Thursday, February 14, 2019

Lesson #309: The Risks of Candidates Climbing Back Down the Corporate Ladder

Posted By: George Deeb - 2/14/2019

Our brains have been wired to think about our careers going up the corporate ladder over time.  A manager, becomes a director, becomes a...

Our brains have been wired to think about our careers going up the corporate ladder over time.  A manager, becomes a director, becomes a vice president, becomes a president, etc.  But, if you think about that structure, there are a lot fewer job positions the further you go up the ladder.  An example typical company may have 125 managers, 25 directors, 5 vice presidents and 1 president.  So, the odds of moving up the ladder aren’t really in your favor, with 80% fewer positions at each next level.  But, people need to make a living.  What happens when an employee needs to go back down the ladder, to find more open positions?  Is that a good idea for you to consider that candidate as a hiring manager?  Let’s find out.


In this post, let’s talk about the sales department as an example.  Most “upper ladder” sales managers have been “lower ladder” salespeople at some point in their past careers.  So, it is highly likely and logical that a sales manager most likely has the knowledge and skillsets required to succeed as a salesperson again.  But, to be clear, the job of a sales manager is completely different from a salesperson.  The salesperson maintains client relationships and closes sales all day, and a sales manager manages and mentors the salespersons all day, to make sure they are hitting their agreed upon targets.  So, making that shift back down the ladder, really means taking on a completely different job again.  You just have to be sure that candidate truly has the appetite for that change.


Continuing this example, once a sales manager gets used to the tasks of being a sales manager (more in the office, less travel, less repetitive tasks, the prestige that comes with the role), for many, it is really hard to get back into a quota hitting sales producer role.  But, that is a more of a general guidance.  There are exceptions to that rule.  Maybe a sales manager got promoted, and realized they don’t like managing people, and actually prefer the “thrill of the hunt” of being a salesperson.  So, it is really important you ask the right questions during the interview process to ensure that candidate will actually be happy doing the work required in that “lower ladder” position.  Understanding that many will say whatever is required to get the job, so buyer beware.


In addition to the role changing at lower lowers, the compensation is typically lower at lower levels.  So, let’s say that Vice President was making $150,000 and now they are looking at a Director level job that makes $80,000.  Once a worker gets used to living off a higher salary, it is really hard for them to make ends meet on a much smaller compensation.  The only times that works out is if the role is combined with material other incentives (like an aggressive commission plan or equity upside to make up the difference), or if they are older in their career (having built up a big savings account to live off of, and perhaps are self-aware of their need to reset their target role and compensation expectation to have a better chance of getting employed at their age).


My off the cuff answer is yes, someone willing to take a pay cut could certainly trigger a concern.  But, it doesn’t necessarily mean it is a deal breaker.  As discussed above, if other incentives are in place, or there is a logical “story” with this candidate, you may be perfectly fine.  Remember, what you gain with an “upper ladder” candidate, is all that extra years of experience that comes with that.  So, if you can get comfortable with the situation, it is like getting a Porsche for the price of a Toyota.  But, buyer beware.


Based on my experience of hiring people over the years, once somebody gets used to getting paid at a certain level, they are going to try to maintain or exceed those levels in future jobs.  So, if they are taking a job with you at half the compensation, without a matching good “story” or incentives, that opens the door to those candidates continuing to look for new jobs, even after they have accepted yours.  But, again, that is a general rule of thumb.  That may not be the case in all scenarios, so do your due diligence and make a judgement call.  For example, someone approaching retirement looking for their last job before they retire, could be perfectly fine and worth the risk.


Generally, a person’s energy declines with their age.  But, that is not always the case.  I have worked with many people in their 60’s whose energy levels exceed that of people in their 20’s.  Another way to think about this:  older “upper ladder” employees are typically more efficient in how they work, so whatever you think they may lack with energy, they should more than offset that risk with efficiencies they have honed with their prior years of experience. 


As you have read above, a lot of things have to go right for someone going back down the ladder to result in a good outcome for your business.  But, that does not mean you should close the door on that scenario in all cases.  You need to assess each candidate on their own merits.  What is their “story”?  How do they answer your questions on the above topics?  Do you believe they can live on a smaller compensation and have the energy and appetite to be successful in that “lower ladder” job?  This situation is laden with potential pitfalls, but it most certainly can work out for the best.  Do your homework!

For future posts, please follow me on Twitter at: @georgedeeb.

Friday, February 8, 2019

Lesson #308: Want to Grow? Complete One Material Action Per Day!

Posted By: George Deeb - 2/08/2019

When you are running a small business, it is really easy to get distracted.  Firstly, your own CEO job most likely has a lot of differe...

