The oil and gas industry in the United States faces various trends within the next five years that promote considerable optimism but that also highlight the need for continual vigilance, says Melvin F. “Trey” Hunt III, partner-in-charge of Oil and Gas Services at Weaver. Those trends relate to the cost and availability of credit and capital, technology, the regulatory landscape, and global conditions and energy demand.
Smart Business spoke with Hunt about the challenges and rewards that those in the oil and gas industry can expect over the next five years.
What do cost and availability of capital and credit look like going forward for the oil and gas industry?
Adverse business conditions in the U.S. during the past five years prompted the Federal Reserve to reduce the prime lending rate to promote investment and economic growth. Although the national economy continues to display signs of recovery, interest rates are likely to remain low for quite some time, leaving credit readily available for capital expenditures. That is great news for oil and gas companies seeking funds to expand operations.
How has new technology revolutionized this industry?
Horizontal drilling and hydraulic fracturing might represent a modern-day Industrial Revolution that will make much more hydrocarbon energy available to consumers in the U.S. and beyond.
The Eagle Ford shale area, a few hours southwest of Houston, serves as an example of the impact those technologies can have for increasing hydrocarbon energy production. For more than 50 years, oil and gas companies largely ignored the Eagle Ford shale due to its marginal economic profile. During that span, the area was home to more white-tailed deer, javelinas and rattlesnakes than people. Thanks to the combination of hydraulic fracturing and horizontal drilling, the vast reserves of the Eagle Ford shale area are now being exploited.
While these technologies are often associated with natural gas production and previously untapped areas, oil companies are also using technology to greatly extend the productive lifespans of mature oil-producing regions. Without question, technological advancements will continue to impact the industry.
How is the regulatory landscape creating a potential challenge for oil and gas exploration?
While the low cost of capital, the availability of credit and improved technology hold tremendous promise for energy companies, the national regulatory landscape presents the potential for unfavorable conditions.
The two major political parties in the U.S. differ in how they view the oil and gas industry. Among other issues, those differences are reflected in debates regarding the continuation of the Intangible Drilling Costs deduction, Cost Depletion allowance and other federal tax incentives favorable to the oil and gas industry. Whether or not such tax provisions remain in effect for 2013 and beyond may hinge on the November election results and any ensuing Congressional and White House
While domestic oil and gas companies benefit from technological advances, they also face calls for more stringent regulation regarding hydraulic fracturing and other practices. Up to now, those calls have mainly affected companies operating in the Eastern United States. Such calls, though, may also affect Texas oil and gas operations during the next five years.
What is in store for the future of the oil and gas industry because of global conditions and energy demand?
Various economic side effects caused by regulatory and geopolitical changes may affect oil companies more than traditional market fundamentals, such as supply and demand.
The measured and efficient exploitation of natural resources around the world depends upon maintaining political stability in Saudi Arabia, Nigeria, Venezuela and other energy-exporting nations. Political unrest in such international regions will influence market conditions for Texas companies. At some point, though, the global economy will also regain momentum, and the hydrocarbon-hungry economies of China, India and other countries will most likely drive energy commodity prices higher. All the while, Big Oil, smaller tech-oil innovators backed by eager venture capital firms and everyone in between will be frenetically pursuing new and creative ways to extract the world’s hydrocarbon treasures.
The next five years offer the promise of low interest rates and access to capital, presenting ideal conditions for business expansion by oil and gas companies. The capabilities of horizontal drilling and hydraulic fracturing make it economically feasible for companies to extract more oil and gas. If the geopolitical and regulatory environments cooperate, the United States could have a recipe for energy independence and economic prosperity for generations, a recipe that would particularly benefit Texas oil and gas companies.
Melvin F. “Trey” Hunt III, CPA, is Weaver’s partner-in-charge of Oil and Gas Services. Weaver is ranked the largest independent regional accounting firm in the Southwest with seven offices throughout Texas. Reach him at (832) 320-3296 or Trey.Hunt@weaverllp.com.
Insights Accounting is brought to you by Weaver
Your staffing agency should be much more than an order taker. Instead, an effective agency can serve as a partner to your company, creating a relationship that develops over time, similar to those with other professional partners you may have whom you rely on for advice when making a business decision.
As the relationship develops, your recruiter will learn about your business culture and, most importantly, what your hiring managers are looking for regarding their current staff, future projects and even potential layoffs, should that be the case.
“Companies need the best candidates to fill an open position, not just warm bodies,” says Jacque Myers, senior engineering recruiter with The Daniel Group. “When we have the opportunity to develop a partnership with a client, we can understand their challenges and help them resolve these issues with one of our hiring solutions.”
Smart Business spoke with Myers about making the most out of your relationship with your staffing agency by developing a strong partnership for the long term.
Why is it important to form a long-term relationship with one staffing partner?
