The Top (Self-Serving) Reason You Need to Keep Your Employees Happy

 

 

Why should I thank my employees for coming to work? Why do we need employee appreciation events like lunches, dinners and parties? I gave them a job, which they are lucky to have these days. Isn’t that enough?

You may have heard these sentiments expressed by CEOs and business owners. Or perhaps you’ve had similar thoughts yourself. Isn’t every two-hour lunch event decreasing your employees’ productivity and costing your business money?

The answer to that is yes. But if these events help keep your employees happy and prevents them from leaving, you are saving money. A lot of money when you consider the high cost of turnover for filling any one of those jobs.

You can find out just how much that cost is with this Turnover Calculator  from The Predictive Index, a workforce assessment company.

This six-step calculator takes into account items such as the cost of covering the position during the time it is vacant, the hiring manager’s time, advertising for the position, resume screening, company time spent interviewing and background checks.

Other costs include the time to onboard the new hire and time for that person to obtain full productivity.  (To obtain the full report on this site, you will have to give your name, company and email at the end. There are other online calculators available as well.)

A study done last year by the Society for Human Resource Management, the 2016 Human Capital Benchmarking Report, concluded the average cost-per-hire is $4,129. And that doesn’t include the additional cost associated with onboarding the new hire.

Whatever the final figure is, it’s indisputable that losing an employee is expensive. So, next time you find yourself concerned about the cost of yet another employee outing or party, remind yourself that if that event helps keep people happy and engaged, it’s a bargain for your business.

The good news is the biggest thing you can do to help retain employees is also the simplest. Show appreciation. Say thank-you. These simple gestures can contribute to your bottom line as well. In an  article in the Wall Street Journal about showing appreciation at the office, it was reported that more than half of human-resource managers say showing appreciation for workers cuts turnover, and 49 percent believe it increases profit.

To read more about how appreciation helps and recognition needs to extend beyond the paycheck, please see my blog Any Time of Year is Good to Express Appreciation.

Here’s some further reading on ways to retain your employees.

How Loyal Employees Contribute to Your Bottom Line
This is a two-part series on the importance of developing and maintaining loyal employees. Part one explores why every company should focus on having loyal employees and how doing so contributes to its revenue. Part two offers tips of how to develop loyal employees.

Work-Life Balance Key to Recruiting, Retention
This two-part series is on the growing importance of offering a work-life balance to employees in your company. Having a work-life balance was ahead of money, recognition and autonomy for more than half the people surveyed in a study done by Accenture in determining whether or not they have a successful career. Part two, Work-Life Balance, the #1 Thing to Offer, discusses the one critical component your workplace must have to keep employees.

5 Things to Know About DIP Financing

If you aren’t familiar with the term DIP financing, well, that might be a good thing. That means your company hasn’t had to explore the possibility of bankruptcy.

DIP (which means debtor-in-possession) financing is for companies in financial distress, primarily for those who have filed for Chapter 11 bankruptcy. Even if you think you may never have to worry about bankruptcy, it’s good to understand what DIP financing is. It is important that you obtain financing PRIOR to filing for bankruptcy protection. To do otherwise seriously jeopardizes your ability to survive.

Remember, even if you are contemplating filing bankruptcy, that does not have to mean the end of your business. Many companies successfully emerge from bankruptcy and DIP financing can be one of the tools your company uses to get it through a difficult time.

Here are five things you should know about DIP financing.

1. This form of debt can allow a company to continue operating until the assets of the company are sold or the business is successfully reorganized. Companies in distress need money to continue operating. But they may already have cash flow problems, and once they have filed for Chapter 11, other forms of credit may dry up, they may begin to lose revenue as customers go elsewhere and they may have additional expenses related to the bankruptcy. So, they may need another source of cash quickly. DIP financing is often the best answer.

2. DIP financing can sometimes be obtained from an existing lender. Sometimes an existing lender will lend money in the form of a DIP loan. They may do so to protect their interests, finance a sale or to protect a liquidation of your assets. The majority of DIP lenders last year were interested parties, according to DebtWire’s North America DIP Financing Report for 2016.

But a current lender may be reluctant or unable to increase its debt level with a company that has filed Chapter 11. A DIP from another lender can be the answer to obtain financing when other sources are not available.

3. Unlike some forms of debt, DIP financing takes top priority, despite it being the newest form of financing for a company. Remember, “Last in, first out”. This is referred to as super priority. A DIP load will be paid back before any other existing debt. This of course is critical to the lender as they have reassurance they will most likely get paid back, even if the company ends up being liquidated. Note that Administrative Claims of the Bankruptcy could be carved out prior to your Super Priority Claim. A good lawyer can assist in this process.

