Hawai‘i’s visionary owners and CEOs face a unique set of challenges when striving for rapid growth in their businesses’ valuation. The limited market size and talent pool make it difficult to scale, while employee exits and disengagement can frustrate progress. However, the islands offer a few distinct advantages to these business builders.

The close-knit business community in Hawai‘i fosters effective word-of-mouth marketing. Owing to its monopolistic nature, players who dominate their industries can enjoy a lion’s share of the industry profits. This is particularly true for business-to-business (B2B) companies in Hawai‘i, where dominant players in each industry can expect disproportionately high valuations compared to their peers.

To capitalize on these opportunities and address the obstacles, growth-focused CEOs need their teams to be as committed to the organization as they themselves are. Where can they find help? Long-time investor, Charlie Munger, has a suggestion – “Show me the incentive and I will show you the outcome.” Here is a video of Charlie Munger and Warren Buffett talking about the power of incentives in driving growth at GEICO.

Growth Share Plan (GSP) is an incentive compensation model that shares year-over-year increases in net profit with key employees. It is proven to foster an owner’s mindset, where employees think and act like owners to drive the company’s growth and long-term success.

Early employees in Silicon Valley startups are highly engaged, in no small measure due to their stock options, which provide a sense of ownership in the company’s success. However, stock option plans can be complex and expensive for small businesses to manage. GSP serves as a more accessible alternative. By integrating GSP into their business model, Hawai‘i CEOs can hire top talent, harness the full potential of their workforce, create a sense of shared purpose, and ultimately, accelerate their company’s growth in a challenging market.

Growth Share Plan: A Game-Changer for Growth Businesses

Unlike traditional profit-sharing plans, a GSP holds financial value only if the company experiences year-over-year (YOY) growth in its bottom line. However, for each dollar increase in net income above the previous year’s baseline, 20 to 40 cents are allocated to the bonus pool.

To maximize the effectiveness of GSP, it’s best to establish quarterly targets at the beginning of each year. Meeting these targets triggers company-wide celebrations, fostering team spirit, and motivating employees who might otherwise be excluded from bonus payouts.

Moreover, we argue that a well-designed GSP should constitute a significant portion of total employee compensation. When targets are achieved, participating employees should receive a bonus equivalent of 25% to 33% of their fixed pay. At this rate, employees gain a substantial upside in driving growth, and it’s difficult to imagine anyone leaving the firm to join a competitor for financial reasons.

Strategic Approach to Foster Owner’s Mindset

To ensure the success of the Growth Share Plan and foster an owner’s mindset among employees, it’s essential for CEOs to take a disciplined approach.

Communication: Clearly communicate the goals, structure, and benefits of the GSP to employees. Transparency is key to employee buy-in. Educate each employee on how they can impact the company’s performance and grow their bonus check simultaneously. Celebrate successes to reinforce the plan.

Weekly Forecasting: Implement a system for weekly forecasting of financial performance (or the Critical Number, defined below) and the resultant employee bonus. This helps employees stay informed and focused on achieving the company’s growth targets.

Empowerment: Encourage employees to contribute ideas, take total ownership of their work, and make decisions that directly impact the company’s growth. Highlight the importance of client retention, client referrals, add-on sales to existing clients, continuous process improvements, and faster project completion in driving GSP success.

CEO Concerns

When considering the implementation of a Growth Share Plan, Hawai‘i CEOs may have some apprehensions.

Losing Money: CEOs may be concerned that sharing a portion of their profits will negatively impact their bottom line. However, Growth Share Plans usually lead to increased profitability, as they incentivize employees to work smarter and drive business growth.

Radical idea: Some CEOs feel that this is unfamiliar territory with uncertain outcome, maybe more suited to high-risk technology enterprises. Nothing could be farther from the truth. Lynsi Snyder (In-N-Out Burger)¹, Jim Sinegal (CostCo)², Herb Kelleher (Southwest Airlines)³, and many other iconic founders, owners and CEOs from various industries have attributed a big part of their organization’s success to incentive compensation of their employees. Closer home, Gourmet Events Hawaii’s amazing growth story was captured in this Forbes article. ZR Systems, a local IT firm (now acquired and renamed to Evocative) had a similar growth run.

