your workplace humming along in perfect harmony. Building your team up and encouraging them to work together as a cohesive unit keeps conflict down. Engaging team members from multiple departments in any significant company change brings a better understanding of both the “why” and the “how”.

Remember, it’s much easier to miscommunicate when you’re barely speaking. While it’s essential to give your team plenty of individual work time and think time, it’s also good to encourage team-building as well.

Understanding Your Role in Team Building

A strong team is the counterfoil to conflict. Productive team meetings, clear protocols, a strong company culture, and open communication are all critical to creating an organization that works together. It’s your role as a leader to foster this collaborative environment.

Management promotes team harmony in two ways:

  • Building trust among team members.
  • Holding each team member accountable for commitments.

Not only do these two elements prevent and address most areas of conflict, but they intertwine entirely. Without trust, it’s challenging to hold your team members accountable for their responsibilities, and if you don’t keep them accountable, they can’t build trust with you and their cohorts.

Trust is essential for a successful team. As management, your role revolves around fostering open dialogue about every topic (even the ugly issues and work conflicts). You also need to continually work to engage those subject matter experts on your team to proactively solve problems as they arise.

Trust comes when your team is confident that sharing concerns with you will result in action. It’s one thing to say you have an open-door policy, but as many jaded employees know, it doesn’t always mean you’re open to hearing criticism or are involved enough to change for the better. Trust also comes with more open communication among the team members. Everyone’s opinion should weigh equally, and their feelings taken into account. People feel valued when they feel heard. Keep in mind that you can’t please all the people all the time. Sometimes getting everyone on the same page is virtually impossible–don’t sweat it, if you have good relationships, the occasional “just do it” is acceptable.

As I said, accountability fosters trust and vice versa. Accountability means management:

  • Holds everyone to the same standard. Clearly defined expectations, deadlines, and processes set the stage for accountability.
  • Follows through on commitments. Team members depend on one another to perform as expected, thus feeding their success.

These areas are a struggle for many leaders, including myself. In the past, I’ve held on to underperforming team members in the hopes their performance would improve through my encouragement. While encouragement and offering second (and third) chances aren’t bad, I was inadvertently sending the rest of my team mixed signals. I was paying attention to the underperforming employee while neglecting everyone else.

Avoid conflict at work by keeping clear expectations and accountability between team members
via Burst

Too little accountability leads to unclear expectations, leading to a trickledown effect on team managers and others. Excellent performance isn’t rewarded, and problem areas aren’t addressed. Accountability means setting up measurable and clear expectations.

When one employee needs too much hand-holding, you’re only hurting the rest of your team. When everyone else is working hard without reward or acknowledgment (because you’re too focused on boosting up one underperforming employee), their spirits get down, and it damages your employees’ ability to work together.

The other component to team building (and counteracting conflict) is bringing everyone together often. Sometimes it takes getting out of the office to enhance your team’s trust and encourage teamwork. Consider scheduling a retreat—anything from a few hours to a full weekend—where individuals learn to work collectively to problem solve through targeted exercises.

In planning a retreat, consider what specific skills you would like your team to build. If problem-solving is weak, build in activities to strengthen skills for your organization. If communication is ineffective, focus on building it. Don’t consider yourself separate from the team on the retreat; it’s crucial your team members see you as a team player.

If a full department retreat isn’t in the cards, team socials, luncheons, or happy hours give everyone a chance to bond and connect. While it may seem counterintuitive to socialize when there’s work to be done, your team will be more dedicated when they get along. This means recognizing and respecting each other as individuals. A little “getting to know you” goes a long way.

Resolving conflict amongst your team is a big job, but if you open the lines of communication, set clear expectations, and engage in team building, you’ll be well on your way to a strong, collaborative department!

Featured image and post images licensed for use via Burst.

Dear CFO,
Our company’s owner just handed me a long list of quarterly priorities for the department that I lead.  I would like to implement some of my own priorities as well this quarter, to help our department run more efficiently. How can I motivate my team to get more done at work? I want to accomplish both sets of priorities, and still get the day-to-day work done. My fellow team members don’t have much extra time and our department doesn’t have room in the budget for outside help. How can I achieve more so we hit our targets?
Trying to Meet Objectives in Boston

As I read your question, my first thought is, “I’ve been there!”

Often it feels as though company priorities are set in a vacuum; totally ignoring the day-to-day reality of staffing and the allocation of other resources. In my experience, while it often feels that way at the department level, it’s not usually the case. My guess is that your company owner is prioritizing a dizzying array of objectives for both the long-term benefit of the company and to meet short-term constraints, such as cash flow.

Unfortunately, the onus is on the department heads to ensure their team stays productive. You may feel like you don’t have a clear path to get more done at work but are still facing constant pressure to make it happen. Team members need buy-in and engagement in the work they do, including company and department priorities (unless you run a department of cyborgs). This engagement is critical for fueling motivation.

While I agree in principle with the best practice that says every goal for every individual and department should align with the top goals of the company, the truth is, it’s not always realistic.

Individual team members will have day-to-day aggravations, roadblocks, or impediments that they feel need to be a quarterly priority as well. While the direct correlation with an individual’s goal and a company goal may not be evident, addressing these challenges (and helping your team address them) will be reflected in employee performance and retention. Therefore, I believe that employees can have priorities not directly tracked to the company goals that will still contribute to effectiveness, efficiency, and overall job satisfaction.

How to Accomplish Company Priorities

Fostering employee engagement is the number one way to improve team productivity and satisfaction
via Burst

The big (not-so) secret to getting more done at work is fostering employee engagement and buy-in. The question then becomes how do you get the buy-in from your team, so you can keep your boss happy and satisfied with your department?

First, to build employee buy-in, focus on the many ways the company priorities benefit your department. Underscore the importance and the impact of proposed priority projects on the individual members of the team, the department as a whole, and of course, the company.

It’s often hard for individuals in the company to see the bigger picture (and feel that it indeed justifies additional effort), so it is important you understand the benefit of each objective and can exuberantly support them. If there is not a direct benefit to workers, it’s important for team leaders and department heads to convey the overall importance to the company just as exuberantly. This doesn’t mean you should ignore your team’s objections or frustrations, but rather that you should prepare to address them directly.

Being prepared to speak to team members’ objections requires you to think and empathize with the individuals in your department. Like all of us, team members have a unique perspective, viewed from their own lens of experience. Therefore, it’s helpful to address the goals in terms of each perspective (and each concern). This means answering the big question WIIFM (“What’s in it for me?!”). Candid honesty is the best policy to address concerns. If there is truly no direct benefit to team members, say so, but within the context of “why” the priority exists.

Address direct impacts of the company priorities such as:

  • Changes in department workflow – for example, expense reports may now be verified in your department.
  • Changes in department staffing – for example, headcount getting cut due to the automation of a process.
  • Changes in department priorities – for example, new computer upgrades are getting fast-tracked.
  • Changes in individual roles and/or responsibilities – such as increased involvement in the expense reporting function requires training for additional processing.
  • Need for additional hours – for example, when training on a new system adds time to the workday, necessitating overtime.
  • Changes in scheduling – for example, a new system implementation requires weekend work from your team.

No matter the scenario, changes should be explained and concerns addressed clearly. Ambiguity is often demotivating. Team members can’t see the benefit or rationale for the actions of the “man behind the curtain.” This leads to distrust and frustration.

Instead, operating with transparency (even when it’s not the greatest news) will help your team get more done at work. They’ll feel engaged and appreciated. Even if a task is difficult or challenging, understanding the greater “why” helps justify the effort.

How to Accomplish Department & Team Priorities

Much the same as setting company priorities, department priorities should be set using specific criteria.

When it comes to setting department priorities, filtering ideas through what Stephen Covey referred to as the “Four Quadrants” will help. For those unfamiliar, each priority and idea can be filtered from the team based on their sense of urgency and importance.

The decision-making matrix that Stephen Covey espoused was also based on the Eisenhower Matrix

Quadrant 1: Urgent/Important

Quadrant 2: Important/Not Urgent

Quadrant 3: Not Important/Urgent

Quadrant 4: Not Important/Not Urgent.

Most priorities for the team to address should come from quadrants 1 and 2. Keep in mind, the sense of urgency and importance of the team members’ ideas may be different from your own, so it’s important to work together to set goals. Some goals may also differ from what the company would deem as quadrant 1 or 2 goals. Yet team members may need to accomplish some of their own objectives to even make it possible to achieve the company goals. (For example, accounts payable might have some ideas to quicken their process, enabling them to take on the new expense report processing without adding staff.)

In my experience, there are a few specific best practices that have helped me get more done at work, accomplishing priorities in both levels—company and team/department. The biggest is encouraging employees to take ownership of the various objectives and priorities. This means assigning a leader.

We all know if a task is everybody’s job, it quickly becomes nobody’s job. As the parable, “Who’s Job Is It Anyway” goes:

There are four people named Everybody, Somebody, Anybody and Nobody. There was an important job to be done and Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that, because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have.

