Given the right environment and abundant executive support, cross-functional teams can lift organizations to new heights by pooling their knowledge, penetrating internal silos and devising innovative, holistic solutions. But without the proper leadership and guidance, teams often languish and become dysfunctional, while failing to achieve their all-important mission.
“Cross-functional teams are responsible for knitting the pieces of the organization together and solving today’s big, wicked problems,” says Dr. Sharon Green, associate professor of management for the College of Business and Economics at California State University, East Bay. “It’s critical that executives re-image their roles and embrace the collaborative process, so teams can flourish and surmount these difficult challenges.”
Smart Business spoke with Green about the role of executives in fostering a collaborative environment and nurturing cross-functional teams.
What is the role of cross-functional teams?
Today’s problems are multi-dimensional, so it takes a group of employees with diverse functional expertise and different perspectives to work across disciplines and devise holistic solutions. In many cases, these teams are being asked to develop new products or implement vast changes that impact the entire company. They often encounter resistance, because many companies are a collection of fiefdoms, so team members have to bridge the divide between departments, or even collaborate with other teams, in the quest for comprehensive solutions. Another reason the teamwork concept is gaining momentum is that it suits the work-style preferences of Generation Y, who are very social, even tribal by nature, and crave a collaborative process and a variety of projects.
How is the team structure evolving to meet new challenges?
To meet the growing need for global solutions and lower operating costs, companies like Hewlett Packard are implementing virtual teams, which connect home-based, high-level professionals from around the world. We’re also seeing the emergence of multicultural teams, especially here in California, because they focus on products and services that satisfy our diverse population. Finally, companies have so many teams in play, there’s a growing need for intra-team collaboration and extreme consensus-building as teams channel their energies toward a common goal.
How can business leaders assess team effectiveness and head off problems?
Traditionally, executives have evaluated teams by monitoring outcomes, cost versus budget and the time required to develop solutions. But these types of high-level assessments don’t expose the underlying issues that point to future problems. Executives need to get down in the weeds and talk to team members, because stress, low energy, absenteeism and poor morale are symptoms of dysfunction and, if left unabated, often lead to turnover and the loss of critical institutional knowledge, particularly in high-tech companies. Also, be sure to evaluate the effectiveness of team leaders, because underperforming teams are often led by veteran, mid-level managers, who rely on command and control techniques and tend to over-manage the process. These managers need training to mentor and coach cross-functional teams, which thrive on empowerment and equality.
How can executives support effective teamwork?
Executives should embrace these techniques to build, nurture and support teams.
• Conduct a personal audit. Leaders must audit their own behaviors and expectations to see if they are enabling or hindering the teamwork process. Do you embrace collaboration? Do you truly trust the team to develop great solutions? Do you see yourself as a team member? Executives must set the tone by embracing the teamwork philosophy and modeling appropriate behaviors.
• Be a great storyteller. To be successful, teams need to understand their mission and role. Why is the project critical and how will their solutions impact the company? Leaders must provide the framework for success through effective storytelling, and then define and communicate the expectations, before backing away and refraining from controlling the process.
• Provide training and development. Teamwork skills are not innate. To groom team players with the ability to work across multiple disciplines, executives must task human resources with creating a training curriculum that covers communication and collaboration skills, as well as conflict resolution, and teaching team members how to play various roles and draft team agreements.
How can executives embrace and support the teamwork process?
First, teams need coaching, encouragement, mediation and impartial feedback to deliver quality outcomes. It’s up to executives to fulfill these needs and provide emotional support. Many executives were star individual performers before moving up the corporate ladder, but they should refrain from doing the work or supplying the answers, and instead offer guidance and counsel so the team members can struggle, persevere and overcome obstacles on their own. Second, team members need to raise their hands and ask for help when they hit an impasse, without worrying that their actions will be viewed as a show of weakness. Finally, executives need to be active participants and provide mentorship, so teams don’t feel like they’ve been assigned a difficult task and set adrift without adequate support.
Dr. Sharon Green is an associate professor of management for the College of Business and Economics at California State University, East Bay. Reach her at email@example.com.
After two years of layoffs, salary freezes and shifting benefit costs, employers are worried about attracting, retaining and engaging top talent now that the economy is improving. In fact, 52 percent of U.S. employers say it’s already difficult to attract employees with critical skills and 25 percent say it’s hard to retain top performers according to the 2010 Towers Watson Global Talent Management and Rewards Survey.
Given these emerging challenges and the ongoing need to contain costs, it’s imperative that employers invest precious dollars in rewards that resonate with employees and prospects. Unfortunately, many organizations are using insufficient data or old intelligence to determine employee preferences, so they’re spending money on programs that have little impact on retention or engagement.
“There’s a gap between the rewards many employers are offering and what employees want,” says Darryl Roberts Ph.D., senior consultant for Organizational Surveys and Insights at Towers Watson. “By listening to their employees and giving them a say in determining their rewards, employers can boost engagement, retention and productivity without increasing expenditures.”
Smart Business spoke with Roberts about the current state of employee rewards and how employers can optimize expenditures by delivering programs that meet employee preferences in a cost-effective way.
What are the challenges facing employers now that the economy is improving?