Companies with a consistent and sizable need for temporary staffing stand to benefit from forming a long-term relationship for several reasons, including having access to a broad, specialized pool of employees who can be qualified to meet the specific needs of your industry or business; having a single point of contact who can handle all of your staffing needs; and realizing the potential cost savings that comes from working with someone who has knowledge of your business and your industry.
From the agency’s perspective, having a long-term relationship helps your recruiters build familiarity and a knowledge base that will help them prepare a cadre of pre-qualified candidates for you to review and consider. Doing this means that when your project begins, your recruiters should be prepared to provide you with better-qualified candidates in a much shorter period of time.
However, failing to establish a long-term relationship with your recruiter can result in a ‘revolving door’ situation with hires that can lead to frustration on the part of the hiring manager and co-workers, as well as a delay in the completion of the project.
Should you be looking for direct hire placement, the staffing partner who, once again, understands your culture, long-term goals and the industry in which you work, will be much better able to find a candidate who fits within your organization.
What should you expect from your staffing partner in addition to resumes?
Your staffing partner can begin finding and earmarking potential contract and direct hire candidates long before your business enters its crunch time. Let your staffing agent know what you are dealing with, both from a budget standpoint and in regard to the long-term goals of the resource they are looking for.
This will put your staffing partner in a position to advise you of the best way of getting the right talent and ultimately realizing staffing success. It will also help to make sure that you do not have any skills gaps by implementing the right mix of direct hires and contract consultants.
The qualification process is equally important. Having a staffing partner who understands your culture and is clear on where your employee or contractor will be spending their time gives you a much better chance of accomplishing your goals through the hires that are made.
To determine if you have a strong relationship with your staffing agent, ask the following questions:
- Does the agent have true ‘partnership’ aptitude? Is the service built around the need to invest sufficient time toward understanding your business, your hiring managers, key drivers, value proposition, and both the hard and soft skills of the candidates?
- Does the agent provide scope, reach or expertise that complements what you are able to do yourself? For example, can the agent identify and penetrate strategic talent populations that are out of your current reach or otherwise not on your radar?
- Will your agent be a true consultative partner who is willing to share constructive feedback and provide recommendations instead of telling you only what you want to hear?
- Is the staffing agency prepared to be your partner in this for the long run and not just the one-time placement?
How soon should you discuss your staffing needs for 2013?
Now is the perfect time to begin meeting and discussing your hiring challenges for the coming year. It is important to share with your staffing agent what you expect your budget for staffing might be, as well as the overall challenges you expect to face so that your staffing consultant can determine how he or she can best accommodate your hiring needs for the upcoming year.
Once all of the information is gathered, the right staffing partner will help you reach your goals by making insightful, timely recommendations and determining the best staffing arrangement that will be most effective for you and your company or department. <<
Jacque Myers is the senior engineering recruiter with The Daniel Group. Reach her at (713) 932-9313 or firstname.lastname@example.org.
Insights Staffing is brought to you by The Daniel Group
On November 28, the 2012 Midwest Social Media Summit will be held at Executive Caterers at Landerhaven in Cleveland, OH. This one-day-conference will offer tips and insights from social media experts and top business leaders who will help you reconsider your strategy or validate your approach.
For more information and to register, click here.
And as a special bonus to our Smart Business readers, we're giving away five FREE tickets to the event! To enter the contest, simply do one of two things:
- Visit the Smart Business Twitter page and follow us. Then just send out a tweet that says, "I don't want to be anti-social. I want to attend the 2012 @Smart_Business Midwest Social Media Summit!"
- Visit the Smart Business Facebook page and like us. Then post to the page, "I don't want to be anti-social. I want to attend the 2012 Smart Business Midwest Social Media Summit!"
We'll draw the winners on Monday, Nov. 19.
For additional information, please contact Anne Hydock at email@example.com or (440) 250-7041.
A good board of directors can be a great support for a top executive regardless of company size. The most common type of board offers advice; however, other boards act as fiduciaries, which have legal liability for the company’s practices – and thus are much more actively involved in overseeing the company. In either scenario, before establishing a board of directors, a small business owner needs to be clear about why he or she wants a board and what the owner is prepared to do to get maximum value from a board.
These steps can help with developing your board of directors:
1) Get prepared. Write down what you want them do, how much time they will need to commit monthly, how long you want them to serve, where you and the company need the most advice, and what are you willing to provide as compensation to board members – if anything. Many nonprofit boards don’t offer payment beyond lunch, but for-profit entities typically provide a quarterly stipend or payment.
2) Choose broadly. Many business owners draft friends and industry colleagues to sit on their boards initially. However avoid picking carbon-copies of yourself. Look for board members with diverse backgrounds and perspectives. It is useful to have board members from a wide range of fields, including legal, finance, accounting and marketing. Organizations such as the U.S. Small Business Administration’s SCORE program of retired business executives and The Alternative Board can connect groups to potential board members.