Assigning ownership increases buy-in and engagement. From there, accomplishing the team priorities and company priorities entail:

    • Vetting the capabilities of each team member and aligning them to tasks. Ensure a clear project plan, milestones, and specific outcomes and align them to specific members of the team (the most closely aligned should ideally be the project lead/owner).
    • Allowing team members to suggest improvements and processes, even if they affect other roles. However, the team members work under the rule, “you can’t make your job easier if it makes my job harder.” When a conflict arises, the team should agree to change the process (ultimately making both jobs more efficient) or to agree upon the transfer and even disbursement of work, based on the overall benefit.
    • Fully cross-training team members to take on additional roles for an agreed-upon time, so a fellow team member can work on a priority. This not only keeps the cross-trained skills fresh but also encourages team building.
    • Providing team members with quiet time. Interruption after interruption punctuates the day-to-day work. Whether interruptions come in the form of outside phone calls, social media, Slack, or email, the costs of constant interruptions are high. Giving team members a ½-day of quiet, focused work time per week will greatly improve productivity. This allows your team to get work done, either in the performance of daily tasks to free up time for the quarterly objectives or establishing the quiet time to work on the quarterly priorities themselves.
    • Providing guidelines for following the process of priorities as well as the level of review and oversight team members should expect. Whether you are using EOS (Entrepreneur Operating System), SMART goals, or other management tools, make sure your team knows the expectations and the timeline for performing them. Transparency and clarity will motivate them along the way.
    • Keeping an Idea Register with SWAG (“Sophisticated Wild @SS Guesses,” for those of you who are not familiar with the term) estimates of time to complete each task. A Micro-project may be <10 hours and could easily fit into the schedule, whereas a macro project >250 hours generally requires coordinated efforts between departments, higher approval, and a full evaluation of cost/benefit, etc. The idea register keeps visibility on great ideas as they pop up and provides the ability to review the ideas as departmental and company objectives are set.

Since you mentioned the need to follow budget constraints, another option to justify the cost of outside help could come from a good cost/benefit analysis. I recently justified the benefit of a temp because the work she picked up would free my controller and that would take work off my plate (and I am an hourly CFO).

via Burst

It’s certainly possible to get more done at work and to motivate your team with strategic planning and by fostering engagement. Remember, cracking the whip and pushing your team to accomplish more and more, without transparency or buy-in, becomes demotivating. Get everyone on the same page.

Accomplishing company (and department) priorities requires inter-departmental cooperation, great leadership, appropriate delegation, and independence…along with good processes to manage the projects. If you have been providing good leadership to your department and you have an engaged team, I am sure that you can accomplish both the company goals as well as the departmental.

Featured image and post images licensed via Burst.


Dear CFO,
Our company president wants to grow our small business. We’re both cash-strapped and “people-strapped” at the moment. Can you recommend some small business growth strategies I can implement at the department level (the areas under my control)? I’m responsible for our business operations, including accounting, IT, and HR.
Struggling with Small Business Growth Strategies in Sacramento

The first comment I hear in the business world is always, “I wish I owned my own business.” To which I always say, “Be careful what you wish for!”

A close second statement is, “I want to grow my business.” To which I also say, “Be careful what you wish for!”

The truth is, most small businesses aren’t set up for growth. A lack of cash and a lack of the right people are often roadblocks, but of course, decisions about growth are rarely left to the department heads. Yet, much of the heavy lifting of growth positioning does fall to you, which sounds very much like the situation you find yourself in now.

The good news is, there are many actions you can take to help prepare your company for future growth. Here’s how to implement small business growth strategies at the department level.

Address the Low-Hanging Fruit (Cashflow Problems) First

As you help position the company for growth, the first area of focus is addressing the cashflow problem. If the need for cash flow is truly dire, as Hippocrates would say, “desperate times call for desperate measures.” There are many ways to address a cash flow issue (see my blog on handling a cashflow crisis for more details).

However, your “cash-strapped” issue is a typical problem. As the head of the accounting department, you’ve probably already taken the following actions. It never hurts to revisit best practices, though, to ensure your department is staying on top of your cash flow.

Best Practices for Addressing Business Cashflow Issues

  1. Don’t give customers a reason to avoid payments. Are all the invoices correct when mailed and emailed out to clients? Are the statements going to the proper addressee? Are the facts and details of the invoice clear and correct?
  2. Follow up in a timely fashion. Do you pursue past due balances immediately? Do you increase contact and collection efforts as the balances age?
  3. Communicate with your vendors regularly. Are there alternate terms for methods of payment, you could work out?
  4. Continue to pay your payroll tax liabilities. It may be tempting to borrow against payroll taxes, but don’t do it. Not only are the fines onerous but there is real liability associated with skipping out on this fiduciary responsibility.
  5. Renegotiate payment terms, if needed. Consider your defined payment terms for customers and vendors. Can you request deposits from customers? Could you extend payment terms with vendors?

Cash flow issues are certainly a concern, but there are steps your department can take to address them and better position the business for growth.

Shore Up Financial Operations to Combat Cashflow Issues in the Future

Addressing financial issues will help avoid more major issues in the future as your business grows.
via Burst

Making the financial operations area as strong as possible is a critical step in small business growth. To shore up your financial operations, begin by creating timely, accurate, and meaningful metrics and financial statements. Remember, these financial areas are critical to support leadership decision-making.

Financial Operation Areas to Address:

Develop meaningful metrics.
As the head of a department (or several departments), you play a vital role in assisting leadership with defining metrics and setting parameters. The way you define metrics will vary by the type of business and the departments within the business.

For example, sales team metrics (company history shows one sale per 100 calls) might be set at 100 calls/day. A service business or support center might measure chargeable time against a standard, while a call center may measure against dollars collected. Metrics might be issued daily, weekly, monthly, or in the case of fast-food sales, by breakfast/lunch/dinner in virtually real time.

As you set metrics, evaluate the accuracy and sophistication of existing information, along with the ability to affect the outcome, against the time needed to do the reporting. Remember that “reporting just to report” is meaningless.

Establish a closing schedule to generate a rhythm of reporting in the business.
For example, the sales team should know they need expenses in by the 5th workday, inventory needs to be entered by day 3, etc. Leadership knows they will have their information by the 7th workday. These clear-cut reporting parameters keep everyone on track.

Clean up your chart of accounts.
Examine the state of your chart of accounts and follow best practices. Meaningful decisions are fed by meaningful statements that come from a meaningful chart of accounts.

Minimize time spent on finding and fixing errors.
While this seems like a no-brainer, chasing changes to previously issued numbers or an update to the wrong file waste valuable time. Mitigate these possibilities by:

    • Limiting access to only those who need to work in the systems.
    • Proper training for those who access systems.
    • Turning on audit trails so discrepancies can be traced to the root cause and prevented in the future.

Assist in analysis.
Prepare comparative financial statements, noting any unexpected or significant variances. Report on changes in product line profitability, margins or other items of importance. Evaluate significant drivers and note any impact on the financials, including the following: differences in workdays in the month, rework changes, collection issues, changes in overtime hours, machine down time, etc.

Use a real and robust accounting system.
Touting a reputation of being “user-friendly” isn’t a criterion for an accounting system. Make sure there are adequate controls and that the system has a balance sheet so you can calculate the cash flow.

Small Business Growth Strategies with Staffing Shortages

A small team shouldn't inhibit business growth, so adjust your small business strategies to fit your team
via Burst

Now, when it comes to being “people-strapped,” you may be facing a different dilemma. First of all, does “people-strapped” mean a shortage of staff (because cash is too short to hire) or do you mean you’re staffed with the wrong people?

If you’re staffed with the wrong people, let me give you some hard-earned advice: trade up immediately!

Trying to fix a broken situation or spending time encouraging people to meet their job obligations isn’t a luxury of the small business. This is especially true if the biggest block to implementing small business growth strategies is that your company is short on both cash and people.

Obviously, there are HR considerations and rules to abide by, as you shore up your staff and assemble the best team possible (with attention to your cash constraints). But I encourage you to create a strategy to optimize voluntary and involuntary turnover (hiring and yes, firing) to strengthen the team. Ultimately, the right people will only help with the growth of the business.

Some Ideas to Build the Right Team for Growth:

    • Offer creative compensation for disciplined team players. Work to create an atmosphere and compensation structure to meet their needs. Remember that broadly defined, “compensation” includes work hours, place of work, amount of travel, vacation and other needs as defined by the team member. This isn’t to say you promote a “do what you want” policy, but that you design the best situation to retain or attract good employees, given your cash constraints.
    • Consider temp-to-hire positions. While these can be more expensive in the short-run it allows you to assess how employees will perform long-term. Consider it “a try it before you buy it” strategy that may save your company the 30%+ of salary (per US DOL) that a bad hire costs a company. Not to mention that this saves you on the hidden costs of bad morale, negative productivity impact, administration and time required for the new candidate search.
      • Follow the rule: hire slow and fire fast. Set clear expectations for employees with strong policies, procedures, and guidelines during the onboarding process. Don’t hesitate to fire employees who don’t perform up to par. This also sends a message to others about expectations as you build up the team.

A good team will give you more for every dollar spent. They will contribute to the morale of the company and display a vested interest in the future of the business. A great team contributes to great company culture and plays an integral role in the company’s success. Don’t shortchange the business with the wrong staff, especially if you’re a small business, where everyone needs to pull their weight.

Address Operating Inefficiencies

Assist in leadership by making sure all operational processes are addressed and understood by your team
via Burst

Once you’ve addressed your issues with cash flow and your staffing deficiencies, you can help position your small business for growth by finding other areas of operating inefficiencies to address. Leadership should be focusing on operations to prepare the company for the next phase. This includes building a growth-ready infrastructure.

