Posts Taged governance

The One Year, Thirty Minute Challenge :: Week 28 :: Governance :: Change

The Greek philosopher Heraclitus said, “Change is the only constant in life.” True when he lived 2500 years ago. Still true now. That being the case, we ought to be pretty good at it. But we’re not. Inevitably, when we introduce change into our organization, it’s a struggle.

We like what we know. It’s comfortable and we know what to expect. So when change comes, for a good percentage of us, we dig in our heels. There are a small number of change addicts out there who embrace it, but they are few and far between.

Joseph Schumpeter (1883 – 1950), an Austrian economist who immigrated to the US and eventually became a US citizen, made a compelling case for change in the workplace. In fact, the change he advocated for was so far reaching, it required periodic “destruction”. Schumpeter introduced the idea of creative destruction in 1942. He taught us that if we are making money, competitors will work to find alternative ways to meet those same customer needs so they can make that money instead of us. So, to succeed for the long-term, we must be ever vigilant to look for ways to improve on our work and do a better job of meeting customer needs, sometimes requiring that we blow up what we’ve done and rebuild it. For a business, it’s the ultimate change – shoot the horse you’ve been riding and get a new horse. Think about the evolution of home entertainment over the last 30 years – VCR to DVD to BluRay to streaming services. Each change in technology required companies to abandon formerly revenue generating products and build new, different ones. Before we move on to this week’s One Year, Thirty Minute Challenge, let’s make a quick list of companies who were confronted with a mandate for creative destruction, refused and subsequently died or are dying now – Kodak, Blockbuster, AOL, Blackberry, MySpace, Xerox, Polaroid and almost every newspaper in the US.

The goal of this week’s exercise is to create a plan you can utilize when you’re introducing change into your organization. That change might be as sweeping as replacing a product line that has generated the bulk of your revenue for the past 10 years, as far-reaching as replacing an enterprise-wide software system or as personal as changing the health insurance provider in your benefit package. Use the though-starters below (listed in no particular order) and supplement with your own to create a change management plan that will equip your team for the one constant – change.

  • Start with why – Change in an organization is never random. Explain the rationale for the change – previously unseen market conditions, changing customer tastes, under-performing vendors, software no longer supported, need new functionality, price, etc.
  • Explain that “here” is unacceptable – One of the most difficult things I’ve run across in introducing change into an organization (a regular occurrence in my work) is a longing for the status quo. The status quo sometimes is laden with emotion because it represents the world as designed by a beloved founder (many times a family member). When we introduce change, it seems like we’re dismantling the founder’s legacy. In reality, change often mirrors the work of the founder – who created the original product or service to meet the needs of the market. We are honoring their work by recalibrating for the needs of a new market. “Here” is never an acceptable alternative for a business. We must evolve.
  • Change is consistent with mastery – Everyone wants to be good at their job. As we become better at our craft, we change. We find new ways to do existing work. Introducing change gives us the opportunity to up our game and add new tools to our toolbox.
  • Change is consistent with lifelong learning – We encourage individual and team growth. Some change is evolutionary, some is revolutionary. When we introduce change into the organization, we add to our collective knowledge base which allows us to become more effective, efficient and serve customers more skillfully.
  • Invite people into the process – As much as possible, involve your team in every part of the change. For example, if you’re buying new enterprise software, don’t make it solely an IT decision. Invite users from every involved department into the evaluation, buying, implementation and training process. It will take longer, but employee buy-in will skyrocket.
  • Be vulnerable – The more complex the change, the more unknowns are out there. You, and other leaders in the organization, don’t know everything. It’s OK to say, “I don’t know” or “I need help”.
  • Be transparent – As change unfolds, be upfront about everything. When a vendor drops the ball, say so. If you decide to delay a portion of the project, don’t obfuscate and or make excuses. Trust will grease the wheels of change and trust comes from transparency and vulnerability.
  • Paint the picture of the future state – As a leader in the organization, it’s imperative that, as part of the “why”, you spell out the desired future state that will result from the change. How will the change make the organization healthier, how will the customer experience improve, how will the organization have better data for decision-making, how will employees be better trained or better equipped.
  • Be resolute – As I wrote this, I almost typed, “Be confident”. But in the context of changing the organization, being resolute is better than being confident. The commitment and subsequent actions to see the transformation through to the end is better than rah-rah speeches.
  • Seek and obtain sponsorship – Don’t lead alone during change. Recruit other leaders to join you in bringing change to the organization. Share the vision and project with those who can lead the charge with you. Focus on those who have the biggest stake in the transformation. They will bring along their teams and will influence those on adjacent teams.
  • Make a roadmap – Identify the beginning, milestones along the way and the end. Flesh out this schedule with activities, status meetings, status reports and the people accountable.
  • Communicate – If this list were in order, this would be close to the top. Communicate before, during and after every phase in the change process. Communicate information, progress (included milestones reached and missed) and the transformation already happening during the implementation of the change. I like the idea of appointing a scribe for the change process – separate from the change manager (project manager, CEO, consultant) and the other project sponsors.
  • Celebrate – When you reach the end and begin to experience transformation in the organization, throw a party. Celebrate those who did the work, the work itself and the impact you’ll have on the organization for years to come.

