In this the fifth of a multipart series of posts started with:Why Small and Mid Sized Firms Grow. This conversation deals with what it really means to have a vision for your company

Vision means different things to different people. It is not a bolt out of the blue that strikes you one morning after a vivid dream. It is not a belief that you will become the next Facebook. We are referring here to a vision in the business sense of the word, as an expectation of what you can realistically expect to achieve after you have assessed the opportunities that exist or can be expected to come about. The conversion of that vision separates the dreamers form the achievers. Developing a business plan to put your resources to work in achieve that vision and will be discussed in upcoming blogs.

But let’s stick to the concept of vision first. Much was made out of the supposed fact that President Bush, did not have the so called “vision thing”. Many people think he actually had a vision, but it was flawed and poorly executed. The point here is that a company can be successful in many ways; it can simply get lucky (i.e. its main competitor goes bankrupt, its major client hits the jackpot and you go along for the ride, etc), it sticks to its knitting and in a good market just keeps on perking along. Or best yet, come up with a vision of what can become a reality after one gathers the facts, determine the marketplace needs, thinks about what they have a passion to accomplish and then goes about making that vision a reality (assuming that they have done their due diligence in what is realistically achievable by them).

So let’s dig a bit deeper into creating a business vision. There are actually two types of visions here. The first is a natural extension of what you are doing; only doing it and a lot better and including a family of free value added (VA) services. This is then packaged and branded to set you apart from the competition. This would be customized to the specific needs of each client and you would fully document the financial savings your program would generate for them. You could then reposition yourself from just another vendor to and trusted advisor and even be able to share in the cost savings generated. Client VA rewards could be tiered by their annual volume with you and receive benefits similar to the airlines’ frequent flyer silver, gold and platinum programs. We will explore this in greater depth in later blogs.

The second vision is a breakthrough concept that opens up whole new vistas for your business. Apple did this when it went from a niche computer company with low market share into an entertainment company resulting from Steve Jobs vision of how music and entertainment juggernaut by integrating: ITunes, Ipod, Iphone and Ipad into Apple; or Google’s vision that the internet could do almost anything they set their mind to (Google Maps, Google Analytics, Google Shopping, the Android, etc.). We have the vision of what outsourcing and distributed processing has done. This is the vision of innovation and the list is immeasurable.

In the last blog, we discussed what you should know about the economy. This knowledge hopefully will allow you to develop a vision to use this information productively.

We welcome your questions as to personal and business challenges you face in order to grow.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this the fourth of a multipart series of posts started with:”Why Small and Mid Sized Firms Grow”. This conversation deals with what you should know about the economy and how it impacts your business.

You don’t need to be an economist to understand that you can’t easily swim upstream and be successful when the economy is either declining or growing very slowly; as it is today. For large companies you often have economic guidance. But for small and mid sized companies you need to do this yourself or find someone to help grow when the market as a whole is not. This is not to say that a rising economy raises all boats, just as all companies fall when the tide drops. But it takes a forward thinking leader who understands their options to get through the tough times.

So what do you need to know about the economy? First of all, we need to recognize that we are in unchartered waters and the old 8-10 year boom-bust cycle as far as we can tell is over. The new economy is one likely to grow slowly at best and the risk of another shock to the system is quite possible as the government which used to work smoothly no longer does. We don’t have to look too far back or ahead to see for example The Economic Cliff, The Sequester, Defaulting on our National Debt, etc. All of these things create a lack of confidence and uncertainty and business people don’t like to make decisions in this climate. One should develop alterative strategies to deal with each opportunity or threat that may impact ones business as soon as possible.

Secondly, as the economy inches along you really have to be on top of your game to gain market share as well as defend your client base. Your competitors are felling the pressure you are and will be looking for ways to do the same thing you are. For you to avoid this fate you need to exercise one or more of the following economic strategies that we will go into more depth in future blogs:

1. Find those markets that are recession proof or do business with those customers who will be survivors
2. Price your services so that the value your client receives will immunize you from a poor or tepid economy
3. Cultivate special relationships anyway you can to remain their favorite, from simply being the best to providing perks
4. Get into a growing market, be it a new service or new location so you have only one direction to go and that is up
5. Create a value proposition so that you are seen as a profit center not a cost center
6. Establish a relationship with prospects that they can’t refuse due to the savings that you will document
7. Get even closer to your clients to make sure no one replaces you with a better offer

Lastly, there are both counter cyclical economic markets and quirky business environments that react uncharacteristically to change and the economy. Here’s some examples: one company was in a small market where the competition was exiting faster then the market was declining, and gained market share, raised prices and made a hefty profit. Another client entered a niche market that no one else dared to because of the potential economic risk of failure. There business model found a way to mitigate this risk and they also charged a premium price and made very high profits.

In the last blog, we discussed the importance of treating everyone fairly and finding out what is critical to them. Dealing with economic uncertainty is a very different process and requires people with different skill sets.

It would be desirable if owners and staff worked towards common objectives. An owner’s goal is to achieve growth, maximize profit and increase the value of their company. Employees want to maximize their compensation, have advance opportunities, good working conditions and job security. The question is how to reconcile these two objectives?

Comp plans were seen as a zero sum game where the winner won and retained most of the money paid out in wages. During periods of high economic growth and labor shortages the employees had the edge. More recently due to outsourcing, automation and the recessionary periods, employers were in the driver’s seat. With few exceptions, the union labor movement is long dead and pitted employees against their employers. Progressive companies realize that employees can be their most valuable asset when made part of a team and properly incentivized. Interestingly, China’s advantage labor costs advantage is rapidly eroding due to an 17% increase in wages, substantially lower productivity compared to American workers, the theft of intellectual property, etc. US companies have gotten their costs under control with better management tools and operating with a leaner and better educated workforce. It is estimated that by 2015 production costs for many items, we will be on par with China. On top of that we are in the new normal economy for the indefinite future where the old rules of an 8-10 year boom-bust economic cycle may no longer apply. There should be a slow but hopefully sustainable growth assuming no “black swan” events. If US companies are properly managed both they and their staff should come out ahead. So the question is how does one go about doing this?

We will concentrate on staff compensation, although perks, contest, etc. should not be ignored. There are two parts to a good comp plan; short term comp and the long term comp. Short term comp (annual) has a base salary (or a draw) plus an incentive in the form of a commission. The commission for producers (sales reps/business developers and recruiters/schedulers) should be tied to the margin $ they are responsible in generating. This should be calculated on a sliding scale where the highest producers that one can least afford to lose are commissioned at the highest rate and those less critical at a lower rate. This sliding scale is the core of a win-win comp plan. The amount to be paid out should ideally be part of a pool of monies set aside for staff compensation so that both the company and its key producers do well. We usually divide up the pie into 4 portions (which need not be equal) for the person: who develops the relationship with the client, who finds and qualifies the candidate, who gets JO and detailed specs, and who schedules, debriefs the candidates and closes the deal. The amount paid out as a percent of margin $ varies as overhead (fixed cost) varies, but there are certain rules of thumb depending on ones mix of business. The details of the payout plan should arrive at a decent return on sales for the company and high compensation for superior employees. We test the plan under various scenarios to make sure that it works as intended for a win-win program.

The second part of the plan is a long term retention plan to retain its best people which can include cash, real or quasi stock (golden handcuffs plan). This is conditional on both achieving certain performance standards and can be used as a retention and exit plan. The idea is to lock in those needed for long term growth and sacrifice a lucrative deal to take a job with the competition. As the company value is a multiple of its profits one can design a generous program which is the ultimate win-win comp plan. There are rules of thumb here too as to what is needed to make this effective along with conditions for qualification.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.