Part VI: Managing Your Business

Chapter 22
Management and LEADERSHIP

IN This Chapter
Organizational structures
Managing people
Leadership

Introduction
Managers create the structures and processes that allow businesses to perform consistently through changing economic conditions.
Leaders inspire teams to pull together and exceed expectations. They give team members the responsibility and authority to contribute to the business, while leaving plenty of room for personal creativity, vision and innovation.
Even if you’re currently a sole proprietor, preparing for growth means preparing to manage and lead employees. A good entrepreneur strikes a healthy balance between encouraging individuality and integrating individual skills smoothly into a shared undertaking.
When you combine the organizational skills of a manager with the inspirational qualities of a leader, you will help your employees to become infinitely valuable collaborators and contributors.
ORGANIZATIONAL Structures
A business’s organizational structure is defined by the roles and responsibilities of employers and employees, the allocation of business tasks, and the flow of information between team members. Although businesses will naturally develop an organizational structure over time, it’s always preferable to plan ahead and choose a structure that makes sense now and will facilitate growth in the future.
Flat organization is a relatively non-hierarchical structure that downplays the distinctions between executives and workers, maintains open lines of communication and feedback between all staff, and encourages employee self-management. It’s most commonly seen in smaller businesses, which often lack the resources or the desire to hire middle managers or to set up departments or divisions. At their best, flat structures are flexible, creative and decisive. At their worst, they’re simply disorganized.
As businesses grow, they often move toward a more bureaucratic structure with clearer functional boundaries and accountability. However, some larger businesses—especially in the tech industry—have managed to maintain a flat structure as they grow.
The most common structure for larger businesses is functional organization, which groups people who share responsibilities and skills. In its simplest form, functional organization begins with the president or CEO and moves down to functional areas such as sales and marketing, accounting and manufacturing.
Functional organization is best for hiring, training and managing people within the context of their individual functions. Its drawbacks may include reduced attention to customer service, less employee flexibility, and a focus on narrow tasks rather than broad strategic goals.
Some businesses have a divisional structure, which consists of self-contained divisions assigned to specific product lines, customer types or geographic areas. This decentralized approach can result in greater efficiency and clearer lines of accountability. The major drawback is the duplication of functions across divisions, as well as the potential for poor coordination or disruptive rivalries between divisions.
A matrix structure combines functional and divisional elements while fostering the cross-functional capabilities of work teams. Employees typically work across functions and divisions, under a functional manager and a project manager. Although this addresses some weaknesses of functional and divisional structures, it can lead to a more complex chain of command. It also may be vulnerable to communication breakdowns and divided loyalties.
In the early stages of your business, you will most likely have a relatively flat structure. As you grow, you will need to decide whether to maintain that structure or to move toward a more hierarchical one.
Step 1: Identifying Activities
The first step in creating a structure is to identify your business’s main activities. Which tasks must be done every day to ensure your survival and success? Which are less critical on a daily basis, but important for ongoing performance?
Note that some of these activities may be specific to your business and may not fit neatly into traditional functional categories such as accounting or sales.
Step 2: Allocating Tasks
Whether you have two employees or 200, you must shift your focus from your individual capabilities to those of your team. Identify the tasks that only you can or should do, and delegate the rest.
One way to delegate tasks is to rank them in order of importance and list the skills they require. If your employees don’t have the required skills, you can either train an existing employee or hire a new employee or an independent contractor.
If you train an existing employee, you will gain new expertise while avoiding the disruption of bringing new team members on board. On the other hand, training takes time and may reduce productivity.
Hiring a new person will give you the expertise you need right away. However, the hiring process can be time-consuming, and it can also affect workplace morale. And there may still be a learning curve as the new employee adjusts.
The same is true of independent contractors: You have to balance the convenience of getting exactly the skills you need against the headache of finding and interviewing prospective contractors, checking their references and so forth. Working with a reputable temp agency is one way to simplify this process, as is using a professional network like LinkedIn.
Step 3: Designing Workspaces
The layout of your work areas can help or hinder your organizational structure. If your business is based on teamwork and collaboration, it makes little sense to confine your workers to cubicles; your space should encourage comfortable face-to-face interaction. Break areas, in particular, can drive engagement and innovation by bringing employees together informally to discuss issues and brainstorm solutions.
By contrast, if your business requires one-on-one consultations with customers, or intense concentration and quiet, employees may need more private space.
Whether your goal is to improve individual productivity or group collaboration, giving employees control over their personal workspace tends to increase commitment and morale. Involving your employees in workspace design can extend this principle to your entire facility.
You should also consider whether some employees will telecommute, as this can reduce the amount of space and equipment your business will need.
All workstations, furniture and equipment should be ergonomically appropriate to keep you and your team healthy, safe and productive. For more information, visit www.osha.gov/SLTC/ergonomics.
Last, consider lighting and plants. Natural light has been shown to improve mood and productivity, so where possible, opt for windows, skylights and other sources of sunlight. Not only will you improve your work environment, but you’ll save money on your electric bills.
Plants are also associated with enhanced employee mood and comfort, and they can even reduce indoor air pollution.
Step 4: Designing Communication Structures
Your organizational structure and workspace design should facilitate communication between employees, managers, customers and partners. Consider how information will flow through your business: What is the chain of command? How will policies and decisions be communicated? How will workers raise questions, make suggestions or express concerns? What type of requests or comments must be in writing, and who should receive them? When will staff meetings be held, and what processes will ensure that everyone’s voice is heard?
If a customer has a question an employee can’t answer, what process must she follow to get the information she needs? If you have multiple departments, or two locations, the need for a clear communications policy—and for keeping a record of all communications—becomes even more pressing. You need to make sure that your communications policies keep key employees in the loop, establish accountability, and result in correct actions.