Our research shows significant gaps between what employers believe is most important to employees and what employees actually want. And given the recent economic obstacles, many HR and business executives are out of touch with employee preferences. For example, 86 percent of the U.S. employees surveyed in the 2010 Towers Watson Global Workforce Study cited improved work-life balance as a retention factor, yet relatively few employers offer flexible schedules despite the often-modest cost of instituting a program. And 62 percent of employees said rapid skill development contributes to a preferred work situation yet only 33 percent of employers said it is available in their organizations.
The good news is employers don’t have to increase rewards spending if they just listen to their employees and recalibrate their current expenditures.
How can employers determine employee preferences and optimize rewards expenditures?
The goal of Total Rewards Optimization (TRO) is to help organizations generate the highest possible perceived value for rewards at the most economical cost. We start by conducting a conjoint survey that determines employee preferences by testing a number of specific reward options. Throughout the process, employees are forced to make trade-offs and prioritize rewards, not look at each reward separately. For example, employees may be asked if they prefer a higher employer 401(k) contribution and less training, or a lower employer 401(k) contribution and more training. Our experience shows that employees understand the challenges employers face and are capable of making prudent choices if they’re brought into the conversation. Next, we analyze the data to identify rewards portfolios that have the highest impact on desirable employee behaviors while delivering the greatest ROI. The process also highlights the best rewards mix at different expenditure levels because there’s not necessarily a one-to-one relationship between cost and employee perception. Some rewards may be less costly but highly valued by employees, while others may be expensive but not deliver enough value to justify their expense.
What else will employers discover through the TRO process?
TRO provides employers with valuable information to calibrate rewards by answering these critical questions.
• What is the right level of total investment in employees? Is the organization spending the right amount? Are there opportunities to do more with less? Conversely, is there an economic case to increase rewards spending?
• Which rewards enable the business plan by driving desirable employee behavior? Organizations may be spending too much on some rewards but not enough on others, and may also have opportunities to modify some rewards programs in ways that improve ROI.
• How should rewards be tailored by employee segment? Employees value different things at different points in their careers or employment situation. For example, early-career employees may place a higher value on learning and development while more experienced workers may value larger 401(k) matches. And employers may need to tailor programs to attract and retain employees with scarce skills such as engineers or IT professionals.
How has TRO helped companies optimize reward expenditures?
When a manufacturing company faced unsustainable pension and benefits costs, it was able to launch pension program changes for new hires, redesign retiree medical and change the distribution of stock options to lower expenses with minimal impact on active employees. A health care provider found that an improved work environment, paid time off for training and more predictable work schedules were more valuable than higher pay and subsequently reduced the annual turnover of clinical staff by 25 percent. And when a large grocery chain faced intense competition and margin pressures, they instituted a program that reduced reward expenditures by $50 million while reinforcing employee behaviors that increased customer loyalty, without increasing employee turnover.
TRO helps employers better invest valuable dollars in rewards that support their business plan.
Darryl Roberts, Ph.D., is a senior consultant for Organizational Surveys and Insights at Towers Watson. Reach him at (949) 253-5229 or firstname.lastname@example.org.
Cash flow is the lifeblood of any successful business. So when credit markets tighten and the economy slows to a crawl, executives often spend valuable time monitoring payables and receivables instead of pursuing lucrative business deals. To solve the problem, leaders frequently turn to traditional, yet costly, remedies like upgrading accounting software or prodding customers to hasten the collection process.
Fortunately, it’s possible to improve cash flow by processing rudimentary financial transactions online or outsourcing them to banks. Modernizing the banking process offers executives myriad benefits such as reduced paperwork, improved efficiencies and a real-time opportunity to manage finances.
“Business leaders don’t have to invest in software or rely on the postal service to speed up collections,” says Elaine Jeon, senior vice president and chief operations administrator for Wilshire State Bank. “By leveraging the robust technology of banks, executives will enjoy better cash flow and reduced risk without making additional investments in technology or hiring additional staff.”
Smart Business spoke with Jeon about the advantages of using treasury management services to improve cash flow and manage company finances.
Which treasury management services improve cash flow?
These services enhance a company’s ability to control the flow of cash, and because employees access the system online, they don’t have to visit the branch to make deposits or initiate transactions.
• SpeeDeposit: Deposit checks as soon as they’re received by scanning the items and submitting them electronically. You’ll also get faster access to funds because deposits are accepted and credited until 7 p.m., and there’s no need to safeguard unprocessed deposits or fill out deposit slips.
• Automated Clearing House (ACH) Origination: The check’s never in the mail when you collect receivables and pay vendors electronically. ACH affords companies precise control over the timing of payments and reduces bad debt exposure, allows business owners to forecast cash flow, negotiate and enforce explicit payment terms and even compete for new deals or larger contracts.
• Lockbox Services: Businesses receiving a high volume of checks can leverage the bank’s staff and technology to process payments and, best of all, deposits are credited the same day they’re received.
• Wire Transfer: Initiate wire transfers to domestic and overseas locations without leaving your office. You’ll also enjoy lower fees and a later cut-off time by processing transfers online, and the added convenience may inspire you to enter new markets.
How does online processing lower risk and improve security?
