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The supervisor should meet with the employee to discuss the team feed-
back results. All feedback should be given confidentially. A total average
score of 7 or above for all questions should be considered excellent.

The goal of the meeting should be to look for five items that the employee
would like to impact before the next review and to create a strategy for
training, development, or more individual feedback (i.e., individual test-
ing or coaching) for that employee.



Reality Check

Consider these questions about your completed worksheet:

• Have you defined the numerical rankings well enough for peers
and team members to give meaningful and consistent feedback?

• Do you agree with the feedback given by team members and
peers for the employee? Can you help coach the employee to bet-
ter his or her performance?

• Are you willing to commit the time it will take to make a 360-
degree feedback process successful in your company?

• Have you trained employees to know how to give and receive
feedback?

• Do you know what characteristics you are looking for in top-level
employees? Does this process help you measure for them?

• Are you willing to participate in a 360-degree feedback process
yourself? Are you committed to your own development?
222 Lead with Courage



MANAGEMENT SKILLS FEEDBACK

Worksheet 7.3 is intended to give feedback to managers on their perfor-
mance, specifically their people management skills. Although managers
are required to give feedback to employees, they may be reticent to get it.
Whereas employee performance problems can hurt a company, key man-
ager problems can kill it. It is imperative that managers know that employ-
ees will have the opportunity to communicate with senior executives or
even the board of directors confidentially.

A company should not attempt to start a 360-degree review process un-
less all levels of employees are willing to participate equally. Again,
managers should know at least three to six months in advance that their
subordinates will review their performance. This kind of process can
bring to light issues—such as possible sexual harassment or favoritism—
early on.



Making It Happen

Ask all subordinates to complete these forms and return them to a sen-
ior manager. They should be tallied with an average score per question
by adding up the total of the 1 to 10 scores and dividing that number by
the number of people who answered the question. Comments should be
collected on another sheet by question number.

A senior executive should meet with the manager to discuss the feedback
results. It’s essential that all feedback be given confidentially without
references that would allow the manager to guess the identity of the
giver of a particular type of feedback. The intent is the personal and pro-
fessional growth of the manager, not an opportunity to punish subordi-
nates for their honesty.

An average total score of 7 or above should be considered excellent. The
goal of the meeting should be to select five items the manager would
like to positively impact before the next review. The company should be
willing to provide the resources necessary to make this a priority (indi-
vidual personality testing, outside coaching) and to create a plan for
development.
223
Driving Employees to Peak Performance



Worksheet 7.3
Management Sk ills Feedback
Please rate your supervisor’s/manager’s performance in the following categories (1–10, 10 = best).
Your scores and comments will be kept confidential.
Return this form to by .
1–10 Comments
Communication
Makes himself or herself available for communication.
Is able to communicate honestly.
Has given me wise suggestions about work or people.
Is able to gracefully handle my communications.
Treats everyone fairly (doesn’t have pets or favorites).
Planning
Manages time wisely.
Keeps stress level under control.
Can plan group workload effectively.
Performance
Sets appropriate goals for the group.
Distributes work fairly in our group.
Sets accountability standards fairly.
Holds people accountable consistently and fairly.
Recommends appropriate compensation.
Feedback
Gives constructive feedback.
Controls anger/is not abusive.
Recognizes outstanding achievement.
Gives credit to others.
Leadership
I respect this person.
A good example as a role model for our corporate
culture.
Doesn’t gossip or allow other behavior which
undermines morale.
Seems happy to be at this company.
Carries out company rules and supports company
policies.
Other comments you wish to make about your supervisor/manager or about his or her
leadership style?
224 Lead with Courage



Reality Check

Consider these questions about your completed worksheet:

• Are managers trained well enough to give and accept feedback?

• Are managers committed to their own development or do they
feel they must be unquestionably “right” to lead effectively?

• Do managers see this process as integral to promotional op-
portunities?

• Are sufficient resources available to employees who want to get
the most out of this process, such as outside coaches, mentors,
psychologists, personality and skills testing, and training pro-
grams for job skills and people skills?

• Is your company paying lip service to professional development,
or is it an integral part of your quality program?
225
Driving Employees to Peak Performance



EMPLOYEE RANKING SYSTEM

Worksheet 7.4 is intended for confidential use by each department man-
ager as a human resource management tool. It’s a place for each manager
to record his or her thinking about individual employee performance.
It’s important to set aside time for managers to discuss their employee-
related problems, even if they don’t share individual scores. Managers
should provide confidential support and feedback for one another in
dealing with these critical but challenging management issues.



Making It Happen

Place each employee’s initials at the top row of boxes in Worksheet 7.4.
Rank each employee from 1 to 10 on each of the dimensions down the left
column. At the bottom of each column, total each 1 to 10 score, and
divide by the number of categories for an average score. This is just a
thumbnail sketch of each of your employees, but the bottom average
should give you an indication of top performers and the weaker links in
the chain.

Look at your scoring this way: Scores of 8 to 10 indicate your strongest
employees. Make sure you are spending enough time mentoring these
employees who have the potential to become your next leaders. Most em-
ployees will probably fall in the 5 to 7 category and will need a variety of
developmental plans. Employees with overall scores of 4 or under have
come to a critical point. Can they move up within the next two to three
months to a score of 5 or better? If not, you should make the decision to
let them go or move them into jobs for which they are better suited. Once
you have made this decision, you should let these employees know as
soon as possible and do what you can to ease the transition.



Reality Check

Consider these questions about your completed worksheet:

• Are most of your employees in the 6 to 10 range? Are you pre-
pared to take action on employees with lower scores?