Because business communications are often electronic, you need to consider how to handle emails, texts and other formats. Can employees forward emails from customers or other employees? Can they write and receive personal messages on the business’s email account? What security and privacy policies will guide your communications?
Step 5: Assessing Structures
Your business may outgrow a specific structure or policy, so you should assess each one regularly using criteria like these:
Does it enhance flexibility?
Does it maximize business resources?
Does it allow you to adapt and evolve?
Does it build your brand?
Is it appropriate for your industry?
Does it create the work environment you and your employees want?
…
One of the things that make me and Bill such a good team is that we see eye to eye on most management issues. When we started out, we both agreed that we wanted an informal office environment without the standard boss/employee hierarchy.
Because we thought of this as a very relaxed approach, we assumed that you achieve it by being very relaxed. If you want a low-pressure environment, you just avoid applying pressure. Simple, right?
Actually, no. In the real world, things are definitely not that simple. The environment we wanted takes discipline and control; the fact that it’s invisible doesn’t mean it’s not there. It’s like when you see a virtuoso musician or an Olympic gymnast—they make everything look so natural, you’d think almost anyone could do it. But of course, that’s only because they put serious effort in ahead of time. It all looks really easy until you try to do it yourself.
Bill Hodgson and Gus Meyrink started designing software together when they were classmates at Vermont Technical College in Randolph Center, Vermont. They soon became close friends and formed a comfortable working relationship.
After they graduated, Bill and Gus moved to Burlington. Taking advantage of the city’s financing program for startups in the Pine Street business district, they formed a small software development firm called Borderlands. After completing a few high-profile jobs, they found a profitable niche as a provider of high-quality custom software to area businesses.
Today, Borderlands has eight full-time staff members—four of whom telecommute—and a close relationship with 10 independent contractors (most of whom are students at St. Michael’s College, working on degrees in computer science or information systems). Borderlands completes almost 25 projects each year. And yet, it’s still located in the same small office where it started out as a two-man business.
…
Creating an Advisory Board Many small businesses benefit from having a formal or informal advisory board that regularly provides advice and guidance. A board could consist of three or four fellow business owners, retired executives, investors, vendors or even customers whose judgment you trust. Where possible, find people whose skills and strengths complement or improve your own. For example, if you’re weak on managing employees, seek a board member with expertise in team-building. Your advisory board should meet twice a year and be recompensed with an honorarium, a meal or some other modest reward. Ideally, your advisors will benefit from the meetings, too. The opportunity to learn from each other should be an important part of their motivation. Before each meeting, inform the members of the planned topics for discussion. To maintain interest and focus, meetings should not last for more than two hours. If you set up an advisory board, bear in mind that you must be honest and open about concerns and problems. Advice based on inaccurate or incomplete information won’t benefit you. If necessary, ask board members to sign a nondisclosure agreement. Fellow business owners may want you to sign one as well, so they can be honest about their own experiences.
Managing PEOPLE
Your business’s most important asset is its people. If you want your business to run smoothly and grow consistently—even in your absence—you must hire or contract with gifted people and motivate them to excel.
In practical terms, this means creating a system of rewards, policies and guidelines; writing clear job descriptions and performance evaluations; and offering appropriate compensation.
If you want a strong, capable team, you need to find talented people to whom you can immediately delegate responsibility. You also need to be secure enough to listen and learn when they come to you with suggestions, ideas and criticism.
Unfortunately, managers who are inefficient or unsure of themselves often don’t like to do this. They’re afraid of being shown up or outperformed, so they try to surround themselves with people who won’t threaten their position. This can have a devastating effect on business culture, competitiveness and efficiency.
Business Culture and Employee Relations
A business’s culture is a function of its values, which govern both the spoken and unspoken rules of behavior. They typically range from how employees dress, to the language they use, to how they deal with each other and their customers.
Values vary from company to company. For example, the corporate culture of a skateboard shop would be very different from that of an accounting firm. Values can be very difficult to change once they’re in place, so it’s important to pay attention to the values you endorse and reward.
If you haven’t done so already, think carefully about how your business culture will reflect and uphold your values. Once you’ve done this, you can communicate these expectations to your team.
Employee and Company Handbook
Early in your business’s life, you should develop a handbook that informs managers and employees on all employment practices and policies. Key sections include:
Mission, vision and values. This section introduces your business’s mission and vision and affirms your business’s commitment to its goals and values. This section should quantify the ethical ideals that will guide your employee’s interactions with customers, management, partners and one another.
Codes of conduct are derived from the ethics and values set forth in the previous section. Codes of conduct can’t simply be vague aspirations; they must include explicit, practical and enforceable rules and principles that employees will follow daily. It’s impossible to have a specific policy for every situation that might arise, so you must clearly define what steps your employees should take when faced with an ethical dilemma.
Anti-discrimination policies. Your employee handbook should list the anti-discrimination laws that apply to your business and emphasize every employee’s responsibility for compliance.
Safety policies. This section should detail specific workplace hazards and explain your safety measures and policies, as well as OSHA rules for reporting unsafe work conditions.
Problem resolution policy. This section sets forth your policy for resolving failures to perform, personal conflicts and employee complaints. It explains how and to whom employees should present their issues and problems. It should also detail potential corrective action, including verbal warnings, counseling, written warnings and termination.
Employee development and performance appraisal policy. This section should explain performance expectations, performance reviews and any opportunities for professional development, training and advancement.