At the department level, you can assist leadership by ensuring the following operating areas are addressed:

    • The roles of each team member are clearly defined, responsibilities and expectations are outlined. Does everyone on your team understand the scope of their job description?
    • Policies and procedures are well-documented. Does your team have a written procedure for each activity? Are the procedures clear and easy to follow?
    • Avoid double-handling data. Data should be entered in a timely, accurate, and consistent manner, with as little “pass around” as possible.
    • Cross-train every member of your team. Cross-training is a great way to test your procedures and discover gaps in job outlines.
    • Evenly distribute tasks. Are jobs delegated? Do one or two members of your team end up doing the bulk of the labor? Ensure leadership at all levels are effectively delegating tasks.
    • Review your internal controls. Do you have steps in place to “keep” your team honest? This includes limiting access, reconciling with independent and outside sources, and cross-training.
    • Train team members to address issues when they arise. This includes:
      • Implementing stopgap measures to eliminate future issues.
      • Fixing mistakes at the source.
      • Learning from missteps and changing behavior.
      • Planning around bottlenecks.
      • Running exception reporting.
      • Communicating with leadership (and having access to leadership).
      • Adjusting future processes to accommodate changes.

Working on growth strategies for your small business means doing your due diligence to ensure your operations are running smoothly. Addressing your cash flow issues as well as your staff-shortages will help you eliminate many of the roadblocks, but it’s an important time to examine the overall health of your business and best practices you have in place.

Depending on your relationship with leadership, you should be able to candidly share your concerns as you implement these steps to help your business grow. As part of the company, you have a vested interest in its success. Any observations will only serve to better position the business for a bright future.

Featured image and post images licensed via Burst.

Implementing More Employee Think Time

May 14, 2019 | Dear CFO | No Comments

Wondering if employee think time is valuable? You bet! If you want to keep employees creative and sharp, here’s why you should budget in some time to ponder.

Dear CFO,
Our company is constantly trying to encourage employees to think creatively so we can stay ahead of the competition.  A recent discussion with my boss led to a conversation about employee contribution, specifically on how to stimulate new ideas and innovative thinking from our team. The problem is, everyone is busy keeping up with his or her job. What are some ways as a Project Manager, I can foster ideas and add employee think time to the schedule (without falling behind)?
Keeping Busy with No Time to Think, Omaha

Scheduling employee think time can be challenging when business is busy, but it's a beneficial practice
via Burst

The logistics of fitting in employee think time can be very challenging, especially in an environment where the demands are high. But giving employees time to mull over problems and come up with innovative solutions means taking the pressure off. Chris Winfield at Inc. writes that companies like 3M are seeing the importance of building in employee think time to the schedule. Downtime and brain breaks are important—the challenge comes when we’re trying to get upper management on board with the idea of employee think time, especially in a world that’s all about productivity.

I personally experienced similar situations, both where I was in charge, but I was too busy to figure out a better way to add employee think time into the day (even though I knew a solution must exist). Or, I knew the way to make our schedules better for problems solving time, but no one above me would listen. I hope you are not in either of those situations. Buy-in from upper management is critical to making employee think time part of the routine.

When Management Gets in the Way

Whether you’re the top brass or you’re stuck somewhere in the middle of the chain of command, it’s important to the health of the business that everyone buys in and supports the idea of employee think time or creative time.

Many of us think creative time is just for creative offices, but all types of industries can benefit from additional employee think time (as well as think time for management). How many people come up with their best ideas in the shower? Why? Because when we’re able to finally relax and step away from a problem we can often gain perspective and insight.

Yet, oftentimes, with deadlines and quotas, we forget that people don’t usually do their best work under pressure. Over the course of my career, I observed this phenomenon time and time again:

  • – Management that isn’t willing to wait even a day or two while you derive a more efficient way to do the reporting they require, or superiors who refuse to give you extra time to streamline your job or address an issue you notice amiss outside your department.
  • – Management that only listens to outside consultants. While I believe consultants can add needed perspective, the roots of many of their suggestions arise from employee discussions, and even discontent voiced to management in the past. This misstep makes employees feel undervalued and ignored at best, and in the worst scenarios, like their jobs are at risk.
  • – Management that expects clean up to happen at the end of the line rather than examining, addressing, and fixing the root cause of the problem. This scenario creates additional work and consumes time that could be used as employee think time to resolve the larger issue.
  • – Individuals who are afraid to speak up and offer suggestions to upper management, because the boss already knows the “best way” and refuses to listen (and in some cases, even punishes them for their perceived criticism).
  • – Especially outside of the tech and creative industries, management that often views employee think time as idleness and thus discourages it.
  • – Incremental improvements that go unnoticed and get lost in the shuffle. Management that has a predisposition to the BIG idea and loses peripheral insight into other problems.

Let’s assume (and hope) you don’t work in an organization where management stifles ideas by the very way they manage. That addresses the first couple of bullet points on the above list. Quality organizations recognize that new ideas, streamlining, and process improvement have to be built into a healthy office culture.

Think your company is falling into any of these traps? The truth is, new ideas often come from a new perspective on an old problem. Employee think time requires both engagement and energy, so individual performance should be taken into account. Some employees are simply better suited and more comfortable with open creative time, whereas others prefer guidance and structure. Using ideation can be a great way to generate new, innovative ideas and is a good way to begin employee think time, especially if it’s new to your office.

According to Mark Twain, “There is no such thing as a new idea. …  We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely; but they are the same old pieces of colored glass that have been in use through all the ages.”

While I’m not sure how Mr. Twain would react to the technological changes of the last century, there is a strong element of truth to the concept of taking old ideas and making new combinations. The question to be addressed is what does the process for making new idea combinations look like?

Leading Employee Think Time By Example

Employee think time and generating new ideas calls for participation from the whole team
via Burst

Generating new ideas requires employee think time for your entire office, not just your creative staff or marketing team. Great ideas can come from anyone. As a leader, encouraging and allowing employee think time is critical in this hyper-competitive world. In fact, the idea of employee think time should be promoted, with all industries following the lead of the tech and creative industries. Idea generation, innovation, and employee think time is productive and should be encouraged.

As a leader you should do the following to foster employee think time and creative approaches in your office:

  • – Lead by example. Make sure your team sees you allocating time to thinking on your own schedule. As a manager, I would take two Thursdays a month, go to a coffee shop from 7am to 9am and read on the industry, leadership, and other topics to stimulate my thinking. I know another senior exec. who gets to the office at 7am every day to start his day with think time, where he can ponder personnel, supply chain, and other issues of his industry.
  • – Allocate employee think time for your team and give them a place to do it. Offering a small conference room or an offsite option on a regular basis encourages your team to work on their role, not in it. It’s important to let them know, they shouldn’t limit their thinking to their role or department; remind them they bring a fresh perspective to other parts of the business too.
  • – Take into account the individuality of your team to optimize their engagement and energy around employee think time.
    • – Some workers may thrive in a group environment and others need quieter surroundings
    • – Some people are raring to go at 7am and others reach their creative peak at 10pm
    • – Some employees may relish the interaction of debate, with quick responses and heated discussion, while others are more deliberate and contemplative in their responses
    • – Allocate specific time to work on problem-solving, either group or private, on a regular basis. Some organizations require daily check-ins, while it’s more common to see weekly or monthly allocations in most business settings
    • – Keep in mind, unproductive meetings or lack of direction will add to the workload instead of solving problems and your team will quickly lose interest.
    • – Be sure to recognize innovative ideas, accomplishments, and progress whether in private or public
  • – Train team members in a number of ideation techniques to help get the ideas started and encourage their implementation of the idea-generating techniques. As leadership, you don’t need to be involved in every brainstorming session. Instead, have a process for documenting the problem they are solving, the ideas generated, the selection and review process, and any documentation needed to acquire the approvals needed to proceed.

Actively seeking new perspectives might mean adding someone from outside the department or company to your problem solving. Alternatively, moodling or noodling on an issue passively creates new perspectives

Implementing New Ideas from Employee Think Time

So, now you made time to come up with all these great ideas, the question becomes, how do you get from idea to implementation?

First of all, don’t expect easy answers. Sometimes the implementation process requires extreme effort and contribution from the team that goes above and beyond the norm. In the case of something like a major system implementation, it may take time and assessment before it’s deemed feasible. For other small-scale innovative suggestions, you can work within the time constraints of your individual departments.

To implement new ideas generated during employee think time:

  • – Sneak in incremental Improvements. You may not be able to tackle the whole improvement right now, but you can make time to take the next small step toward the big improvement. At the department level, incremental gets the job done. As Shane Fielder says, “incremental improvement done imperfectly, over time, produces monumental results”.
  • – Take advantage of downtime. Most departments have an ebb and flow to the workload. For example, accounting is really busy right after month end, but often has a bit of a lull in mid-month. Take advantage of the slower schedule by using that time for implementation of the new ideas.
  • – Break BIG ideas into incremental improvements. Rather than trying to tackle everything at once, split up the process into manageable tasks. Big ideas move your company in a new direction. It’s important that there’s a focus around innovative, big ideas, and the strategies to implement them. But remember, most BIG ideas break down into a series of steps, and those incremental tasks are easier to sneak into the crevices of the day.
  • – Create the implementation timeframe thoughtfully and reward performance as you go along. Some projects require a short timeframe and condensed efforts (such as a system conversion) while as bigger projects, like improving the procedure documentation process, can happen over a longer timeframe. Both short and long-term projects require a level of recognition commensurate with the efforts involved.