• Do you find more performance problems in one category than in
others? Are there people problems that could be solved by training?
226 Lead with Courage



Worksheet 7.4
Employee Rank ing System (by Department)
(1–10, 10 = best)

Employee Number
1 2 3 4 5 6 7 8 9
Quality of Work
1. Technical skills.
2. Accuracy, little supervision required.
3. Creativity/originality of work.
4. Communication skills.
5. New approaches to problems.
6. Accepts responsibility—takes initiative
for action.
7. Forward-thinking/moving in same
direction as company.
8. Continues to learn and improve.
Quantity of Work
1. Meets deadlines.
2. Consistently hard worker.
3. Planning/time management/workspace
organization.
4. Does fair share of department’s work.
5. Is in on time, on time to meetings, and
doesn’t miss a lot of work.
People Issues/ Teamwork
1. Solves people problems directly.
2. Positive influence on coworker morale.
3. Working relationships inside company.
4. Leadership in company/shares
information and suggestions with others.
5. Working relationships outside company
with customers or vendors.
6. Participates in meetings.
Total (A)
Number of Categories (B)
Overall Rank (A/B)
227
Driving Employees to Peak Performance



Are they quality or quantity problems that might be due to work
overload or inadequate resources?

• Are lower scores due to lack of skills, lack of interest, or lack of
willingness to perform up to capacity?

• Are you looking for promotional or other leadership opportuni-
ties for employees scoring in the 8 to 10 range?

• Are a few much lower scores bringing down the average for par-
ticular employees? Can you give these individuals honest feed-
back to help them improve these scores?
228 Lead with Courage



HUMAN RESOURCE KEY INDICATORS

Worksheet 7.5 allows you to gauge the morale, productivity, and effi-
ciency of the workforce. Generally, absenteeism goes up when employ-
ees take vacations in the summer. Watch for higher absenteeism in
departments as a possible trend of discontentment.

If you have staffed correctly, temporary labor and overtime should be
zero most months or reflect your seasonality. An increase two months in
a row could indicate a more regular need that should be filled. Because
overtime pay is higher than regular pay, some employees will regularly
find reasons to work extra hours. All overtime requests should be ap-
proved in advance to keep this extra premium to a minimum.

Tracking trends and asking the right questions should let employees know
that you are watching this expense carefully. I also recommend tracking
the number of suggestions in the suggestion box as a general indicator of
morale problems. If you see a sudden increase, consider it a legitimate con-
cern and take steps, such as an employee survey, to determine the reasons.



Making It Happen

List for each department the number of days missed due to the variety of
reasons listed, and get the average days missed per employee by dividing
the total days missed by the number of employees. Also determine the
amount of money spent on overtime and temporary help by entering the
number of hours worked and multiplying by the rate per hour. If you use
a suggestion box, tally the number of suggestions and attach them to this
worksheet.



Reality Check

Consider these questions about your completed worksheet:

• Are employees in certain departments taking more time off than
those in others? Does this suggest anything about the type of
work or management that goes on in different departments?

• Are some departments making up for lost time with overtime or
temporary help?
229
Driving Employees to Peak Performance



Worksheet 7.5
Human Resource Key Indicators
for (Month/ Year)
Absenteeism (# of days missed this month)
Sick Personal Number of Average/
Department Vacation Leave Leave Total Employees Employee




Overtime
Number of Overtime
Department Overtime Hours Premium Total ($)




Total:

Temporary Labor
Department Number of Hours Rate ($)/Hours Total ($)




Total:

Attached: Suggestions from Suggestion Box
Total number of suggestions this month
230 Lead with Courage



• Can efficiency be increased to reduce the need for overtime or
temporary labor?

• Are there specific, meaningful connections between fluctuations
in human resources indicators and spikes in inventory or order
backlogs? If so, what can you do to smooth out these spikes?


W H AT ’ S N E X T

In the final chapter, I discuss action-based ways for communicat-
ing your vision as a leader, as well as tactics for growing your lead-
ership abilities, including the intangibles of what makes for a
great CEO.
8
LEADING YOUR
BUSINESS FOR
MAXIMUM RESULTS
We aim above the mark to hit the mark.
—Ralph Waldo Emerson




W hen you build a company, you create something that didn’t exist
before, and it takes a special kind of person to cope with all of the
challenges creating a business will bring. It takes both foresight and in-
sight and the ability to look at the world at large and decide where your
company must fit in to survive. It also takes insight, the ability to look in-
side yourself and others, and the willingness to grow personally to meet
the ever-increasing demands of running a business. Finally, it takes
courage to consistently stay the course when those around you might
question your decisions or your actions, as well as the ability to know
when you need outside help.

There are 10 factors that help determine whether a business will succeed
or fail. In the box on page 232, these factors are not in order of impor-
tance; all are essential.

It’s no accident that the first five reasons that businesses succeed de-
pend almost exclusively on the CEO and top managers. It’s up to you to
constantly increase the skills and experience that make you an effective
CEO, but the real challenge is to continue growing in the more intangi-
ble areas that give you the ability to persist when others would not and
the energy to try something new when the last three tries didn’t work.
The key for this is maturity.


231
232 Lead with Courage




TOP 1 0 R E A SONS T H AT B US I N E SSE S S UC C E E D

1. The experience and skills of the top managers.

2. The energy, persistence, and resourcefulness (the will to make
the business succeed) of the top managers.

3. The maturity to treat employees, suppliers, and partners fairly
and respectfully.

4. Deal-making skills to sell the product at the highest possible
price given your market.

5. Deal-making skills to work with resource suppliers to keep
costs low.

6. A product that is at least a cut above the competition, and ser-
vice that doesn’t get in the way of people buying the product.

7. The ability to create a “buzz” around the product with aggres-
sive and strategic marketing.

8. The ability to keep developing new products to retain and build
a customer base.

9. Superior location and/or promotion, creating a connection be-
tween your product and where it can be obtained.

10. A steady source of business during both good economic times
and downturns.




Maturity is a quality that enables you to be willing to risk profits to
do the right thing, to have more tolerance for the differences of oth-
ers, and to be willing to wait until the time is right rather than re-
quire immediate gratification.