Employee compensation policy. This explains how your business compensates its employees. It should address the various job classifications that exist within your business. It should also address timekeeping methods; how and when salary is paid; payment options (e.g., direct deposit); payroll taxes and withholdings; overtime compensation; bonuses and other incentives; breaks; holiday pay; jury duty; and sick leave. If you allow telecommuting or other flexible work options, you should detail these arrangements as well. As with all employee-related issues, you must comply with federal, state and local regulations. Have your legal advisor review your handbook and any other human resource policies and practices.
Employee benefits policy. This section should describe all required or optional benefits your business offers and explain who is eligible for them. Any legal rights or requirements relating to these benefits should be included.
Computer security. This section should detail allowable computer use and online activities; email etiquette, requirements and restrictions (e.g., no forwarding emails); and electronic data security policies. If you are operating under specific regulations, such as HIPAA, your handbook should explain those regulations and specify compliance standards and penalties for noncompliance.
Nondisclosure and noncompetition. You may want to have employees sign nondisclosure or noncompetition statements. Consult your lawyer before including such statements.
The Hiring Process
Before hiring even one employee, you need to write a clear, concise job description, including experience, qualifications, responsibilities and performance criteria.
Consider this job description for a marketing manager:
Inkhorn Press Job Title: Marketing Manager Department: Sales and Marketing Reports to: President Responsible for: Creating market development strategies for our line of environmentally friendly postcards and stationery featuring 100-percent postconsumer paper stock and soy inks; focusing on new product introductions; working closely with sales team to launch products and meet scheduled commitments; managing communications between the president and the sales staff; acting as an advocate for different product and customer segments; and tracking progress. The ideal candidate will flourish in a fast-paced entrepreneurial setting and know how to have fun. Experience in the printing industry is essential. Minimum qualifications: BA/BS in Marketing/Communications or equivalent; three years of product management experience; creative ability; and independent judgment. Computer skills: word processing, spreadsheet and design software (InDesign, Illustrator, Photoshop).
Conducting Interviews
Before you conduct a face-to-face interview, come up with a list of open-ended questions that will encourage the applicant to talk about her experience, work history and professional goals. These questions should be the same for all applicants, as this will make it easier to compare their answers.
At the beginning of the interview, build rapport with a short discussion of a neutral topic. Take note of the applicant’s demeanor, body language and comfort level.
Next, based on your review of the candidate’s résumé, try to assess her accomplishments. What exactly has this person achieved in the past five years? Get the person to talk about her contributions to other businesses, and move from there to a more general discussion of interests, goals and values. Ask to hear about specific projects the candidate has started and finished, and the outcome of these efforts. You’re not likely to remember everything you hear, so take detailed notes.
It may also be helpful to ask the candidate to describe her best and worst qualities as an employee; you can disarm the candidate by offering the same critique of yourself. An honest person with a clear grasp of her strengths and weaknesses is likely to be a valuable team member.
Another good strategy is to present candidates with a selection of possible business and interpersonal scenarios. Ask the candidate how she would react to a specific crisis or challenge. This will give you some insight into the candidate’s personality, judgment and work style.
At the end of the interview, you should feel that you understand the candidate’s employment history, qualifications and skills and you should have a good sense of how you feel about her as a person.
It’s important to like the people you work with, so you’ll want to hire people you feel are personable and engaging. It’s also important to hire people with good communication skills. The ability to make yourself understood is fundamental to every job description, so look for clear, direct and complete answers to questions.
What Happens Next?
Job seekers may have a lot riding on the outcome of a job interview, so be considerate and don’t leave them hanging. If it’s clear that someone isn’t right for the job, say so on the spot. If you need to interview other applicants before making a decision, tell the applicant how long you expect this to take. Follow up when you’re finished, and thank the applicant for contacting you (even if you decided to give the job to someone else).
This is the right thing to do on a personal level, but it’s also wise from a professional standpoint. Your applicant may know many other people in your industry or have a strong professional network. Rude behavior could cause trouble for you down the line, whereas respect and decency might earn you a valuable recommendation. In today’s connected world, politeness isn’t just good manners; it’s good business.
Checking References
After the interview, check references to verify the candidate’s qualifications and get information on work habits. How does the candidate work under pressure? Is he disciplined, detail-oriented and able to complete tasks without constant supervision? Ask about any possible personal or professional problems the candidate had on the job. Use your interview notes and the candidate’s résumé to guide your search for more information.
…
Bill and I didn’t plan on having telecommuters; it just kind of happened. Like I said, we wanted to have a relaxed environment—the kind we’d always thrived in. But we never actually sat down and plotted out how to do it.
The telecommuting policy just naturally evolved out of our dealings with freelancers. For one thing, we were used to working that way. For another, it kept our costs down. We didn’t need to buy more workstations or computers—or move to a new space—because our people were equipped at least as well as we were.
We were very comfortable interacting through IMs and Skype, and if we needed to see people in person, they could just bike down to the office. Or maybe we’d meet them for lunch. It was all nice and casual, just like we wanted it.
Eventually, four of these workers became invaluable team members and were given full-time positions. It seemed natural for them to continue to telecommute. After all, they were self-motivated, reliable people who’d proved themselves time and again.
But not everyone works well in this setting, as Bill and Gus would soon find out.
…
Communicating Expectations
As a manager, you need to communicate your expectations clearly. What do you expect of each employee? Who is accountable for specific tasks? What is the deadline for task completion?
Employees who know what is expected of them can measure their performance against the standard you’ve set and adjust where necessary. Workers who don’t have a clear vision of what is expected of them—either because expectations weren’t clearly defined or keep changing—quickly lose focus and morale.
