Hemphill's Rules !

Hemphill's Small Business CEO School A Success!

Decisions made in recovery will separate “winners" from “losers", and "champions" from "winners" for years to come.

Currently, small business ceo's and entrprenuers face the unprecedented challenge of forging their own recovery.

In past recessions, large numbers of companies stopped growing permanently - they never recovered. The fact is 81% of the factors that cause growth stalls are preventable errors in judgment or strategy—even in a recession. And downturns present an increased number of opportunities for bad decisions that can have long-lasting consequences.

Recovery is not a restoration. Small business leaders and executives must avoid retrenching around long-term, deeply held beliefs that may no longer be true.

Hemphill's Executive Guidance for 2010 presents several key enemies of post-recession performance that challenge conventional wisdom and the pre-recession assumptions many businesses’ plans still embrace. Left unaddressed, each of these can significantly undermine your corporate recovery, erode profits, and make past performance levels unattainable.

Sharply Lower Marketing and SalesProductivity Due to Changed Customer Needs
A shift in customer buying behavior turns top performers into average performers cuts channel output by more than 15%.

The most obvious effect of severe recession is that customers buy less. What is less obvious is how economic trauma changes customers’ needs and shifts their priorities and buying behavior. It is essential to recognize and modify any brand or selling strategy that is out of step with current customer patterns.

Three changes in particular counter conventional wisdom about customer needs:
Just as companies invest heavily to create and demonstrate functional value in hard financial terms, consumers are increasingly swayed by emotional brand attributes. It is essential to create an emotional connection with consumers because those hardest hit by the recession are more likely to respond to emotional differentiation.

In today’s economic climate, sales professionals who challenge customers are far more likely to outperform those still focused on relationships. “Challenging" overcomes customer risk aversion and can defeat a consensus buying posture. But today, only 27% of a company’s field sales population (at best) is able to have these types of conversations.

While companies aim for customer satisfaction and delight, there are higher loyalty benefits from simply making it easier for a customer to access your organization. Reducing “customer effort" creates far more customer loyalty than improving or enhancing their experience.

Confronting the Enemy

Revisit your customers' needs by asking:
What are the product/service features that customers value based on their functional needs? What are the emotional needs customers are trying to fulfill with your product/service?

Identify points of credible superiority by defining:

How does your product/service enable the outcomes and personal satisfaction your customers seek better than alternatives?
What are your proof points and will your customers appreciate the difference?
Adapt selling models that challenge customer beliefs and educate them about their own business.

7%The average organization faces an imminent 7% productivity loss from the combination of departing top talent and undermanaged recruiting pipelines.
Recent economic turmoil and the resulting layoffs, reorganizations, and wage pressures have exacted a huge toll on the workforce of most companies. While most CEOs derive some level of comfort from having identified and retained their most important people across this period of tumult, just underneath the surface lurk two troubling trends:

The combined damage of employee disengagement and employer inaction. First, there exists quiet yet dangerous disengagement among companies’ best employees—which means most of your strategies are built around those most likely to leave. Over the past six months, high-potential employees expressed 13% increased desire to leave their company within the next year, compared to no change in this desire for non-high-potential employees. Second, employers are showing lax recruiting activity, despite 75% higher application volumes. Most recruiters are discarding applications from individuals unqualified for open positions, rather than storing them and creating a talent pipeline for future needs.These two facts together create a harsh reality: when companies lose even a small segment of their high performers as economic conditions improve, they will find key projects crippled by the lack of available talent.

Well-engaged but potentially immobilized employees. Sixty percent of engaged employees are not directing their efforts toward the firm’s top priorities. As a result, most companies have suffered significant productivity loss from disengagement and misdirection right when they are trying to execute enormous change in their organizations.

Confronting the Enemy

Carefully monitor and manage elevated attrition and disengagement among high-potential employees. Keep recruiting pipelines full.

Consider competencies that are hardest to replace when considering staff reductions.
Take advantage of managers and peers to focus employees and ensure mobilization rather than using top-down communications

Enemy #2: Productivity Losses Due to Top Talent Disengagement and Flight
7%The average organization faces an imminent 7% productivity loss from the combination of departing top talent and undermanaged recruiting pipelines.
Recent economic turmoil and the resulting layoffs, reorganizations, and wage pressures have exacted a huge toll on the workforce of most companies. While most CEOs derive some level of comfort from having identified and retained their most important people across this period of tumult, just underneath the surface lurk two troubling trends:

The combined damage of employee disengagement and employer inactionFirst, there exists quiet yet dangerous disengagement among companies’ best employees—which means most of your strategies are built around those most likely to leave. Over the past six months, high-potential employees expressed 13% increased desire to leave their company within the next year, compared to no change in this desire for non-high-potential employees. Second, employers are showing lax recruiting activity, despite 75% higher application volumes. Most recruiters are discarding applications from individuals unqualified for open positions, rather than storing them and creating a talent pipeline for future needs.These two facts together create a harsh reality: when companies lose even a small segment of their high performers as economic conditions improve, they will find key projects crippled by the lack of available talent.

