Place A Value On Your Time

Professionals, ranging from consultants to attorneys, all have one thing in common...monetizing their time. Unlike sellers of physical products, these "knowledge sellers" must account for every minute of billable time, otherwise, they suffer "shrinkage" like the physical product sellers.

One may often hear stories about attorneys being asked for "free advice" by friends, relatives, and casual acquaintances. But the same is also true in the field of consulting, whether it is the local computer expert, medical doctor, or political scientist. The knowledge these individuals have acquired is usually a result of many years of experience, training, and education, and it is not uncommon for someone to have spent hundreds of thousands of dollars pursuing a graduate degree which required more than twenty years in classrooms.

Within our organization, we have hundreds of executives with MBAs and advanced degrees, and a large number of JDs, MDs, and PhDs. Each possesses a particular expertise which may be of tremendous value to our clients in solving complex business challenges.

When prospective clients approach us with a problem, we construct a profile outlining the key problem areas as provided to us. Our next step is to forward this information to our Associates who are available for an engagement, and who have the expertise required.

A brief 15 minute phone call from a prospective client usually requires over 100 man-hours of time on our part to review and respond, due to the size of our organization.

In real time, only a few hours elapse before a qualified response can be provided to the prospect. Once a Letter of Engagement has been executed, we can have our Associate on site within a few days.

Professionals should not underestimate the value of their time, as evidenced by the above real-life example. Other factors can also affect the value of it...specifically, supply and demand. The greater the specialty, often the higher the monetary value. But it has to be of value to the client, no matter what the billable rate might be.

Partnering for Success

We are always pleased to receive inquiries from individual executives desiring information about our company, and who are interested in a possible affiliation with us. We also welcome the large number of inquiries we receive from potential partners such as Private Equity and Venture Capital firms. Whether the scenario is a technology start-up, or a middle market buyout, investment capital must be combined with strong management to have the formula succeed.

One instance that tends to repeat itself is that of a private equity buyout of a closely-held company. A founding executive may be retiring and has no one in his/her family interested in succeeding the managing founder. Additionally, the current management team may not be in a position to commit to a buyout. While LBOs occur quite often, in some instances a cash buyout may occur by the private equity firm, who then introduces a new management team into the business. We may be invited to participate in this scenario due to the depth of our management team, and in addition to strategic consulting, we may be retained to provide an Interim CEO-CFO-CIO-CMO team.

In the world of Interim Management, we are occasionally approached by organizations seeking our assistance in circumstances which are extremely sensitive and confidential. These covert discussions are necessary to maintain the stability, security, and investor confidence of what are often large public companies. Replacing a high-profile CEO or CFO is big news in the financial markets, and can have a positive or negative effect on the company's valuation. But it is equally important for organizations of any size operating in any sector to maintain a high level of confidentiality.

Interim CEO 24/7 has more than 350 professionals located in 100 cities around the globe. While the majority of this group is comprised of former CEOs and CFOs, we also have a large number of CIOs, CTOs, and CMOs. Their backgrounds are impressive, ranging from top-level assignments with Global 100 companies to Silicon Valley start-ups with successful IPOs and highly-profitable operations. Our executives based outside of North America are multi-disciplined and multi-lingual; several have Ph.D's in technical fields with extensive published works.

If your organization has an upcoming need, we would be pleased to discuss it with you.

How IEs Create a Step Change in Performance

In a recent assignment with a multi-billion aerospace manufacturing and repair center, the senior executive team had just received an intriguing presentation and tour from one of the engine suppliers as to their progress in implementing lean manufacturing. The results presented by the contractor were intriguing but represented an opportunity in just one third of the core business base. What the client required was an overarching strategy which fully integrated the entire enterprise, not just the production floor shops. The most important aspect though, is making the strategy actionable and leading the organization through the change. Even in the most challenging operational conditions it is possible to achieve breakthrough results – the key is in transforming the dialogue and relationships within the organization. During the next few weeks, I will list a few examples of how a long term consulting project helped an organization dramatically increase their productivity and their profits.