Good managers base their expectations on a desired outcome. Instead of micromanaging employees, they set a standard and timeframe for performance and allow employees to choose the pace and working methods they prefer.
This method only works when employees see the big picture, share the company’s goals and understand how their efforts fit together. Creating this sense of a shared mission is another task that falls to you as a manager.
Compensating Your Employees
You should know what your people are worth and create competitive compensation packages to pay them accordingly. Many small businesses lack the cash flow to pay out big salaries, but you can compensate and reward your people in other ways, such as flexible work hours or vacation time.
Salary & Wages
This is the annual or monthly dollar amount you offer. It might be based on an industry standard, market condition, or such factors as experience, functional area (e.g., office staff vs. manufacturing staff), or the complexity or importance of the job.
Vacation Time
Vacation leave practices are often dictated by the geographic region and industry in which a business operates. Usually, vacation time is tied to how long an employee has stayed with you; for instance, an employee might get two weeks after one year, and three weeks after five years. Your policy should stipulate that employees must provide adequate notice of vacations.
Holidays
Although some holidays—such as Christmas, Thanksgiving, New Year’s Day, and Presidents’ Day—are considered standard paid time off, it’s up to you to decide which holidays you will choose.
Family & Sick Leave
Sick leave practices vary considerably by industry and business. When assessing sick leave policies, weigh the cost of offering paid sick days against the cost of having sick employees come to work to avoid losing income; they may get other employees sick and reduce your productivity.
Also, note that some states and cities have mandatory requirements for paid sick leave.
The federal Family and Medical Leave Act (FMLA) requires businesses with more than 50 employees to provide up to 12 weeks of unpaid leave. State laws may have stricter requirements, so check with your state department of labor for the laws that affect you.
Health & Medical Coverage
This is one of the fundamental benefits that many employers offer their employees. Although the cost can be significant, it can be offset by tax credits and potentially higher worker productivity and morale.
The following discussion is intended as a very basic introduction to these issues; consult your accountant and attorney before offering an employee health plan.
The Small Business Health Options Program (SHOP)
This business-oriented health insurance marketplace was created by the Affordable Care Act (ACA). It can cover up to 50 percent of premium costs for businesses with 50 eligible employees or fewer; coverage can include the owner. You can pass some of the premium cost to employees, provided the amount doesn’t exceed 9.5 percent of the employee’s annual household income.
You may also be able to reduce the cost of coverage by an additional 20 to 50 percent by creating a workplace wellness program that delivers such health benefits as tobacco cessation or reduced cholesterol levels.
You can enroll in SHOP at any point during the year. Visit www.healthcare.gov/small-businesses/employers to learn more.
Plans outside the ACA marketplace
You can buy health insurance outside the ACA marketplace through insurance companies, agents, brokers and online health insurance sellers, provided the plan meets the ACA requirements for minimum essential coverage. However, you will not be eligible for tax incentives or subsidies.
Self-insurance
Self-insurance usually entails setting aside money to cover employee health costs, while also taking out a reinsurance policy to protect against catastrophic losses. It’s usually undertaken only by very large companies. Although self-insurance can reduce costs if your employees rarely get sick or have serious accidents, you may not want to take that chance. Reinsurance is not available in some states, and coverage can vary considerably.
Like other employee-sponsored health plans, self-insurance plans must meet the minimum essential coverage requirements of the ACA.
Incentives
Common employee incentives include:
Stock purchase plans. Employee stock purchase plans are a common incentive in high-growth, high-tech industries. They give employees an added incentive to help the business succeed, and allow the business to compensate employees with earnings it has not yet produced.
Profit sharing plans. In the early stages of your business, it’s best to stay away from promises to share profits. It will be a while before your business generates profits, and it will be even longer before you’ve generated enough cash to pay out on a formal plan.
Pension plans are one of the best incentives a business can offer to recruit and retain good employees, but due to the cost, very few companies with fewer than 20 employees offer one. There are two basic types of plans. A defined plan pays a set amount and guarantees a certain level of income at retirement, based on length of service and wage level. A contribution plan promises, but does not guarantee, a set amount.
Consult your lawyer and accountant before offering any of these plans.
Rewarding Your Employees
What you reward communicates what your business values. If you reward people for great customer service, then great customer service becomes a priority, rather than mere rhetoric.
Some people assume that salary is the most important motivation for employees, but this isn’t always the case. Often, employees are more interested in new challenges and opportunities for learning. This type of motivation is critically important for a growing business.
You should develop year-long motivational training strategies for your business. These may include a schedule of programs that your salespeople can look forward to throughout the year. You may also want to create an agenda for internal sales, productivity, or quality contests. Each month, gains can be measured, winners selected, and fun prizes awarded.
This schedule provides markers throughout the year that will keep your people motivated and focused. You should also post your business’s performance goals prominently around your workspace.
Good managers continually refresh their employees’ awareness of the business’s goals and rekindle their enthusiasm. One method is to create incentives for exceeding targeted levels of performance. How much employees are rewarded depends upon how much they have exceeded their targets.
Consider creating rewards for:
Meeting or exceeding quality standards
Environmental improvements, like saving energy or resources
Coming up with redesign ideas
Solving problems with products, processes or delivery of services
Improving order turnaround time
Acquiring new skills or expertise outside of one’s functional area
Reducing waste or pollution
Exceeding targeted inventory turnover or project completion dates
Exceeding sales goals
Exceeding receivables collection targets
Rewards are often more effective when employees are allowed some input into their design. Instead of assuming employees will be motivated by receiving a pair of fuzzy dice that say “World’s Greatest Employee,” ask them what would motivate them.