4. Interest rates can vary widely. Rates in 2016 varied from 12% to 18%, according to DebtWire’s DIP Financing Report. Most had maturity rates of less than a year, while some were as short as three months. Note that interest rates for smaller DIP loans (less than $1.0 million), which have more risk to the lender could approach 20%+ range.

Amounts vary widely as well. I’ve worked with companies that needed DIP loans of less than $1million but most required millions of dollars to finance their survival.

5. DIP financing can help restore confidence to the companys vendors and customers. Knowing that a lender has examined the business and its ability to repay the money, and is willing to lend it more money can help calm concerns in the market. Customers and vendors that may have been tempted to take their business elsewhere may be reassured that the company has the funds to continue operations, keep vendors current and is committed to emerging from bankruptcy.

If you’d like assistance in obtaining DIP financing, please contact me directly at LKatz@GlassRatner.com or (404) 307-6150. We have many sources throughout the country. We also have several local lenders that specialize in smaller credit facilities.

Giving Employees Bereavement Time is Good For Business

Facebook made the news recently for adding a generous paid bereavement leave to its list of benefits. An employee can get up to 20 days of paid leave when a member of their immediate family dies and 10 days for a member of their extended family.

COO Sheryl Sandburg, who tragically lost her husband Dave in 2015 during a trip to Mexico, announced the policy on where else? Her Facebook page.

“We’re extending bereavement leave to give our employees more time to grieve and recover and will now provide paid family leave so they can care for sick family members as well. Only 60 percent of private sector workers in the United States get paid time off after the death of a loved one and usually just a few days.”

Her post got over 35,000 likes.

I’m a big proponent of employees taking time off for vacation, and have written about it several times. In “Three Reasons You Want Employees to Take Vacation I discuss how it’s better for their health and makes them more productive to have a break from work.

Bereavement leave is in a different category than vacation, of course. And there is no federally mandated requirement for payment for time off after the death of a loved one, even to attend the funeral. However, about 60 percent of all workers do receive around three days for the death of an immediate family member and one day for extended family members.

The 2016 Employee Benefits Report done by the Society of Human Resource Management reported that 81 percent of employers give paid bereavement leave for their employees.

The typical amount of leave given was one day for an extended family member or relative of an opposite-sex partner; two days for a miscarriage, relative of a spouse or relative of a same-sex spouse; three days for an extended family or partner and four days for a spouse or a child. Most companies did not provide any leave for the death of a friend or a colleague.

(Many companies are giving time off for the death of a pet. But that’s a topic for another day.)

A study done by Boston Consulting Group on a situation that also involves leave – family leave for mothers and fathers – found that “employers see a solid business case for offering paid family leave, including benefits such as improved talent retention and attraction and their own ability to manage the costs of the program through thoughtful policy design.” This study was conducted by reviewing the policies of more than 250 companies.

An article about the study, “Why Paid Family Leave is Good Business,” points to five reasons giving family leave is good for business. I believe a few of these can apply to bereavement leave as well.

  • Employee retention. When employees feel valued as individuals by being given time off when they need it, then tend to stick around.
  • Improved engagement, morale and productivity. An employee who isn’t allowed paid time off after the death of a loved one can suffer from low morale. And even though they may be in the office right after a death, they won’t be very productive. Giving them time off allows them to be with family during a difficult time.

“Companies that stand by the people who work for them do the right thing and the smart thing – it helps them serve their mission, live their values, and improve their bottom line by increasing the loyalty and performance of their workforce,” Sheryl wrote in her Facebook message.

I do have to add one caveat, however. I once worked with a company where a guy took leave three times in one year, each time claiming his grandmother had died. “How many grandmothers do you have?” I asked him after the third time.

“Oh, [expletive],” he said, realizing he’d been caught. “Yeah, you used that same excuse three months ago,” I informed him. He did not get paid leave that time.

In my career as a turnaround authority, I often employ the motto “Trust, but verify.” In the case of bereavement leave, this is a good motto to remember. You don’t want a few people who are taking advantage of a policy to ruin it for everyone else.

Giving employees time to grieve is the right thing to do. It shows an employee you care, and can lead to increased productivity. Sounds like a win-win to me.

CEOs Didn’t Start with Fancy Jobs, And Your Kids Don’t Have to Either

As a former peanut seller, I know how much I learned from hawking those bags of goobers at Atlanta Crackers games as a young boy. I also learned many lessons from being a bag boy, babysitter, gas station attendant and a paper boy.

I think of those days every time I see parents stressing over their children finding the perfect summer job, believing it will be the key to their future success. While I understand their concern, I know the most successful people didn’t start as an intern in a fancy office.

One of my first jobs was selling peanuts at Atlanta Crackers baseball games at the Ponce de Leon Stadium, now replaced with a shopping center. The Sears building in the background is now Ponce City Market.

