Forming an Effective Advisory Board

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Probably the first place to start is assessing your needs. A simple assessment of your strengths and deficiencies is a great place to start. Objectively ranking yourself and/or your management team on the following items may help.

Strategic Planning and Focus

Marketing

Sales

Finance and reporting systems

Human Resources

Continuous Improvement (manufacturing or non-manufacturing)

Risk Management

Now you have a place to start in terms of potential needs. Do you have specific needs over the short and long term and are you looking for experience in those facets of your business? Perhaps you see mergers and acquisitions as necessary in the future or you plan to grow organically. Again, these questions will help you determine what kind of guidance you may need from your board.

Determine what exactly you want from your board. Do you want someone to bounce ideas off of or do you want a board that picks you apart so you can grow? Or perhaps it is something in between. This will determine the type of people you want on your board which is just as important as the knowledge you need them to bring to the table. Setting these expectations will be critical in ensuring you attract the right people but is also sets the stage for how your board will function. More importantly, it will greatly impact how effective your board will be for you.

The size of your board is also impacted by your assessment of your needs. Most larger public boards have all the above disciplines covered. They may even have sub-committees that handle issues such as management compensation or corporate governance. Obviously, a new advisory board wouldn’t be that complex or large. Because of this, you may need to prioritize those areas that are most critical.

Give some thought to scope. You likely want your board advising you on the “big picture” stuff, not whether you should let go John in accounting. It doesn’t hurt to spell this out in your board expectations at the outset. You will also need to structure your meetings and ensure they operate at that level. This doesn’t have to be your job. You may look for someone on the board who has the ability to moderate these meetings in that fashion. In fact, a good number of boards have a board chair that works with the owners to plan meetings and the agenda. Again, this doesn’t have to be set in stone and can be rotated or assumed by you in the future.

Board compensation will also be a factor in board composition. The size of your company will likely dictate the size of board you can afford. Like anything, you get what you pay for. So you will need to balance size of board versus cost. There are no hard and fast rules for board compensation. But companies reaching a size of $60 to $100 million would likely have a board of 5-6 members. They would be paid between $20,000 to $30,000 annually plus $1,500 to $3,000 for quarterly meetings. Those are ball park figures as it all depends on the people you are trying to attract and their experience. Regardless, you will want to have a pretty firm idea of the compensation structure for your board. It may be helpful to view your board as you would any other investment. For example, if you were to budget $100,000 for a board of three in a company with a $3,000,000 EBITDA, You could then measure in your own head whether it is worth 3% of your EBITDA to have that resource both at the start and as you move forward. Looking at it another way, you likely spend that amount hiring other professionals such as your lawyer and accountant.  So would it make sense to spend an equal amount on three advisers with perhaps similar credentials?

You obviously want a board that is respectful and works together, but you also don’t want a board that agrees on everything. Ideally you want a balance of both. So spend time learning more about the working styles and accomplishments of potential members.  Also consider the “been there, done that” factor. You want a balance of people that have experience in your industry and/or in business itself. But you also want contrarians or people that don’t have all the answers from experience but can ask the right questions. It may be wise to limit the number of people that are intimate with your business and/or your industry as you want the board to be focused at the 30,000 foot level, not the ground floor.

At this point, you are likely thinking, man, this is far too complex for my initial board. Don’t worry, these are only factors to keep in mind. You may not get it right the first time and your needs will likely change over time.  Don’t be afraid to adjust as you go. You may be wise to limit your board spots to one year mutually renewable terms. That way, if you have to make some adjustments you will have that flexibility.

Most experienced board members will want to ensure potential liability is covered. Even if it is only an advisory board, there can be potential for liability. They will likely require you to have some form of director’s liability insurance. At a minimum, they will want an indemnification from the company in case things ever go awry. These are simple things to put in place and should not be an impediment to forming a board.

Where do you find board members? The answer is everywhere. You may belong to business groups or other groups that can be a source. It’s a little easier than interviewing a new hire in that a new hire knows there is a job. You can meet people and find out a lot about them before actually approaching them to be a board member. You may even have the opportunity to ask potential candidates for advice on a specific business issue and determining from that their ability to add value in a board role.

Unlike hiring for a position in your company, you are not in a rush as there is likely not an immediate need for a board. So you can take your time and build as you go. Take your time determining what you need and don’t try to get the perfect solution right off the bat. As we know in business, there is only progress, not perfection. Don’t be afraid to ask for help as there are numerous resources out there.