Complexity: Some may worry that Growth Share Plans are too complicated to implement and manage. While it’s true that these plans require careful planning and execution, it can be done internally or by partnering with an experienced advisor.

Confidentiality: CEOs may be hesitant to share sensitive financial information with their employees. In these cases, Growth Share Plans are tied to a “critical number” – that most closely predicts the net income. Cypac, a Hawai‘i cybersecurity firm that we advise, ties its GSP to “devices defended”. Growing the count of devices they secure is key to driving profitable growth (and valuation) in their business. Also, since it is an existing operational metric, it is already well understood by the employees. However, in other organizations, the critical number may be more nuanced and need careful analysis at the start.

Ensuring Fairness: Concerns may arise about distributing the growth share fairly among employees. To address this, it’s important to establish clear criteria for eligibility and payouts.

Long-term Sustainability: Some CEOs question the long-term viability of Growth Share Plans, especially during economic downturns. By designing a plan that only rewards employees when there is year-over-year growth, you can protect the business from financial strain while still incentivizing employees during periods of growth.

With the successful implementation of a Growth Share Plan, your company can foster an ownership mindset among your employees, resulting in higher engagement, increased productivity, and lower turnover – all essential ingredients in Hawai‘i’s growth stories.

Note: Employee compensation needs careful design considerations and can have legal implications. Our blog content is for informational purposes only. It should not be taken as legal, financial or business advice.

Further Reading

1. Lawler III, E.E., 1990. Strategic Pay: Aligning Organizational Strategies and Pay Systems. Link.
2. Pfeffer, J., 1998. Six dangerous myths about pay. Link.
3. Lazear, E.P., 2000. Performance pay and productivity. Link.

The post Unlocking Business Growth Using the Power of Incentives appeared first on GUILD Consulting.

Here are some tips, compiled by experienced remote workers, for managing yourself and your teams while working from home.

1. Act Like You Are in the Office

Simply acting like you’re heading into work can do wonders for productivity.  Set an alarm, make the coffee, and get dressed.  Then—you guessed it—walk over to your new home office and start working.  Merely maintaining the appearance of going to work can be the crucial difference between a productive day and never gaining any momentum.

Talk to your spouse and kids about your availability for office meetings, and communicate what you can to your co-workers through your online calendar.

Take intermittent breaks later in the day, but start the morning with a bang!

2. Use Task-Specific Technology Tools

With your team, collectively agree on four online tools—one for each of the following (only a subset of available software options are presented here):

• streamlining project management (Microsoft Excel, Google Sheets, Trello, Asana)
• individual and group chats (MS Teams, Google Hangouts Chat)
• document-sharing (MS SharePoint, Google Drive)
• video meetings (MS Teams, Skype, Google Hangouts, Zoom [be sure to review security settings to preclude uninvited guests])

Many workers already use only a phone and email for work purposes, and may not need software beyond this list.  If most of your team is already familiar with a tool, use it: this will greatly increase communication, efficiency, and team output.

Match your tasks with appropriate tools—such as using email when sending out information or a question that does not need a quick response.  However, when collaborating or brainstorming ideas, it is often better to interact by phone or video chat.  Text-only messages can be misconstrued, wheres a real-time, face-to-face video conversation can usually eliminate gaps in communication.  Transient or longer-term bandwidth issues of one or more remote team members may require modifying tool selection to permit smooth workflow.

Triaging tasks, and using smart tools tailored for each job, can streamline the workday and permit efficient task completion.

3. Outcome, not Activity

Many office-based employees are accustomed to operating on a daily schedule while managers ensure that the workers are occupied with work.  However, when working remotely, it is easier and indeed better to look for outcomes, rather than hours worked.  This paradigm shift was inevitable, but this crisis has made it a reality.