You should reassess your rewards programs regularly. Do employees value them? Are they motivating the desired behavior? If not, ask employees for help with designing a new and better program.
…
Borderlands initially specialized in application software and database development. Since then, in response to consumer demand, they’ve branched into responsive web design, real-time databases and social intranet development. Borderlands has completed projects for clients in manufacturing, financial services, consulting and omnichannel retail operations.
For the most part, Borderlands’s team works remotely. Once a week, all full-time staff attend a meeting at Borderlands’ office. During the rest of the week, they work wherever and whenever they feel like it. They log directly into Borderlands’ network to upload finished code, check out parts of projects to work on, and swap emails and IMs with co-workers. Although there’s little or no day-to-day supervision, jobs almost always get done properly and on time.
I actually think Borderlands has a great management structure. Gus and I are really proud of it. But I wouldn’t recommend our trial-and-error method of achieving it to anyone else, unless they enjoy being seriously stressed out.
Today, we can say that we’ve developed policies and processes that work beautifully for us. And I think our employees would say our policies work beautifully for them, too.
But the process of developing those policies came very close to shutting us down.
…
Outsourcing
Outsourcing transfers one of your services, processes or functions to an external provider. For example, you might contract with an accounting or virtual office service so you can concentrate on what you do best.
As with any business strategy, outsourcing will be successful or unsuccessful depending on how well you understand your business, your customers and yourself.
The public image of outsourcing is widely linked to globalization, and the fact that many firms outsource to countries where labor may cost less than a dollar per day. Pay attention to employee and customer perceptions, and consider the ill-will outsourcing may cause.
Understand that you’re not just changing your letterhead or putting in a water cooler. You’re changing a structure in which people live and work. Make them unhappy, and the structure may start to crumble.
Also, remember that you’re entering into a contractual arrangement that is likely to determine the future of your enterprise. Don’t assume anything! Contracts must address performance standards, expense caps and time-certain milestones.
Here are some other things you’ll need in order to make an informed decision:
A complete grasp of your company’s core competencies and the time and effort required to train your people to do a job others are prepared to do.
A clear understanding of the big picture. Consider how outsourcing will affect your production output, workplace culture, brand image and goodwill.
A detailed picture of costs. Is outsourcing going to be more profitable than streamlining or improving the operation you have? If not, forget it!
An understanding of what makes your business special. If it’s customer service, you need friendly, full-time, in-house employees. If it’s discounting, then relying on an outsourcer—like an automated phone system or overseas call center—might make more sense.
It can’t be overstated that some tasks are not suitable for outsourcing, and some jobs are not economical to outsource. Before you make a move, understand your core competencies, calculate how the expense of outsourcing will affect your cash flow, and assess how the move is going to be received by your workforce and customers.
Independent Contractors
Working with independent contractors can be a great way to reduce your costs and maintain your flexibility. Because independent contractors are not legally viewed as employees, many employment laws, costs and tax regulations don’t apply to businesses that hire them.
The IRS normally considers people or businesses who provide services to other business owners to be independent contractors only if they:
Have more than one client
Provide their own tools or equipment
Have the authority to hire employees to assist them
Are paid upon completion of specific portions of the project
File taxes as a business
Advertise to the public as a business
Perform work for more than two owners in a year
Have their own place of business
If the IRS finds that you misclassified an employee as an independent contractor, the penalties are likely to be severe. If you’re not sure whether a worker qualifies as an independent contractor, contact your lawyer.
Resolving Performance Issues
When an employee isn’t performing to your satisfaction, it’s wise to investigate possible causes. Sometimes, the problem can be solved by making relatively simple changes in the work environment. The following questions can help you pinpoint issues:
Is the job description clear enough?
Is equipment reliable, efficient and adequate to the employee’s needs?
Is the work environment ergonomically correct and conducive to productivity?
Is the worker getting the necessary support from other team members?
Are larger process problems preventing the employee from meeting his goals despite fulfilling his part of the task?
Does the employee feel the job expectations are fair and attainable? If not, why not?
Does the employee have the right skills and training for the job?
Does the employee get regular feedback from managers?
If the answer to one or more of these questions is “no,” consider developing a plan with your employee on how to improve the situation. Specify what degree of improvement you expect and how it will be measured and rewarded. If you make the requested changes, and the employee’s performance does not improve within the specified timeframe, disciplinary measures or termination may be necessary.
Firing People
Deciding whether to fire an employee is one of the most important managerial decisions you can make. There can be serious legal consequences for mishandling discipline or termination procedures. Also, an unhappy ex-employee may sabotage or steal from your business, or even become violent.
Even if the employee leaves peaceably, a badly handled firing can lead to resentment or loss of morale among the remaining employees. On the other hand, failing to fire an underperforming or difficult employee can have exactly the same effect.
It’s little wonder that many business owners hesitate to terminate problem employees, even after giving them several warnings.
There is a standard process for terminating an employee:
Always begin by offering friendly, private suggestions to improve shortcomings in performance or attitude. In some cases, the employee may simply need a little more help, guidance or information.
If the problems persist, proceed to a firm verbal warning that describes the improvement you expect to see, and explains what the employee should do to achieve it. Offer help, if necessary.
If the verbal warning has no effect, proceed to a written warning that states the problem, the performance you expect and the due date for improvement.
Schedule a followup review.
Meet again to share your assessment of the employee’s performance.
Make the decision to keep, terminate or reassign the employee.
Document each stage of this process objectively and professionally in your employee’s personnel file. Stick to the facts, and don’t get personal.
If you do decide to terminate an employee, follow these steps:
If you’re feeling angry, do your best to calm down. In most cases, it’s better to keep an unsatisfactory employee for an extra day or two than to risk losing your temper during the firing process. You need to feel confident that you can maintain your self-control.