PERSONAL CHARACTERISTICS OF CEOs

There are a number of characteristics that define good CEOs, whether in
$5 million or $5 billion companies:
233
Leading Your Business for Maximum Results




F I V E DE F I N I NG C H A R AC T E R I ST IC S
O F GR E AT C EOS

1. Personal insight. Great CEOs are great leaders. They know
themselves and what they stand for. They have been called on
all their lives as problem solvers because others know them to
be fair and impartial. People respect their opinions and look
to them for guidance.
Great CEOs are mature as people. They can suffer disap-
pointment more gracefully than others and give others credit
for their achievements. They don’t come in the office door
yelling for something they need. They aren’t as concerned
about titles or power structures as they are about the welfare
of those who work at the company. They are trustworthy be-
cause they’ve always been honest with people and have
earned that trust. They care about families, and they know
that people are more important than dollars and express it in
their actions every day.
Finally, great CEOs seek out feedback. They want to know
how others see them so that they can understand themselves
better and continue to grow as people. They also want feed-
back about the company from an employee perspective, and
they use surveys as a starting point for creating a dialogue to
make things better.

2. Resourcefulness. Great CEOs seem to have boundless energy.
They come to work with the greatest enthusiasm. Even when
they don’t feel like it, they find ways to reenergize themselves
and come in ready to go. They take good care of themselves
physically and emotionally so that they can be there for the
employees and the needs of the company. They give much
more than they take every day.
They don’t give up. If the wall is too high, they back down
and find another way around. They don’t blame, but they do
look for solutions to problems so that those problems are less
likely to happen again.

3. Courage. The CEO has one of the world’s toughest jobs. No
matter how tough it was to start the company, it’s even harder
to keep it going and growing. A CEO must decide what he or
she stands for and do what is right, all the time.
(continued)
234 Lead with Courage




It takes courage to fire the salesperson responsible for the
company’s biggest, most lucrative account when that same
salesperson drives a company car drunk and causes an acci-
dent. There will be many times when CEOs will want to
smooth over something that requires decisive action because
of the potential consequences or because they just can’t take
on one more challenge at the moment. However, CEOs who
exercise poor moral judgment will lose their personal in-
tegrity with all of their employees watching.

4. Willing to look at risk. A great CEO isn’t afraid to look at the
downside and answer the hard questions he or she hopes will
never become a reality. The CEO needs a backup plan—one
that is designed by looking at the company’s worst-case sce-
narios. This plan addresses questions such as: What if your
industry experiences a slump? What if new governmental
regulations affect your business? What if you lose the client
that accounts for 50 percent of your sales?
Preparing yourself and your company for these eventuali-
ties may be the difference between a tough year or two and
bankruptcy. If you are in business for 20 years, some of your
worst-case scenarios will probably happen. The key is to be
ready and able to take immediate action to reduce the loss.

5. Foresight. It seems some CEOs have an uncanny ability to pre-
dict the future. They may have unusual insights into their
particular markets, and luck may play a part as well. In addi-
tion, they are prepared to create their own luck by cultivating
an ability to see opportunities for their company and to make
the deals that convert those opportunities into realities. Some
things that may seem like amazing foresight are actually the
result of the hard work and discipline it takes to constantly
look forward to build a successful company.
Great CEOs must also constantly develop new products to
build and retain a customer base. Foresight is also the ability
to hire and retain the right people, looking ahead toward the
growth of the company. Finally, over time, each company
must develop a steady source of business during both good
economic times and bad, because there are sure to be bad
economic times during the life of a business.
235
Leading Your Business for Maximum Results



FACING THE TOUGHEST QUESTIONS

One CEO who demonstrates many of the traits I mentioned is Toby Lenk,
who took his company, eToys, from a start-up to a public company in just
two years. On the day the company went public in May 1999, Lenk’s 10.5
million shares of stock were worth more than $850 million. However,
when eToys filed for bankruptcy in March 2001, Lenk still held 10 mil-
lion shares of eToys stock. He ended up with the money he took in salary
for those four years and little else—even though his idea made a lot of
other people very wealthy.

Lenk’s story is a great study about CEOs and raises some provocative
questions: How much do you give; how much do you take? What do you
owe the company you build, and what does it owe you? Where do you go
to find the answers?

Great CEOs like Lenk confront difficult questions like these and follow
their moral and ethical compasses. They create both a compelling and
heartfelt business plan and game plan. Ultimately, their behavior and
their belief in their vision for the company will determine whether the
endeavor thrives or perishes.



LOOK TO THE LONG TERM—THE VERY LONG TERM

A crucial aspect of leading your business is to determine how to keep
the business running in your absence. You won’t be around forever, so
plan ahead. This fact is sometimes difficult to appreciate, especially if
you founded the company, but it’s important. Making sure that your
company survives helps you and your employees focus on matters of
importance.

Many companies run, and even thrive, on personality alone—on the
charismatic leader whose employees rally round for direction and in-
spiration. However, businesses like these can appear more like cults
than companies, and cult companies often don’t outlive their leaders.
Companies thrive when they operate according to principles their em-
ployees can believe in. Your employees will do better if they believe that
your company exists to do something more than make you wealthy.
They want to know that their efforts will pay off whether you’re
around or not.
236 Lead with Courage



This doesn’t take away from you—the person running the company—so
much as it gives to your employees. You improve your own prospects for
a payoff from your employees if you improve their prospects for a payoff
from your company. If you show them that you expect your company to
run whether you’re there or not, you demonstrate that you really do look
to the long term.



FIND THE IMPORTANT DETAILS AND FOCUS ON THEM

Another aspect of leadership is knowing what drives your business.
Study your operations; then extract those details that are key to your
success. It’s not enough to house volumes of reports on a bookshelf. You
must know what those reports mean. If, for example, you send out
50,000 pieces of direct mail and two weeks later sales jump, you may
conclude that you dropped an effective mailing. However, perhaps your
advertising kicked in at the same time, or perhaps a distributor
launched an incentive program. You must find out so you know what
works and what doesn’t.


In addition, remember that data is often about quantity, not quality.
Only people—not mere data—can qualitatively measure performance by
answering questions such as the following:


• How well do our results match up against our expectations?
What’s different?