Well-engaged but potentially immobilized employeesSixty percent of engaged employees are not directing their efforts toward the firm’s top priorities. As a result, most companies have suffered significant productivity loss from disengagement and misdirection right when they are trying to execute enormous change in their organizations.

Confronting the Enemy
Carefully monitor and manage elevated attrition and disengagement among high-potential employees.
Keep recruiting pipelines full.
Consider competencies that are hardest to replace when considering staff reductions.
Take advantage of managers and peers to focus employees and ensure mobilization rather than using top-down communications.

Enemy #3: Larger and More Frequent Losses Due to Increasing Risk Velocity
20%, 50%While most companies focus on risk identification and prevention, organizations that focus on prioritization and response enjoy 20% higher revenue growth and as much as 50% higher earnings growth than their peers.
“As best as I can understand, we are going after multiyear growth in the emerging economies of the world, and we’re making the next two quarters by gutting the compliance and accounting departments. I’m putting our house in my wife’s name." That’s how the governance chair for a U.S.–based, Fortune–500 company summed up a two-day strategy offsite. Joking aside, his assessment rings true at many companies for two reasons:

The peril of entering developing markets with underdeveloped risk managementMany companies are hinging their growth on inherently more risky, developing markets such as China, India, and Brazil. Unfortunately, inertia and cost cutting have left these companies with risk management capabilities that are:

Focused in the wrong places, Far too lean for the myriad commercial and legal challenges they now face, and Not agile enough to address rising velocity of key risks.

Of course the developed world has its own risks. A toxic and unprecedented combination of monetary stimulus; wholesale deleveraging of businesses, banks, and consumers; and nearly $1 trillion in unused U.S. economic capacity confront companies trying to make even the simplest interest rate, currency, and capital planning decisions.

The need for faster, more agile, risk management strategies.While organizations are better at assessing the likelihood and potential severity of risk events, they have ignored the increasing velocity with which risks can occur and swamp a company. The best companies are focusing on strengthening their risk agility and preparing for only the most important and uncertain scenarios.

The Enemy:

Spend less time on risk assessment and more time on building effective risk response capabilities. Test risk metrics for economic relevance before adding them to business scorecards. Reduce information overload by reporting metrics on a timeline aligned with their variability and how quickly operating plans can be changed.
Incorporate speed of onset for risk events into risk prioritization criteria.

Enemy #4: Rising Losses and Steeper Penalties, due to High Levels of Employee Misconduct; 7%In the United States alone, organizations already lose an estimated 7% of their annual revenue to fraud. That number seems sure to climb and be compounded by heightened government vigilance.

Restructuring and downsizing over the past year have created an increased state of distrust, anxiety and cynicism among employees. This has translated directly into a rise in fraud and misconduct. Employees’ view of management’s integrity has decreased 5% while misconduct has risen at a startling rate of 20%. Given the grim employment projections for 2010, this complex scenario is likely to continue:
A perfect storm: lower confidence, higher misconduct, and stricter enforcementAs if the heightened risk of misconduct and decline in employee engagement and productivity weren’t enough, tolerance for bad behavior is at an all-time low. Governments of most industrial nations are responding to public scrutiny over the cause of the economic downturn with a wave of new regulations—and perhaps more importantly—an increased zeal for enforcement. Today, a single investigation can put your company into crisis mode—adding brand and reputation damage to the mounting burdens of lost productivity.

Solving employee disengagement with visible ethicsEmployees view the actions of senior executives as actions of “the company." Building integrity and trust requires you to consistently model ethical behavior, deal decisively with misconduct and communicate openly. You must put corporate values into action to create a more ethical and productive work environment.

Managers exhibiting corporate values can improve employee performance by 12%.
Managers demonstrating ethical behavior can improve employee performance by 9%.

Confronting the Enemy

Recognize and respond to the emotional effects of the recession on employees.
Demonstrate personal integrity and intolerance of misconduct consistently throughout the entire organization at all times.