While implementing employee think time will result in many benefits for your team, keep in mind that employee think time isn’t its own reward for most of your team. Even when offering employee think time becomes an embedded process in your office, it is still important to recognize the benefits of the ideas created.

Always remember to reward and celebrate think time achievements and innovative new ideas
Via Burst

Create processes to capture the great ideas that your team generates, as well as methods to measure improvements. Regularly scheduled weekly meetings that focus on progress against “Big Rocks,” (a Covey term used in the EOS system) or metrics specific to improvements (for example, reducing days sales outstanding from 45 to 30 days) will help keep your team on track.

Good luck as you implement more employee think time for your team. One of the most important pieces to remember is to always reward your team for performance. Celebrate the wins and help them to recognize the value of their great ideas!

Featured image and all post images licensed via Burst.

Wondering how to manage team vacation requests, when your staff wants time off? Here’s how to prioritize vacation and why you should promote paid vacation.

Dear CFO,
My company recently implemented a mandatory vacation policy because the CEO believes we will benefit personally from time off, and the company will benefit from a happier, healthier, and more creative workforce. I’m concerned about how to manage team vacation requests. As you know, the workload doesn’t change based on who is in the office. I’m not sure how to make time for my team to take these vacations when we’re already over-worked.
No Vacation in 5 Years, Chattanooga, TN

I can relate to your dilemma. Knowing how to manage team vacation requests is certainly a challenge for any team leader. The workload is constant no matter who is there to perform it.

With a mandatory vacation policy, most employees will (and should) opt to take their vacation. Our company policy was “use it or lose it,” and no one chooses to lose days. With two weeks of vacation, 11 holidays and two personal days, it meant that every employee was out of the office for about a month of each year.

There are two obvious potential answers to the question of how to manage team vacation requests: 1) Staff your team 10% higher to compensate for the “lost” time, or 2) Ask your team to work overtime to make up for the deficit.

While I said those were obvious solutions to the vacation request dilemma, they may not be the right solution. Let’s look at the problem from the perspective of the CEO and get creative, especially since those two costly solutions might not fly anyway.

Why Vacation is Critical for Your Team

Most of your team members are knowledge workers, especially when it comes to their specific role. Optimizing results means relying on the wisdom, experience, and unique perspectives they bring to their job. In addition, chances are high that most of your incoming team is of the Millennial generation. These 20-30-somethings are focused on accomplishment (not time at the office) and using technology to connect and contribute.

In his book The Organized Mind, Daniel J. Levitin discusses the addiction and effects of technology and the fact that the brain uses a disproportionate 20% share of the body’s energy. These two factors support the need for vacations to allow workers to unplug, refuel, and replenish the motivation and creativity needed to perform as knowledge workers.

As a leader, you set the example for your team. If you don’t take your vacation days, or if you’re only taking “working vacations” (i.e. constantly checking your email and calling in), your team knows you don’t value vacation. There is no “do as I say, not as I do” when you are in a leadership role. Additionally, the benefits of vacation extend to managers, CEOs, and team leaders as well as their staff.

Shawn Achor, the author of The Happiness Advantage, found that employees who take time off perform better. Research supports that “when the brain can think positively, productivity improves 31%…and creativity and revenues can triple.”  As a corollary, employee retention increases. Not only are your people happier, healthier, and more productive, but their attitude will influence others on the team.

Addressing the Fears of Encouraging Vacation


Work overload often makes employees hesitant to take vacation time
image via Pixabay

With all these benefits, it seems logical that employers would jump at the chance to promote vacation, but of course, the show (or in this case work) must go on. It’s easy to see the benefits of team vacations on paper. It’s quite another to manage team vacation requests that leave you shorthanded.

The US Travel Association offers some statistics that show just how common the fear is for employees when they fill out their PTO request:

  • 40% of employees are afraid of the mountain of work that they will have upon return.
  • 35% say they are the only ones who can do their jobs.
  • 25% are even afraid of losing their jobs (although the current tight labor situation may impact this stat slightly).

While you may be one of the 28% of leaders who “cringe” at approving time off or the 32% who believe other employees have extra burdens when team members take time off, the fact of the matter is a vacation is still important for morale. If you’re seeking optimal performance from your team members, you need to approve at least some of those requests.

In fact, it could be a fear of judgment or repercussions that is preventing your team from putting in their requests. Yet, if you want to encourage productivity and a positive work environment, vacation is necessary for everyone.

Cruise Planners CEO, Tanya Murphy says, “Before I owned my travel agency, I worked in corporate America. I observed that some of my colleagues wouldn’t take a vacation out of a sense that it would hurt their career ambitions. I took every vacation day I was allowed, and I was promoted several times in my 16-year career. If employees are delivering work while they’re there, then they shouldn’t worry they’ll be seen as a slacker. Take your vacation days!”

As CEO of a small company with a policy of 23 days off per year, I dealt directly with the dilemma of how to manage team vacation requests. The fears of untold piles of work, being the only person who knew the job, or worries about being replaced were very real. In a small company, there are several steps to take to relieve these fears and this is where strong systems and company culture come into play:

    • Every position should have a set of clearly outlined policies and procedures that assure consistent treatment of the company business. This would allow anyone to step in at a moment’s notice to perform the job
    • At least two people should be trained in each position. At my company, we used vacations as an opportunity for “refreshing” the skills of the backup person.
    • Process critical work while a team member is on vacation. For example, the backup person processes cash but filing can wait for the regular team member’s return.
    • Spread some tasks among other team members to alleviate the backlog. All team members recognize that the same consideration applied when they vacationed.
    • Consider hiring a temporary worker to fill the role if circumstances make the aforementioned steps too difficult. If this is a continuing issue, consider ways to streamline some processes.
    • Another option might be to allocate some of your budget to a vacation fund – that the employees may ONLY use for vacation.

How to Encourage and Manage Team Vacation Requests

Encourage your team to take vacation time and make it easy for them to plan around work
image via Pixabay

Vacation policies are usually quite clear on the “what” of the vacation, such as each employee earns one day of vacation a month for the first year, or each employee starts with two weeks of vacation. Often the policy defines the use by an anniversary, fiscal, or calendar year and other details like additional weeks at 5/10/15 years.

However, the application of the “how” of vacations may not be clearly stated in the policy. Many leaders manage team vacation requests by seniority or on a first come/first serve basis. This can be effective, but it may also lead to some tough choices.

To ensure continuity, often departments in an organization have specific times of the month or year where no vacations can be scheduled. For example, retail typically has a no vacation policy for Black Friday. Accounting departments may not allow vacation before the month is closed or at the time of inventory.

It’s important for morale that team members perceive the “how” of vacation use as fair. I found it best to be clear when you outline blackout vacation days. Lay out the schedule at the beginning of the year and allow first come/first serve requests. In my experience, we generally had a policy that two people couldn’t be out at the same time in our small organization. If there was a conflict between vacation requests, it could generally be resolved with a diplomatic conversation.

Alleviating the anxiety around employee vacations requires planning. Once the team member is assured the company has their back with cross-training, policies, and procedures, they should still prepare the team for their absence. Encouraging vacation planning best practices reinforces the message of leadership’s commitment to and the sanctity of vacation time.

Encourage your team to use these vacation planning guidelines:

    • If possible, plan the first day back as a half day to reboot mentally and physically.
    • Review the policies and procedures of the position to ensure that you’re up to date and perform a dry run with the back-up team member.
    • Make the boss or a delegated team member aware of open work and the status of all projects.
    • While no one can predict every concern that comes up, you should share any anticipated hiccups or challenges that might occur during your absence.
    • Clear up as many urgent tasks as possible. Often, the time leading up to a vacation can be very productive, so take advantage and leave the desk clear.
    • Set expectations for action in your emails and voicemail. I would recommend setting the away message to direct correspondence to your backup person. Keep the message brief with just a simple return date.
    • Follow-up with the boss, team members, clients and others at a one week and then three-day timeframe reminding them of the vacation. Offer management an opportunity to resolve any anticipated issues before departure.
    • Only let family or close friends know your whereabouts. There is no need to let the office know where you’re headed.
    • Truly unplug and avoid taking a phone (or at least answering it) on every expedition and excursion within your trip.

These practices encourage employees to really unplug and take a break from the busyness of their position. While it can be tough for some workers to leave the role, ensure them that the office will be just fine without them there for a few days. Focus on the importance of their refreshed return, where they’ll be able to offer a renewed perspective.

This also means, that as a manager, you need to adhere to your vacation policies. Use the opportunity to identify gaps in your cross training and delegation traps. Even when it would be easier to pick up the phone and call a team member on vacation, refrain. Troubleshoot the answer on your own and reinforce your company’s philosophy on vacation time.

Changing your mindset to one that understands and appreciates the benefits of vacation will help you think more creatively and support the full use of vacations for yourself and your team. By encouraging and learning how to effectively manage team vacation requests, you’ll promote a healthy, happy and productive work environment.

Vacations should be a regular (not a once every five years) occurrence. Best wishes that you also get to schedule some time away as you reinforce your company’s new vacation policy.

Featured image via Pixabay. All images licensed for use via Pixabay licensing.

How to Do a SWOT Analysis: Template & Tips

December 11, 2018 | Dear CFO | No Comments

Dear CFO,
My company is embarking on its first ever strategic analysis and planning session and I’ve been asked to help the team start with a “SWOT analysis.” I am not sure how to do a SWOT analysis or where to begin.
Needing a first step in Amarillo

A first-time strategic analysis and planning process can be intimidating. It’s hard to start with a blank sheet of paper to stimulate meaningful outcomes. But, as with many business planning processes, there are tricks of the trade to help you get off to a productive start. One of the best strategic analysis tools is a SWOT analysis.