Managers can set expectations for team members being online and reachable through the team’s selected chat tool.  However, remember that managers may know vanishingly little about other employees’ living conditions, kids’ school-related activities, and other parameters.  Instead, an effective remote manager will focus on asking How long will this task take?  What’s getting done?  How much is being accomplished and in what amount of time?  Are there any bottlenecks?  For certain types of tasks, managers may find that more can be completed in shorter times due to fewer office distractions, no travel, and streamlined work.  In time, managers will get a feel of how quickly their teams can move, identify roadblocks, and find resolutions.

It is important that leaders remain mindful of not becoming hamstrung by performance measures alone.  Much of any strategic plan needs to now be revisited in light of these unprecedented changes, and certain metrics do not translate well to remote work.

Trusting the staff now working remotely can go a long way.  If the required work is coming in on time, they are more likely than not putting in the necessary time and effort.  Tell them!  Managers need to go out of their way to convey positivity to their workers.  Show them that trust has been earned, but continue to hold them accountable.  Offer rewards or send gift cards (the purchase of which Hawaii’s food and coffee shops can certainly use right now) for encouragement.

Allow the team to make decisions together: What time should the morning huddle be hosted?  What projects should be discussed first?  Who can work together and take point on this presentation?—and so on.

4. Focus on Communication Protocol 

Set up good communication practices for everyone to stay on task (and working in the right direction).  This includes a daily check in: invite all remote workers and discuss tasks and snags.  See if anyone has questions, and ascertain how each can best contribute that day’s efforts towards reaching a common goal.

One of the most important rules should be avoiding negativity.  Without seeing one another face to face, it is easy to type snarky comments in a chat window.  Even when joking, context can be lost and plaintext messages can be read and differently interpreted by the recipient.  Encourage a “no negative comments” policy early on to avoid any confusion or hurt feelings.

With such in place, talk frequently.  Chat programs permit easy communication with coworkers.  If the physical office had an “open door” culture, allow coworkers to start chats with managers at any time, unless marked on the team’s calendaring tool as unavailable.  Don’t waste time wondering if things are on the right track; real-time chatting can clear up miscommunication and free up time that would have otherwise been wasted.  Face-to-face video meetings are important to develop fragile ideas or discuss sensitive topics.

Managers should ensure a disciplined rhythm for meetings.  A defined timeline and pace should be established before bringing the meeting to order; all invitees should begin the login process before the defined start-time for the meeting.  Don’t waste time with off-topic wanderings.  Stay on task and be brief to best use everyone’s time.  If follow-up questions arise after the allotted time has expired, direct such to the team’s selected chat program and ensure that pertinent information so shared is summarized and, if necessary, conveyed to meeting attendees.

The tone of the meeting, however, remains critical.  Virtual meetings desaturate personable aspects that would otherwise permit team members to become chummy or feel comfortable.  Be inclusive of ideas and encourage all to speak up.  A shot-down comment will sting for a long time.

5. Know the Manager’s New Role

As the manager of a suddenly dispersed workforce, trusting one’s team and focusing on their progress (rather than on hours put in) will go a long way.  Discuss priorities, share expectations, and anticipate a certain amount of pushback by employees.

Check in regularly to see if members have questions or have hit any roadblocks.  It is likely that in days to come, workers will find that productivity groove and need less of a manager’s time; until then there are likely to be at least a few transitional difficulties.  This will also encourage—if not mandate—communication, whether with managers or by reaching out to each other through one or more of the team’s online tools.

Make room for emotional adjustment.  Being stuck at home all day, for some, can be depressing.  Having kids and family around while working can be overwhelming.  Managers who expect clear and absolute separation of the personal and professional lives of their colleagues will inevitably be disappointed.  Such an expectation is unrealistic, or even inhumane.

Start meetings by asking, “How are we feeling?”—tacitly acknowledging that these are emotionally charged times.  Only then move to the meeting’s agenda.

The bar for being an effective manager just got raised.  Godspeed.

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“Gov. David Ige calls for tourism halt for 30 days amid coronavirus pandemic” – Star Advertiser, Mar 18

These recent measures by Hawaii state may delay or limit the humanitarian crisis caused by COVID-19, but they make it abundantly clear that our actions to contain the virus will themselves cause massive business disruptions. And then, there is the imminent risk from virus spread in our communities.