Call the employee into your office or some other private place. Do not humiliate him in front of other employees. Consider having another manager present as a witness, depending on the employee’s temperament and behavior.
Inform the employee of your decision, and explain the rationale for it. Refer to previous warnings and the opportunities you offered for improvement. Don’t get personal, even if the employee does. Stick to performance issues.
Be sympathetic but firm. It’s normal to feel like the bad guy. But if you followed the procedures listed above, you should feel confident that you treated the employee fairly and be able to act decisively with a clear conscience.
Allow the employee to retain as much pride and self-respect as possible. You should avoid humiliating the employee any more than is unavoidable. However, don’t try to make the employee feel better with praise or compliments. It’s important not to send mixed messages.
Keep it short. Don’t get bogged down in debate or argument. You have made your decision, so there is little to discuss apart from next steps: severance pay, clearing out personal belongings and so forth. Ten to 15 minutes should be adequate.
In the unlikely event that an employee makes threats against you, your employees or your business, take it seriously. Contact the police, your lawyer and mental-health professionals in order to find out what to do next. Although such threats are rare, and most of them are never acted on, how you handle them can be vital from a legal standpoint as well as a safety standpoint.
Leadership
We’ve already discussed the traits of good managers. What’s the difference between being a manager and being a leader?
Managers coordinate and organize team members and keep things running smoothly. Leaders inspire them to make a personal investment in the business and to contribute the very best they have to offer.
Thus, a good manager is not necessarily a good leader. A leader should be:
Coherent, forward-thinking, and consistent
Able to adapt to a wide variety of circumstances and personalities
Able to understand team roles, functions and expectations
Skilled at leading efficient, focused meetings
Able to sustain a positive climate
Able to resolve conflicts
Able to diagnose and correct weaknesses
Some people are naturally good at leading. The rest of us must learn these skills. Ask yourself these questions:
When you were last in a leadership role, how did you perform?
Who are the leaders you’ve most admired or responded to, and why?
Which leadership traits and skills do you think you have? Which do you lack?
There is no single leadership style that works in all situations. The ideal way to lead your marketing team may be very different from the ideal way to lead your production team. Part of being a leader is the ability to adapt to different environments. In most cases, this means finding the correct balance between directive and supportive leading:
Directive leading is similar to what traditional bosses do. It involves one-way communication, in which team members are told what to do and how to do it.
Supportive leading requires two-way communication, as team members are encouraged to contribute ideas and participate in decision-making.
As a leader, you must persuade your team to share a goal and to contribute generously toward reaching it. Then, you can facilitate the process by which the team allocates its own tasks, arrives at a plan and sets a reasonable deadline for completion.
Another important part of leadership is knowing when to let someone else take the spotlight. When you use other people’s ideas, give them the credit publicly. Good leaders take pride in their teams and are happy to show off their capabilities.
In fact, one of the best things you can do as a leader is to create new leaders. Your goal should be to turn big people into giants. When you make people feel small, your business shrinks with them.
Modeling Good Behavior
As as leader, you must be a good role model, consistently displaying the behavior and values you want to see.
You can lecture employees all you want, and surround them with motivational posters, but in the end, it’s your everyday behavior that will have the biggest influence on their productivity, loyalty and morale. If you don’t tell team members the truth, they won’t be honest with you. If you don’t take responsibility for your actions, they won’t take responsibility for theirs. If you’re not open to new ideas, they won’t make or listen to suggestions.
The most eloquent statement of ethics is worthless unless the code of conduct it dictates is an obvious, measurable force in your day-to-day business. If your team sees that compromises are often made and rules often broken, they’ll form their own opinions about what you really value.
You can best communicate your ethical expectations through daily interaction. Let your employees know what’s important to you: If safety, quality and customer service come first in your business, make sure your employees know what you expect them to do when conflicts arise between any of these values. They must understand that you will reward those who uphold your ethical code, and you will remove those who don’t.
…
When Gus’s girlfriend Tracy finished school and moved to Burlington, she became Borderlands’ project manager. Primarily, she supervised the company’s four telecommuting employees. This system worked well, usually. And when it didn’t, it wasn’t the end of the world.
Then, Borderlands got a big break. A local human services firm wanted a content management system that would allow employees to post, edit and monitor collaborative content. At the same time, government agencies and other professionals needed to be able to access these data securely.
At the time, that was the biggest, most complex job we’d tackled. The security issues were especially challenging—we had to comply not just with Sarbanes-Oxley, but also with HIPAA and FISMA.
Gus and Tracy and I talked it over and concluded that we’d need a bigger, more experienced team. We hired four freelancers and assigned a team member to mentor each of them on a one-to-one basis. As far as preparing our team goes, that’s all we did. We assumed that we would simply be scaling up our existing process. But in fact, we were putting a strain on it that it was never designed to handle.
…
Building Teams
A team is a group of people who pool their individual strengths to reach a shared goal. As such, teams are the building blocks of successful organizations. They integrate a variety of skills and personalities, encourage constructive conflict, and generate innovative ideas and solutions.
Depending on your goals, you may need to create several teams to perform specific functions, or simply organize your personnel into a single team with a broad range of responsibilities.
Open communication and constructive confrontation are the essential attributes of any effective team. Team members must:
Identify common ground.
Encourage expression of all viewpoints.
Share positive and negative feedback.
Facilitate conflict resolution.
Support and trust one another.
Keeping your team focused yet open to new ideas requires dedicated attention to group dynamics. As a team leader, you should:
Understand each member’s strengths and help your team member’s to understand them as well.
