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No gossip column on 990s can omit the juicy topic of what we’re all getting paid.

The 990 tracks highest paid compensation in two places – Part VII, Line 1d on the main form and also Schedule J (There are 16 additional schedules that can accompany the main form and sometimes this is where the bodies are buried.)

There are two ways to examine the data.1045_4931523

  1. What did the highest paid staff member receive?
  2. What percentage of the total compensation expense (Part I, Line 15) are the Highest Compensated Employees taking?

 

 

Let’s start with the highest compensated in $ even though the percentage of total compensation by percentage may not be unusual.

  1. Leadership of universities/medical facilities and private schools for the wealthy are routinely given higher salary in lieu of stock options. The theory is high leadership skill is required but leaders could also make more in the for-profit corporations with stock options as incentives. The eye popping salaries are a replacement for the stock and other incentives to be made at Apple, GE, and IBM.
  2. Higher pay can be concealed by Part VII Section A Column F – Other related organizations. While I have an upcoming look at nonprofit captive corporations, some midmarket nonprofits with financial sophistication use this column to add an extra $50,000 to the executive compensation. Wish I worked there 🙂
  3. Guidestar publishes an annual compensation report. For example, the CEO in Sacramento for a nonprofit should make approximately $54,000 if the total revenue is less than $500,000; $112,000 if the total revenue is less than $1 million. $130,000 if the total revenue is less than $5 million, and $175,000 at greater than $5 million revenue. These numbers strike many Boards as generous, but Guidestar is watching all of these clever add ons and reporting them. Why should you settle for less than fair? (Guidestar, 2017:208)

Let’s continue with the underpaid!

  1. Leadership compensation by percentage of total compensation is how much the Board thinks that the leadership is worth. An agency of $6+ million should expect that leadership compensation will absorb 3-5% of total compensation.
  2. Since ill-equipped leadership will never get the nonprofit to $6 million in revenue, small organizations may experience 6-12% of total compensation for leadership costs. Boards have to pay in advance of the larger size that good leadership can provide. It’s necessary pain of investment!
  3. If you are in a $500,000 revenue organization, be careful not to overvalue the ED job. Let’s use the Sacramento example and your compensation should be $54,000. Because the company is small, your job may also include clerical for 25% of the time and program meetings for 25%. Those two compensations for full-time work are $30,000 and $40,000.

So your total compensation would be

  • 50% ED – $27,000 (54,000*.5)
  • 25% Clerical – $7,500 (30,000*.25)
  • 25% Program – $10,000 (40,000*.25)
  • TOTAL $42,500
  1. I’ve also seen another nonprofit with $18 million in revenue and 1% in Highest Compensated Staff. While I applaud the benefits that staff receive in pension and health, it appears that they are risking a loss of leadership when managers go to a convention and chat about salaries. (People gossip at conventions! ). Poor Board leadership.

 

Let’s finally think about the overpaid

  1. I’m looking at a $7 million revenue organization with compensation requiring about 16% of the total compensation budget. That is leadership that has the board in their pocket!
  2. I’m also looking at a medical nonprofit that has been in the news for fraud charges. There is $2.5 million in compensation from related organizations – for 2 people.

 

Conclusion

Board of Directors should structure compensation to be generous to leadership and expect high results in return. Small agencies must suffer with tight budgets until total revenue approaches $6+ million. Boards should work with Executive Directors/CEO so that most of their time is spent in leadership. Mixing job descriptions will never produce great results in lives of clients. At the same time, there are ceilings to compensation for highest paid employees. With the 990, we can see where an agency is on the continuum.

The CEO/ED job is challenging. A business coach can help and contact me if you need support to go through this process.

Did you work harder after you hired more people? The reason to hire more staff is because there is too much work. How can more people create more work instead of less work?

Companies go through ‘valleys of death.’ This is commonly described as any nonprofit between $1-6 million in revenue. This is the growth period where the need for more office support (administrative, legal, hr, accounting, etc) is high but the cash is really not there to pay everyone.1118_4740631

Valleys of Death – Employees

Another Valley of Death happens when the staff team grows and changes.