Here is one of our extended engagements:

• A major aerospace repair center had not produced an operating profit in its entire history. In the plant’s best years, it managed to break even and get the product out the door, though the production flow days had grown significantly. Misalignment of resources, poor capacity planning and utilization, ineffective product lifecycle management (including failure to maintain and upgrade the capital equipment), sub-optimized materiel requirements planning and purchasing were just a few of the principal symptoms. The situation was further exacerbated by organizational communication barriers across the enterprise. Over time, these conditions resulted in deteriorating relationships with the primary customers who were becoming increasingly upset with the trend towards rising costs and missed delivery dates.

The first step was to craft a vision of the center as a state-of-the-industry standard setter. Seeing through the current conditions to what is possible is the way great companies come into form. To create a sense of ownership of the vision, the next step was to enroll the enterprise from executive management to the newest employee. We opened the organization to listen to all parts of the extended enterprise which included the primary customers, suppliers, original equipment manufacturers, contracted repair companies etc. Our approach to building a great company included creating an internal transformation activity which included staffing from the top companies in America – including those from supporting industries. Key to communicating the vision was unifying the management and labor executives in a one-team partnership.

We began the process by assembling an in-house team to develop the contract for the expertise we needed to fully staff the program office and develop the master contract. From there we began the change management process from the board room to the lunch room. Simultaneously we exponentially expanded the number of black belts and green belts on staff through extensive training with one of the principal suppliers well known for its progress in Six Sigma. As all of this was taking place, we began planning the early-win projects and facilities moves which would serve as the indicators to the workforce that change was underway. Mass education of the workforce was led by the production division leadership, further reinforcing that the change was internally, rather than externally driven. As the employees increased their understanding of lean cellular operations, they were eager to contribute to the cell design process, increasing their pride in craftsmanship. We kept the focus on what was going right – and before long, organizational behaviors that had impeded production, quality and profitability began to fall away.

Once the Master Transformation Team was in place, the center was ready to accelerate. Production flow days, a key cost and performance measure -- decreased by a third on several major product lines. One product line was so successful, that they were able to transfer the savings generated from improved operations to two additional aircraft scheduled for the following year – essentially repairing the aircraft for free! As progress accelerated in transforming the production processes, the supporting key back shop processes such as finance, materiel planning, inventory management, bill of materials planning and maintenance and engineering data management came under increasing scrutiny – truly giving this an enterprise wide perspective. Ensuring that all levels of the organization were involved in the detail planning was the key to owning the new way of doing business.

Confronting the need for massive change in the business can be a daunting task. Choosing the right advisors to help lead the way is fundamental. We help you uncover the operational value that can easily be lost in the clutter of day-to-day operations. In the right hands, a poorly performing company can make the step change to market leader.

EL
CEO 24/7

Executive Succession

Sadly, I read news accounts of accidental deaths where not only families are affected by the loss of their loved ones, but organizations are deprived of their leaders. A recent article on this subject caught my attention, and prompted me to post a plea to others.

You may have read about this, or a similar incident, in the news recently. An aircraft carrying the top executives of two companies crashed, killing nearly all of the passengers and crew members onboard. In such a tragic occurrence, so many family members, relatives, and friends are affected. Separate and apart from this grieving, certain mechanisms may or may not be in place within the companies and organizations also affected by the loss of these key executives and their dependents. It becomes clear that the question of succession needs to be immediately addressed.

Succession planning should be an important ingredient in any organizational strategy. Many questions arise from the moment the news of an unexpected incident is broadcast. Employees want to know how they will be personally impacted...investors and creditors have concerns as to the viability of the operations...customers of the companies want reassurances that products and services will continue to be delivered. As cold as some of that may sound, it is a hard economic reality.

There are many sources of information available on the subject of succession planning, but chief executives and boards of directors in all organizations should address the potential problems. One of the ways to do that would be to retain a consultant to conduct an analysis and deliver recommendations to the organization's board of directors. Depending on the size of the company, retaining a firm which has executive management expertise in the same industry would be a very cost-effective option. Consulting firms which can provide an Interim CEO, Interim CFO, or Interim CTO should be in every company's Rolodex.

MM
CEO 24/7

Rent vs. Buy...An Executive

It may come as no surprise that renting or leasing is a huge business. When most people think of renting, it is usually in conjunction with primary housing, cars, vacation homes, or tools for those weekend projects. But renting, or leasing, is a very large business worldwide, especially in the commercial and industrial sectors.