3) Orient the board. While board members may be familiar with your organization or products, they may have only a broad understanding of your operations. Therefore, it may be useful to provide orientation for incoming board members to cover organizational structure, functional duties for each division and division head, a brief description of each product/program/service that includes its target market, as well as pie charts that display major revenue streams and expenses.
4) Share authority. Many entrepreneurs conceive and build a company according to their liking and their understanding of the customer. Owners and managers should run the day-to-day operations in alignment with the board policies. A good board will encourage the development of processes for rationally researching, analyzing and assessing all aspects of the company. Moreover, few board members want to give up their time to meet to essentially rubber-stamp every executive decision.
5) Reassess your board periodically. What you need today to help your business flourish may not be what you’ll need in three or five years. As you periodically conduct mid-term strategic planning, you should review the skills and resources presented by each board director in light of where you want to take the company. Don’t be afraid to disband and redesign your board.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
"Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness.“ W.H. Murray
Last month we discussed how to make the right choices in life and business. We talked of positioning ourselves as business leaders in such a way that we make good, solid choices.
This month, I would like to follow up that article with one concerning commitment and business. Will the two topics complement each other? I believe the answer is yes. In fact, I see the topics as dependent on one another.
Here is my premise: When we work through the process of making a choice and we lack commitment to that choice, ineffectiveness is sure to follow.
First, a few assumptions I hold related to commitment:
- Commitment is more than a head game.
- Commitment is positive.
- Commitment itself is a choice.
- Commitment flows from powerful leaders.
- Commitment is the driving force needed to push our choices into reality.
Now let’s fledge out each of these assumptions.
Commitment is more than a head game.
While our commitments start as a thought process, they cannot stay in our head. One way to state this is:
Commitment is a verb – it’s an action word.
Deciding to commit to a choice is only the beginning – now comes the real work. We must act on our commitment to that choice or, as I said earlier, ineffectiveness is sure to follow.
Commitment without action is worthless. When we have done the due diligence and made a right choice, we must act for that choice to have:
Commitment is so much more than a head game. It involves action.
Commitment is positive.
When business leaders decide to make a commitment to a goal, plan, strategy or new direction, they have made a positive decision.
Let me try to draw the timeline out a bit:
The leader has painstakingly worked through all the considerations needed in order to make a right choice.
The leader now makes a conscious commitment to that right choice and moves out in action related to the commitment.
The choice and the commitment are going to have a meaningful, powerful, results-oriented impact on the leader’s business.
That is positive. When we follow this series of actions, no matter what the outcome, the result is positive. This realization can help us as leaders to see our role and our work in a very different light.
Commitment itself is a choice.
This might seem obvious, but it is important for this reason:
Not committing to a choice that has been deemed “right” is a sure and certain way to open the flood gates of ineffectiveness in our business. Not committing is a choice we make to not do the right thing, the best thing, and the needed thing to move our business forward.
Simply put: committing or not – we make a choice – the difference is very important when it comes to good business.
Commitment flows from powerful leaders.
This is true, but the statement does not go far enough. In my estimation, real, powerful leaders are the ones that can make a choice, commit to that choice and take direct, intense action related to the choice.
This ability flows naturally from powerful leaders. It is second nature to the way they conduct themselves, their teams and their business. It is fun to watch it unfold.
Commitment is the driving force needed to push our choices into reality.
Each time we make a choice we are setting a goal that wants to be achieved.
As Mack R. Douglas reminds us that the good news is:
“The achievement of your goal is assured the moment you commit yourself to it.”
Commitment is the vehicle—the force—that drives our choices from concept to reality. The power of a simple commitment has transformed many leaders and their respective businesses. Without that power, I have seen business after business and leader after leader flounder and fail.
I think commitment is lacking in so many areas in our society these days. In developed and free nations, people are blessed with the ability to make choices, but often we lack commitment.
In business we are confronted with the need to make right choices on a minute-by-minute basis. Each leader and team member is charged with making choices as a significant part of their daily activities. Those choices then require a commitment. This is the game we play in the workplace and in life.
The process is really simple if you think about it: Make a choice. Commit to the choice. Act.
Are you ready?
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email firstname.lastname@example.org or visit her website at www.delorespressley.com.
Lois Kelly is the author of “Beyond Buzz: The Next Generation of Word-of-Mouth Marketing.” She offered her ideas about the top types of stories people like to talk about. If you’re pitching your company to investors, customers, partners, journalists, vendors or employees and you don’t use at least one of these storylines, you probably have a problem. And, most likely, you’re too close to what you’re doing, so you think that you’re uniquely “patent-pending, curve-jumping and revolutionary.”
1. Aspirations and beliefs. More than any other topic, people like to hear about aspirations and beliefs. (This may be why religion is the most popular word-of mouth topic, ever.) Aspirations are helpful because they help us connect emotionally to the speaker, the company and the issues. They help us see into a person or company’s soul.