1-10 Employees

Companies usually start with the vision of one person. How many times have you seen a great visionary start a small homeless program? The new company is built around the passion and skill of the founder. Of course, the owner cannot prepare food, clean and recruit clients so helper people are hired, 2 social workers, a kitchen assistant, and a custodian. This model climbs to 10 employees. The new staff are owner-helpers. They don’t have much authority. The director/owner sets the rules for the shelter, orders the supplies and keeps the books. The helpers clean and help. It is critical that the director/owner trusts the helpers.

10-25 Employees

Over 10 staff and more is needed than loyalty to the director/owner. Good food and safe housing created a flood of applicants for the housing program. The director/owner helpers are replaced by staff who have the ability to make good decisions when the director/owner is not there.

26-100 Employees

The staff team over 25 people is the highest level of director/owner failure. It is possible for the owner to work too hard in the 10-20 staff member range and not hire capable people to exercise independent judgment. If the director/owner continues to add 30 helpers without independent good judgment

  1. The director/owner will collapse from overwork OR
  2. The agency will lose newer staff and cycle between shrinkage and growth with 25 staff

The director/owner must prepare for a constant change in role during growth. There is a steady shift from

  • Leader doing all of the work with help
  • Skillful staff taking over marketing, accounting, client engagement
  • Leader becoming a visionary and values thought leader with managers
  • Leader setting 3 year highly achievable goals with management team

There is a saying that at 10 staff the owner needs to hire someone identical to herself. At 100 staff, she needs to hire someone much different from her style to fill in missing skills.

Any problems?

  1. The director feels too badly to transition staff who helped to start the company but don’t have a place on a larger team. One for-profit owner had two CEOs who could not grow as the company expanded to 5 sites around the world. He simply added them to his research staff at their same rate of pay – until he was no longer breaking even.
  2. A nonprofit director lost many younger staff when three ‘original’ staff were mean and dismissive and no longer playing valuable roles. She couldn’t face the stress of honesty and transition.
  3. A director liked to hire managers who were not threatening. They had less ability than the director. The agency could never break growth barriers because the team lacked skills and experience to take it to the next level.

There are personnel companies who can be hired to review job descriptions and actually transition unproductive managers when the owner/director or board does not feel capable of the task.

Conclusion

Leading a growing company is a difficult and constantly changing job. Your role requirements will not stay the same for 12 months.  While sufficient cash is a challenge, the balance of effective people on the team at different stages is critical. The CEO job is challenging. A business coach can help and contact me if your team needs support to go through this process.

This weekly club meeting talks about stress that CEOs and Executive Directors feel when employees don’t do the right things at the right times and life gets difficult.  Perfectly happy Directors and Presidents are not eligible for membership. This week, I’m thinking about why employees get the job description and don’t understand the job.

955_5660976Job Description
In a former job, I was also half of the HR department. I wrote job descriptions for every job. Since the job involved children, I carefully added that you have to be able to get down on the floor with kids and lift 70 pounds. The description is great – but has so many details in it that’s its impossible to know what the actual job is. While it’s critical to be able to carry a child in a fire, the day to day work for the appraisal is quite different.  In 10 years, staff had to pick up a 70-pound child one time! How do you protect yourself without hopelessly confusing your new employee?

What is the job description? The job description outlines the legal limits of your authority. If you are the first grade teacher, you cannot pay bills. It’s not in the job description. You don’t have the authority. The job description describes the limits of the job but employees want to know what is the core of the job?

Job Scorecard
There are several systems online to identify simply what the job is about. The job scorecard is what the job is really about. It’s simple enough for employees to understand. It protects them because you write down how you measure success. Many employees try to be successful if they know what you want.

Some employees won’t give their best until they understand what you want. I like a 10 point job scorecard that has 4 sections. I can tell the staff very simply what the job is about and they are not surprised later in feedback and appraisals.