As you probably know, SWOT stands for Strength, Weaknesses, Opportunities, and Threats. Learning how to do a SWOT analysis isn’t challenging, but this simple guide is a powerful tool for visioning and strategic planning. Engaging multi-functional teams in defining the various elements of a SWOT analysis eliminates the risk of getting too focused on the perspective of a single person (the boss). Enlisting the help of your full team provides a more well-rounded view including the issues faced in the day-to-day operations of the company.

How to Do a SWOT Analysis from Scratch

To get started with the SWOT analysis, there are several approaches. Often, a company will start by performing a SWOT analysis on a competitor as a frame of reference and to get thoughts flowing. It’s usually easier to identify the weaknesses and challenges of your competitors and often they will be congruent to your own company’s challenges.

SWOT analysis is a team effort - everyone should be involved to help target all aspects of the business
via Pxhere

Similarly, as you’re planning how to do a SWOT analysis, consider internal framing of your perspective for strengths and weaknesses and using an outside perspective when thinking of opportunities and threats. Remember that the SWOT analysis paints the picture of where you are today. Using the strategic analysis and plan, you will then decide how to better move toward your goals and company targets. Directly address opportunities and threats within the strategic plan as it is developed. Then plan for the future by strategically pursuing opportunities that fit your goals and troubleshoot relevant threats.

Your Company culture determines the best method to develop the SWOT, whether you use four quadrants on a whiteboard, mind mapping, specific software, or flip charts. The SWOT development method isn’t as important as the content that comes from the activity. However, I recommend no matter what method you take to develop your SWOT, you approach it as a group activity, as the outcome will be more complete and you’ll create a more accurate assessment. Document the SWOT analysis both for reference and for comparison as you move forward with strategic planning.

Using Questions to Develop Your SWOT Analysis

As you’re deciding how to do a SWOT analysis, it’s helpful to develop a set of questions to guide you through each quadrant. You’ll find a set of SWOT template questions below to help as you go through the SWOT analysis exercise.

Notice that in posing the questions, they are often the mirror image of another element of the SWOT analysis. So, don’t be too concerned if a question is in the “wrong” category for your company. A question of Opportunity can be evaluated in the context of a Strength or a Threat, and a Threat may expose a Weakness or convert to an Opportunity. Each quadrant is related and intertwined.

As you might guess, these SWOT template questions aren’t comprehensive. You may wish to amend them to align with issues unique to your own business. As you decide on which questions apply, think in terms of your products, employees, customers, competitors, economy, and more specific questions will come to mind.

SWOT Template: Strengths

The first step in your SWOT analysis is identifying the strengths
via Pxhere

Examine your company’s strengths, both internally and externally. Consider your company against your own benchmarks and the market competition.

    • Does your company’s value proposition compete favorably in the market?
    • What distinguishes your product from that of the competition?
    • Are your systems up-to-date with timely and accurate information for decision-making?
    • Are your distribution channels loyal and functioning well?
    • Does your product reflect an experience for Millennial buyers?
    • Do you have a clear pipeline of new products or services?
    • Are you the market leader in any emerging markets (ex. serving the cannabis market)?
    • Do you provide a highly specialized product?
    • Do you hold patents over other intellectual property?
    • Can you get the job done faster or cheaper than a competitor?
    • Is your customer experience better because frontline employees love their jobs?
    • Can your business grow with your existing infrastructure?
    • Are there high barriers to entry in your business?


SWOT Template: Weaknesses

Identifying weaknesses during a SWOT analysis helps you better prepare for improvement
via Pxhere

Don’t be myopic when analyzing weaknesses. Take a clear step back and examine your competitors’ strengths. Look at others within your industry to expose your own challenges.

    • Do you know why your company loses sales?
    • How strong is your brand within the market?
    • How are your lead times compared to the lead times of your competitors?
    • Are your employees provided market pay, benefits, and other perks they value?
    • What complaints do you hear from customers, distributors, or employees? Do you address the concerns and what are they telling you?
    • Do your products represent a substantial enough compensation for your distributors or are you too small a fish in too big a pond?
    • Do you have a high employee turnover?
    • Do you have adequate policies and procedures to assure tribal knowledge stays within the company?
    • Do you have a clear method for facilitating the training and evaluation of employees? Do you have adequate cross-training and bench strength?
    • Do you know your product development and life cycle, especially compared to your competitors?
    • Does your company culture support changes, if they are needed?


SWOT Template: Opportunities

As a team, identify the opportunities your business has to grow and improve during the SWOT analysis
via Pxhere

As with strengths and weaknesses, opportunities exposed are considered in the context of the strategic plan (long-term and short-term).

    • Are new markets opening up that your product can address (solar energy, hydroponics, virtual reality, etc.)?
    • Have you created technology that positions your product ahead of the competition?
    • Can you accelerate your development cycle?
    • Can you capitalize on alternate marketing channels (social media, strategic alliances etc.)?
    • Can you tweak your product to meet an alternate demographic need?
    • Have you scoured your intellectual property to find new applications?
    • Can you fill a hole in your product line, distribution channel or geographic reach with an acquisition?
    • How will your customer base change over the next 3 to 5 years? Taylor Swift changed to keep her customer base, will you adapt to the new to keep yours?


SWOT Template: Threats

During the SWOT analysis, threats are the last to be identified but they're some of the most important factors
via Pxhere

Don’t forget that unaddressed weaknesses can turn into threats. Think broadly – competitors, general economy, regulations, tariffs, global reach, and product evolution.

    • Is someone eating away at your market share?
    • Are you the high cost/high service producer in a market that is moving toward price competition?
    • Are substitute products entering the market (such as what was seen in the craft brewing industry)?
    • Are you limited to servicing a specific geography (such as in the case of a franchise)?
    • Do you lead or lag in a changing economy and how does that bode for you today?
    • Did you anticipate growth and spend yourself into financial difficulty?
    • Have you addressed eroding market share?
    • Is your industry changing (such as: production moving overseas, alternate products, consolidating for economies of scale, etc.)?
    • Have you evaluated your competition in all of your markets?
    • Are competitors capitalizing on new marketing and distribution channels?
    • Are there regulations or tariffs on the horizon that could negatively affect your business or that of your customer base?
    • Are you dependent on a customer or market facing disruption?
    • Are regulations increasing overhead and threatening profitability (community banks)?
    • Are competitors entering new geographies, consolidating vertical markets or making other changes?

For each section of your SWOT analysis, rank the top five Strengths, Weaknesses, Opportunities, and Threats you’ve identified during your brainstorming session. The criteria for ranking should be the highest value at this point in time (rather than anticipated threats in the future, or past weaknesses now being addressed).

Once you’ve ranked each quadrant of your SWOT analysis, determine how to capitalize on Strengths and Opportunities. How will you move forward productively to make gains? Then address Weaknesses and Threats as you build the strategic plan. Go slow and deliberately address each item. There is no need aim for completion of every item in your plan this year. You may wish to view your plan as 1, 3 and 5-year benchmarks. In the end, the company proceeds with the elements of the SWOT analysis within the context of the vision, mission, and strategic plan.

The SWOT analysis is a great business exercise to highlight areas of importance and keep them on the radar for planning. It’s a simple tool, but one that will really paint the full picture for you and your company. Best of luck on your SWOT analysis! I’m sure it will give you a 360-degree view of where your business is headed.

Featured image via Pxhere. All images licensed for use via Pxhere licensing.

Finding and implementing an ERP system is a big job! Here’s what you need to know to get through the ERP system selection and implementation process.

Dear CFO,
Our company is looking for a new ERP system. My CEO just informed me that I am leading our ERP system selection process as well as participating in the implementation team once we find the right fit. I’ve purchased accounting software in the past but selecting an ERP system seems like a BIG job. Can you give me some tips to help in the process?
ERP System Searching in Idaho

First, let me congratulate you. Obviously, your CEO believes that you are capable of leading the team through the ERP (Enterprise Resource Planning) system selection. You’re right—ERP system selection and implementation is a big and important task. You’ll need to do plenty of homework to select the best system for your company.

Before you begin, there’s one matter to get out of the way: you need the authority to accomplish the objective. So, the first order of business is to make sure the CEO puts the proper priority on the ERP system selection project and participants (in person or via other communication) in the project management and implementation process. If those who are not direct reports miss deadlines during the selection and implementation process, the CEO must validate your authority. The CEO is also responsible for fixing any business issues that exist from lack of discipline to cash flow issues. Frequently the financial department is responsible for taking the lead in ERP system selection, because the system dovetails into the company performance, and enables the reporting management desires.

Before Starting ERP System Selection

There are a few steps you should take before you begin the ERP system selection. These steps will ensure that you know exactly what you’re looking for once you begin your search.

Coordinate communication with your CEO.
Take steps to ensure you’re consistent in your communication cycle on the new ERP system–setting expectations and keeping appropriate team members in the loop. Be prepared to continue with status updates, both formal and informal throughout the ERP system selection and implementation process.

Obtain or create the current workflows for all company operations affected by the new ERP system.