Challenge team members to exceed their personal goals and expectations.
Praise team members publicly and correct them privately.
Watch out for the formation of cliques and rivalries that may slow or stall progress.
Keep team members engaged and accountable through regular meetings.
Be available, open, engaged and impartial when team members need your input or guidance.
Setting Goals
All great leaders know the importance of setting goals. In order to be effective, business goals should be generated collaboratively, in writing, by managers and employees. They must also be consistent with the company’s ethics and mission.
Above all, your goals must be SMART:
Specific
Measurable
Attainable
Realistic
Time-bound
Studies show that ambitious but attainable goals often lead to better performance from team members. By getting your team to commit to attainable, worthwhile goals—and to each other—you will improve the attitude of your employees as well as your bottom line. We will discuss this further in Chapter 27 Project Management.
Empowering Your Team
Empowerment means giving employees the authority to manage themselves. In many cases, this requires stripping away layers of management so that functions traditionally performed by managers—such as setting goals, assessing performance and restructuring work processes—can be performed by line employees. Some organizations even empower teams to hire and fire members, or to evaluate and contract with outside suppliers.
Regardless of your industry or the size of your business, an empowered team will collaborate in setting its own goals and selecting the best way to achieve them.
The starting point for creating an empowered team is to establish a shared vision that will provide a context for all decision-making, and will also serve as a yardstick to measure progress.
Your second task is to create a climate of shared responsibility within your team. This means that in order to reap the rewards of success, every member of the team must perform. If any member does not, it is the responsibility of the entire group to assess the difficulty and remedy it.
Virtual Teams
A virtual team is a team that collaborates over the Internet or other communication technologies. Virtual team members may be in different cities, or even in different countries. In some cases, they may work in the same office, but do most or all of their collaborative work online. The advantages of virtual teams include:
Finding better employees
More time, greater flexibility, and fewer traveling and dining costs for workers
Less need for office space and equipment
Fostering disciplined collaboration that makes the business more competitive
Ensuring that handicapped or injured workers can contribute equally
Of course, there are disadvantages, too:
Virtual collaboration is only as good as your technology, which in turn is only as good as your team’s understanding of your technology.
Communication problems often arise when working across cultural or national borders.
Having workers in different time zones may delay or confuse projects.
Virtual communication may lead to misunderstandings and may not be as fulfilling as face-to-face meetings.
The biggest obstacle virtual teams face is a lack of adequate communication and cooperation. Here are some tips on solving communication problems:
Make sure team members understand how they fit into the big picture. As the team leader, you must share your overarching vision of the team’s project. Report on milestones, deadlines and progress throughout the process.
Set a mandatory response time for emails and phone calls. Virtual collaboration depends on timely responses to questions and concerns. Team members should be instructed to answer all queries within 24 hours, even if it’s just a matter of acknowledging receipt of the message.
Make team members’ schedules available to each other. Team members should be aware of days off, business trips, illnesses and so forth.
Avoid text-only communication. Where possible, encourage voice-based communication and videoconferencing. This will give your team members a better sense of each others’ personalities and help to build trust.
Use project management, networking and communications tools to improve communications and accountability. Options include Basecamp, Asana and Google Hangouts.
Don’t make the mistake of thinking that technology will solve all your problems. Networking tools and social media will benefit your team only if there are clear ground rules that specify proper use, responsibilities and etiquette. Technology should enhance real-world values and communication, not substitute for them.
…
Once they’d clarified the schedule and the deliverables with their new client, Bill and Gus turned their developers loose. Under Gus’s supervision, four workers began designing the user interface. Meanwhile, Bill guided the other four employees in creating the back end: the APIs and function calls that would drive the database. Using the Git version-control system, the teams worked in parallel, checking out segments of code, debugging, and addressing security vulnerabilities.
The work was going more slowly than usual, and Tracy started feeling nervous. The new freelancers had very different temperaments and work styles, and they had been given no time to adapt to their new environment.
She explained her concerns to Bill and Gus: Tina struck her as “flaky,” and Colin seemed to be very confused about who was in charge and what was expected of him. And although Eli was competent, he seemed to be annoyed by having to take directions from her.
“Jane’s doing great,” she told them. “But everyone else is having serious adjustment problems. They might grow out of it someday. But right now, they need a boss.”
In response, Bill and Gus pointed out that their hands-off style had always worked in the past. They advised her to give everyone a little more time and space to work out their roles; as they saw it, this initial “exploratory” phase would help to strengthen the team.
We were so confident in our team that we even accepted a couple of smaller jobs and worked on them personally. Those jobs turned out to be a big distraction—enough so that we had to cancel a couple of staff meetings to wrap them up. By that time, Tracy’s hair was on fire, so we apologized and promised to get back up to speed on the database project.
Unfortunately, we didn’t get a chance. Everything was already starting to fall apart. Tina quit suddenly and moved to Montreal. Meanwhile, Colin kept sending Tracy panicked emails asking about deliverables and bug fixes that had already been logged and uploaded. Jane was complaining that she was having to do her job and Eli’s. And no one had heard from Eli in three or four days.
Within 48 hours, the project was at a standstill.
…
Overcoming Obstacles
The biggest challenge in creating and maintaining a team is managing group dynamics. Personality conflicts, peer pressures, conflicting loyalties and old habits can cause a team to work at cross purposes. Your daily task is to create an atmosphere in which people can freely express positive and negative views. In this way, they can vent frustrations and overcome negative feelings, which will allow them to focus their energy on the mission rather than on team dynamics.
Keeping clear lines of responsibility and accountability within the team is a major challenge. However, you can overcome this difficulty by helping your team to return to the basics: talk, listen, encourage one another, and focus on the mission.