Example: Accountant

  1. Knowledge, Skills, Abilities – 3 measures. For example, an accountant might have
    1. Knowledge – BA Accounting and 40 hours of additional training per year
    2. Skills – 3 years experience in inventory allocations (Knowledge plus practice)
    3. Abilities – interprets our corporate financials to board (baked in knowledge)
  2. Values – 3 measures of values (values have to already be established)
    1. Value is mission-driven staff – measure is staying late to meet the reporting deadline
    2. Value is delighted customers – measure is returning calls and emails in one day
    3. Value is flawless execution – measure is 0 corrections required in the audit.
  3. Visible Results – 2 measures for an Accountant
    1. Reports to the managers by 5th of the month
    2. Public audit without qualification
  4. Key Responsibilities –
    1. 18-month rolling cost budget
    2. Inventory entries with sales, costs of goods sold, raw materials, finished goods, and work in progress.

Isn’t that simple?

Keep the job descriptions because they keep jobs from changing without good reasons. They protect both manager and employee in moments of tension.

Use the job scorecard to do appraisals and help the employee understand how they add value to the company. Your employees will not understand you until they know what you want. Job scorecards help!

The CEO job is challenging. A business coach can help and contact me if your team needs support to go through this process.

 

 

This weekly club meeting talks about stress that CEOs and Executive Directors feel when2_2501249 employees don’t do the right things at the right times and life gets difficult.  Perfectly happy Directors and Presidents are not eligible for membership. This week, I want to deal with the stress of the 18-36 month window.

ReHire
When you first take the CEO job, you have to rehire all of the people who report directly to you. Perhaps you assumed that they are good sheep and will simply change to a new head sheep?

Not so.

Someone who now reports to you isn’t confident and you make them nervous. Someone else wanted the job that you have. Someone else has been cutting corners (with time and attendance, expense account, etc) with the last boss and wonders how to test your tolerance. And so on. You thought it was a greener pasture, but all greener pastures have manure!

Meet with each direct report and help them show their best side to you. Recognize their talents, skills, values and passion. Meet together as a team and give staff an idea of your most important values. My own personal values include:

  • I don’t hire assistants. I hire people smarter than I am who own their part of the company – In your area, take responsibility and authority and bring me solutions as well as problems.
  • Be a continuous learner. I expect to offer more skills to my job one year from now. I expect you to offer more one year from now. I read one book a week. What is your goal?
  • I pay 75 percentile for your position. I think that great managers need to be compensated so they don’t worry about job and home. I pay for professional development. I offer flex time and remote work where possible. I respect your valuable contribution to this company.
  • I only want people in this company that you would enthusiastically rehire. Does anyone need more attention on your team? Does anyone need to transition? Those will be my questions.

Result
The result of the rehiring – people feel respect for who they are and what they have accomplished and they have a clear idea on how to work with you. In most cases, this is a great start.

Review
Research shows that effective CEOs will need a 50% change in leadership team in the 18-36 month range. The management mix requires a team that can be effective under your leadership. In some cases, the reporting managers also see this and create their own retirements and resignations. This is not a sign of poor leadership as long as the revolving door stops within 24 months. It’s what is needed to take the organization to the next level.

The review period is where you set up a job scorecard for each position with the help of the leadership team. The process is necessary but it will point out some managers who are not in the right seat or not a match for the next phase of the company.

Repair
The discernment process is a time where you meet with some direct report about needed changes that may bring about transition. It’s also a time to see if you have followed the Rehire and Review process.

Failure to rehire can cause leadership challenges in the first 12 months.

Failure to retire people that you do not enthusiastically want will cause problems in year 2. According to the Rockefeller Habits Question 1, you need a leadership team that understands each other’s differences, priorities, and styles and a team that is able to engage in constructive debate. And you need team members who function flawlessly so that you are leading instead of repairing problems. Here are 3 Repair Steps.

  1. It is never too late to say to a direct report ‘I apologize for the awkward start to our relationship and I’d like to hear more about your talents and interests as we continue to create the team.’ No one is perfect and you are opening the rehiring question and giving them respect and a chance to join your team.
  2. It is never too late to state your values and apologize if anyone is surprised.
  3. It is never too late to start a repair or termination that you delayed out of fear or misplaced sympathy. I hate to fire people – until they start making me do or fix their work, or until they start to create trouble on the team.