  • If fancy flowcharts exist, use them. If not, a quick and dirty flow chart draft will suffice – it’s highly likely the processes will change with a new system anyway.
  • Documentation should include the details of who, what and where for each step and identify the data collected. Be sure to distinguish what processes are automated today and which ones are manual; that will assist in defining staff needs and systems required to close gaps.
  • The information included in the workflows will guide the system evaluation, including needed changes and system improvements.

Engage the ERP system selection participants.
These team members are usually selected by the CEO and/or department heads in the project planning process; this includes subject matter experts (SMEs) from each area affected by the proposed new ERP system.


Researching and Finding the Right ERP System

When selecting a new system, create a list of needed features to help narrow down what kind of system you need
Image via Pixabay

During the research phase, you’ll be setting up metrics, checks, and balances, so you’re sure to be successful in your ERP system selection. This phase of the process is as much about finding the “best” software as finding the RIGHT software for your company.

Needs / Wants / Nice-to-Haves

Define the needs, wants, and nice-to-haves for each area or department. This is a critical step and worth the time. You will want to make sure that, at the minimum, the software meets the absolute needs of each area of the business. The workflows are a good resource for setting the baseline, but think broadly – you are looking for a new ERP system to improve your business. It’s important to find a system robust enough to carry your company forward. Separate out the needs, wants and nice-to-haves:

  • Needs – Elements critical to performing the operations of the business, eliminating significant pain points, or meeting government or internal reporting requirements. Your business will probably have unique needs that may not be available features in off-the-shelf software.
  • Wants – Elements that improve processes or facilitate reporting but aren’t critical to the regular operations of the business.
  • Nice-to-haves – Items that, if the cost/benefit makes sense, could improve some aspects of processing or reporting.

Score System Features

Set up the needs definition as a scorecard to evaluate each need/want/nice-to-have against the various ERP software features. Be sure to weight the scorecard based on the needs; are all the needs of the same value? Is the end-of-day balancing of the same importance as regulatory compliance or daily reporting? If so, they get the same weight but you may find that the needs have several levels of importance within them.

Data Transfer

Decide how much historical data will transfer to the new system. Frequently, data from older systems isn’t as easily transferable. Companies may decide to keep old systems running for a period of time to provide reference or historical information. A corollary of this is setting a timeline and selecting the expected date of transition to the new system.

Data Clean-up

Begin cleansing your data. For any data exported from your old system, this is the time to clean it up. Start tidying up your data for consistency (addresses, naming conventions) and completeness (adding email addresses, phone number, or other missing data). Once the new ERP system is selected, the data available from the old system is mapped to the new system fields and this may highlight additional data element needs.

Demo Testing

Develop “use case” scenarios to test the demos and evaluate how well the software meets your needs. These should be the exact processes that you use in the business on a regular basis. Provide real data (changing names or identifying information). Some vendors will upload your data to the new ERP system so you can test it in a “sandbox” format.

Enlist Subject Matter Experts (SMEs)

Subject matter experts can help determine what kind of system you need to work across all levels of your business
Image via Pixabay

Engage the SMEs within your company to set up a preliminary project plan and timeline.  You may wish to use a project management tool or simply list the plan in Excel for the initial run.

  • Brainstorm every task required for ERP System implementation – this should be as detailed as possible.
  • Identify the SME for every task.
  • Put the task list in a sequential order.
  • If the details or steps are significant, consider breaking each into sub-projects. There might be sub-projects for every segment of the business. For example, manufacturing’s project might include renaming the inventory item master, updating bills of materials, integrating machine software, training staff, designing reports and dashboards.

Build Excitement

Start to build excitement for the new system amongst your staff and team. The people factor is critical to the successful ERP system implementation. Keeping your team members engaged, informed, and encouraged is important in the long process of ERP system selection and implementation.


The ERP System Selection Process

Once you’ve identified your needs and done your homework, it’s time for the official ERP system selection. This is a big step as you weigh all the factors—cost, capacity, user-friendliness, and more.

Narrow Down the Field

  • Identify industry software within your budget, if available. Recent hires into the departments may able to shed light on other systems they used at previous companies and how well the systems performed. Identify industry association or other comparisons of potential software. For example, the AICPA offers an annual review comparing tax software. Keep in mind, most of the reviews only cover the most generic functions of the software. Also, long-standing industry software may still be operating on “old technology” behind a modern-looking interface. I don’t view this as a deal breaker unless the reporting is too old school.
  • Choose the finalists. Once you have identified several software options, try to quickly narrow down the choices to five (or fewer) and only delve deeply into those finalists.

Focus on Usability Specific to YOUR Business

  • Be sure to look at the reporting tools. How flexible are the reports? Are there third-party report add-ons that integrate with the system? Will you be able to generate the reports that management requests (and is it efficient to do so)? For example, behind the scenes, Great Plains Dynamics was 20+ years old, but they updated the reporting to make it very adaptable and user-friendly. Be sure to understand the skill sets required to build reports. Do those skills exist amongst your team or are the requirements new?
  • Make sure the data collection in the system is complete for your needs. For example, if you’re required to file governmental reports on minority contractors your company uses and there’s no data field to identify the minority contractor, you will need a workaround.
  • Provide your “use case” scenarios to the vendor and request a demo version of the software to test. Test under the Pareto principle: meet the exact needs of 80% of your transactions, don’t try to identify and make the ERP system selection based on the outliers. With larger ERP systems, the vendors will typically be more accommodating than vendors of smaller cloud-based software. Don’t believe a task can be done by the software system unless you see it for yourself. If a vendor claims it can be done always say, “show me!”
  • Prioritize when you select software. When using the Pareto principle, measure by several facets: first by cost, then importance. Make sure the most expensive processes are covered by the ERP system, while simultaneously ensuring the most important processes are covered as well (whether they are regulatory or business-driven).
  • Identify how long the software provider has been in business, how many users the company has, and request their upgrade release schedules. If you are under regulations such as HIPAA or GDPR, verify that the software is compliant. Identify the size of the development team that created the ERP system you’re potentially buying. If it was engineered by a small team, you may need to ask about retention packages for key individuals.

Enlist SMEs for More In-Depth Systems Research

  • Obtain three current users for each ERP system you’re exploring and contact them for insights and references. Be sure to have your SMEs talk to users in all areas of the company. If possible, an in-person visit and demonstration is even better. You will be able to see the software in action.
  • Ask about all aspects of the software and user experience. In addition to the use case scenarios, vendor history, and user satisfaction, ask about:
    • User security levels (set-up, access within functions, etc.). Larger systems can offer security on the field level whereas smaller systems may secure access at the module or transaction level.
    • Customer support and maintenance. What is included if you buy a customer support program? How much support is available in the initial learning phase?
    • Set-up process and requirements. In my opinion, this is one of the most important points. The set-up is critical to the successful implementation of a new ERP system. Whoever guides you through the set-up process needs to be intimately familiar with the effects of any choice made in the set-up. Bad set-up creates long-lasting pain. Examples might include: thinking serial number control might be good and then finding out that every single transaction needs the serial number to move it through the system, causing added workload; deciding to treat an item as non-inventory without recognizing that limits the ability to track it; or a simple misidentification of the type of account resulting reporting errors.
    • Release schedule and what might be coming out during your implementation period.
  • Determine the need for all modules of the software based on the interviews with references and your team’s evaluation. This is also the time to decide on the ERP system implementation process: phased or “flip the switch.”

Select Your Finalists

Narrow down your choices. If only one software meets your needs and falls within your budget, you can skip this step. However, if you have 2 or 3 finalists that meet your needs and price seems to be the deciding factor, set up an analysis to compare total costs over a 3 to 5-year period. Consider the following:

  • Maintenance coverage may be included in the first-year implementation plan of some options, but not others.
  • Necessary hardware upgrades to satisfy system requirements; be sure to include software expense for all regions. Typically, software users have to buy a production region, test region, and perhaps others based on the size of your organization.
  • The need for any add-on products such as reporting tools to fulfill the needs analysis.
  • Ongoing annual maintenance costs, user fees, per seat costs, or historical price increases.
  • Consulting or other out-of-pocket implementation costs.


Planning for ERP System Implementation

Creating a visual workflow for your system transition makes it easier to plan the next steps
Image via Pixabay

Once you’ve settled on an ERP system selection, you’re ready to begin implementation. A little foresight and planning will help you avoid any issues as you move forward.

Create a Workflow

As you work on creating or restructuring the workflow for the new ERP system consider:

  • Entering data at the point where you create data.
  • Eliminating multiple touches on the data.
  • Creating exception or control reports to verify processing (for example, cash deposit reports, payroll payments exceeding a certain dollar amount, employee utilization under a certain percent).
  • Eliminating multiple check or approval points (this may involve security levels for managers different from front-end users).
  • Performing comparisons within the system.
  • Optimizing the system capabilities to eliminate redundancy.
  • Standardizing and using file naming conventions and electronic filing capabilities.

Watch Out for Implementation Issues

Be on the lookout for common issues in implementation. Some of these implementation issues include:

  • User security levels are set too tight or too loose. I prefer setting the security levels tight and as the user encounters a roadblock, freeing that capability. This security assures access is available only to the needed parts of the system. Even though some companies prefer more lax security limitation, HIPAA and GDPR considerations should drive set-up and security.
  • Even with thorough evaluation and testing, there will be transactions or reporting that require workarounds. No system meets all the requirements.
  • Team members complain about change, the workload, learning – you name it. This is normal and shouldn’t be discouraging. Continue to communicate the why and the benefits to the company and the user.
  • Something wasn’t set-up right. Many elements of set-up can be changed after implementation, but some are set for life. Hopefully, the problem is correctable. Make sure you know what is administrable and what is not. Have multiple people trained on maintenance during implementation.
  • If you do a data conversion, make sure the team knows how the data migrated, then test the system extensively.