An example of equipment leasing might be seen on a commercial building project. A large steel span needs to be erected as part of the building, but the contractor does not have the crane capacity to complete the job. Cherry pickers aren't large enough to do it, so the contractor leases a crane and operator for the day to complete the task. While the lease amount is significant, it pales in comparison to the cost, maintenance, and liability of ownership of the crane and the trained operators.

Another example of leasing is in the commercial real estate market. You may have noticed the number of 'big box' retailers popping up in communities across the land over the past twenty years or so. And you might have imagined the tremendous costs of acquiring the land, performing site studies and environmental assessments, permitting, grading, and finally building the structure itself. How, one might wonder, does the retailer keep prices so low when the costs of the building must run into the millions of dollars/euros? In most instances, the owner sells the building to another entity and leases it back from them, thereby conserving their own capital while being true to their core competencies...in this case, retailing...not real estate.

Executive 'ownership' is being viewed differently these days, also. In the not too distant past, a company might hire an executive with the intent of it being a career-hire. A great deal of training, time, and expense was exhausted by the company, only to see the executive become a 'free agent' after a few years, and exit the company for greener pastures. But in recent years, the landscape has changed, and companies have found that hiring a top-level Interim Executive to prepare the company for a public offering, a merger, to perform a turnaround, or to invigorate the sales team has its benefits.

The definitions have changed, also. Many executives have become 'interim executives' anyway, whether they are employees or not. Consider the average tenure of a top-level executive in a public company today, and you may find that many are in place for three years or less. Add together the retained recruiting expenses, relocation costs, hiring bonuses, deferred compensation and stock options, insurance policies, health benefits, expense accounts, salary and bonuses...whew!...it might have been less expensive to hire an IE. No lawsuits for early termination or failure to exercise options with the IE, and no bruised egos. When the contract is up, the IE moves to the next engagement.

If you utilize a firm specializing in IEs, you hire the firm, not the individual executive, and gain the benefit of the sum of experience in that firm.

LP
CEO 24/7

When You Need One, But Can't Afford One

Growing pains...there are a few remedies, and the remedies are not always painless. Companies are constantly in need of top executive talent. Some of it is grown organically, but much of it is imported, and that bodes well for companies attempting to achieve 'executive equilibrium'. Organizations possessing top talent in their functional areas are able to offer more quality recommendations to their CEO on critical and strategic issues. But what if your company is not quite at the point where in can attract a highly compensated executive? Consider this...

One of our clients is a solid performer in its market space, with revenues in excess of $50M (USD) and strong operating margins for their peer group. But a few years ago, they had smaller revenues, fewer employees, and far fewer customers. With a solid growth record, they wanted to bring an industry veteran onboard as a Chief Operating Officer. They looked around, talked to some of the top recruiting firms, and put the pencil to the paper. The privately-held firm discovered that the total compensation package required was more than they felt they could handle at the time. The conservative owners, afterall, had always drawn relatively low salaries, opting to take dividend distributions at the end of each fiscal year. COO candidates were expecting strong six-figure base salaries, hiring bonuses, interest-free loans, relocation assistance, deferred compensation, income tax gross up, equity, multi-year contracts, outplacement, T&E perks, etc.

When we learned of the company's dilemma, we approached them with an alternative...consider contract to hire. We had several seasoned executives with multi-national company experience in the same vertical industry. One was a former SBU President and General Manager; another a former COO; and another a former SVP. None of these was really interested in a full-time gig, but would entertain an interim assignment if the numbers were right and the challenge was there.

After a series of interviews with both the client and the candidates, we arrived at a mutually agreed upon solution. The company would commit to a one-year contract at the market rate, but at a minimum of 30 hours per week pro-rated. Performance bonuses were part of the formula, but there was no relocation required, no outplacement, no equity, no deferred compensation or interest-free loans, and no hiring bonuses. The interim position and candidate could be eligible for a permanent position, when created. The savings to the company exceeded fifty percent, and our executives performed above forecasted levels. At the end of the first year, we and the interim COO received a substantial performance bonus, and the contract was extended.