Treasury management allows companies to leverage the bank’s technical infrastructure, IT expertise and network security without purchasing additional software or hardware, because employees access the program through a secure website. The system also accommodates an unlimited number of users, while reducing the risk of embezzlement or fraud, because administrators can establish access and permission levels and segment transactions by size. Creating different access levels allows the accounting staff to enter transactions so managers and executives can review and approve them online. Each user’s identity is verified when they log in and companies can instantly add or delete employees when the need arises. Finally, businesses that issue large numbers of checks, like real estate or escrow companies, often use positive pay services to prevent fraud. With positive pay, the bank verifies each check number and amount against a list supplied by the company to make sure checks haven’t been altered.
Why is the bank’s software superior to in-house programs?
Companies often collect data in several software programs, so executives have to transfer the information onto spreadsheets to obtain a holistic view of the company’s banking transactions and financial information. The bank’s treasury management system consolidates financial data and transactions from multiple accounts and business entities, giving executives and officers a single, real-time view of the entire organization’s finances along with the analytical capabilities of a Fortune 500 company. And because the program is Web-accessible, executives can monitor cash flow, analyze the company’s daily cash position, identify funds available for investment and improve yields by initiating transfers from anywhere in the world.
How can executives assess the costs and benefits of purchasing these services?
Certainly executives need to consider the cost of treasury management before deciding to purchase the services. But it’s important to note that online processing or outsourcing banking transactions allows companies to reduce or eliminate many direct and indirect costs along with these additional benefits.
• Online transactions are paperless so they increase efficiencies by reducing the need for faxes and e-mails.
• Multi-level security reduces risk without creating costly, redundant processes.
• Banks provide technical support and employee training at no additional charge.
• Transactions are processed by trained, specialized bank personnel who are more efficient than external employees.
• Fewer trips to the branch and streamlined processing lets employees focus on customers and revenue-generating activities.
Above all, treasury management allows executives to prioritize growth and innovation rather than administrative tasks, and that’s important in today’s environment.
Elaine Jeon is senior vice president and chief operations administrator for Wilshire State Bank. Reach her at (213) 427-6580 or email@example.com.
The global economy is undergoing a sea change. While American markets languish and deficits snowball, the global market has continued to grow in size and importance. Whether it is for technology or consumer products, the global market is now the best place to grow sales and profits. To fully realize the potential of these opportunities, executives must undergo a paradigm shift, strategically analyze data and build alliances before the first dollar changes hands.
“The $500 billion current account deficit and the trillion-dollar-plus U.S. budget gap are not sustainable and can’t be financed much longer,” says Dr. Glen Taylor, director of MBA Programs for Global Innovation at California State University, East Bay. “If we keep printing money to cover our debts, it will lead to inflation, devaluation of the dollar and diminished purchasing power, so our future depends on global expansion.”
“To sustain growth and allow the next generation of Americans to have a better life, we have to rethink globalization, identify opportunities and be contributors to the global economy, rather than consumers,” says Dr. Yi Jiang, associate director of MBA Programs for Global Innovation at California State University, East Bay.
Smart Business spoke with Jiang and Taylor about the process of identifying and making the most of ripe opportunities in the global marketplace.
What prevents U.S. executives from capitalizing on the best global opportunities?
Taylor: U.S. executives need a changed mindset and a different approach to analyze and select global opportunities, because our country is no longer the dominant market in the world. Our loss of supremacy means that we need to learn how to do business in other countries that don’t always comply with our culture and business practices. We must put ourselves in their shoes and see things from their perspective in order to identify and capitalize on the best opportunities.
Jiang: We’ve had a tendency to view globalization in simplified terms and think of other countries as a resource for outsourced services and cheap labor. But when executives apply a different perspective to the analysis process and develop innovative products and solutions, they stand the best chance of succeeding outside the U.S. For example, PepsiCo recognized an unmet need in India, and capitalized by identifying itself as a provider of well-being services, rather than a supplier of food and beverages. The CEO’s paradigm shift and innovative marketing approach has led to greater success than simply transferring the U.S. strategy to another culture.
What’s the first step in the identification process?
Taylor: The first step is demographic analysis, but unless executives take a deep dive into the data, they may overlook emerging trends and actually target the wrong customers. For example, a superficial analysis of Chinese demographics reveals no net population growth, but an in-depth study shows that social change is underway and people are urbanizing at the fastest rate in the world, adding tens of millions of new global consumers each year. This creates unprecedented demand growth for all kinds of products and services. The country’s rising affluence has made the Chinese auto market the largest in the world, the largest market for mobile communications technology, and the largest market for consumer products and services of all kinds.
Jiang: Don’t take a cookie-cutter approach to the analysis process, because each country has regional and generational differences that create unique opportunities. While cultural and generational differences often drive demand on the consumer side, U.S. executives must consider dynamic industry cycles and a county’s openness and resources before attempting to position each country in the holistic picture of global strategy.
What’s the next step?
Jiang: After analyzing the data, travel to the country to experience the culture, validate your hypothesis and establish strategic business partnerships and networks. You’ll need seamless collaboration to understand the cultural nuances and build a supply chain. Infusing yourself in the culture will help you identify additional opportunities, since the best ideas often come from prospective partners, suppliers and customers.