In summary, before you start be clear on what you want and then determine who you want. Decide on the level of investment and then move ahead. Like companies, effective boards are built over time, so get started and don’t be afraid to adjust as you go.

André Kriening is an Advisory Services professional with a background in accounting, finance, manufacturing and commercial lending.  After selling his business in 2013, André founded Strat+ Advisory Services, assisting other business owners and advisory boards with Strategic Focus, Leadership Development, and Operational Excellence. He can be contacted at: stratplus@shaw.ca or via cell: (204) 295-9013.

***6 STAR*** Customer Service – Part 1

customer-service.0822.12At my company, we coined the phrase Six Star Service.  My VP of Sales was the kind of guy you love dealing with as a customer. His office was right next to mine, so I could often overhear his conversations with our customers. There really wasn’t any rocket science to what he did. He was polite, empathetic, and would jump to the pump for his customers. He came from a background of commission sales which in hindsight, probably helped him develop these skills. After all, if you didn’t make the customer happy 100% of the time, you didn’t eat.

When he became VP of Sales, he wanted his team to have that same level of caring. I am a huge fan of branding everything, as it is a powerful way to convey emotion and intent. He had recently finished a book about the Ritz Carleton and wanted to brand his new customer service strategy as Five Star Service.

I suggested that in today’s day and age, everyone was claiming to provide Five Star Service. I related a personal car-buying experience to him to prove my point. I had gone into a local dealership to buy a van. I had done my homework and knew exactly what I wanted. I have a rule that I don’t pay full list but I also understand that dealerships need to make money. So I am what you might call a fair customer, and if the price is within a few hundred dollars, we have a deal.

The young salesman I was talking to had to do the usual song-and-dance and check with his manager. Usually dealerships have the smarts to put this guy out of sight, and after a few excused absenses, your salesperson will come out with a deal. In this case, the manager was standing in the showroom within ear shot. I could literally hear him swearing as he spoke to the salesman. I am not sure exactly what was being said, but he was either frustrated with the sales guy for not bringing him a better deal, or with me for asking for one. Regardless, after much back and forth, he eventually came back and we shook on a deal. I had thought about walking out, but I really wanted the vehicle. Moreover, I had just experienced even less professional treatment at another dealership, so I pressed on.

Next, I was ushered to the “Finance Manager.”  I did not need financing, which did not seem to impress him, but he insisted that I purchase undercoating, as the vehicle could rust. He also strongly encouraged me to take the extended warranty. After all, he had recently had a lady come in with a blown transmission and she was, thankfully, covered. In fact, he had another customer who experienced the same fate after only 3 short years. Any work that the salesman had done to convince me of the quality of their products was quickly starting to dwindle!

Despite the dealerships’s best efforts, I still wanted the van. As I walked out that day, I felt drained. I thought to myself, shouldn’t buying a new vehicle be a happy experience? Somebody’s second- largest purchase, next to a home, should rank up there, no? And guess what I saw when I opened the door to leave? A big, permanent sign outside that said this was a 5-Star Certified Dealer. They didn’t even have to “re-earn” it every year. They were lifetime certified by the fact the sign was not going anywhere.

In relating my story to my VP of Sales, I suggested to him that if that was 5-Star Service, we had to strive to be a six. The point was not to declare ourselves to be at that level as the dealership had done, but to allow us to communicate what level we expected of ourselves.

My VP’s next step was to develop standards with his Customer Service Team. Being a lean manufacturing guy, I shared another story of a local restaurant that had done what I would consider to be lean customer service. My VP loved this restaurant for its consistency in service and in food quality, particularly with regards to steaks. I had a friend who had intimate knowledge of how the place was run, and got a true understanding of how they pulled it off.

Firstly, everything had a standard “tact time.” Tact time is a lean term relating to the time it takes to perform a specific task or process. There was a list of how long each activity should take, including everything from seating to getting your bill after the last bite. The water glasses could never be more than half empty, and prepared food had to be delivered to the table within “x” amount of minutes. As many restaurants do today, they had a system of tag-teaming, whereby another waiter may deliver the food if yours was busy.