Ensure that financial communications are frequent, frank, and focused on employee concerns.
Enemy #4: Rising Losses and Steeper PenaltiesDue to High Levels of Employee Misconduct
7%In the United States alone, organizations already lose an estimated 7% of their annual revenue to fraud. That number seems sure to climb and be compounded by heightened government vigilance.
Restructuring and downsizing over the past year have created an increased state of distrust, anxiety and cynicism among employees. This has translated directly into a rise in fraud and misconduct. Employees’ view of management’s integrity has decreased 5% while misconduct has risen at a startling rate of 20%. Given the grim employment projections for 2010, this complex scenario is likely to continue:
A perfect storm: lower confidence, higher misconduct, and stricter enforcementAs if the heightened risk of misconduct and decline in employee engagement and productivity weren’t enough, tolerance for bad behavior is at an all-time low. Governments of most industrial nations are responding to public scrutiny over the cause of the economic downturn with a wave of new regulations—and perhaps more importantly—an increased zeal for enforcement. Today, a single investigation can put your company into crisis mode—adding brand and reputation damage to the mounting burdens of lost productivity.
Solving employee disengagement with visible ethicsEmployees view the actions of senior executives as actions of “the company." Building integrity and trust requires you to consistently model ethical behavior, deal decisively with misconduct and communicate openly. You must put corporate values into action to create a more ethical and productive work environment.
Managers exhibiting corporate values can improve employee performance by 12%.
Managers demonstrating ethical behavior can improve employee performance by 9%.
Confronting the Enemy
Recognize and respond to the emotional effects of the recession on employees.
Demonstrate personal integrity and intolerance of misconduct consistently throughout the entire organization at all times.
Ensure that financial communications are frequent, frank, and focused on employee concerns.
Enemy #5: Low Returns from IT Budgets Targetinga Shrinking Share of Enterprise Information
40%Right now, 40% of the most valuable information created by employees is out of reach of corporate systems, and this share is growing every day.
The social media phenomenon has arrived at the enterprise. Companies are adopting Web 2.0 technologies to boost employee collaboration and using tools like Facebook and Twitter to engage customers.
Lost in all the buzz is the fact that even though companies are increasingly using social media for business strategies, a vast majority of the information being created and shared is outside core IT platforms. This is a twofold problem:
Vital information can’t be found or used.
In a capital-constrained environment, the IT budget is mis-deployed; and this budget often consumes the largest share of a company’s capital expenditures.
This is not a small or temporary IT problem, and the scale is extraordinary:
The average employee creates two-thirds of a gigabyte (GB) of content at work and at home each year. The average knowledge worker creates even more—between one and two GB annually.
Only 15% of content created at work is entered into structured systems (ERP/CRM). As much as 68% flows through corporate channels (e.g., e-mail, internal shared storage) that are loosely managed. Seventeen percent of content flows through non-corporate systems such as Twitter, Gmail, and Facebook.
More than half of lost information is important to your business—either for the value or the danger it represents.
Confronting the Enemy
Have a full view of your company’s “collaboration portfolio."
Target key architecture decisions on enabling productive exchanges that create lasting information value.
Invest in collaborative platforms clearly tied to measurable business goals to ensure real value creation.
Adopt clear policies and educate employees on how to make good judgments and limit the risks of sloppy communications choices.
Enemy #6: Productivity Losses Due to Misplaced Leaders
10%Correct reassignment and proper support of a company’s existing leaders can improve revenue and profit by more than 10%.
Many organizations have responded to the financial downturn by focusing on improving the quality of the leadership bench. No wonder—the difference between high-performing leaders and low-performing leaders significantly impacts on team and overall corporate performance. Teams led by the best leaders were 30% less likely to turn over, and worked 26% harder than teams led by the worst leaders. Where are all the good leaders? They are right inside your company. The problem is that most companies have the right talent buried in the wrong places and stymied by significant organizational constraints:
Many leaders are unable to adapt to changing situations. Different market situations require different competencies. To enable success, companies must assign leaders to roles based on the identified competencies needed in the current markets. Proper allocation of leadership talent can improve a company’s ability to outperform on revenue outcomes by as much as 31%.
Capable leaders may still face structural, resource, cultural, process, and interface barriers. As much as 40% of leadership performance is hindered by organizational barriers including lack of role clarity, poor goal alignment, and weak knowledge transfer systems. For example, clarity about empowerment can improve leaders' ability to outperform against their objectives (revenue, profit, budget, service delivery) by as much as 9%. Performance requires an effective leader and an effective organization.

Confronting the Enemy

Remove all barriers to leadership performance—both soft and hard.
Clarify leadership roles and accountabilities.
Deploy leaders with the right capabilities against current and future needs.
Continuously analyze which leadership capabilities should be leveraged in each critical area.

Kevin K. Hemphill, has been consulting with small business leaders for almost a decade. Hemphill draws his insight form numerous sources;however, Hemphill credits Harry S. Dent for some of his best insight and most powerful insight.

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