Taylor: Meeting people is an important part of the evaluation process, and business relationships are like a marriage, so prospective partners must get to know each other before making a commitment. And your travels may yield additional opportunities, especially if you view things with an eye for the innovations being developed in other markets. Even though the U.S. may not be able to compete in labor-intensive manufacturing, we have endless opportunities to develop and export intellectual property, and there’s an unmet need for clean tech infrastructure in many parts of the world.
What else must executives do to succeed in the global marketplace?
Jiang: Remember that global opportunities and situations are fluid, so what seems like a great idea today may not work tomorrow. Conduct extensive scenario analyses so you are prepared to perform under a variety of circumstances, and keep your finger on the pulse of prospective customers by garnering feedback through open source social networking.
Taylor: There’s every reason to be extremely optimistic about our future, if we make changes in the way we conduct business and get our deficits under control. The key is to search out opportunities in global markets to develop innovative products and services that build on our strengths while embracing new ideas from other countries
Dr. Glen Taylor is the director of MBA Programs for Global Innovation at California State University, East Bay. Reach him at firstname.lastname@example.org.
Dr. Yi Jiang is the associate director of MBA Programs for Global Innovation at California State University, East Bay. Reach her at email@example.com.
Executives who fail to maximize their banking relationships may miss out on opportunities to improve cash flow, garner attractive financing rates or off-load the processing of rudimentary accounting transactions.
On the surface, this seems like an avoidable problem. After all, executives need banking services to drive revenues and profits, and bankers have a bevy of programs at their disposal. But executives are often paired with novice bankers who lack the business acumen to embrace their vision, suggest appropriate solutions or advocate on their behalf.
“Executives shouldn’t settle for an order-taker or a lackadaisical banking partner, because they have a lot to lose,” says Simon Oh, first vice president and manager of the Irvine Branch for Wilshire State Bank. “Insist on regular account reviews, a customized service plan and advantageous rates, or go find another banker.”
Smart Business spoke with Oh about the techniques and strategies that maximize banking relationships.
What should executives look for in a banking partner?
Banking relationships are unusual, because bankers actually play a dual role. They not only represent the bank to the client, they represent the client to the bank and negotiate on their behalf. To execute this delicate yet strategic mission, your banker should ask questions, understand your business objectives and obstacles and offer a customized suite of services and rates that will help you meet your goals. Unfortunately, new bankers often take a transactional approach to client relationships and tout the product of the day instead of recommending services you really need. It’s better to surround yourself with expert advisers like a knowledgeable banker, lawyer and CPA, because each member of the team offers wisdom and solutions that can help you grow your business.
What’s the key to the selection process?
Ask the banker about his experience, whether he’s familiar with your industry and how he’s helped other companies facing similar challenges. You want to assess his listening skills and his ability to analyze your financials and develop solutions before making a commitment. Finally, evaluate his aggressiveness and his willingness to offer competitive terms. Some banks are more business-friendly than others and your ability to strike a good deal may hinge on your banker’s negotiation skills and tenacity.
What’s the best way to manage a banking relationship?
First, meet with your banker at least once a year, or more often if you’re contemplating a major change like buying a building or using a line of credit to finance an acquisition. Think of a visit with your banker like a visit to the dentist, because it’s better to diagnose and fix problems before you suffer a financial toothache. Share your concerns and expectations, your five-year business plan and your current financials and tax returns, so your banker can suggest services to help you meet your goals and proactively assess your borrowing ability. You’ll be poised to pounce on an emerging opportunity if you know your borrowing capacity and interest rates beforehand. Additionally, your banker should analyze your company’s turn on receivables and debt ratios and then suggest ways to meet or exceed the industry norm; his job is to make sure your financials support your vision. Finally, be ready to negotiate. While banking services are not free, you can garner better rates by consolidating all of your accounts and services with a single bank.
Which banking services incite growth in a stagnant economy?
In times like these improving cash flow is invaluable, and banks offer services that speed up the collections cycle and allow businesses to hold on to their cash for as long as possible.
- Remote deposit services. This service allows businesses to deposit checks immediately without leaving the office.
- Automated Clearing House (ACH) origination. Provides businesses with the ability to collect fees for products and services on a timely basis by directly debiting client accounts.
- Online bill payment. Businesses can schedule exact payment dates, instead of relying on the postal service and issuing checks days or even weeks in advance.
- Online domestic and international wire transfers. Negotiate exchange rates up front and capitalize on advantageous rates by paying invoices in foreign currencies.
- Outsourced receivables and payables. Outsourcing rudimentary accounting transactions to your bank often improves cash flow and security while allowing your staff to focus their time and energy on revenue-generating activities.
- Seasoned banker. You’ll miss out on important benefits unless you partner with a seasoned banker who can spot a need and recommend a solution.
How can executives leverage their banking relationship to strike a better deal?
Although most services have fixed pricing, many banks consider the entire customer relationship when negotiating fees. Research the market, so you know the going rate for services and products before you meet with your banker, then unleash your secret advocate and let him lobby on your behalf.
Simon Oh is the first vice president and manager of the Irvine Branch for Wilshire State Bank. Reach him at (714) 665-6801 or firstname.lastname@example.org.