When you are running a small business, it is really easy to get distracted.  Firstly, your own CEO job most likely has a lot of different tasks, from chief strategist to chief bottle washer.  Secondly, your team often has many demands on your time, to help point them in the right direction on their projects.  And, thirdly, it’s just too easy to get sucked into the random inbound contacts that come into your email box or through social media.  All I can say to you entrepreneurs who are “floating in the wind” of poor time management is: unless you are doing at least one material thing each day to move your business forward, towards new revenue or profit heights, you are never going to grow your business as quickly as you could be.  Allow me to explain.


To me, a material action is something that has meaningful revenue or profit implications from its output.  On the revenue side, it could be things like launching a new marketing campaign, or making a new sales call, or ideating a new product line, or expanding into a new target-customer or geographic market, or hiring a new salesperson, or negotiating business merger opportunities, etc.  Anything that will drive new revenues.  On the profit side, it could be things like cutting your cost structure, or improving your business efficiency, or improving your company morale and productivity, to name a few.  Anything that will drive higher margins for your business.


On the flipside, there are a lot of demands on your time that you think may be important, but just are not a material action, as defined above.  This could be things like producing your monthly financial statements, or posting to your social media accounts, or writing a new monthly email newsletter, or managing your ad agency, or doing one-on-one meetings with your direct reports, or running payroll checks, or upgrading your systems, or relocating your home office, etc.  Yes, these are important tasks that need to get done.  But, they are not going to propel your business to the next level.


I bet if you did a critical assessment of how you are spending each of your working hours, most of you are spending the vast majority of your time, if not all of your time, on “less material” actions.  To me, if you are not spending at least 20% of each day on “material actions” you will not have a reasonable chance to grow your revenues and propel your business to the next level.  So, it is important that you actually carve out “material action” time into your daily schedules.  For example, maybe you block out 8am-10am each day for you to think and act strategically and materially about your business.  Note that I intentionally did not suggest 3pm-5pm each day, when you are most likely tired and not doing your best thinking.


We recently acquired a business in February 2018.  At the time, they were doing around $2.5MM in annual revenues.  Within four months of acquiring the business, our annualized revenue run rate had doubled to over $5MM.  How did we do that?  We focused on material actions to drive the business forward.  We quadrupled our marketing budget, hired a new ad agency, we launched an SEO effort, opened new sales and marketing channels, expanded our sales team, grew our margins, etc.  Our focus was on driving revenues as quickly as we could, and our time was firmly focused on making those material actions happen.


In continuing the above story, with an increase in revenues came an increase in time that was needed on “less material” projects in the months that followed.  We learned our CRM could not handle the extra volume, and we needed to upgrade to a different CRM, which needed to be researched.  We learned our product information on the website was out of date, and needed to be updated.  Our product offering needed to be fine-tuned, to make the business more scalable.  Our ad agency suggested we make some technology changes, which resulted in some unexpected hiccups and fixing time required.  In doubling our staff size, came the review of hundreds of resumes and dozens of interviews.  Sometimes those hires worked out, and other times they did not, spinning our wheels right back to where we started.  Quickly, the time I had to focus on “material” projects, started to get consumed by “less material” projects.  And, guess what happened: sales growth started to slow down!!


I get it, small businesses are typically under-capitalized and don’t necessarily have the luxury of large teams of staff to help leverage your workload.  But, even in small businesses, you need to figure out how to keep yourself moving the business forward with “material” projects.  Where you can, hand off the “less material” work.  Let your bookkeeper produce monthly financial statements.  Let your head of marketing manage your ad agency.  Let your head of technology review various systems needed.  And, take yourself out of that process, at least until the busy work is done and you can review the final output of that work.  Don’t let the “less material” work get in the way of you having the time required to drive the business forward by completing "material" work.


Executives in small businesses are typically very busy people, wearing many different hats at the same time.  The real challenge you will have is making sure that 100% of your time is not consumed by “less material” projects.  You need the discipline of: (i) knowing what projects have the highest odds of moving your revenue or profit growth to the next level (which is an art of its own); and (ii) making sure that slotted time to work on “material” projects is actually getting reserved to make sure that work gets done.  Remember the scene in the Pixar movie “Up”, where the dog kept getting distracted by the squirrels running by?  The “less material” work you doing are “the squirrels”, distracting you from where your focus needs to be.

For future posts, please follow me on Twitter at: @georgedeeb.

Saturday, February 2, 2019

Don't Let Short-Term Thinking Undermine Long-Term Success

Posted By: George Deeb - 2/02/2019

I recently met a business owner who made 100 percent of her decisions based on how it impacts the immediate cash flow of the business. A...

I recently met a business owner who made 100 percent of her decisions based on how it impacts the immediate cash flow of the business. And I mean every decision -- from which accountant or lawyer to advise the business, what marketing could drive revenue this minute, all the way down to minute things like figuring out which credit card would yield immediate cash back rewards on expenses. Some of this is admirable, but mostly it is completely short-sighted and hurting her business long term. I get it. Most entrepreneurs are cash starved and looking to save every penny they can. But, in this case study post, you are going to learn that cutting pennies today, could be costing you millions of dollars tomorrow. Allow me to explain.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

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