2. David vs. Goliath. In the story of David and Goliath, the young Hebrew David took on the Philistine giant Goliath and beat him. It is the way Southwest Airlines conquered the big carriers, the way the once unknown Japanese car manufacturers took on Detroit and the way social media is taking on the media giants. Sharing stories about how a small organization is taking on a big company is great business sport. Rooting for the underdog grabs our emotions, creates meaning and invokes passion. We like to listen to the little guy talk about how he’s going to win and why the world — or the industry — will be a better place for it.
3. Avalanche about to roll. The mountain is rumbling, the sun is getting stronger, but the rocks and snow have yet to fall. You want to tune in and listen to the “avalanche about to roll” topic because you know that there’s a chance that you will be killed if caught unaware. This theme taps into our desire to get the inside story before it’s widely known. It’s not only interesting to hear someone speak about these ideas, but they also have the ingredients for optimal viral and pass-along effect.
4. Contrarian/counterintuitive/challenging assumptions. These three themes are like first cousins, similar in many ways but slightly different. Contrarian perspectives defy conventional wisdom; they are positions that often are not in line with — or may even be directly opposite to — the wisdom of the crowd. The boldness of contrarian views grabs attention. The more original and less arrogant they are, the more useful they will be in provoking meaningful conversations.
Counterintuitive ideas fight with what our intuition (as opposed to a majority of the public) says is true. When you introduce counterintuitive ideas, it takes people a minute to reconcile the objective truth with their gut assumption about the topic. Framing views counter to how we intuitively think about topics — going against natural “gut instincts”— pauses and then resets how we think and talk about concepts.
Challenging widely held assumptions means that when everyone else says the reason for an event is X, you show that it’s actually Y. Challenging assumptions is good for debate and discussion and especially important in protecting corporate reputation.
5. Anxieties. Anxiety is a cousin of the avalanche about to roll, but it is more about uncertainty than an emerging, disruptive trend. Examples of anxiety themes abound: 1.) Financial services companies urging baby boomers to hurry up and invest more for retirement: “You’re 55. Will you have your needed $3.2 million to retire comfortably?” 2.) Tutoring companies that plant seeds of doubt about whether our kids will score well enough on the SATs to get into a good college. Although anxiety themes grab attention, go easy. People are becoming skeptical, and rightly so. Too many politicians and companies have bombarded us with FUD (fear, uncertainty and doubt) with no facts to back up their point.
6. Personalities and personal stories. There’s nothing more interesting than a personal story with some life lessons to help us understand what makes executives tick and what they value the most. The points of these personal stories are remembered, retold and instilled into organizational culture.
7. How-to stories and advice. Theoretical and thought-provoking ideas are nice, but people love pragmatic how-to advice: how to solve problems, find next practices and overcome common obstacles. To be interesting, how-to themes need to be fresh and original, providing a new twist to what people already know or tackle thorny issues like how to get IT and marketing organizations to work together despite deep culture clashes between the two.
Here’s a good exercise for your team. Have them read this column and then answer the question: What storyline does our marketing currently use? Then, if you’re brave enough, ask the question: What storyline should our marketing use?
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at email@example.com.
The number of seismic changes in the way business is done during the past 10 to 15 years is unprecedented. Just ponder the magnitude of all that has occurred as you read this list: Cell phones became ubiquitous, and computers with 24/7 Internet access moved from the strident screechy tones and beeps of telephone dial up to today’s broadband connections that transmit huge amounts of data in seconds, resulting in virtually everyone being constantly connected.
Instead of getting the latest news at 11 p.m. and sleeping on it, we now receive a constant stream of information in real time. Reaction time has moved from digesting the myriad of hard copy reports that awaited you at the office each morning to now making decisions simultaneously with that first sip of morning coffee while reading data on a smart devise.
In addition, the era of easy money is also long gone, along with what seemed to be extraordinary and unlimited growth where the average company would do just fine, propelled by a rising tide of good times.
The tragedy of Sept. 11 jolted the world permanently, altering the way people live and think about the future. There are no more givens that one will grow up, go to school, get a job, have a family and live happily ever after. Two major wars have lingered beyond anyone’s worst expectations. Then came the economic meltdown of 2008 when the wheels came off the wagon and the music stopped playing while everyone frantically searched for too few remaining chairs. With the stock market crash and the banking/lending meltdown, even the most sanguine turned jaundiced toward their views of government, business and what the future holds.
Even those businesses naively ensconced in their fairytale cocoons realized it was no longer business as usual. What worked for years would no longer move the needle. Customers’ attitudes and loyalties could no longer be taken for granted as businesses acknowledged that future success and prosperity could well be the exception, rather than the rule.
Does this mean that everything that we’ve learned in the past has gone swirling down the drain, including basic business principles and practices that were sacrosanct?
There are no pat answers to deal with almost revolutionary metamorphoses, if you don’t change, you most certainly will become a victim of change.