Legislators were undoubtedly well-intentioned when they set out to reform the nation’s health care system, but the lawmaking process often creates collateral damage, and this time the silent casualties may include your company’s absence and disability programs. The bill mandates specific provisions that weaken an employer’s ability to manage employee health, and ultimately their attendance and productivity. Because HR professionals are focused on revising the company’s current health plan and mitigating the upcoming cost increases, there is little time and focus remaining to manage absence and productivity.
“Employers can take some simple steps now to protect productivity while their attention is diverted between now and when the law takes full effect in 2014,” says Skip Simonds, practice leader for Absence and Disability Management for the Western Region at Towers Watson.
Smart Business spoke with Simonds about the impact of health care reform on employer absence and disability programs and the action steps that will help keep employee productivity intact.
How does health care reform weaken existing absence and disability programs?
The primary goal of health care reform was to provide benefits to a broader segment of the U.S. population and control costs, but it’s created additional administrative burdens for employers, and limits their ability to manage employee health by allowing employees to opt out of the company plan or purchase coverage in state-run pools. Employers have been able to drive substantial gains in productivity, because they’ve designed plans that influence and reward specific employee behaviors. And data shows that taking a holistic approach and creating complementary health, wellness, absence, workers’ compensation and disability programs is the best way to control costs while limiting abuses and absenteeism. If you remove a few pieces of the puzzle, you diminish the efficacy of the entire program. To make matters worse, the changes come on the heels of recession-induced staff reductions, so HR has limited resources to deal with the problem.
How should employers adapt current programs to drive productivity?
Switch to a paid time off (PTO) plan instead of allotting specific time for sick leave or vacation. PTO plans shift the burden and cost of managing incidental absences onto employees and boost productivity by reducing the use of unplanned sick days for questionable reasons. Studies show that employees are more likely to work through marginal illnesses and avoid taking ‘mental health’ days so they can save their time off for vacations. If you don’t switch to PTO, consider boosting the effectiveness of your current program by offering a bodacious prize for perfect attendance. One company increased perfect attendance from 10 percent to 50 percent of the employee population by entering the names of perfect attendees into an annual drawing for a new car. The car cost $40,000, but the incentive reduced lost time expenses by $450,000.
What other changes should employers consider?
Create an economic incentive for employees to return to work by reducing the short-term disability benefits from 100 percent to 60 percent or 66 percent of income. Simultaneously if supervisors are resistant to providing transitional work, charge the costs of that light duty to their cost center regardless of who provides it. The best way to reduce absenteeism and disability costs is by making sure that everyone has some skin in the game.
How can employers focus on this problem with limited HR staff?
Outsource the management of FMLA to an insurance company or third-party provider. Engaging a knowledgeable partner is like getting a free staff member, and an outsider has the freedom to quiz medical providers and find alternate treatments that reduce the need for missed time. Outsourcing also allows HR to focus on more important issues, and our experience shows that it increases compliance with a very cumbersome law that allows employees to take time off intermittently. This is especially true in California with its myriad of mandated leaves. A recent three-year study showed that intermittent benefits accounted for 19 percent of all FMLA taken, and employers with integrated FMLA/disability administration had lower costs than employers without integration that included 22 percent fewer lost work days and 36 percent fewer repeat users.
How can employers use data to boost the effectiveness of absence and disability programs?
Outsourced providers generally offer robust data collection, which illustrates the close link between employees’ utilization of sick time, short-term disability and workers’ compensation. Review the data on a quarterly basis to spot trends and hold vendors accountable to provide recommendations that will improve your program and results. Only 11 percent of employees that file medical claims also file lost time claims, but those employees drive 53 percent of medical and disability benefit dollars; so a decrease in disability costs can yield an even larger decrease in health care costs. But what’s most troubling is that 96 percent of CFOs say they understand the connection between employee health, lost time and productivity, but 78 percent don’t receive any meaningful data to help them analyze or manage the situation. Suffice to say that employers stand to reap tangible savings by simply collecting data and reviewing it on a regular basis.
Skip Simonds is the practice leader for Absence and Disability Management for the Western Region at Towers Watson. Reach him at (818) 623-4576 or email@example.com.
Although increased innovation and cultural adaptation may top the agendas of business executives in 2011, few leaders possess the transformational skills to invigorate new ideas or the discipline to implement them.
Traditionally, leaders have relied on charisma to incite change. In fact, James MacGregor Burns had politicians in mind when he developed the transformational leadership theory in the late 1970s. But charm isn’t enough to achieve success in today’s business environment. Modern business leaders need a blend of transformational and transactional talents to create a vision, sell their ideas to stakeholders, engender trust and execute the plan, while keeping everyone engaged in the process.
“Transformational leaders must combine the audacity of imagination with systematic discipline to drive quality throughout the execution process,” says Dr. Mohammad H. Qayoumi, president of California State University, East Bay. “Many leaders have great vision, but unfortunately they don’t have the systematic discipline to transform a great idea on paper into a working model or the mental fortitude to execute the working model.”
Smart Business spoke with Qayoumi about the advantages of transformational leadership in today’s business environment.
How would you define transformational leadership?