For the Hawaii CEO, a “wing it” approach has zero chance of success. This crisis calls for business leaders to take deliberate, bold and swift actions.

We recommend the CEO take a 3-pronged approach (we will update our thoughts here, if new information necessitates that).

A. Financial Plan

1. Plan for six twelve months of depressed revenues. Build a quick-and-dirty revenue forecast based on the likely scenario of what % of your customers will be lost, and of those that remain, how much of their spend with you will be reduced. (Keep your assumptions simple so you can revisit them as needed).
2. Cash will be critical for business continuity. You don’t want to be cash-strapped in a down market. Use your revenue and collections assumptions to develop a cash forecast. Then, identify a “minimum cash” target that you feel comfortable with to weather this storm. In most sectors, Hawaii CEO’s should aim to build two three months of fixed costs (payroll, rent, etc.) in the bank. This “war chest of cash” is needed to safeguard your business through the economic downturn.
3. Assemble a core team to build a comprehensive action plan to address the liquidity gap you have previously identified. Look at all the drivers of cash – from revenue-loss mitigation, to aggressive cost-cutting, to rapid collections, to delayed payments to vendors, capital expenditure avoidance and contract re-negotiations. Prioritize immediate actions that your team will take and set clear targets in each area. Make sure there is individual accountability and a sense of urgency among the members of your core team. Nothing is more important for your business.
4. Be ready with a prioritized list of more aggressive actions if revenue declines are deeper or longer than you first assumed. Also, agree with your core team on what events should trigger those actions.

B. People Plan

1. Act as a bridge between your team and the health advisory by State agencies.
2. Over-communicate with your employees, customers, vendors, and other stakeholders; and encourage them to escalate any key issue directly to you or a designated chief-of-staff. Uncertainty will breed unnecessary fear, and kill productivity.
3. Invest in remote work, setting up as many of your employees and contractors to work from home, as feasible. Those who must come in to work will need staggered shifts to ensure “social distancing”. To make this transition effective, it is important to establish new ground rules for working “together” and, more importantly, do a mental switch from tracking staff efforts to looking at deliverables and outcomes. There are several great tools for online chat, task management and remote meetings to choose from. You can read our thoughts here.
4. Develop a deep personal understanding of various staff roles, criticality of those roles to business continuity, and the levels of current individual performance. Build basic contingency plans for any labor shortage due to sickness or unavoidable layoffs.

C. Stabilization and Growth Plan

1. Focus on the profitable core of your business. Is your organization stretched too thin? Are there lines of business which are subsidized by other, more profitable business units or offerings? If so, they may need to be temporarily suspended or permanently shuttered/ divested.
2. Major work streams (core operations) and the crisis response will need most attention. Establish a rhythm for virtual, daily huddles and weekly reviews, which dive deeper and track progress against the action plan. Take direct action in areas which get stuck or need policy-level changes.
3. Keep an eye on the market. While your primary focus is on mitigating business risks in this down cycle, listen closely to other market signals. As months go by, there will emerge excellent opportunities for M&A, or evolving your current offerings to deepen customer loyalty, or restructuring your business to be more online, or preparing for a “new normal” for operating on the islands. These opportunities can be leveraged by only those who are prepared.

The COVID-19 crisis will eventually blow over, and Hawaii’s economy will bounce back. Many businesses with poor liquidity or indecisive managers will perish. The bold CEO and her organization will emerge stronger at the other end. And, it will be because of their timely actions.

How can GUILD Consulting help you?

We specialize in “strategy” and “alignment.” We will perform the critical analyses and facilitate a 4-hour planning session with your core team (virtual) to develop an action plan with clear accountabilities and timelines. We will “stress test” the plan to make sure your team is aligned and ready.

To learn more, email us at solutions@guild.im or call (808) 729-5850.

The post The Hawaii CEO’s Plan for Dealing with COVID-19 appeared first on GUILD Consulting.