Welcome to the new ‘now.’ If you’re leading an organization today, you must devote the majority of your time and efforts to looking ahead and trying to find the answers before your competitors even know the questions. Change has become how we must do business. What worked for your company previously is, at best, a fleeting memory overshadowed by the customers’ mindset of “What have you done for me today?” In short, there are no guarantees other than you’ll have to continuously get better or be gone.
A scary thought? It all depends how you approach this new reality. With changes come new opportunities, new ground rules and the ability to find a better way and deliver that better way more efficiently and effectively.
So how do you go about preparing for the future? Certainly use all of the new tools that are at your fingertips. Instant information on the Web is available to all of us with a few keystrokes directed at a growing number of sophisticated search engine. Data that took weeks and months to gather can now be gleaned in minutes or hours. While Americans are graying as the over-50 crowd mushrooms, don’t ignore the young who know only this new way of life. Does this mean you should add a few 14-year-olds to your board? Maybe not a practical idea, but be sure you’re at least talking to a couple of them on an ongoing basis. Ideas come in many forms, many times from the most unlikely.
You must retrain your team to challenge virtually everything and find a better way, envision products, goods and services that no one knows they even need yet, and create a strategy to deliver them compellingly and creatively.
Will there continue to be business casualties? You bet. Much more importantly, however, there will be many business successes for those companies led by visionaries who answer that morning wake-up call each day with an open mind to the new now.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
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If you’ve been running a business for some time, then I’m sure you know some CEOs who are struggling to keep their business going or have already closed their doors.
In some cases, the cause might be the economy. Maybe they were in an industry hit particularly hard and were crippled by the drop off in sales or maybe a large customer folded or took its business elsewhere.
The most troubling aspect in many of these situations is that the person in charge didn’t necessarily do anything wrong. The leader made all the right calls and did everything by the book but still ended up with a struggling business.
After you’ve been running a business for a while, you realize that even doing everything right doesn’t guarantee success. The harshest lesson to learn is that you can’t control everything and bad things happen to good people and good companies.
The real test for many begins not with how they deal with success but how they deal with setbacks. Most have never tasted defeat before, and it can be a difficult experience. One day they are the CEO of a successful and respected company, and the next day they are sitting at home wondering what they could have done differently. The experience can be depressing for some and overwhelming for others.
But there’s a saying that as one door closes, another opens, and that certainly holds true with business. If you find yourself in the situation of leading a struggling business, you need to approach it as a challenge. Don’t waste time lamenting what could have been; focus your energy on what could be. Maybe you need to tweak your business, or maybe you need to completely reinvent your company, but the key is to do something.
Take McDonald’s for instance. In the early 2000s, the company was distracted by multiple acquisitions, a massive expansion plan and a menu cluttered with items consumers didn’t necessarily want. The stock price dropped to $12. The company reinvented itself by returning to its roots, divesting of the distracting side businesses and revamping its menu and restaurants to appeal to consumers. The results changed the perception of McDonald’s from a restaurant in decline to the undisputed king of the industry with a stock price in the $80 range.
Another example is IBM. The company was saddled with low growth after trying to dominate the consumer and business hardware and software segments, and its stock dropped to $10. The leadership refocused the company on business software, a few key business hardware components and IT services. It now dominates the business IT services category and its stock commands almost $200 per share.
While you may not be as large as IBM or McDonald’s, the point is that business is constantly evolving. Sometimes it means getting back to your roots, and other times it means abandoning one line of business in favor of another.
Take a hard look at your company and think about what you could do differently. Are there some product lines that are better than others? What if you focused on your core products and did them better than anyone else? Can you follow the lead of McDonald’s or IBM to chart a new course?
If it’s too late for that, look at your current situation and find a new path to success. You led a successful business once, so you can surely do it again. Reach out to friends and colleagues to find out where the opportunities may be in the market and think about a way they could invest in your new venture. You never know who may be able to lend a helping hand. One door may have closed in your career, but with some entrepreneurial thinking, the help of some friends and prayer, another will open. The best is yet to come.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
James Taylor and Arun Pasrija, Ph.D., remember well when the company they founded, CHR Solutions Inc., acquired another business a few years ago — and two of the acquired executives were a bit hostile with each other.
But Taylor and Pasrija were no novices at acquiring and merging other businesses with their telecommunication technology solutions company. Throughout an eight-year time span, they acquired or merged 12 companies. CHR Solutions now has 530 employees and annual revenue of $61 million for 2011.
This particular situation, however, demanded a resolution that was nearly a total makeover.
“Two senior executives at two major locations were at war with each other,” says Taylor, chairman and CEO of the company.
“They just refused to deal with each other. They refused to cooperate, didn’t want to talk to each other, and all they were doing was destroying value.”
Part of the reason that both executives voted in favor of the acquisition was to prevent the other from being in charge anymore. They reasoned that by becoming smaller fish in a bigger sea, so to speak, neither would be a leader.
“As part of the solution, we had to work with the senior executive who owned a big portion of that challenge,” Taylor says. “The other person had basically given up trying — but he owned much of the problem, too, for having given up.”