Outline a Transition Plan

Define and outline the transition plan to the new system during project planning (and leave room for adjustments). Transfer of historical data (manual or electronic) is part of the transition to the new ERP system. Some of the detailed information for the implementation may not become available until the software system is purchased. These variables may include transaction volume, staffing, and training. Typically, there are two ways to transition to new software:

  • Concurrent processing for a period – This means the data goes in both systems and the results are compared for agreement prior to fully switching to the new system. Keep in mind, most companies are running lean and concurrent processing puts an undue burden on staff.
  • Cold cutover – This means the use of the new system begins on a specified date. With adequate training and testing, I believe the cold cutover works more efficiently and can save extra work from your staff.

Adopt a clear plan for customer/vendor portals. Opening client or vendor portals involves developing a communication plan as well as a training plan. This will vary from an email to a personal session depending on your customer and vendor base. Most portals are easy to use but don’t neglect the communication of the how and why. Highlight the benefits to their business or organization. This transition to a new ERP System should improve their interactions with your company.

In the most recent ERP system transition that I oversaw, we developed the procedures for each process prior to training. Each person’s training verified the documentation of the procedure and we edited as necessary. Using the procedure outlines and previously processed transactions, we built the historical data using it as training material for the new system.

During the transition to the new ERP system, all team members trained and after each month’s data entry, we ran reports to verify the accuracy and completeness of the processing in the new system. The team was working on real transactions and issues that would arise every day were part of the training. This involved some additional work, but it assured that the training was real world and made for a successful ERP system transition.

ERP system selection and implementation require cross-functional interaction and agreement. When done well, it can be very smooth and will result in real gains from the new system. Good Luck!

Featured image via Pixabay. All images licensed for use via Pixabay licensing.

Recently, a Project Manager in St. Louis asked me about due diligence and acquisition integration. They were coming into the acquisition process with no previous experience. First, we addressed the due diligence process, but the other piece of the acquisition comes during the integration. Integration project management and planning is vital during this step.

Informing the Project Manager that the company is targeting an acquisition puts the manager in a positive place; this means there is time to prepare for the integration. Keep in mind, while targeting and completing the transaction aren’t the same, if the CEO is actively seeking acquisitions, it’s likely a transaction and integration will happen eventually. So once you get the heads up, you should start considering the integration plan.

Integration project planning has to cross multiple levels of the company to be successful
Image via Burst

Smooth integration requires much integration project planning and the implementation of the plan needs to cross organization lines. To ensure this happens, careful integration project management is required. Once acquired, the plan of the target needs to include input of members from each business by including them on the integration project management team as you refine the integration plan. If your CEO clearly defined the “why” and the “what” of the acquisition, your definition of the “how” will be much easier.

The performance of an acquired business often doesn’t meet the projected value, even in large companies with dedicated integration project management teams. For small companies, successful integration is in some ways easier, although still a huge amount of work. The lead integrators in a small company, usually the CEO and finance, are closely familiar with the business, culture, and employees, which isn’t necessarily the case in a larger organization. Integrating the new business is a more intimate affair in a smaller company and therefore, I believe, the likelihood of success can be greater.

Keep in mind that there are tangible and intangible drivers for implementing a successful integration management plan. Both are critical to success and often only the tangible is addressed in the acquisition integration management and strategic plan. The tangible factors are easier to identify, quantify, and develop tactics for integration. Recognizing the intangible factors is also important and the CEO sets the stage for the cultural integration beginning in the evaluation and negotiation process. Once the deal is done, in creating “day one”. It is likely that you will be responsible for the mechanics of making that happen.

Integration Project Management: Planning for Day One

For day one to go as smoothly as possible, it’s important that the integration project management team works together. If you’re overseeing the process you should be sure to do the following:

  • Coordinate with your CEO on the messaging of the day to make sure it is threaded throughout the areas of your responsibility.
  • Anticipate and coordinate the communications for customers, vendors, and other stakeholders. You may be responsible for drafting these as well, unless you are part of a larger organization.
  • Anticipate and coordinate the press release and social media platforms. An outside marketing & PR firm or internal staff may do the actual drafting and release. Be sure the social media team has announcement content with consistent messaging.
  • Prepare for the formal onboarding of new team members. Coordinate with all team members for appropriate introductions and conveying consistent messaging.

General Planning for a Smooth Integration

Initial planning for the tangible elements of acquisition involves thinking about all the elements of your business that are everyday occurrences. Much of the integration process is adjusting the mechanics of the combined entity. Again, clearly defining the “why” of the acquisition will help guide the integration project management team with the general planning for the impact on the acquiring company.

Creating an integration project plan from day 1 will ensure a much smoother transition
Image via Pxhere

It is important to remember that the acquisition is supposed to benefit the whole new company. Spend enough time with the acquisition to identify their best practices that you should adopt. Do NOT shoehorn the acquisition into your company’s mold. Both sides have strengths to bring to the table. The more you optimize the culture, learning curve, and operations, the more successful and smooth the acquisition process will be for all employees.

Your integration project management plan needs to start by asking questions on the changes in the business. Based on the answers, the team will then develop the steps to address each issue. Hopefully, the cost side of these questions was modeled in the forecasts you prepared for the negotiations.

Some areas to examine as part of your integration project management plan:

    • CashWill customers change their deposit habits, directing to your lockbox or location? How will you communicate any change and in what timeframe? Will deposit activity change substantially (large individual deposits periodically or a significant volume of small transactions)? What about credit cards and ACH draws from customers or by vendors? Will vendor payments change to your bank or not? What does your bank need to know about any of these changes? Does this offer an opportunity to restructure bank fees? Does your current bank have the capacity to handle the potential changes or do you need a new relationship?
      Develop a timeline, specific steps, and responsibilities to address the answers.
    • Accounts Receivable – Are the payment terms similar to the current terms? Do the customers pay in the same way (ACH, direct deposit, lockbox, credit card)? Are expected customer balances higher or lower than your current business? How do the expected balances support any line of credit requirements? (Keep in mind an acquisition often includes either new banking needs or renegotiation of current requirements.) What are the implications of changes in distribution channels (adding online, a distributor network, retail locations or other)?
      Develop a timeline, specific steps, and responsibilities to address the answers. Notify customers of any changes in invoicing and deposit procedures, addresses or other changes. Address the transition as part of any long-term contracts as negotiated.
    • Inventory Do you have a comprehensive inventory procedure to employ to assure complete and accurate inventory. Will SKUs increase because of the acquisition? Will there be a consolidation of physical space deciding where, when, and how? How will inventory changes influence related costs (rent, shipping, employees, etc.)?
      Develop a timeline, outline specific steps and allocate responsibilities to address the answers.
    • Accounts PayableCan you consolidate purchasing power? How and when will you consolidate? Do vendor balances and expected payments vary from your business (large periodic payments or small regular payments)? How does that affect cash flow and bank balances?
      Develop a timeline, outline specific steps, and allocate responsibilities to address the answers. Notify vendors of any changes in billing and shipping addresses or other information. Address any long-term contracts as negotiated.
    • Debt – Typically, this changes with the acquisition. Do you have new covenants and reporting requirements?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Negotiated Compliance – In the case of our acquisition, we had a lookback provision based on the actual revenue from customers in existence at the time of the acquisition. This required specific reporting for a class of customers. Does the agreement call for any specific reporting to the seller (often required with seller financing) or others involved in the transaction?
      Develop a timeline, specific steps, and responsibilities to develop systems to assure compliance.
    • Other changes – This is the laundry list of things that change because of any location, name, or other changes and often this simply means changing who pays the bill.
      • Update licenses (software, naming rights, etc.), leases, contracts, etc. according to negotiated or legal requirements.
      • Determine the use and integration of phone systems, ERP, CRM, or other systems and the transition plan. Obviously, a single line here understates what is involved. The initial evaluation establishes a timeline for decision and change, keeping in mind the 90-day window. Often an acquisition forces an upgrade in the systems due to volume and or changes in complexity. In the meantime, what actions are required to keep things running?
      • Change of physical space – Often there are long-term lease commitments to deal with. For example, in an acquisition that we did, we were responsible for some high rent space that no longer suited our needs. We moved to a new location (another set of to do’s) and sublet the space. While the sublet payments didn’t cover the entire cost, it did defray the out of pocket expenses. Consider areas you’re integrating two office cultures (which should have been a primary consideration in the acquisition decision), one location’s modern office space and the other’s dingy old warehouse, may breed discontent. It may mean your office space needs an upgrade.
      • New location – The outcome of the acquisition may mean relocating a distribution center more centrally or eliminating excess/redundant facilities. The complexity involves personnel, logistics, notices, etc. During integration project management and planning, the move and/or elimination timeline should begin within the 90-day window, thereby setting expectations. The plan itself need not be complete in that timeframe.

General integration concerns to be aware of:

  • If the reporting entities remain separate, define the allocation of the costs of any of the above.
  • Define the change in each team member’s role. Define the integration of new team members. Are there opportunities for growth on the team?
  • Communication styles play a big role in setting new team members up for success during the restructure. Using some initial testing (DiSC, Myers-Briggs, Culture Index) may help in smoothing potential communication missteps. Your management team can communicate in the way the new team member needs to hear it.