They were baby sitters, fast food employees and vacuum cleaner salesmen. Like me, Warren Buffett started as a paper boy. In my blog, Want to Be a CEO? Any Job Can Be a Good Start, I wrote about the early jobs of the CEOs of Netflix, Dell and Yahoo. None of them included an office with a desk.

Reading about their first jobs is one of my favorite parts of the interviews with CEOs and founders in “The Corner Office” column in the New York Times on Sundays. Here are just a few of my favorites:

Lisa Gersh, former Chief Executive of Goop: After realizing she wanted more than the $1 an hour she got for babysitting, as a preteen Gersh went to classes and got a degree in umpiring girls’ softball. She blew the whistle during games on girls older than she was for $5 an hour.

Mark Nathan, CEO of Zipari: At the age of 10, he took a wheelbarrow and collected old newspapers. Then he’d tie them into bundles, throw them in the back of a station wagon and take them to an industrial market that recycled newsprint. He got $15 for a load.

Deryl McKissack, CEO of McKissack & McKissack: Descendants of slaves, McKissack’s family owns the oldest African-American architectural firm in the country. Deryl began making architectural drawings when she was six.

Ashton B. Carter, former secretary of defense. Carter worked at a carwash when he was 11, but after complaining that he wasn’t included in the tip distribution, got fired. Then he got a job at a Gulf gas station and also worked as an orderly in a hospital. His duties included taking dead people to the morgue.

Yuchon Lee: CEO and co-founder of Allego. In kindergarten Lee resold fancy stickers his father brought back from Japan. In his later years in elementary school, he sold silkworms.

If your child doesn’t end up with a fancy office job this summer, remember that valuable lessons come from any job. And they may have a great “first job” story to tell in their later years when people ask about their success.

Should the CEO Be Fired? That Depends

In the wake of multiple problems splashed across headlines worldwide, speculation has run rampant that Uber co-founder and CEO Travis Kalanick may be on his way out. Issues include claims of sexual harassment at the company, massive loss of users and even a widely circulated video of the billionaire getting in a fight with a driver over fares for black cars.

In an article on Mashable, 5 Ways to Save Uber From Itself, the number one suggestion to save the global company is to fire Kalanick. “If you cut off the head, the body can function … at least temporarily,” the writer claims. Other business analysts claim that while he was once the ride-sharing company’s biggest asset, he is now their biggest liability.

But is firing the CEO the best solution? I advise companies that the decision to fire a CEO is never a simple one and should not be done in haste. There are several factors to take into consideration. And firing a CEO can often set the company back, especially in a time of difficulty.

A recent article in Fast Company, “Why Uber Shouldn’t Fire Its Bad Boy CEO,” made the case that Uber may actually benefit from keeping Kalanick in the CEO’s chair.

The article references this article on the Harvard Business Review, “Holes at the Top: Why CEOs Firings Backfire,” which explains why CEOs are often swiftly shown the door when times are bad.

“When companies do well, their CEOs are showered with money, perks, and adulation. When they do poorly, they’re given the blame—and the boot.”

The writer, Margaret Wiersema, is a leader in corporate strategy and CEO replacement and succession. She studied all instances of CEO turnover for a period of two years and found most CEOs were replaced not by the board after careful thought and deliberation, but at the insistence of investors upset over returns.

She compared performance of the companies from two years before a dismissal to two years after, compared performance with industry averages and then compared the performance of companies whose CEOs had retired as opposed to those whose had been fired.

Wiersema came to the same conclusion that I have after decades of working with companies in turmoil. “Most companies perform no better – in terms of earnings or stock-price performance – after they dismiss their CEOs than they did in the years leading up to the dismissals. Worse, the organizational disruption created by rushed firings – particularly the bypassing of normal succession processes – can leave companies with deep and lasting scars. Far from being a silver bullet, the replacement of a CEO often amounts to little more than a self-inflicted wound.”

I’ve seen companies where CEOs were fired for far fewer infractions. For example, perhaps the CEO didn’t make the numbers for a year or two. The business was still profitable, but it was below expectations and not as profitable as projected. Those CEOs often get fired within 3-6 months, rarely leading to the increase in profits that was hoped for. As for Kalanick, while Uber may be in a public relations crisis, and thousands of users have protested conditions at the company by following the instructions on the social media hashtag #deleteuber, the company is still growing. The head of North American operations claimed growth during the first 10 weeks of 2017 was better than the first 10 weeks of 2016. So maybe he is here to stay. At least for now.

Firing a CEO is not an easy or simple decision and shouldn’t be rushed, especially if big changes are being made to turn a company around. Those changes can take time.

Ultimately, it’s up to the board of directors. They have to make the decision based on a number of factors. But more often than not, it pays to keep the CEO because he can be a part of the solution, even if he was originally perceived as part of the problem.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

You Can Fight Fraud. And Win.