What Taylor and Pasrija did amounts to an attitude adjustment, mental makeover and reassignment.
“We revised the other executive’s role, took him out of his assignment where the conflict was, reshaped and remodeled him, and he then worked directly with us at a senior executive level on strategic items; we really reshaped his attitude and his involvement,” Taylor says.
After a length of time, the situation had not only been resolved but a new chapter was unfolding.
“It took about three years to rehabilitate the relationship and redevelop mutual respect and trust, and, frankly, I think we went even further — I think we helped them re-establish some of the friendship they had before,” Taylor says. “The guy who was causing problems is actually back today working for the guy who he swore he couldn’t work for and the other guy swore he couldn’t work with.”
“We just couldn’t walk in and leave it alone like that,” says Pasrija, president and COO of CHR Solutions. “So we addressed it, and I think it worked out pretty good because it gave both of them some space initially so they were not interacting with each other. Then it improved to the point where they appreciated what the other party brought to the table.”
Taylor notes separating the parties was the first step of the solution.
“We had to take the pressure off first,” he says. “We had to take them out from reporting to each other or one of them reporting to the other, and we had to start educating. I think there was some ego relative to that as well as I don’t think the hostile exec fully understood the situation. Part of that rehabilitation process was that as he participated more closely with the senior execs of the organization, he got a perspective about the decisions we were making and why we are making them, and he had a chance to catch his breath and feel like he was adding value.”
One of the major points that hit home was that the executive needed a behavior change in order to be a successful leader.
“It’s not about right or wrong; it’s about changing to be successful,” Taylor says. “We were firm with him: ‘If you can’t change, we can’t correct this and you can’t be here.’ That’s a pretty significant conversation about a guy’s career and his life and the 25 years he spent investing in the company and the industry that he is in.”
The moment of truth came, and he met the challenge head-on. It paid off.
“He actually told us at one point that he had never had the coaching that he was receiving from us,” Taylor says.
“Once an executive is reshaped, it creates alignment right at the people,” Pasrija says. “People see the issue, the senior guys realize that there was an issue at the senior level, and the improvement gets amplified all the way down.”
But it’s not unusual during the acquisition process when executives are being vetted that you find some leaders who haven’t received professional executive training. That’s where the acquiring company has to step in.
“Many times, these guys in smaller companies, they don’t have what I will call professional leadership. What they have is 25 years of first-year experience,” Taylor says. “I don’t mean that in a negative way. Technicians — borrowing the term from Michael Gerber’s ‘The E-Myth’ — may be very, very competent at the business and technical aspects of what they’re doing, but they’ve not done HR management or leadership development, they’ve not run bigger organizations, and they don’t know how to manage conflict.”
Taylor feels a weakness in leadership training may be the cause for some companies to hit a financial brick wall.
“There is a reason many small entrepreneurial companies get stuck at a $5 million, $10 million or $15 million size, and the reason for that is the depth of management,” Taylor says. “That’s only what management can handle. You’ve got to think differently — it’s a different capital structure. It’s a different leadership structure. It’s a different investment you make. It’s a different way you manage.
“We’ve got to help them with the additional skills they need to run the business in a different way and a different level.”
Here’s how Taylor and Pasrija focus on enhancing employees gained through an acquisition or merger — and existing staff — to tap new levels of success.
Look for more talent, not less
There are several criteria that have to be met when a company makes an acquisition or merger. Geography, adding to the product line and creating an attractive client list are examples. In addition, the leadership team should have some similar values.
“You can think of a business almost like a mosaic, made of all the small little stones that build a picture,” Taylor says. “Look for things that add value, that fill in parts of the mosaic, whether it be a product, people, geographic reach, whether they be of the size and scalability that they offer or whether they bring long-term clients.
“But look for things that you can integrate and that the leadership team buys in and understands your vision because you are not looking to write checks and send a bunch of people home. Look for more talent on the team. I believe you can never have too much talent. I never get up in the morning and say, ‘Oh gosh, I wish we didn’t have so much talent.’”
Pasrija says he believes the most important criterion is spending time during integration with the management team and making sure the new faces can be part of the broader team.
“From the personality perspective, that will make or break the deal,” he says. “All the other things are important but are actually kind of minimal. You want to make sure the product is a right fit, but beyond that, you have to focus on integration, which takes a lot of time, so you are just comfortable to have these teams that can integrate and be part of each other.”
It’s better to integrate rather than incinerate, Taylor says. But it may not be the case for all industries.
“As you integrate companies, a lot of people want to do burnouts,” he says. “We don’t like burnouts. Burnouts mean don’t integrate. So the idea of burnouts is to try to protect your purchase price versus some of the functions you have made.
“We think the trade-off on burnouts is worse than the downside created by not integrating, particularly in the services area. Now that could be different in the manufacturing business or something else, but particularly in the services business, that is just a very specific thing we go through.”
Getting employees to integrate in one culture for one company in one version is a key to success, Pasrija says.