MM
CEO 24/7

How IEs 'Think Outside of the Box'

Just as many people are creatures of habit, many businesses are operated in a similar manner. During the next few weeks, I will list a few examples of how several hourly consulting projects have helped organizations increase their productivity and their profits.

Here is one of our hourly engagements:

• An electronics distributor's CEO had not intended to micro-manage his staff and employees, but he had allowed everyone to approach him for answers from the outset. After several years, he felt he could no longer 'get away' for more than a few hours at a time, since the employees depended on him for every decision.

The solution was quite simple; implementing it proved a bit more difficult. The CEO had inadvertently trained his employees to question their own decisions, prompting them to rely on him. Much of this behavior evolved from the firm's entrepreneurial beginnings. Getting the CEO to step back and allow them to not only make decisions, but take responsibility for them required adjustments on both sides.

We began the process by taking the CEO out of the office for a few hours each week, providing coaching to him and reviewing his strategic plan. The employees were instructed not to contact him during that period, but to resolve any problems or conflicts in his absence. Meanwhile, we met with the employees on a variety of issues. After a few weeks, the CEO felt comfortable enough to attend a full day seminar off-site. The employees gained confidence in supervising themselves during that time, and wrote reports on actions taken in the CEO's absence. The CEO read the reports, and was impressed by the results.

Over time, managers began to manage, and the CEO had a few subordinates reporting to him, rather than impromptu employee meetings all day long. The extra time gained allowed him to focus on expanding the business and other strategic areas. And the entire atmosphere became less stressful for everyone.

While the lesson here would appear to be straightforward and part of Business 101, it reflects a situation that we see repeated in numerous organizations, both for-profit and non-profit. Not every company CEO, owner, or manager is a born leader. We work closely with these individuals and organizations to help transform mere mortals into productive and respected leaders.

CEO 24/7

IE Helps Firm With Successful Exit Strategy

There is a life cycle attached to every commercial venture. Like any story, there is a beginning, a middle, and an ending. In business ventures, the serial entrepreneur understands this axiom, but many others find it difficult to grasp.

After nearly fifty years, the owners of a mid-sized manufacturing business decided to walk away from the company that they had founded. It was one that they had dreamed about starting while in college, and essentially began in the workshop of one of their parent's homes. Like most inventors, they began by tinkering with a device that would enable them and others to perform tasks more easily and efficiently. They succeeded in creating a tool and realized that it would also have a marketable value to others. When they started prospecting for customers, the inventors/entrepreneurs discovered the paradox of the business world...cash flow. They had orders in hand, but not enough money to produce and ship the orders. Banks weren't interested in loaning them money, because there was little collateral and the risk was too great. The new businessmen became creative with their financing, and along with funds from friends and family, they received advances from their customers...in exchange for a discount. The business took off.

Over the years, the company grew from the workshop to a leased building, then to several separate buildings spread over the community. After twenty years, they were able to acquire a large parcel of land, and consolidate all of their operations into one campus. Their manufacturing business had grown to the point that they were exporting their products to locations around the world, and their domestic base was solid, due in part to a productive sales channel. Their balance sheet was strong, and they had no long-term debt. One of the partners decided to sell his interest to his life-long friend and partner, and after thirty years in the venture, took an early retirement.

During the next ten year period, the business began to change somewhat. The daughter of the remaining founder had become active in the management of the business after she completed college, and the skills required to keep the business moving forward had changed drastically from its inception. As the father and founder took a less active role, the daughter's responsibilities increased. By the time she turned thirty, her own desire to raise a family was taking precedent. It was at that point that she sat down with her father to discuss the future of the business. The decision was made to look for a buyer.

Entrepreneurs and artists have a few things in common. They each create something, but many are ultimately faced with having to surrender part of their creation to someone else. The artist sells the painting to an appreciative customer. The entrepreneur must decide whether or not to close the business or to sell it to someone else. In deciding to sell, the owners of this firm entered into an era of uncertainty. How does one retain the existing employees or attract new ones when the future of the business is unresolved? Many employees felt comfortable with the owners/managers...would they feel the same with new ownership? And how does the company attract new talent, if only to disclose that a commitment is fluid?