We all know Smokey the Bear’s slogan. “Remember – only you can prevent forest fires.” You can use the same slogan for fraud: only you can prevent fraud in your company.

I couldn’t let National Fraud Awareness Month slip by without mentioning a major contributor to revenue loss for a company. In its 2016 Global Fraud Study, the Association of Certified Fraud Examiners (ACFE) reported that a typical organization loses 5% of its revenue in a given year as a result of fraud.

Let that sink in a minute – 5% of your total revenue. Billing schemes and check tampering pose the greatest risk. And here’s another thing to think about, the perpetrator’s level of authority is strongly correlated with the size of the fraud. The higher up the thief, the bigger the theft.

I have written extensively about fraud as it can severely damage a company, and can even cause it to fail. While you can’t prevent fraud 100 percent, you can lessen its effect on your business. Does your company have strong enough fraud prevention measures in place? Here are a few articles to get you started.

Best friends, grandmothers, partners, even church ladies – I’ve seen them all commit fraud. When it comes to protecting your assets, trust no one. Don’t ever think that you know someone well enough to say, “He would never do that.” Maybe not. But don’t find out the hard way.

Sadly, the same goes for family members. Just read about the sad case of Gladys Knight and her son and what he did to her poor chicken and waffles restaurants.

I once worked with a company where the younger brother was running the business and took a salary beyond the limits allowed by the corporate minutes. Unfortunately, the fraud was only discovered after Daddy died and the statute of limitations had run out.

Fraud can occur when you have three elements: pressure, opportunity and rationalization. Knowledge of the fraud triangle is the basis of any successful fraud-deterrence program.

To catch fraud early, you need to know what the red flags are. One of these is when an employee exhibits behavioral changes, undergoes a sudden change in lifestyle or has financial difficulties. Read the article for four other red flags you need to be on the alert for.

According to the ACFE, the most common way internal fraud is detected is by receiving a tip from someone. One of the things your company can do is set up an anonymous hotline for anyone to report suspected theft. Their numbers show that organizations that had one were much more likely to detect fraud than those that didn’t – 45.3% to 28.2%.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.

5 Tips for Handling Crises

It made national headlines last week: Atlanta’s I-85 bridge collapsed. A three-mile stretch of highway, carrying 250,000 drivers a day through the middle of the city, was shut down after a massive fire caused a bridge to collapse.

Thousands of business owners were suddenly faced with a huge problem. How do they get their employees to work? What about delivery trucks? What about customers getting to their place of business? Businesses close to the collapse faced a worse crisis as access to their companies was compromised. Several businesses in the area are closed as they figure out what to do.

The I-85 bridge collapse in Atlanta caused a crisis for many metro-area businesses.

There were a lot of unknowns about the situation. But one thing is for certain – a city with massive traffic problems already was about to get a lot worse.

As a CEO or business owner, you may have thought through many contingencies and have a plan for what to do in certain circumstances. Maybe you have a bad-weather plan that covers managing your company for a week or two if conditions prevent people from driving to work. If you did have a plan on how to handle transportation issues in the event of a major artery being closed, congratulations!  You are ahead of the game.

For most people, however, a bridge collapse of this magnitude or some other unpredictable crisis falls into the “Expect the Unexpected” category. Here are a few tips on how to manage your company during a time of crisis.

  1. Don’t panic. Don’t stress yourself by imagining worse-case scenarios. Remind yourself you are capable of leading your company in good times and bad and you’ll figure out a way to manage this one as well. People take their cues from you and it’s important for you to remain calm in the face of any type of crisis. Manage your stress levels. When I deal with CEOS in a crisis situation, teaching them how to manage the stress in their lives is crucial to guiding them through a crisis.
  1. Correspond with employees, vendors and stakeholders as soon as possible. People don’t do well with uncertainty. Even if you don’t yet have a plan, reassure everyone that you are meeting with senior management and will be back in touch with your plan. Reassure them and convey a sense of calmness will let them know you are on top of the situation.
  1. Ask for your employees input. As part of gathering information to formulate a plan, it can be a good idea to ask your employees as well as senior management for any intel they may have about the particular situation. For the bridge collapse, asking for information people may have heard through their neighborhood associations about alternatives or finding out information about their access to public transportation can be helpful.
  1. Get creative. Consider all possibilities in the wake of a crisis. If ever there is a time for out-of-the-box thinking, it can be during a time of crisis. Some Atlanta companies have implemented staggered working hours for employees, added more options for telecommuting and are giving discounts to employees for monthly passes on public transportation. A rental car company that has an empty lot and is cut off from getting new inventory is thinking of sending new renters to the airport and compensating them accordingly.
  1. Pick one plan and stick to it. As I advise in my book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” when facing a crisis, pick one logical and reasonable plan and stick with it. Align everyone and everything in your company towards this goal and for this plan.

My book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” is now available as an ebook.