CEOs can let problems slide, but my Personnel Consultant always said, you can’t cure cancer with aspirin.

  • They’ve worked here for 15 years.
    • I respect that but the company is growing and changing and needs staff who empower that change. Can they change? I’ll help.
  • They probably can’t get a parallel job with their training.
    • That is a choice that they made when they decided not to keep learning. It’s tragic, but respect their choice.
  • They have a lot of friends on the staff team.
    • Very likely, but employees protect their own job first. There may be muttering but none of us are as popular at work as we hoped 😊

The CEO job is challenging. A business coach can help and contact me if you need support to go through this process. But with or without support, most Executive Directors inherit leadership teams with issues. The issues can be managed – and the Board was wise enough to hire you to do it.

Rehire, Review, Repair.

 

If you want One Minute TurnArounds by email, please sign up!

GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.

A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

 

 

Leaders universally face stress and discouragement. Many feel guilt when plans do not work as expected. The video is an introduction to causes of those feelings that cannot be shared.  There are ways to manage these jobs.

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Leadership has a hidden cost of loneliness. Many CEOs are excited by the chance to be a leader or the chance to make a difference with a great product or service. The raise in pay certainly feels good too!

 

Various studies have been done that show that deep feelings of loneliness permeate the leadership job. Example – You suddenly have to deal with a manager who is not doing the right thing and there may be no one in your agency who should know about your inner struggle to choose the right course.

One category of loneliness is about planning to handle bad things that may not happen. Examples may be a financial risk that has not yet happened, a key resignation looming, or funds that may be missing. Imagine telling anyone on staff that payroll may not be paid but don’t worry because it is still just a risk.

There is also the loneliness of unpopular decisions. It’s easy to make most decisions. That’s surfing. It’s those other decisions where you need to take a risk and a stand.  That may be magnified if people perceive your leadership as a support to a group of stakeholders. Gay presidents, women CEOs’, persons of color as Chairs of Boards can face double burdens to defend some leadership decision if a stakeholder group is surprised by the decision.

I’m also speaking from personal experience leading agencies for 30 years. And that’s why I’m in coaching now. You’re probably watching this because you need an outside voice to help you get clarity, keep you on track with the decisions that you’ve made and be available during dark hours.

It’s not only for peace of mind. Think of all the wasted leadership and sleepless hours on loneliness. Your company mission and money will bounce up when you can place your energy where it’s critically needed.

If you want One Minute TurnArounds by email, please sign up!

GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.

A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

wine.jpg?fit=500%2C350&ssl=1

I picture my work with a glass of wine and a cup of coffee on my desk. When I start the day, I reach for the coffee. I decide what tasks to do today and I place any of the hard, nasty ones at the top of the list*. I think you know the kind of work that I mean.  I hate to respond to regulatory orders for audits and information so that needs to happen with coffee. Fire someone – definitely coffee.

 

At some point in the day, I can switch to the glass of wine. What’s the difference?

 

Reaching for wine is when I’m working on the stuff that I’m really good at and love. I’m thrilled to spend time out of the office thinking about the whole company. I’m good at the Strategic Plan and building systems to protect the company. That’s why I consult in these areas. It’s drinking from the wine glass.

 

Do you ever stop drinking coffee?

You can kill off your zeal and joy by only drinking coffee. We all have some hard tasks that need to get done. The trouble starts when you never have time to get to the wine that revives your vision and gives you new energy.

 

We are all exactly equal in one way. TIME

Maybe you read this as owner of a 10,000 worker company. I direct 150 staff. The President directs 4 million workers in the Executive Branch. It doesn’t matter. We all came in early this morning with the same exact amount 10 hours to work. The day marches forward for princes as well as paupers.

You are probably doing some coffee work that wastes your essential leadership time and robs the joy.