Groupthink
A team affected by groupthink loses its ability to investigate alternative courses of action. This results from the desire of groups to minimize or avoid disagreements between members. Also, insecure team members may vote with the majority if they don’t feel confident in their own viewpoint.
The natural tendency toward groupthink is one of the main reasons to encourage dissenting views. It’s not easy to go against the majority viewpoint; a person who has enough character to do so may not always be correct, but should always be heard.
Resolving Conflicts
Conflict is inevitable in any group situation. Unless it’s addressed and resolved, it can bring team efforts to a standstill. The resulting negativity may even spill beyond the team and affect other employees.
Organizational theorists have identified two primary forms of conflict.
Cognitive conflict is conflict over ideas. This is precisely the type of conflict your team should be having. The conflict between various points of view is what eventually leads to an idea that transcends individual capabilities.
Affective conflict is conflict over personalities and power. It often arises when people fail to distinguish between positions and interests. Affective conflict can sidetrack your entire team by making them angry or apathetic.
Your job is to encourage cognitive conflict while nipping affective conflict in the bud. There are as many possible causes of affective conflict as there are types of people, and learning to defuse it is often a process of trial and error. But as a general rule, the best way to resolve affective conflict is to depersonalize it by turning it into a problem-solving situation for which all parties share responsibility. The following tactics are often helpful:
Define the problem in practical terms. If your team has a hard deadline, you need to find a path from where you are to where you need to be. Discuss the likely results of failing to resolve the conflict in time, and ask your team to suggest a constructive course of action.
Confront and resolve difficult problems in person. Don’t rely on email or phone calls unless it’s absolutely necessary.
Leave personalities out of it. If a team member is being negative, try to identify her underlying concerns instead of focusing on her “bad attitude.” The real problem may have little or nothing to do with the employee’s initial complaints.
Listen and learn. Let team members have their say without interruption, and do your best to put yourself in their shoes. Summarize their points calmly before answering, and ask for clarification if necessary. This can keep discussions from overheating, and it will also show that you’re seriously considering their points.
Accept criticism with an open mind. Act on constructive feedback, and learn not to overreact to negative feedback.
Identify common ground. Look for facts, goals and ideals on which you agree. Once you’ve found common ground, the value of coming up with a solution is obvious.
Work jointly toward a solution. The goal should be a win-win solution that will allow upset team members to feel that their concerns were addressed while allowing the project to move forward. In extreme situations, differences may be impossible to resolve, and it may be necessary to transfer or even fire a team member. But if the process that leads up to this decision is fair, calm and rational, it’s much less likely to affect morale.
…
We were in an unbelievably bad position. We had three weeks left to finish the project, and our new team had totally fallen apart. People were stressed out and angry. And rightly so.
Gus and I finally realized that we’d been asleep at the switch. We wanted a relaxed, no-pressure work environment, but instead we created one with no oversight for disorganized employees and too much work for conscientious ones. We had learned that reliable telecommuters are made, not born. And we agreed it was time to start listening to Tracy.
The first thing they had to do was get two new workers. They placed ads at St. Michael’s computer science department and found replacements for Tina and Eli. These developers worked daily in the Borderlands office, under Tracy’s close but friendly supervision, as did Jane and Colin.
Tracy felt strongly that they needed to know how their team was spending its time and how this affected profitability. Tracking hours, deliverables and progress accounted for more than three hours a week of their time, but it was worth it. Also, they made modifications to their project management software to account for the new developers. IMs reminded team members about deadlines and alerted them when pieces of code were locked, or being modified by another member of the team. Bill, in particular, took great pains to ensure that no efforts were duplicated and that all communications were recorded in detail.
Amazingly, the project was completed on time—just barely!—and our client was happy with it. Gus, Tracy and I look back on that project as a milestone, because that was where we learned that there’s a positive side to rules, structure and pressure.
Today, we still aim for a relaxed environment, but we no longer assume it’s something that just magically happens. We look for team players who are suited to our environment, and we mentor them until we feel they’re ready for self-management. It’s a little more effort up front, but it’s paid off for everyone.
…
Conclusion
In the day-to-day rush to make products, fill orders and collect payments, the important task of creating company policies is often pushed aside. Skilled managers create organizational structures that motivate employees to invest themselves in growing the business.
By virtue of being a small business, your company already enjoys many of the qualities that corporate America covets: a collaborative atmosphere, swift communication and the ability to adapt rapidly to evolving market conditions.
If you create a fulfilling and enjoyable place to work, hire smart people, motivate them, and compensate them fairly, you will have a much better chance of achieving your business goals. Employees are crucial to your success, so treat them well!

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| NxLeveL® TECH TIP BUSINESS RESOURCES AND THE WEB
Bring Your Own Device (BYOD) Although it may seem counterintuitive, “bring your own device” policies that allow employees to use their own mobile devices for work have been associated with higher productivity in some studies. BYOD can also slash technology costs, since you don’t have to supply employees with the devices they need to do their job. On the other hand, network security is a significant concern. Your antivirus protections and other network security measures are only as strong as your weakest link, and BYOD policies have the potential to add numerous weak links. You also need to consider what happens to sensitive company data and online assets if an employee’s device is lost or stolen. Device tracking apps can wipe data from the hard drives of phones and tablets, but only if someone at your business has been tasked to ensure that the necessary app for each device is installed, up to date and activated. BYOD works best when your team is technologically sophisticated and well informed about security threats and best practices. If your team is not at that level, the benefits of BYOD may not justify the expense of training them. And even if they are, a firm with highly sensitive data should be wary of BYOD policies.