• Is the trend up or down?

• Will these trends last a short time, or do they look long term?

• What might have contributed to what we see in the data?

• What’s missing from this data that would lead us to ask more
questions?


As a rule, the finance department is the sole corporate unit devoted to
quantitative analysis. It doesn’t develop, produce, market, or deliver the
product. It measures the results of your efforts to do those things. It pro-
vides you with data from which to draw the benchmarks for measuring
your company’s performance. This doesn’t make the financial depart-
ment more important than the others, but simply more useful in this
context—if you decide to use it this way.
237
Leading Your Business for Maximum Results




FAC E R E A L I T Y W H E N YOU LOOK
AT YOU R C OM PA N Y DATA

The problems you encounter in running your company are tough
enough to solve. Don’t let confusion muddy the waters. This means
keeping your analyses as objective as possible and admitting what
you see to those around you. Don’t try to persuade yourself or oth-
ers to see what isn’t there. You may be the only person, for example,
who can tell whether a two-month downturn in revenues reflects
your ordinary business cycle or the beginning of a more drastic
trend. Therefore, you must gauge the truth and act accordingly.
Later in this chapter, I discuss how to know if you can help to fix
this trend by bringing in an outside consultant.




LEADING DURING TIMES OF GROWTH

Your business may outperform your projections, or it may fall short.
Either way, you need to know. A game plan allows you to monitor per-
formance in detail, so learn how performance varies from the vision of
your business plan. There are no shortcuts in preparing the information,
in studying it, and in acting on it. You must plan, act, measure, and plan
again. Don’t expect to do this quickly. Analyzing the data takes time—at
least twice as long as it takes to compile the data, according to one rule of
thumb.

You may be jubilant when you outperform expectations, but just as many
problems can stem from too much business as too little. Are you pre-
pared with staff and resources to handle faster growth than you initially
projected?

Take each variance as an opportunity to rethink how it will impact each
aspect of your business. Although growth can be a wonderful thing for a
company, it can be challenging. This is a great time to get some outside
consulting help from someone who has been there and can guide you in
the next step for your company.

To be sure you stay on track, you will need to keep data and make choices
in each of two areas: where to invest your time and resources over time.
Running a small business is a balancing act because resources are always
scarce. I always set out to upgrade and change each area over time—
238 Lead with Courage



finance, sales and marketing, operations, human resources—so that no
area would be left without improvements for a long period.

Managing high growth means you have done many important things
well—product development, marketing, and sales—that’s the good news.
The bad news is that, at least for the short run, it feels as though the com-
pany is running you. Sometimes the best you can do is to enjoy the ride.
Understand that it’s probably temporary and leverage the opportunities
as best you can.

What you do during this period will have an impact on the life of your
company. Watch for the following:

• Don’t reduce your quality standards or treat people as if they are
dispensable.

• Avoid burnout (yours and your employees’). Keep this time in
perspective and help your employees do the same by taking time
off when you can.

• Consider getting a line of credit or other borrowing vehicle while
your sales and profits can justify it.

• Consider the risks of stocking more inventory than you can
quickly sell in case demand decreases faster than expected.

• Get all the public relations you can while your story is newsworthy.

• Pay down debt and set up the ability to borrow in the future.



MANAGING SLUMPS

If you plan to stay in business long, you’ll see up economies and down
economies in your career. The secret of success is to learn how to make
money during both. This means trying brand new, bold strategies. Deter-
mine who’s still buying what you’re selling; maybe they are in a new in-
dustry, or the product they’re buying is just a little different from what
you’re offering.

The good news about lean times is that they might offer you a breather
from the otherwise breakneck speed at which you usually operate. For
example, you’ll have time to plan that marketing campaign you’ve been
thinking about for the past two years.
239
Leading Your Business for Maximum Results



It’s essential to stay positive in tough times and to celebrate the progress
you’ve already made in your business and the lean times you’ve already
made it through. Instead of looking at today and next week, look at a year
or more ago. What have you done that you’re particularly proud of in the
past few years? Resist the impulse to conclude that your success is now
ending—a slump is just a lull in the action.

Ask really successful people and you’ll find that most have gone to the
edge of personal crisis. It’s what they learned about themselves during
those critical times that made it all worthwhile. Have you been tested in
the past? Do you know you will be able to make it because you’ve risen to
the challenge before?

If not, maybe this is the time to find out about yourself. If you usually
shrink from a challenge, this time rise to meet it. Find the big customers
you’ve always wanted but assumed you were too small to lure—ask them
for their business, or do something really bold to get yourself noticed.

You’ll never find the energy for that next bold move unless you feel good
about yourself right now. Indeed, you’re too important to the business
you’ve created not to take great care of yourself. Learn what works for
you and do it religiously. Get physical activity, even if it’s just a walk dur-
ing lunch. Develop eating habits that will sustain you. Find the things
you enjoy and engage in them regularly. Get outside perspectives so that
you don’t take everything so seriously.



YOU CAN’T DO IT ALONE

The job of a CEO is overwhelming—so overwhelming, that many CEOs
don’t realize that they’ve lost touch with their families, lost friends, and
haven’t done anything but work for years.

Don’t try to run a company without support. If your family thinks the
business is a bad idea altogether, try to get some counseling and talk it
through. It’s perfectly understandable that a spouse might be concerned
that a business will cost money initially, be risky, and, more importantly,
take you away from the family. This isn’t an insignificant concern. Con-
tinually work on compromises.

Well-established companies face family concerns as well. Who should
work in the family business? Who in the next generation should run the
240 Lead with Courage



business after the founder retires? How can the family wealth be divided
after the death of the founder if all of the wealth is in the business? Many
other CEOs have dealt with these issues successfully, and you can, too,
with their help. Find a group of other CEOs, preferably from a variety of
industries, to share the burden with you and to give you the benefit of
their experiences and help you cultivate new ideas.