To handle the transition, an interim management team was retained to not only manage the day-to-day operations, but to also negotiate the sale and continuance of the business. This allowed the owners to slowly transition out while the IEs executed the plan. The IEs disposed of the non-performing assets and slow moving inventory, and increased earnings. They negotiated the sale of an overseas location to a foreign distributor who agreed to retain the employees. The IEs looked at M&A prospects, but eventually found a private equity firm interested in acquiring the company for cash. It was a win-win for everyone, and the IEs stayed onboard during the change of ownership and assisted with the recruitment of new management.

GM
CEO 24/7

Looking for Success in the International Space? - Retain An IE

Foreign operations are an unnecessarily expensive business. I have been doing this for years. The road map is invariable and predictable. First there is a flurry of optimism and excitement. Passports and Visas in order, off we go to El Dorado. It’s an exciting affair… international departure lounges and exotic destinations. The initial trip always yields a favorable report. Of course it does. In the information age there is an abundance of data available to facilitate the identification of new markets. An hour of smart searching on the web and one can access all there is to know about the widget market in Ghana.

Very few companies possess the internal human resources to exploit operations in foreign markets. And even if they do, can they afford to dedicate this staff to a still-to-be-proved viable venture? Hiring a full time professional to start up the venture from day one or sending out a valuable member of management is very high risk indeed. When I am approached in such circumstances, I insist on an Interim Management arrangement. Give it a name. Initiating commercial activity in a foreign market is a start up. It is irrelevant how big and bad you are in your domestic market...you are a novice in foreign lands. You will find very few Fortune 500 CEOs who will disagree with this assessment. You will find even more CFOs who quite simply do not want to talk about the subject.

Just because one is in a new environment, does not mean that the old rules no longer apply. In fact, it is in such circumstances that one needs to adhere even more rigidly to solid professional standards and practices. If it is unwise to task an inexperienced executive with an important venture in a domestic market, then the same holds true for foreign operations. A significant addition to this maxim is that it is not only the executive that is inexperienced in the foreign market, but the company itself.

Before I get carried away, go 18 months forward from the buzz of the JFK International Departure Lounge. The exciting new venture that everyone wanted to be associated with has now become the corporate black hole. There have been many casualties. Not wanting to mix metaphors – it is now a rudderless ship floating aimlessly (and expensively) towards some foreign shore.

There is no great mystery to being successful in new markets. It is rather straight forward. I could draw a magnificently exciting profile of what makes a successful International Interim Executive, but the reality is that I do what you do…I just do it somewhere else.

Like everything in life, there is a learning curve. Unfortunately the promise of foreign gold and the adrenaline rush of jetting off all over the place dim the sensibility of even the most seasoned campaigners. Experience counts and can be acquired through the intelligent use of Interim Executives in international markets. It is that simple.

The International Interim Executive has done it before. All you are requesting is that he now does it for you.

DF
CEO 24/7

Rebuilding Confidence

Shortly after a private equity firm got involved, I was called in to analyze their company's stake in a transportation company. The target company was being directed by the second generation of the founder, but had stumbled badly and required a capital infusion.

The foreign manufacturer had recently opened a new manufacturing facility in the U.S., but had lost one of its major customers to a competitor. Revenues had dropped to less than 50 percent of their peak. Several key sales people had also left the company for greener pastures, leaving a void that was being filled by employees from other departments. The hole seemed to be getting deeper.

After visiting both the U.S. location and the headquarters, and meeting with the executive management and the employees, it appeared that the fifty year-old company had failed to address changing market conditions. Additionally, it was still operating with paper, pencil and typewriters for internal and external communications and record-keeping. Their new facility required a few changes to streamline their assembly line, and the installation of a mid-range computer system with enterprise software eliminated the previously mentioned problems and helped to increase productivity. Extensive training on the new system, along with workflow changes, took months to complete, but the ROI was quick. Experienced sales reps were recruited and trained, and equipped with state-of-the-art technology, allowing them to access real-time information and quickly respond to RFPs and customer inquiries.

I personally visited with their major customers, and took several key executives along. We also invited the customers to the new manufacturing facility, and impressed them with the ISO application process. After one year, we recaptured the major customer that had been lost, while simultaneously expanding the customer base. Revenues soared above the previous high. As the interim COO, I was retained for a total of 24 months. Eventually, the private equity firm sold their stake to another group, and at a very nice return.

DE