All processes were documented step-by-step, ranging from food prep. to cooking, to cleaning. All of this was the “magic” behind the scenes that allowed the customer to experience consistent service from server to server, meal to meal, and from location to location. My friend who worked there also shared that rookies that didn’t cut it stuck out like a sore thumb because of the standards. He joked that some newbies would be there one day and that he would just never see them again. The point I took from this is that performance evaluation was perhaps more objective and issues that negatively affected the customer experience were dealt with quickly.

My VP did a great job emulating some of this in our company, including implementing key phrases like “my pleasure, glad I could help.” As a side note, he also insisted that these standards be followed with our internal customers, the other employees from other departments. That did a lot to help set a professional and caring culture inside our company.

As I was told when we were thinking of starting lean manufacturing, some people will get it and some won’t. Setting these standards and discussing their importance with our people often helped solidify who was on the team and who wasn’t.

It is often said that you should hire for attitude and train skill. But the question is, which attitudes? One of my key criteria for determining a successful team member has become a level of empathy. Simply put, if a person can put themselves in other peoples’ shoes more often than they wear his/her own, he/she is most likely going to be a great team player. This empathy requirement holds especially true for customer service.

In the course of developing Six Star Service, we spent a lot of time educating our people on what it was like to be our customer. In most cases, we were dealing with buyers at huge OEM’s (Original Equipment Manufacturers). Their jobs could be extremely challenging as they were responsible for coordinating thousands of parts daily to feed their production lines. If another supplier let them down or something didn’t ship, they would have to scramble to accommodate a newly created build schedule. They would call us daily to see if we could accommodate the changes.

Being on the other end of those calls can be challenging. But if our people understood the buyer’s world, it made it that much easier to empathize and help the customer. If we managed those requests professionally and with flexibility, we would look like heroes.  (The flexibility part of this is a whole other story which really formed part of our secret sauce.  But that is for another day).  And we would get numerous emails like, “you guys rock” or “you saved me again”.

The Six Star Customer service strategy became a competitive advantage as our service was viewed by many as far superior than our competitors and other suppliers to our customers. It became apparent that doing the simple stuff right often had a bigger impact on our customers than a lot of the complicated stuff we did behind the scenes.

So that’s my story.  The first part anyway.  Hope you enjoyed it!  Please feel free to contact me: stratplus@shaw.ca

André Kriening is an Advisory Services professional with a background in manufacturing and commercial lending.  After selling his business in 2013, André founded Strat+ Advisory Services, assisting other business owners with Strategic Focus, Leadership Development, and Operational Excellence.

“GOT STRATEGIC FOCUS?”

strategyThe manufacturing business I ran was probably like most businesses out there.  We focused hard on quality, delivery, and service.  Pleasing the customer was the first priority and we were very good at it. I considered myself pretty progressive, having opened up the books to my people and having implemented things like lean before it was all the rage. I would even have an annual meeting with all employees to discuss the big picture: our markets, our customers, our results, and our strategies going forward. But I found as a leadership team, we spent more time on operational aspects than thinking strategically.

As a result, I decided to go outside for some help. I rarely did this. I was a firm believer in the do-it-yourself approach and I was very fond of saying “You can’t outsource leadership.” However, a friend by the name of David Woods offered to help me and he was someone that I trusted. I distinctly remember him saying to me “You will get through this process and will be frustrated after we finish. You will likely say something like: This is what I have been telling them (my leadership team) all along.” And David was right. My people went through the session like it was brand new. Having said this, I was impressed with my team as they had all the answers necessary to formulate the overall strategy.  So at least I had done something right.

The danger with a lot of these types of sessions is that your people come back all fired up. Then the daily rush hits and the great stuff you came up with fades away. And this is where my outsourcing leadership belief comes to play. I needed to put some formal structure in place that focused only on strategy.  That’s where I developed our Strategic Initiatives dashboard and a process that went with it.

One of the big initial wins made the effort worthwhile. We had been trying to develop a new product which we felt was critical to our future for about two years. We worked in fits and starts, with slow progress. Being smaller, our product development guy was also heavily involved in production, so guess what took priority?

In our second war room meeting two months after our session with David, our product development guy walked in with a finished prototype. I almost fell off my chair. I jumped up and said “Do you guys see what can happen when we focus? We have been struggling with this for two years. Our customers have been all over us for this, and in two short months, we have a solution!”  I was excited, but more importantly, I was now sleeping better at night because we were focusing on some of the things that kept me up. We were making progress.