But if, as business owners, we invest in what matters through the efforts of non-profit organizations, we can create change.

In this time of resentment and umbrage, one of the harder questions is how to stay reasonably buoyant and make positive contributions. Here’s one answer that traces its origins to Loren Eiseley, a gifted anthropologist, educator, philosopher, and natural scientist, who taught and from the 1950s through the 1970s.

One morning an old man was walking on a nearby beach after a big storm had passed and saw the shore littered with dead and dying starfish as far as the eye could see. Off in the distance, he noticed a small boy approaching. As the boy walked, he paused once in a while, picked up one of the starfish and threw it into the sea.

When the boy came closer, they had the following conversation:

Old Man: Good morning! May I ask what it is that you are doing?

Young Boy: Well, I’m throwing some of the starfish back into the ocean. The tide has washed them up onto the beach and they can’t return to the sea by themselves and when the sun gets high, they will die, unless I get them back into the water.”

Old Man: But there must be tens of thousands of starfish on this beach. I’m afraid you won’t really be able to make much of a difference.

The boy bent down, picked up another starfish and threw it as far as he could into the ocean. Then he turned, smiled, and said: “It made a difference to that one!”

We have many words for starfish throwers. In older times that function may have been done by leopard chiefs (Central Africa), talking chiefs, (Polynesia), big men (Papua New Guinea), haku or lei makers (Hawaii), or rabbis, priests, counselors, or “confianza” in Latin America. Today, they may be called brokers, intermediaries, conciliators, mediators, facilitators, team leaders, referees, coaches, or resolution advisers.

Regardless, they take their satisfaction and small joys, one starfish at a time. But here’s the big question: What happens to the starfish after we throw it back in the water?

Non-profit organizations are focused on policy; they’re focused on change. By putting our efforts into helping them succeed, businesses bypass those seeking an agenda or watching their bottom line. Supporting their efforts is a great way to promote change and to find real movement within a cause.

Partners at GUILD Consulting will be happy to talk to you about our work with non-profit organizations and the impact they can provide to business. Email us at solutions@guild.im or call (808) 729-5850.

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Some very common scenarios:

• A working group convened by a government agency is reviewing potential future improvements to a highly used local park. Opinions on a few key park features diverge and are the subject of fierce controversy.
• A university college is debating which of three candidates should be their next dean. One is a respected older faculty member nearing retirement. A second is a bright, young faculty member who has just achieved tenure and has radical ideas. The third is an out-of-state candidate with good credentials.
• An engineering firm is trying to decide between different budget cutbacks. Each department is hoping to avoid personnel and resources losses.

A potential intermediate step that can sharpen discussion is a straw poll designed to calibrate and aggregate a group’s opinion. In some settings it is called the “Fist-to-Five” method, though at GUILD Consulting we call it, “The Heartthrob to Heart Attack Scale.”

It’s a five-to-one straw vote that locates and sums up how a collective body feels about the issue or idea at hand.

For example:

We introduce this tool at the start of trainings and use it judiciously. When the time is right, people are reminded it’s not a final vote and asked to put a number on how they feel. Sometimes the results are obvious, if everyone clusters between 4s and 5s or at the bottom between 1s and 2s.

When results diverge more dramatically, we might ask each person to explain why they straw polled the way they did. For example, “Sam, you voted this a 4. Tell us what it would take to change your polling number from a 4 to a 3, or even to a 2.”

The polling tool tends to have two constructive effects:

• it sharpens the issues, and
• it promotes a more meaningful discussion

There are many other uses and modifications for this, too. In one particular scenario, we worked with a group who felt especially bad about some actions they had taken that hadn’t worked out. When asked to calibrate the “burden” they felt in numbers, where 5 equaled 500-lbs, 1 equaled 100 lbs., their own results surprised them. Most felt only modestly bad while a few answered with 0. In addition, only a few felt deeply troubled, and the meeting quickly moved on to other more important matters.

Our Partners at GUILD Consulting will be happy to talk to you about approaches to better team alignment. Email us at solutions@guild.im or call (808) 729-5850.

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