GETTING OUTSIDE HELP

In addition to finding other CEOs for guidance, you might find yourself
needing the services of a consultant at certain points during the life of
your business. Many owners and managers are suspicious of consul-
tants; they distrust freelance experts who charge big hourly rates but
make little long-term commitment. Sometimes, they resent any outsider
criticizing their companies—no matter how much they know, intellectu-
ally, that they need help. However, one crucial trait of great leaders is
that they know when to ask for help.




R E A SONS YOU M I G H T N E E D
SOM E OU T S I DE H E L P

• You need a high or specific level of expertise that goes beyond
what your company could afford to pay an employee.

• Your needs, generated by growth or external market forces, are
only temporary.

• Problems have become so acute that they require immediate
response.

• Problems are of such a broad institutional nature that they
defy internal response.




How do you know you’re in this kind of position? You’re calling the bank
every day—nervous to hear your account balance because you can’t get
straight information from your accounting department. Traditional mar-
keting campaigns that have worked for years take a sudden dive in perfor-
mance. Production bottlenecks you never saw before flare up and won’t
go away.
241
Leading Your Business for Maximum Results



Unfortunately, identifying a problem isn’t the same as fixing it. That’s
where outside consultants—used well—come in. To use a consultant well,
you have to look past short-term tensions to long-term goals. You have to
be willing to share relevant information freely and cooperate openly. This
doesn’t mean handing over the keys to your kingdom, but it does mean
you have to do some preliminary work and expand your concepts of trust
and comfort to include some outsiders.

Done well, these efforts will return many times their original invest-
ment. They’ll get you past sticky problems and lead you into productive
relationships with the best consultants in their fields. Consultants have a
bad reputation among some owners and managers for two basic reasons:

1. There are many bad ones.

2. Many clients use consultants badly.


HIRING QUALITY CONSULTING HELP

In the 1980s, the number of business consultants, especially financial con-
sultants, grew substantially. There are many business experts happy to
work with small, growing companies. However, as a potential buyer, you
should beware. Not every consultant is a McKinsey Co. or Tom Peters.

Erratic use makes problems of erratic quality worse. Often, the owners
and managers who complain most about consultants use them in the
most ill-advised ways. Horror stories usually include some variation on
this theme: A manager knows someone or meets someone whose ideas
and expertise impress people (primarily, the manager himself or her-
self). The someone may be a consultant or may become available because
of a career change. The manager likes the someone’s ideas or energy or
charisma but doesn’t have a suitable job available, so the manager hires
the someone as a consultant on some nonspecific basis such as “improv-
ing performance.” A scenario like this is destined for trouble.

If you want people with good ideas and energy and charisma around you,
hire them as employees. Save consultants for more specific goals.


Finding the Right Consultant

Most consultants market their services by word of mouth. As a result,
when owners or managers think they need someone, they usually do
242 Lead with Courage



best to ask friends or peers for names, but recommendations don’t en-
sure success. The key to success lies in interviewing consultants well and
being very specific about your needs, expectations, and budget.

The following questions and answer guidelines can help you interview
prospective consultants and choose the right one for a given time and
circumstance.



Ten Questions You Should Ask before Hiring a Consultant

1. Most consultants focus on two areas: cutting costs and raising revenues.
What do you see as the relationship between the two functions? Which do you do
better?
Cost cutting is the consultant’s usual expertise. It’s what most com-
panies need. The main reason for corporate restructuring is to reduce
costs. Many hire outside consultants to take an objective look at organi-
zational charts, value-adding processes, and competitive environments.
“We spend a lot of time talking to a company’s customers, so we under-
stand what they like and don’t like,” one consultant says. “What does the
customer value? Is it time? Is it quality? We define that.” This means that
a company can cut jobs and still not touch on one nonvalue-added activ-
ity or add value to the customer.

2. What was your professional experience before you became a consultant?
Ultimately, you should want any consultant you use to have a strong
bottom-line sensibility. You want this person—or team—to focus on the
things that will add the greatest amount of value to your company in the
shortest amount of time. This kind of thinking doesn’t come naturally
to many people. It usually demands two kinds of experience: as a chief
executive officer or as a corporate-turnaround specialist. A consultant
who has this kind of experience has dealt with strict cost controls, high-
pressure scrutiny, and the need for quick results. These are the same
traits you should look for in anyone giving you expert advice. Though it
may seem counterintuitive, you might look for bankruptcy and similar
workout experience from a consultant. The urgency learned in that envi-
ronment applies well to the urgencies of daily business life.

3. How many professionals work with you or at your firm?
Business consultants fall essentially into two categories: solo practition-
ers and team players. The differences between the two usually involve
the type of work they take. Most of the time, the soloists deal with less
243
Leading Your Business for Maximum Results



specific, strategic, or vision-related issues; the teams get into more
tightly focused number crunching. Less specific functions tend to take
less time (sometimes as little as one day); the more specific take more.

One of these functions isn’t better or worse than the other. The trap to
beware is the marketing soloist who claims he or she can also review all
of your accounting. The exercises in this book will help you make your
financial statements easier to understand, but don’t expect one consul-
tant to fix all your problems.

4. Will you sign a letter of confidentiality? Will you refrain from working for
our competitors?
Some owners and managers assume that short-term strategic consultants
pose less of a threat to proprietary interests than the number crunchers.
However, you and your staff should feel free to discuss any business sub-
ject with your consultant and trust his or her discretion. If you feel un-
comfortable, you won’t discuss things candidly. The solution is to ask all
consultants to sign a letter of confidentiality.
Your risk in these cases isn’t usually that the consultant will knowingly
steal proprietary information or material. Most are professional enough
and work in small enough markets that reputations matter. More often,
the risk involves a consultant’s unwittingly mentioning something. If the
consultant has signed a confidentiality letter, he or she will be more
likely to think twice.