Initial definitions of the “why” and “what” of the integration will help your integration project management team to direct the initial planning. Comprehensive due diligence during this phase will lead to a smooth integration. Remember, this is a team effort and the successful integration is not fully on your shoulders… although sometimes it may feel like it.

If your company is going through an acquisition, you may need further help in the integration. I offer a 2-hour free consult and would be happy to help. Reach out and let me know how I can guide your acquisition process.

Featured image via Pxhere. All images licensed for use via Pxhere and Burst licensing.

When your company is going through an acquisition due diligence is vital in all areas. Here are the most important points requiring due diligence in mergers and acquisitions.

Dear CFO,
Management is currently targeting an acquisition and I’ve been told I will be in charge of the project plan for the acquisition due diligence and subsequent integration of the business. This is a new experience for me and I am not sure where to start.
Finance Manager in St. Louis

It is wise to seek help during the acquisition process. The good news in your question is that management is just targeting an acquisition. Since seeking an acquisition is often a very confidential process, gathering data and setting up the plan as a “preparation for a potential acquisition” is a good cover. This gives you time to actually plan and seek input from the various departments within your organization before the acquisition takes place. Often times the acquisition due diligence and integration are an afterthought of the “hunt.

Keep in mind, participation in acquisition due diligence is often quite limited due to the confidentiality involved in seeking and evaluating an acquisition target. Make sure your CEO or Corporate Development Team clearly defines who can and will be involved in the process. Often outside firms are used during the due diligence process to avoid rumors of the sale disrupting current operations of either business. If your CEO clearly defined the “why” and the “what” of the acquisition, the focus of the acquisition due diligence is clearer.

Acquisition Due Diligence

The main objective in due diligence in acquisitions and mergers is the verification of the thesis for the acquisition. Typically, the objective of acquisition due diligence is verifying the business representations of the seller (financial results, market penetration, customer satisfaction and continuity, vendor availability, production/service capability, distribution channels) as well as identify “skeletons in the closet” (outstanding warranties, lawsuits, insurance issues, customer concentrations, vendor reliance, a new product by a competitor, or unfavorable contract clauses, to name a few).

The results of due diligence in acquisitions and mergers may reframe the negotiations or actually kill the deal. If the Letter of Intent (LOI) is well written and there is a joint vision, surprises in due diligence can often be overcome without killing the deal. This is why strategic planning is so important. Involve your outside legal and business advisors to create a comprehensive acquisition due diligence plan. Experienced advisors will point out gaps in your process and provide tips on specific areas needing attention. You know a lot about your business, so use that knowledge and that of your advisors to form a comprehensive framework, including pertinent tips below.

Due diligence in acquisitions and mergers often starts with the analysis of the historical financial statements and forecasts. In a larger company with audited financials and full footnotes, you can place more reliance on the historical statements themselves. There are additional procedures for all financial due diligence. In a smaller company with internally prepared or reviewed statements, I would suggest additional financial due diligence.

Acquisition Due Diligence Procedures

Bring your acquisition team together to carefully go over the procedures and steps involved in acquisition due diligence
Image via Pxhere
  • Verify that each account on the balance sheet is reconciled, preferably monthly, and review the reconciliations for unusual items, just as you would with your own company’s balance sheet. If allowed, confirm customer balances and aging, and engage in discussions with vendors on payment history.
  • Validate revenue through cash. In a spin-out from a larger organization, the seller represented sales at a level that I could not trace through to cash. So, in my opinion, sales were overstated. As a result, a $1 million look back provision held money in escrow that we claimed when sales did not match the represented amounts.
  • Determine policies and procedures are in place to assure control, completeness, and accuracy of financial information. If these do not exist, focus more procedures on the forecasts and financials to verify the information.
  • Identify the qualifications of the individuals contributing to the financials and evaluate the general level of competence of the staff.
  • Identify activity on the financial records that might lead to other disclosures: legal expenses, rent, or outside services might identify or help quantify risk/exposure areas.
  • Verify all expenses were included in the financials. Often financials of closely held companies are adjusted for the “extras” that the owner took out of the business; be sure that your company will not incur similar expenses. Watch another area of adjustment: the removal of “one-time” expenses (often with further discussion, they are not one-time).
  • Observe service/production and inventory areas for general organization and busyness, paying attention to the workforce and physical characteristics. Pay attention to potential obsolete and unused equipment, work areas, and inventory. Observe the quality and quantity of any finished goods not shipped. A previous client of mine once had significant consigned inventory on-site from both vendors and customers (billed but not shipped). Ask questions to make sure what is on-site belongs to the company and is in use. Often a complete inventory observation is a condition of the sale. Verify that assets on the asset list are physically present and in use.
  • Analyze any forecasts and assumptions thereof with a critical eye in the context of:
    • Historical performance and relationships – if the company claims a new product will bump sales by X%, what is the basis of the claim and have they achieved a similar success in the past? How have supporting costs moved in a similar direction? What is the basis of the cost relationships?
    • Assumptions in the forecast related to the balance sheet make sense. If they are at 80% capacity and increasing sales will exceed capacity, how will they meet the need, expansion, or outsourcing? Is that properly reflected in the numbers?
    • Changes in divisional or product line expectations, especially if they are inconsistent with past performance.
    • Are balance sheet assumptions consistent? If they are going to improve collections to reduce days sales outstanding in receivables, is the strategy plausible and are any associated costs also projected? Will they need more inventory if a new product line is added and have they forecasted that?
    • Ask more questions on anything represented in the business plan that has a financial impact. Clarify both the thought process in the conversion to the forecast as well as the actual inclusion in the forecast.
    • Look for all elements of the business plan (private placement memorandum or another document) consistently represented in the financial statements and forecasts.

Generally, during due diligence in acquisitions and mergers, a buyer will also run their own forecasts using both the seller’s assumptions and adding their own, such as economies of scale, consolidation of positions, etc. Even if the seller recognizes that you will be gaining additional benefit, most buyers try not to pay for what they bring to the table. Keep in mind, although this is conventional wisdom and a laudable goal, in competitive bid processes, buyers are often paying for synergy they bring

Verifications During Due Diligence

Verify acquisition due diligence by carefully going over information and paperwork involved in the process
Image via Pxhere

Even though the numbers are a significant driver of the pricing in the sale, other factors also influence pricing including representations and “skeletons.”  In a small company much of the acquisition due diligence falls under the umbrella of the financial area, so you may be called upon to verify items outside of the financial statements. Thorough analysis of the financials may reveal skeletons and verify representations, however addressing other financial issues often requires independent verification of representations.

Some areas of verification during the acquisition due diligence process are:

  • Customers – To determine satisfaction, look for online reviews, analyze customer retention, or send a survey or other independent means of verifying satisfaction. Customer contracts giving special pricing or long-term commitments with customers should also be factored into your analysis.
  • Market penetration and position – Contact an industry trade organization and seek government or industry reports on the size of the market and new developments in the industry. Compare these reports with the seller’s representation and actual position. Look for new products that are competing within the market. Pay attention to the cliché here – Did buggy whip manufacturers see the end of the market with the introduction of the “horseless” carriage? Think broadly. Remember, only Steve Jobs saw the “need” for the iPhone.
  • Vendors – Determine if the primary raw materials of the seller (ex. people, steel, plastic, or other material critical to the process) are readily available and obtainable through multiple vendors. Also, contracts and purchasing agreements both length and availability affecting the cost of materials come under scrutiny.
  • Employees/Culture – com reviews, compensation and benefits packages, tenure, discipline actions, interviews, and observation of the work areas can all help frame the culture of the organization and the ability to fit with yours. In a large company where I consulted, there were bells to tell people to take breaks, eat lunch, etc. This culture may not bring employees fit for an entrepreneurial environment, or people with narrowly focused or previously micro-managed jobs may not fit an “all hands on deck” atmosphere, as I learned in my organization. In my opinion, we pay too little attention here and it often is the make or break piece of the deal.
  • Contracts – Have your legal team review important leases, software, and other licensing, purchasing, or sales agreements, distributor agreements, insurance, and any other agreements that may influence how you move forward.
  • “Skeletons” – Review legal bills to identify issues, insurance clauses for coverage of product liability, PR faux pas, OSHA reporting, and other inside and outside reporting or contracts for hidden risk areas. Evaluate company performance under various economic conditions. Are they the first to see the impact of a downturn or among the last, and where are they in the cycle now?

Some or all of these factors may or may not be important to examine during the acquisition due diligence. It really depends on the “why” and “what” behind the acquisition, as well as the form of transaction (stock purchase vs. asset purchase), if the company is looking at the acquisition for the short or long-run, if you need it to fill a missing part of your product offering, and so on. Look at all the factors that play a role in the acquisition. Planning your due diligence should focus on what you are seeking to gain in the transaction, but not to the exclusion of evidence to the contrary in moving ahead. Don’t fall in love with the process or the target.

I believe acquisition due diligence should be performed with skepticism. Identify the risk/benefit areas of the acquisition with an objective view and present the findings for deliberation in the negotiations and pricing steps of the deal.

After the acquisition due diligence comes addressing the integrations. For these steps and more important tips to help you succeed in your business, visit the RMR Analysts blog!

Feature image via Pxhere. All post images licensed for use via Pxhere licensing.