I was also proud that our company was evolving to be more like other larger, successful companies. We now had strategic focus in the areas of growth, continuous improvement, product development, and people development.  And we had a system for keeping us on track while the world kept spinning around us.

So I developed a training tool for this process that I could share with others.  My first client was not a manufacturer at all, he had a financial services practice. So I realized that this framework fits in any organization.

So that’s my story.  Hope you enjoyed it!  Please feel free to contact me: stratplus@shaw.ca

Compensate for Attitude, not Skill.

images (1) There is an old adage that says “Hire for attitude, you can train for skill,”  or something along those lines. However, many companies rarely base their compensation on attitude. It gets based on longevity and skill. I can certainly appreciate that people who have been with you longer should be able to offer more value and therefore, should be paid more. But, I would also argue that it is essential that your compensation strategy has a behavior component. Here are a few things to consider:

1) Does your present plan reward the behaviors you want and need?
When my company was experiencing the economic crisis of 2008, more than ever, I needed our people to be innovative in how they were working, and be willing to adapt to change. Our performance reviews began to focus more on these behaviors than the traditional factors. We started asking new questions. Aside from doing your job, how many new ideas have you submitted or how many continuous improvement groups have you been a part of? Are you negative during meetings or do you focus on problem-solving during times of crisis? Are you willing to change the way you have always done things if the team decides to try something new? These are conversations we began having out of necessity. They also translated to pay. You can be darn sure that during the crisis, we were going to reward those people that helped us most in managing through the mayhem rather than providing roadblocks to innovation.

2) Do you communicate these expectations to your people?
If you have employees that aren’t displaying the right behaviors, do you clearly communicate what needs to change and explain why they may not be getting a raise or bonus? Is there a clear progression that escalates in severity? For example, we usually worked with a three-strike policy. First, there was a heads-up that we needed to see a change. Next, there was a formal warning which went into the employee’s file and resulted in a six-month suspension from any bonuses and increases. And finally, there was an invitation to the employee to be successful somewhere else. We often found that the initial tough conversations resulted in two outcomes: either the employee realized he/she needed to change or he/she thought you were full of it and thus never altered his/her behavior. In both cases, the employees themselves were happier after the resolution. In the case of the former, it often created a tighter bond between the employee, his/her leader, and the overall team.

Do you have a system that rewards employees for the “right stuff”?  Do your employees clearly understand what contribution you require? Again, we went through great lengths to verbally reward our people at every opportunity. This would not only make them feel good but allow them to build confidence and grow.

3) Are your company values clearly stated?
I truly believe that “Everything you need to know in life, you learned in Kindergarten.” While most of us don’t need to be reminded to be honest, respectful, positive, and helpful to one’s team, some people do. We often found that our conversations with employees who weren’t performing revolved around this value system. If somebody was constantly negative during meetings or on the shop floor, that was really a form of disrespect to his/her teammates. As sad as it sounds, these values need to be posted as a reminder to everyone: “This is how we do things here.”

4) Are you afraid to pay based on behavior because it is too subjective?
Yes, assessing someone’s behavior is subjective. However, unless your people are paid on piecework or commission, your assessment of their performance is subjective anyway. And if that is your opinion, shouldn’t the employee be entitled to know? At least initially, there should be a two-way discussion. You may learn some valuable information in the process.

As a company, you are well within your rights to expect certain behaviors, especially if those expectations are clearly communicated. I am not suggesting that compensation be based solely on behavior, but it must be a part of the mix. Also, some of the behavioral aspects of an employee’s performance are quanitfiable. The number of improvement ideas an employee submits or the resulting productivity is objective. And even though everything cannot be translated into hard numbers, often it is just as important to reward the effort as it is the actual results. Trust me, I am as much of a results guy as the next business owner, but this approach removed so much inefficiency and waste that our results following the recession were nothing short of astonishing.

The transition from a skills-based compensation plan to one including behavioral aspects was an evolution for my company.  In a way, the recession helped create this culture as we no longer had a choice. Survival was on the line. As a company owner and as a leadership team, this approach made life a lot simpler, allowing us to focus on the job at hand, rather than the distractions. We became stonger financially, operationally, and most importantly, culturally.

Andre Kriening is an Advisory Services professional with a background in manufacturing and commercial lending.  After selling his business in 2013, Andre founded Strat+ Advisory Services, assisting other business owners with Strategic Focus, Leadership Development, and Operational Excellence.