5. Who are some of your other clients? Who are some people and companies with
whom you’ve worked before? May I call them to ask about your work?
Don’t be wowed by big-shot former clients. At big companies, consul-
tants are hired in teams to tackle extremely specific projects. Just be-
cause the person in the expensive suit claims Chrysler as a former client
doesn’t mean he knows Lee Iacocca on a first-name basis. In fact, it’s bet-
ter if the consultant has worked with companies closer to your size and
shape because he or she will more likely understand your needs.

6. With how many clients do you work at one time? Do you have enough time to
devote to our company to accomplish our goals? Will you return phone calls or
e-mails the same day?
Asking other or former clients about the consultant’s responsiveness and
attentiveness can be helpful, as can asking more pointed questions of the
consultant. The questions all focus on the same point: How much atten-
tion can the consultant afford to spend on your needs? The number of
clients a consultant can serve well varies with the kind of service pro-
vided and client involved, but some general rules apply: You want to
244 Lead with Courage



have same-day response to questions or problems. If you’re undertaking
a major restructuring, you probably don’t want your consultant working
with more than two or three other clients. One caveat is that some own-
ers and managers who’ve had bad experiences with overly invasive (and
expensive) consultants warn that you shouldn’t be the only client a con-
sultant has.

7. Will you teach us to do this work for ourselves and become self-sufficient?
How long will this take?
One common trap in using a consultant is becoming dependent on him or
her. From the consultant’s perspective, this may simply be good busi-
ness, ensuring future work. From your perspective, it may be little better
than the status you had before you had the consultant come in. By mak-
ing training part of the consultant’s job, you can limit the chances of a
prolonged engagement. Establish a schedule within which the consultant
can accomplish his or her goals. Assign a staff person to work closely in
this process and learn everything he or she can.

8. Have you written anything—published or not—that deals with issues such as
the ones this company faces?
Consultants love to write about their experiences and their theories. If
so, it can help you understand how the consultant sees markets and busi-
ness factors that may affect you. Management or technical literature can
be a good place to look for consultants. Although the latest management
guru writing for the Harvard Business Review may be beyond your needs
and means, you might be able to find useful experts in trade or regional
newspapers and journals.

9. How do you charge for services? Do your fees include travel time and other
miscellaneous charges or are those billed separately?
There’s no set standard for paying consultants: Some work on a straight-
fee basis, others work for a fee plus performance bonus, and a few work
on a contingency basis—tied to sales increases or cost reductions. As
with paying any outside contractor, your concerns should be ensuring a
high quality of work and containing costs within a predetermined
budget. With consultants, focusing their use as specifically as possible
will help accomplish both of these ends.
In addition, make it clear from the beginning what incidental expenses
you’re willing to pay and how you’ll pay them. Consultants who’ve
worked at or for large corporations may be accustomed to expense ac-
counts that you aren’t. Be very clear about how much you’re willing to
spend on the whole project or series of projects. Insist that the consultant
245
Leading Your Business for Maximum Results



warn you—in writing—if the project won’t be completed on time and
within budget.

10. What kind of documentation will you give us when the project is completed?
Who will own that documentation?
Keeping a paper trail of the work a consultant does for you accomplishes
several ends—all good. First, if the consultation has worked well, this
will usually give you some forms and tools to use to improve some part
of your performance.
Second, it allows you to keep a record of the analyses made of your com-
pany and the responses you’ve taken. This kind of “scrapbook” can be a
big help when dealing with future problems or other consultants. Fi-
nally, keeping a paper trail makes clear what the consultant did—and
didn’t do—while working for you. If any disputes should emerge over
payment, ownership, or confidentiality, you’ll have some support.
In general, all of the work (including spreadsheets, working papers,
plans, or literature) a consultant does for you is your property. Some-
times—especially in the cases of innovations and literature—this be-
comes an issue. Make it clear from the beginning that you want to own
everything that comes from the consultation.


Establishing a Successful Relationship

Talk to as many consultants as you can before hiring one. Even if you
have one person or firm in mind, interview at least a few others as a sort
of due diligence. You’ll probably find that each interview helps you focus
on the issues you’re hiring a consultant to help resolve.

Conduct the interviews in a comfortable place. In some cases, this might
mean a neutral location and setting—over lunch or in some kind of recre-
ational setting. Being away from the office sometimes helps people think
about problems in more objective terms.

When you’ve found a consultant who seems promising, use the inter-
view to test his or her response to one or two of the real problems you’re
facing. You don’t have to recreate every detail of your problem; boil it
down to its essential elements and pose it as a sample of the kind of work
you’re anticipating.

This kind of question works on two levels. First, it gives you a sense of
how the consultant works in a short amount of time with rudimentary
246 Lead with Courage



information. Second, it lets you know what kind of response the consul-
tant gives. You can judge these things on a personal level as well as a pro-
fessional level. Ask yourself if this is the kind of person with whom
you’d feel comfortable working. Does the consultant respond quickly
enough? Does he or she think carefully enough? Is he or she too re-
served? Too extreme?

Working intensely with an outside critic and analyst of your company
requires a certain level of personal affinity—at least some similarity in
style. Although you don’t have to (and probably shouldn’t) have a per-
sonal relationship with a consultant, you shouldn’t underestimate the
importance of professional compatibility.

A good consultant will relate to your company and your goals and make
immediate contributions. Sometimes the best work a consultant does
comes when he or she is new to your company.

Interviewing consultants carefully also helps you avoid wasting their
time—and your own—later on. Using a consultant effectively and well
depends to a significant degree on how you set the relationship up ini-
tially. The following steps explain this process more succinctly.



Do Your Homework before the Consultant Comes In

Too many owners and managers hire a consultant and then stop think-
ing. They present a list of general problems and expect the expert to con-
jure dramatic results. This approach almost always ends in frustration
and many, many billable hours.

Instead, you have to take the initiative. Discuss your needs, problems,
and parameters in candid terms from the start. Set a budget or schedule
upfront for each project a consultant tackles. Save your skepticism (or
your staff’s) for the interview process; once you’ve chosen a consultant,
give him or her everything you’ve got.