“You need to present one company to a customer or client,” he says. “They don’t really care whether there were two, three or four companies in their history or there are offices in different states. It’s one company helping them solve their needs. And that model will help their clients succeed.”
Learn to rank the entrepreneurs
Before you attend to reshaping or re-educating executives acquired in an acquisition or merger, there needs to be an honest appraisal of their talents. You will save yourself some time and effort if you evaluate the entrepreneurs in three categories or stages. Meet with the person to try to establish what stage of an entrepreneur he or she is.
“Stage I is that he or she is Superman or Superwoman,” Taylor says. “They can leap buildings in a single bound. They have a great big S on their chest. That big old S stops bullets, and everything’s good, right?
“Well, the reality of those people is they kill companies. If you go back to the ’90s and look at all the sales, mergers, acquisitions and the dot-com roll-up, they were all supermen and superwomen. If they are Stage I, run away. Don’t walk.”
The second stage involves some qualities of the first but with more self-awareness of strengths and weaknesses.
“If they are Stage II entrepreneurs, they woke up and realized that it’s just a T-shirt and it doesn’t stop bullets,” Taylor says. “But they say, ‘You know what? I’m kind of achy. My stomach is upset. I have a fever. I have a headache.’ The diagnosis is that you have the flu, and they say, ‘No no, just give me some Tylenol and send me back in, coach.’
“The problem with that is Stage II entrepreneurs cost money. They take bigger zigs and longer zags than you need to have. The problem with a zig and a zag is that the more out of a straight line you are, the longer it takes and the more money it takes. Sometimes with the right Stage II person, you can bring him or her into Stage III. But go cautious on Stage II. Really understand where they are; understand the culture that they have created.”
As you may expect, the perfect candidates are the Stage III hopefuls. As troops parachute into a combat zone and hit the ground running, so do Stage III entrepreneurs.
“Because of their time frame, some people who have led the business before are immediate Stage III entrepreneurs,” Taylor says. “Some get there in a very short time, some are super bad for 25 years. The Stage III entrepreneur gets there and says, ‘OK, how do I do this run? What’s the right thing to do?’ They can check their ego aside, too.”
Invest in developing leaders
One of the things both Taylor and Pasrija benefited from in their careers was a leadership development training program. Taylor received training from Sears, and Pasrija from Lucent Technologies. It gave them the impetus to create a leadership development program for current and acquired employees at CHR Solutions. The program has graduated 60 future leaders since 2008 when it was founded.
“We believe we can actually create talent from inside,” Pasrija says. “Not that we couldn’t have gone out and hired executives. We wanted to invest to create a pool of potential leaders. It’s good for the morale of the employees; it’s good for us because we develop comfort and trust in them.”
The company selects 20 to 25 employees each year to be so-called “special leaders.”
“They’ve demonstrated leadership behaviors and quality,” Pasrija says. “We believe it is worth the investment, and some of them for sure will be able to take much, much bigger roles down the road.”
The program, which costs $60,000 to $70,000 a month to operate, is a two-step process.
“One is a formal kind of a mini-executive MBA if you will, where they go through classes for the course of a year,” Pasrija says. “It is held from 7 to 9 in the morning every other week — two hours of a lecture, classwork and homework assignments.”
Classes are held on sales and sales processes, marketing, product management, finance and accounting, understanding cash flow, balance sheets, income saving, why it is important to focus on net terms for a contract, working capital and other concepts.
“We have to manage change,” Pasrija says. “That’s a big feat. Crucial conversations: how to have a hard conversation with your peers, with your employees, your managers and, sometimes, the client.”
The “students” go through all the processes and then undertake a final assignment. They are put in charge of a fictitious company with a senior leader and their team, and they are given a scenario, much like a case study.
“Here’s what’s going on, here are the financials, here are the industry situations and you plan for business and the events that will happen,” Pasrija says. “Then you go back and figure out what would you do and what is the impact. Then they work on it for a couple of weeks and make a presentation to the entire management team.”
“After completion, they are sort of fast-tracked for opportunities and given much higher preference in promotions,” Taylor says. “This is very, very formal. We spend thousands and thousands of dollars doing this every year — we think it is that important.
“If you’re going to grow large business, you have to be able to create the appropriate discipline and infrastructure to exactly achieve the very way and be very profit-driven. That’s part of the culture of who you are and what you are doing.
“That’s hard to achieve if you think about it for a second. Think about that versus a freewheeling entrepreneur who started his own small business. A large part of that cultural change and educational process is to bring them into what it takes to be a much larger business.” <<
How to reach: CHR Solutions Inc., (713) 995-4778 or www.chrsolutions.com
James Taylor, chairman and CEO, CHR Solutions Inc.
Arun Pasrija, president and COO, CHR Solutions Inc.
Pasrija: Pune, India
Taylor: West Plains, Mo., so I’m a hillbilly. I’m from a foreign country as well!
What was your first job?