Transformational leadership describes the ability to incite change in people and organizations, rather than simply managing the status quo. The theory is executed by an ethical, energetic leader who stirs others’ imaginations and invites them into the process. One of the key differentiators that separates a transformational leader from a transactional leader is support for risk-taking. Transformational leaders understand that promoting new ideas is bound to produce a few failures. Rather than being deterred by an occasional set-back, bold leaders view them as learning opportunities and subscribe to the notion that failure is nobler than not trying at all. Furthermore, they understand that risk tolerance engenders a culture that will support the transformation process.
Why is transformational leadership appropriate for today’s business environment?
The recent economic calamity accelerated the pace of change, and in taking a look back, we can see that linear thinking and rigid processes stifled creativity and contributed to our problems. Transformational leaders inspire innovation and intellectual stimulation by taking a fresh look at old problems and breaking down both the real and perceived constraints to creative thinking. They also anticipate issues and initiate change proactively, instead of sitting on the sidelines while others test the waters. Passive leaders, who merely react to unforeseen business events, will soon find their competitors dominating the market. In essence, transformational leadership creates a new mental model which is better suited to today’s rapidly changing environment.
Do transformational leaders need unique qualities or skills?
Above all, transformational leaders need equilibrium and a systematic approach to the change process, because they must continue managing the business in its current state while creating a pathway to the future. They must align and navigate two systems concurrently, while keeping their finger on the pulse of the organization and modulating the change process. If the pace of change is too rapid, you can lose people before the mission is complete, yet if you move too slowly, resistance can mount. It’s really about honoring the past and respecting history, while simultaneously being a force for change. Unfortunately, our current educational system typically doesn’t teach these types of intangible skills and qualities. But we can learn from mentors and by observing leaders who possess this type of intellectual dexterity, if we’re willing to be humble and venture outside of our own companies and industries to find the trailblazers. Certainly when we think of famous transformational leaders we recall Jack Welch, Walt Disney and Martin Luther King Jr., just to name a few.
How can leaders get others on board with their vision?
You’ll encounter less drag and resistance during the change process if you solicit the imagination of others as you develop your plan and offer them the opportunity to visualize themselves in the future organization. Oftentimes, leaders push harder and harder when they encounter resistance. But you don’t need to exert force to move forward if you include others in the planning process and create mindshare for your ideas. Most plans begin as a diamond in the rough, but through collaboration and evidence-based decision making, leaders begin to clarify and polish their message, craft a shared vision and build support for their strategy.
Why is collaboration critical to the transformation process?
Collaboration is a key element of the transformation process because it fosters innovation, dismantles silos, reduces bureaucratic roadblocks and mobilizes the idea of doing more work with fewer people and resources. Initiating a collaborative culture also provides the added benefit of developing and empowering people, which is another tenet of the transformational leadership theory. The idea is that charismatic leaders inspire their followers to act beyond the framework of the existing organization and take it to new heights. As long as you have an incandescent passion for your ideas and approach implementation with systematic discipline, there’s no reason why you can’t be a highly effective transformational leader.
Dr. Mohammad H. Qayoumi is the president of California State University, East Bay. Reach him at (510) 885-3877 or firstname.lastname@example.org.
Although the worst of the economic storm has finally passed, gloomy conditions are expected to linger throughout 2011. But the dim forecast hasn’t stopped opportunistic small business owners from cashing in on favorable lending conditions and using the funds to acquire struggling competitors, purchase discounted real estate or expand their global reach. In fact, conservative lenders with healthy loan portfolios have been enticing qualified borrowers with low interest rates and aggressively pursuing deals.
According to the Los Angeles office of the SBA, lenders made 1,725 loans to small businesses in Los Angeles, Ventura and Santa Barbara counties during the nine-month period that ended June 30, 2010, which was about 50 percent more than in the same period a year earlier. The dollar volume of those loans nearly doubled compared with the year-earlier period to $850.8 million.
“Lenders have a healthy appetite for quality loans,” says Sung Soo Han, executive vice president and chief loan officer for Wilshire State Bank. “Given the current lending climate, small business owners should be assertive, shop the market and take advantage of these historically low interest rates and government incentives before they expire.”
Smart Business spoke with Han about the 2011 lending climate and how small business owners can seize the opportunity to drive growth.
How will the 2011 lending climate differ from 2010?
We’re expecting the 2010 economic conditions to persist throughout 2011 and that will require lenders to minimize risk by scrutinizing loan applications and assessing a company’s profitability and business strategies. But that means qualified borrowers are hard to find, so they wield a great deal of power in the current environment. If you own a profitable small business, you’ll receive aggressive loan pricing that includes fixed rates of 4 percent to 5 percent guaranteed for five to 10 years. In addition, the Small Business Jobs and Credit Act of 2010, which was signed into law in late September, could be extended into 2011. The bill incentivizes lenders by raising the government guarantee from 75 percent to 90 percent of the loan, and encourages borrowers by raising lending ceilings from $2 million to $5 million and waiving the origination fees.
Which loan programs are best suited for growth?
Small business owners have many programs to choose from, but these loans are popular for expansion or growth.
- SBA loans. Owners who want to purchase an office building or plant or acquire another business usually opt for an SBA loan because they offer prime rates and borrowers can make a down payment of 10 percent to 15 percent and pay off the balance over a 10-year period. Each lender has different underwriting criteria and capacity, so be sure to call a number of institutions.