Know What You Need from the Consultant

One of the biggest cost drivers in hiring outside expertise is bringing peo-
ple up to date on your company’s operations. It’s a cost driver that you can
control, though. However, it’s important for the consultant to stay away
247
Leading Your Business for Maximum Results



from data gathering and other basic reporting functions; keep the consul-
tant focused on analysis. You can tabulate numbers yourself; you’ve hired
the expert to help you move forward from there. If you’re able to keep
records over even a short period of time, you can hand the consultant your
paper trail and ask him or her to read the performance numbers directly.
The worksheets in this book are designed to serve that purpose.

Another point to consider is that many consultants have a steep sort of
half life as to enthusiasm for a project. In other words, their best thoughts
and greatest creativity come early in their relationships with clients.
Being prepared from the start allows you to take full advantage of short
attention spans.

When you hire consultants, keep in mind that their most important skill
should be critical analysis and problem solving.

Give consultants specific goals. Don’t just say you have problems. In
short, know what you need, whether it’s a temporary executive, an out-
side thinker to help jump-start your ideas, or an arbitrator for internal
disputes.

In addition, to the extent you use consultants as managers, try to limit
them to so-called “bridge management” functions. Bridge management
simply means an outside consultant will oversee a business function
between permanent managers or during periods of particular turmoil.

The following are reasons that owners and managers hire bridge
managers:

• They need someone to handle excess workloads caused by proj-
ects or increased business.

• They need someone to bridge the gaps left when downsizing
takes place.

• They want to test the need for a position or the person being con-
sidered for hire.

• They want someone to handle specific short-term tasks that call
for experience and objectivity.

Make sure to give bridge managers clear instructions and schedules for
the work they will do.
248 Lead with Courage



Have Deadlines

You should also give them short deadlines or even a series of short dead-
lines instead of open-ended ones. Consultants may serve operational
functions for set periods of time, but they shouldn’t manage in the broad
sense of that word.


Like any outside contractor or vendor, consultant services are a commod-
ity—and consultants want to sell as much of this commodity over as long
a time as they can. That’s their understandable inclination as business
people. However, it’s your understandable inclination as an owner or
manager to minimize the amount you pay them.


The consultant may be right to say there aren’t quick fixes to serious
problems, but don’t let that lead to open-ended engagements. Most con-
sultants agree that restructuring involves two phases: a design phase, in
which new ways of doing work are fashioned, and an implementation
phase, in which the new ways of doing work actually are put in place.
Have the consultant schedule these phases. This helps set up an exit
strategy for the consultant, which is an important cost control tool. In ad-
dition, the consultant will see the project as a limited engagement, rather
than open ended.



Keep the Hierarchy Clear

Have the consultant report to the fewest people possible—one, if that can
be arranged. As we’ve discussed elsewhere, the best way to do this is to
keep the agenda simple and clear. When you hire a consultant, write a
short memo that tells the relevant people in your company who this per-
son is and why you’ve hired him or her. Also specify where and how the
consultant fits into the organizational chart. Avoid confusion of author-
ity and responsibility.

A consultant who worked as a bridge manager for a North Carolina bank
in the early 1990s found that two factors ensured success. First, the sen-
ior manager made sure that everyone affected was informed of her ar-
rival and her background, which gave her instant credibility. Second, the
terms of her appointment were clearly spelled out. “I had a contract, and
I treated the job as if it were my own, but I clearly knew that this was
only for a certain period,” she says.
249
Leading Your Business for Maximum Results



Keep the Consultant Focused on Value-Added Functions

Make sure the consultant has both a vision for how to improve your com-
pany and a clear sense of concrete ways to help your company. The consul-
tant’s image of operational perfection may sound great in a management
journal, but it may do little in the marketplace. For example, consultants
often focus on staffing and personnel issues as a means of increasing ef-
ficiency. However, that’s not always the best approach to take. If your
product costs $10 to produce with labor costs of $1 and you cut out half
the labor cost (a major achievement), you’ve still reduced your cost by
only 5 percent. If the retail price of your product is $20, you’ve cut only
2.5 percent. The consultant will boast that he or she has cut labor costs in
half—but the retail customer won’t be so impressed by this discount.
Ultimately, processes that don’t add value to the customer erode a com-
pany’s competitiveness.



Set Regular Meetings

Set regular times to meet (weekly or monthly) when the consultant will
review conclusions, answer questions, and challenge you on better ways
to run your business.

Make sure these are working meetings. Avoid meetings that turn into ad-
ministrative updates. By meeting with the consultant regularly, you can
compartmentalize—and better control—the amount of time you spend
with him or her. It also forces the consultant to be succinct and not draw
on too much of your time. In this context, you can expect more from a
consultant than from an employee. The consultant’s attention should
focus squarely on problems you’re paying him or her to consider, not on
operational details.

This approach may not be practical in the midst of an intense project, but
it will be a good way to use the consultant before and after that intensity.
(Also bear in mind that not all consulting relationships have to be in-
tense at any point in their duration.)



Don’t Tolerate Vague Conclusions

Because consulting is a business that relies on a constant stream of new
ideas, some consultants become immersed in trendy terms. For example,
250 Lead with Courage



phrases such as “business process innovation,” “business process re-
assessment,” “core process redesign,” and “business process reengineer-
ing” all mean the same thing: restructuring your company. Some financial
and management consultants revel in technical language and jargon. It’s
an easy way of making themselves appear better informed and qualified
than one another—and potential clients. This can present a bewildering
array of information and advice. Wise people, from Benjamin Franklin to
Stephen Hawking, have said that true intelligence is the ability to explain
complicated concepts in simple terms.

Remember that consultants you hire work for you. They should answer
the questions you ask in language you prefer. Insist that they do.