Pasrija: My first job was actually at a motorcycle factory. It was a summer job assembling 150cc bikes made by the Escorts Group.
Taylor: I’m trying to remember when I didn’t work. I used to cut firewood, pick rocks, bale hay and work in different stores. It’s a great thing for kids to learn how to work and do things.
Whom do you admire in business?
Taylor: I admire Bill Gates, Larry Ellison, Michael Dell and Steve Jobs — they created something from nothing. It’s about the entrepreneurial spirit. They got ‘out of the box.’
Pasrija: I admire Warren Buffett. I’ve read a lot of his books, and I always read his annual shareholder letter. His way of getting the big picture, keeping it simple, making sure the right people are doing the right things and honesty and integrity behind his business — I really have a lot of respect for what he has accomplished.
What was the best business advice you have given or received?
Pasrija: We’ve assembled a very strong team. Always keep telling your team, ‘We can do anything we want but we cannot do everything we want. We need to figure out what to focus on.’
Taylor: I was once told early in my career that too many people are afraid of hard work. People try to do the quick and easy. Many entrepreneurs give up and quit or only were business people because they are afraid of the hard work, and the reality of it is that some of the stuff, you just have to grind it out.
What is your definition of business success?
Pasrija: If you have a client who is happy with the product or services you are selling, the employees love to come to work every day and are excited, and their shareholders are happy to see the value of the enterprise going up every year. I think that’s success.
Taylor: We’ve had the luxury of focusing a little on the ball where it needs to go. I think that’s part of what has caused some loss in America for things such as research and development, the loss of some of these key long-term strategic things. That doesn’t mean that we’re not focused on profitability, but you’ve also got to balance that with longer-term success. That’s difficult as you are consuming cash at the rate that you grow, and you continue to make investments. We want employees to be happy and do things but it also means that we have to be competitive. It’s a sign of hard work, balance and vision.
A frenzy arose recently when the Associated Press reported some hiring companies were asking potential job candidates for their Facebook passwords. While the practice is not nearly as widespread as the news story originally suggested, the idea of such an invasion of privacy hit a strong nerve and sparked a national discussion. Maryland was quick to pass legislation prohibiting employers from asking to access an applicant’s social media profiles, and other states have proposed similar legislation.
So where should the line be drawn? If asking job applicants for Facebook passwords is taboo, can you Google them? If sending friend requests is too forward, can you connect with applicants via LinkedIn?
There are no correct answers because there are no concrete rules, but before you take to the Net to investigate your next new hire, ask yourself a few questions.
What’s to gain?
What do you want to learn by investigating a job applicant online? Federal Equal Employment Opportunity Commission laws dictate that companies make hiring decisions based on job-related information only. While a basic Google search is unlikely to provide much job-related data, it could easily divulge information that puts an applicant in a protected class — their race, color, religion, sex, national origin, age, disability or genetics. Certainly, some of the same information would be disclosed during an interview, but what if after reviewing one candidate’s lackluster resume, you decide interviewing him or her would be a waste of time?
However, out of curiosity, you Google the applicant anyway and learn she’s an African-American woman in her late 50s. Now there is the potential taint of discrimination attached to your decision not to interview her.
Can you handle the truth?
What will you do with the information you discover? Remember the famous courtroom scene in the movie “A Few Good Men” in which Jack Nicholson’s character screams, “You can’t handle the truth!” Can you handle the truth? Are you ready for what you might learn about a job applicant online?
What if through connecting with your top candidate on a social networking site, you come across a fundraising campaign for his child with muscular dystrophy? You might assume if you hire him, your company’s health insurance premiums would increase or that he would be unable to fully commit to the job with a special needs child at home.
What if you discover the young go-getter you are about to hire as an executive assistant has been moonlighting at a questionable nightclub? You can’t unlearn facts once you’ve learned them, so can you trust yourself to make a completely unbiased hiring decision?
Can you be certain that what you find is a current and accurate representation of the candidate?
If your parents were right and you’re judged by the company you keep, for better or worse a company is also judged by the people it employs. In this age of rampant online recklessness, it’s understandable that employers would want to protect their company’s reputation from the damage even just one employee’s careless indiscretion could cause.
Remember the Domino’s Pizza incident when two employees posted a video of themselves sabotaging a submarine sandwich? Personal posts could be a red flag that the candidate you are about to hire doesn’t always display the best judgment.
But how can you be sure those party pics you found tagging your star candidate were posted with her knowledge or are not from 10 years ago when she was still a college coed?
Social media offers companies an alluring platform to connect with their audiences, whether that’s customers, employees or even prospective employees. But company representatives need to use discretion if they intend to access social media or any online tools in the hiring process. Some well-intended prying could be deemed discriminatory or lead you to pass up a potential star.
Poor judgment, whether it is on the part of an individual or part of a company practice, will always carry negative consequences.
John Allen is president and COO of G&A Partners, a Texas-based human resources and administrative services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com.