- C & I loans. Commercial and industrial loans provide lines of credit from $3 million to $10 million and are frequently used by manufacturers and wholesalers to extend their global reach, open new vertical markets or expand product lines. If you have a relationship with a bank, deposits on account and a track record of timely debt repayment, they should offer you very aggressive pricing. If not, use your power to shop the market.
- Construction loans. Construction of warehouses, office buildings and shopping centers is starting to pick up and debt service starts when the project is completed, which will likely be 2012 when the economy is expected to improve. Loan officers are eager to grant construction loans because they’re allowed to consider future economic conditions during the underwriting process.
Are some loans easier to secure in a tight credit market?
The current climate makes it difficult for owners to secure funding if their business is unprofitable or experiencing cash flow problems, but any loan that is low risk, guaranteed by the government or secured by assets will be easier to obtain. For example, trade finance loans, which are used to finance transactions between importers and exporters are almost risk-free, yet demand for this product has waned, so borrowers have the upper hand and can drive a great deal. The SBA’s Export Working Capital Program (EWCP), which provides short-term working capital to exporters, is favored by lenders because the government guarantees 90 percent of balances from $300,000 to $5 million. When owners want to capitalize on an emerging opportunity, they often select an asset-based loan (ABL) which is secured by real property, accounts receivable, equipment or finished inventory. ABLs offer a speedy underwriting process that doesn’t focus on the applicant’s creditworthiness.
What else should owners know about the current lending process?
Lenders have been bombarded by calls from small business owners, but given the lackluster economy, they can only entertain requests from qualified borrowers. Grab their attention by describing your company’s 2010 financial results and providing a copy of your tax return. Next, provide a copy of your business resume and be prepared to conduct a line-item review of your company’s financial statements. Bolster your case by describing any non-recurring expenses that can be added back to boost cash flow or by offering data that illustrates industry cycles or projected growth. As long as you can repay the loan go for it. 2011 offers the perfect lending climate to expand your small business.
Sung Soo Han is the executive vice president and chief loan officer for Wilshire State Bank. Reach him at (213) 427-6595 or email@example.com.
When organic growth stalls, bold companies seek mergers and acquisitions to bolster revenue, acquire new capabilities or enter new markets. But even the most promising deal can fall short of expectations, because the path to successful integration is strewn with land mines.
Worse yet, an analysis of the Towers Watson Quarterly Deal Performance Monitor reveals that risks escalate as companies venture across borders to expand their global reach. The percentage of cross-border deals rose during the first quarter of 2010, yet acquiring companies barely outperformed the market, proving that global transactions impose unique obstacles. Despite boasting higher success rates, domestic deals certainly aren’t problem-free. Defections by key leaders, declining employee engagement and misaligned cultures are bona fide hazards that often go undetected during due diligence and later threaten the transition.
“Financial due diligence focuses on the obvious risks,” says Christine Infante, consultant with the Rewards, Talent & Communications Practice at Towers Watson. “Integrating people and cultures poses a substantial transactional risk, yet culture fit and integration are often overlooked during the pre-deal assessment and planning phases.”
Smart Business spoke with Infante about the strategies and tactics that lead to a successful integration.
Why is the post-acquisition period so perilous?
Executives often focus on the economic synergies created by the acquisition and underestimate the need for employee and cultural cohesion that ultimately determine the deal’s success. They also subscribe to the theory that assimilation takes about 100 days, when achieving complete alignment of business processes, technology and compensation plans may take a year or more. If change management and communications programs cease before the assimilation is complete, top performers can be left vulnerable to overtures from competitors. Our surveys show that even dedicated employees who want to do a good job can get lost navigating the subtleties of a new culture or ambiguous administrative procedures.
What can be done to avoid these issues?
Our research shows that leadership is critical during turbulent times and leaders must be involved in every phase of the transition. Take steps to retain the right managers after an acquisition so they can assure operational consistency and shepherd employees through the change process. Keep your finger on the pulse of the organization by measuring leader engagement at the beginning of the process, throughout the first year, and into the next year. Finally, create a framework for success by giving them the training and the tools they need to execute their mission.
How can leaders assist with human capital planning?
Leaders are responsible for authoring and executing the post-acquisition talent management plan. They must find ways to create efficiencies, eliminate redundancies and estimate the number of employees and the necessary skills to execute the revised business plan. A sound human capital plan outlines the best strategies for closing talent gaps, retaining top performers and optimizing staff synergies while designing a structure that creates new career paths for employees and merges two disparate teams into one.
How can leaders foster cultural alignment?
Assess the cultures of both organizations during the due diligence process, then design a single culture that retains the best elements and supports the new business strategy. Allow managers to attend change management workshops where they learn how to model the appropriate behaviors and paint a picture of the desired culture for employees as well as intervention techniques that will keep the cultural transformation on track.
What’s the best way to handle change management and communications?