Specific Applications for Consultants

Here are some more detailed uses owners and managers often find for
consultants:

• Running focus groups drawn from your customers.
• Producing or reviewing long-term strategic plans.
• Analyzing divestitures, mergers, or acquisitions.
• Changing the methods by which performance is rewarded.
• Helping you use technology more effectively.
• Interviewing your employees to help you discover how they feel
about the direction of the company.
• Assessing the effectiveness of your staff and analyzing your
workforce.
• Proposing new staffing mixes, which bring together individuals
who contribute to a particular solution.
• Changing job descriptions to lower costs, reduce waste, and im-
prove the quality of products and services.
• Speaking to your board of directors or lenders to increase man-
agement’s credibility.
• Finding investors or other sources of equity funding.

In conclusion, when you keep consultants disciplined and focused, you
can use them to great advantage.
251
Leading Your Business for Maximum Results



BOARDS OF DIRECTORS AND ADVISORS

Very few business people have all the expertise they need to successfully
run a business alone. In addition to using consultants, most successful
business owners have had mentors, support groups, or boards of advi-
sors to offer advice and support on critical issues at times of both chal-
lenge and opportunity. These business leaders recognize that it would be
foolish to deprive themselves of all the help they can get.

If you’re incorporated, you are required to have a board of directors.
The directors may be friends or family, and you generally aren’t
required to have more than two or three directors if you run a small,




T E N QU E ST IONS TO A S K
YOU R BOA R D O F DI R E C TOR S

1. What do you want the company to accomplish in the years
ahead?

2. Do you think the company is currently missing any opportuni-
ties it ought to be pursuing?

3. What messages would you like to send to the staff in terms of
your own philosophies about your business?

4. What would you like a planning process to accomplish for you
and for the company?

5. In your estimation, what are the key internal problems facing
the company right now?

6. What could really hurt the business in the next few years?

7. Do you want to incorporate any plans to change ownership into
the planning process?

8. How much involvement would you like to have/plan to have in
the company this year?

9. What insights do you have about the future of our industry?

10. Are there other comments or opinions you would like to have
integrated into the planning process?
252 Lead with Courage



privately-owned company. You can use a board of directors to help with
a variety of decisions and strategic moves. To start the dialog, make sure
to get the answers to these questions each year, particularly before you
start a strategic or annual planning process.

You can also seek out other talent by using professional advisors (i.e.,
your attorney, accountant, insurance agent) and by setting up a board of
advisors.

A board of advisors is usually composed of four to eight individuals,
each of whom brings a different type of expertise (marketing, finance,
operations, product or service expertise, human resource, strategy, etc.,
in your industry or not).


Consider potential board sources from these categories:

• Trade associations.

• Government or educational institutions.

• Successful entrepreneurs.

• Suppliers.

• Professionals in your industry.

• Other professionals (attorneys, accountants, insurance agents,
real estate brokers, bankers, consultants).

A board of advisors is not the same as a board of directors. A board of di-
rectors has a legal responsibility to the shareholders of a corporation.

A board of advisors has no legal obligation to make decisions—it is cre-
ated solely to give advice to the business owner. Advisors, therefore,
don’t have the same personal liability as directors.

It’s especially important for a new business to set up a board of advisors.
It can help with funding, both in raising funds and in giving the kind of
credibility to the enterprise that lenders and investors like to see.

Boards of advisors usually meet quarterly. Help your board help you by
setting an agenda for the meeting and sending the board information on
how the company is doing ahead of time. Plan to meet for about three
hours per session. Your agenda should include all the major questions
253
Leading Your Business for Maximum Results



you would like to have help in answering, both problems you are
wrestling with and upcoming opportunities.

In addition to the quarterly meetings, advisors should expect to be avail-
able to you by phone and should also be expected to review monthly re-
ports or updates and telephone you with their questions. Advisors will
probably spend about 10 hours per quarter on your business.

If you are a start-up business, advisors may agree to meet without pay.
Once you have completed your first year in business or if you had out-
side funding from the start, plan to pay advisors anywhere from $1,000
to $2,500 per quarter, usually right after the quarterly meeting.



STARTING OVER: THE ANNUAL GAME-PLANNING PROCESS

No matter how often you do strategic planning, you need a new game plan
every year. The first step is to accumulate and review the right kinds of
background information about what’s already been accomplished—in
particular, data that show trends up or down over time—such as meaning-
ful sales, operational, and financial reports—and feedback from outside
the entrepreneur’s limited vision. You can generally gather feedback in
the form of surveys: from customers, vendors, business partners, and em-
ployees. Having this knowledge as mental background is important to
planning for the future. All participants should have this information for
review two weeks before a planning day or multiple day retreat. It is best if
each participant holds the responsibility for preparing some of the mate-
rial in the notebook.

Action planning must come from a consensus on the major challenges
and opportunities facing the business. Issues should be labeled as criti-
cal (needing immediate task force action), to be dealt with this year, and
left for attention later when resources are available. Critical issues might
be cash flow and negative perceptions of product or service. All agreed-
on objectives must be doable with the resources and time allotted, or the
plan is destined for failure.



TOOLS FOR LEADING YOUR BUSINESS

The worksheets at the end of this chapter can help you get feedback that
will be invaluable in making you a better leader. These resources will
254 Lead with Courage



help you to see trends from year to year. You can also use these tools for
developing your plan for improving morale and making yourself a re-
source in helping employees get their jobs done. These resources include:

• Employee opinion survey.

• Company performance review.

Ask yourself these questions about your role in the company and its
success:

• Where are you spending your time, now or during the next two
months?

• How do you enhance your own personal creativity?

• Does the business play to your strengths?

• What are your top five accomplishments (in business or not)?

• What are your top three weaknesses as a business owner?

• Do you work more than six days a week or 50 hours a week?

• What are your hobbies?

• How much time per week do you spend with family and friends?

• Who holds you accountable for your work as a CEO?

• If you could change one thing in your business, what would it be?

• What is the one thing really bothering you most in your business
right now?
255
Leading Your Business for Maximum Results



EMPLOYEE OPINION SURVEY

Worksheet 8.1 is a traditional opinion survey, meant to be used at about
the same time each year and trended over time. Add questions as they
seem pertinent to particular areas of concern.



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