 

If you’ll use this week’s exercise to put together a change management toolbox using these ideas (plus any additional that you come up with), you’ll be ready to lead your organization through the inevitable, necessary changes that will make your organization ready for the future.

 

The One Year, Thirty Minute Challenge :: Week 18 :: Governance :: Legal Organization

This week’s One Year, Thirty Minute Challenge isn’t too sexy, but it could –

  • impact your ability to shield yourself, your family and your assets from legal liability
  • impact your ability to raise capital for your business
  • impact your personal tax liability
  • and more

My purpose this week isn’t to offer advice, because the topic is outside my area of expertise. The real answers will have to come from your accountant and/or tax attorney. My purpose this week is to offer education and encourage you to consider your options for the legal organization of your company.

Typically, most small business are legally organized one of these 5 ways –

Sole Proprietorship

Sole proprietorships are the simplest form of business organization. They do not produce a separate business entity but can register a separate trade name (Super Good Plumbing vs. Jim Smith, Plumber). Business assets and liabilities are mingled with personal assets and liabilities. Consequently, sole proprietors can be held financially liable for business debts and can be held personally liable for the actions of the business (which could put personal assets at risk). Sole proprietors can sometimes have greater difficulty in raising money than those who choose other business organizations.

Partnership

This is for a business owned by two or more individuals. In “General partnerships”, partners share profits, losses and liability. In “Limited partnerships”, one partner has control of the operation and bears unlimited liability while the other partner(s) contributes, shares profits and has limited liability. Limited Liability Partnerships (LLP) give limited liability to each partner, protecting them from the actions of other partners. Partnerships can sometimes more effectively raise money versus sole proprietors since lenders can consider the combined creditworthiness of all partners.

Limited Liability Companies

Limited Liability Companies (LLC) are hybrids of partnerships and corporations. They allow owners to protect their personal assets by separating them from the business’ assets. They also protect owner’s assets in the event someone sues the business. Business profits and losses are passed through to the owner’s personal income. Members of an LLC are considered self-employed.

Corporation

A corporation is an entity unto itself, separate from its owners. It can own assets, sell assets, sue, be sued and sell part of itself to other entities (stockholders). The corporation is responsible for its own debts and liabilities. Shareholders are protected from liability, but should the corporation become worthless (loss of all asset value, bankruptcy, a large legal judgement, etc.), the shareholder’s stock could be worth nothing. There are several flavors of corporations, but here are three common ones.

  • C Corp – it is owned by shareholders and is taxed as its own entity. In some cases, the profits are taxed twice – the corporation pays taxes and, when dividends are paid to shareholders, they are taxed again when the shareholder pays personal taxes. C Corps can raise money through the sale of stock.
  • S Corp – it is owned by shareholders, but profits are passed through to shareholders to be taxed at each shareholder’s individual tax rate. There are limits on the number of shareholders in an S Corp.
  • B Corp – these are for profit entities, but shareholders hold the company accountable to make some tangible public benefit besides making a profit. Some states require an annual filing that documents their public benefit.

 

Cooperative

Cooperatives are owned and operated by those who benefit from its services. Profits are disbursed to the members of the cooperative. A frequent use of cooperatives is farmers banding together to market their products as one entity to regular buyers – distributors, grocery store chains, food service suppliers.

If you want more detail, check out the Small Business Administration Page on business structure at https://www.sba.gov/business-guide/launch-your-business/choose-business-structure.

This week’s exercise is to consider what you’ve just read and examine, with your accounting and tax advisors, whether or not you can find more favorable tax treatment, better financial resources, better protection for personal assets, better options for employee compensation or any other additional benefits by changing your legal structure.