Managing change is both a rational and emotional process and employees turn to leaders for guidance, motivation and focus. After the quiet period ends, people will be starved for information and it is management’s job to build trust and goodwill by providing just the right amount of information at the right time. Since change management and communications are intertwined, provide managers with training and a toolkit so they can monitor major milestones and disseminate reliable, consistent information as events unfold. The kit should contain talking points, data and side-by-side comparisons of current and proposed benefit and compensation plans and policies so managers can confidently explain the changes to employees. Understand each company’s ‘sacred cows’ for one it may be paid time off and for the other profit sharing. Plan carefully to make the transition of benefits go smoothly.
How can HR support successful integration?
HR can play an active role by involving employees in discussions around the alignment of compensation and benefit plans and by maintaining consistent delivery of critical services like payroll and benefits during the transition period. Assess each company’s HR technology as part of the due diligence process, select the right system for the job and assure a seamless transition by authoring a realistic timeline for the conversion. Allowing workers to provide input into the design of these plans gives them a sense of control over their financial destiny; their feedback is invaluable because the new plans will directly impact attraction and retention of talent. An inclusive process also serves as an outward sign of management’s commitment to cultural change, and it keeps employees engaged by offering them a say in and preview of the emerging organization.
Christine Infante is a consultant with the Rewards, Talent & Communications Practice at Towers Watson. Reach her at (858) 523-5514 or firstname.lastname@example.org.
Small business owners got the break they’ve been hoping for when President Obama signed the Small Business Jobs and Credit Act of 2010 on Sept. 27. The legislation also affects thousands of SBA loans currently in the pipeline and offers business owners an affordable opportunity to expand or hire new employees by increasing the borrowing limits and waiving guaranty fees.
But owners may be left out in the cold unless they act quickly and prudently. The program is scheduled to run until Dec. 31, 2010, or until the funding is exhausted, and navigating the application process can be challenging. Loan officers are compelled to closely scrutinize applications and applicants because of the fragile economy and the lending standards set forth by the SBA and participating banks.
“The funds can only be used for certain purposes and banks are required to review documentation and assess the business owner’s character and creditworthiness,” says Anna Chung, senior vice president of the SBA Lending Group at Wilshire State Bank. “But the legislation still provides a great opportunity for business owners who do their homework, meet the qualifications and skillfully navigate the lending process.”
Smart Business spoke with Chung about this ripe opportunity for business owners and her tips for navigating the SBA loan process.
Why is this legislation beneficial for small business owners?
In the midst of a very tight credit market, the legislation provides $30 billion dollars more in funding and another $12 billion dollars in tax breaks to help small businesses expand and start hiring. Perhaps the best news is that the bill incentivizes both parties to consummate a deal. First, the program eliminates the loan guaranty fees that were previously paid by borrowers. That’s a substantial savings since fees average around 3 percent of the loan. Second, the SBA reduces the risk for banks by guaranteeing up to 90 percent of the exposure. Third, those businesses having a tangible net worth of $15 million and two-year average net income after federal income tax of $5 million are now eligible for the SBA program. The previous size standards were based on the number of employees or annual sales. Last, the new law permanently increases the limits on 7(a) and 504 loans from $2 million to $5 million, and the limits for manufacturers in the 504 program have been increased to $5.5 million.
Must the funds be used for specific purposes?
The funds must be used for business purposes such as advertising, hiring or purchasing capital equipment or real estate. In some cases, owners can use the funds to refinance high-interest loans or satisfy an upcoming balloon payment. It gets tricky when owners want to use the funds to meet operating expenses or start-up costs, because the business must be healthy enough to satisfy the underwriting standards and banks want to see a positive trend.
What should business owners know about the application process?
There are more than 2,500 banks nationwide that participate in the SBA program and the loan must fit the institution’s risk profile and credit appetite. You may be turned down by one bank and approved by another, so persevere until you succeed.
- Character counts. Start with a banker you know because the loan officer will consider tangible and intangible criteria when evaluating an application; he or she will be familiar with your business and will know your history when it comes to fiscal responsibility and debt management.
- Visit SBA.gov. All participating banks should accept the application forms found here, which request the same kind of information as the forms used by the banks themselves; you can download the forms and study the requirements. Some local SBA offices offer free classes in business plan or resume writing.
- Gather documentation. You’ll need to submit business tax returns from the last three years, YTD and current interim financial statements and a personal financial statement.
- Funding purpose. Bring a written statement describing how you’ll use the funds. Bankers need proof to satisfy the SBA requirements and down the road owners will need to verify that the funds were used properly.
- Business resume. A written business plan is great, but bankers really want to see a resume and a short business overview in order to evaluate the owner’s qualifications within the context of the current business strategy.
Are there other tips that will help owners navigate the process?
First, tell the banker how much money you need to execute your plan rather than asking how much you can borrow. Do your homework before the meeting by running financial projections and be prepared to sell your ideas, your qualifications and the ROI. You can always modify your plan if necessary. Second, run a copy of your credit report and bring it to the meeting. Every inquiry drives your score down, and your credit history will be closely evaluated by the loan officer. Third, know the facts. Small business loans aren’t just for women-owned or minority-owned firms and they’re not available to nonprofit organizations. Finally, act now because the window of opportunity is open for small business owners, but as we’ve seen before, it can close in a hurry.
Anna Chung is the senior vice president of the SBA Lending Group at Wilshire State Bank. Reach her at email@example.com or (213) 637-9742.