  

Outsourcing

I listened to one leader who tries to outsource everything except his core strategic tasks. What a fantastic idea! In my workday, I need to get more contracts for my company and build relationships with owners. Or I can spend the day hunting for the last audit and certificate of incorporation. Which use of my limited management 10 hours will move the company forward the most?

 

Outsourcing Benefits

  1. The company that accepts your outsourcing knows how to do that one task
  2. You don’t have to hire excess capacity or worry about hiring/supervision/unemployment because everyone is working for the other company.
  3. Some outsourcing reduces criticism

 

Outsourcing Cautions

  1. Choose an outsourcing company that is similar to your size. ADP is too big for most companies and they don’t really need your money.
  2. Plan how to measure whether the outsourcing is effective and how often to monitor. If you fire the janitors and bring in a cleaning company, you will need to have clear measurements of success, monitoring, and fraud control for theft. If you just give some strangers the keys and go back to your Strategic Plan, plan for a lot of coffee in days ahead 🙂
  3. Be careful of agencies which do so many kinds of jobs that they know a little about a lot of things. That’s like hiring yourself 🙂
  4. Watch for business changes and make sure that the contracted outsourcing still meets your needs. I use Netflix and recently got Amazon Prime. Suddenly, I wonder why I am still paying monthly for Netflix which I don’t watch that often.

 

10 Good Outsourcing Examples

  1. Payroll and Human Resources with a company such as APS. For us, APS is not too large so we can always speak to someone. Payroll is not that complicated for a payroll company. The software calculates taxes and pays employees. It’s ok not to watch them too closely since the employees and IRS are also watching. Many will also store required company documents and appraisals, training videos, time off requests. Etc. If it’s easy to use, then there is no downside to outsourcing.
  2. Janitorial – your part time janitors may be the worst. Few really want the job and janitors know more places to hide than the building inspector 🙂  Sadly, the janitorial company has similar trouble so you have to set this up carefully.
  3. Legal and Audit – you probably already outsource this
  4. Consultants for planning, cash management, and fraud – me 🙂 Very effective if the practice areas match your needs. Be careful with consultants who think they can do everything.
  5. Consultants to renegotiate loans, contracts and fire long term staff. Sometimes a fresh start is needed but consultants can be a buffer.
  6. Food – I’m amazed at service companies who run their own kitchen with all the problems of spoilage, regulations and staff. Outsourcing can’t be worse than what you are doing.
  7. Transportation and office equipment – lease everything and let someone else worry about repairs
  8. Clerical – we use Dropbox to store all corporate documents. 137,000 files today. A staff member in Indonesia labels them. I don’t have a filing cabinet in my office.
  9. Social media – there are a million eager workers in other countries who know more than you do about Google Analytics. Give it away
  10. Accounting and Accounts Receivable – an accounting and budgeting package always balances. You don’t have to check the assets against debits and credits! Once you have accidentally dropped a major line in an Excel chart from the SUM function, you will outsource and never look back

 

Conclusion

You are probably hesitating because you have seen some expensive quotes for outsourcing. True. So it comes down to three choices

  1. You hire another executive level staff member to take many of the coffee tasks while you save your 10 hours for leadership $$$$
  2. You burn yourself out and don’t advance the company because your life is all about the coffee jobs and you don’t even look at the wine. Company hires new CEO $$$$$
  3. You outsource and pay for some of the costs by reducing some operations staff and one less supervisor. $$

The coffee jobs are required but not essential. The wine jobs are all about the leadership and joy of the job. You have to find a balance that works for you and the agency. Outsourcing is one tool to take the 10 hours you are given today and invest it wisely. Start today.

If you want One Minute TurnArounds by email, please sign up!

GDPR – Your email is collected by an automated system so that the One Minute Manager posts can be sent. You will be invited twice a year to a two hour Scaling Up workshop for CEOs and EDs. Annually, you will be offered an Ebook and asked whether the resources of TurnAround Business Coaching are helpful.

A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

 

 

*Tracy, Brian. Eat That Frog!: 21 Great Ways to Stop Procrastinating and Get More Done in Less Time. San Francisco, CA: Berrett-Koehler, 2007. Print.

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