In my experience of working with MDs of their own companies over the last 14 years it doesn’t take very long before they start talking about why they set up their business, what is important to them in running the business and keeping it solvent/profitable, the differences that exist between them and other Directors and shareholders or conversations that start about a manager who just doesn’t get it. There are many insightful stories and anecdotes. Passions and frustrations run high in equal measure. So in a very conversational way, the values of the MD become very clear i.e. what really matters to them. With a bit of gentle probing, it doesn’t take a lot to get an MD to define the behaviours that enable success in their business. ‘If only people did this, we would be even more productive.’ When the MD set up the business, working with a small team, direction, focus, consistent behaviour was all a lot easier because everyone could see what was happening, everyone was involved in … [Read more...]
How to design a robust profit-sharing bonus scheme for 2019
In the last newsletter we talked about what to do about awarding a Xmas bonus. [If you missed it click here to find it] Now we talk about putting a bonus scheme into place for 2019. If your financial year-end is say March, the next few months could be a good time to develop and trial a scheme before launching it in April. What should l incentivise people on? The profitability of the business is a simple way to measure business success. If there is a large minority of support staff then you might also consider cost-savings/efficiency savings as being the other side of the profit coin. You might be tempted by the achievement of individual objectives. Our general experience in the SME space is that staff appraisals don’t happen consistently enough so we wouldn’t recommend a performance pay system based on the achievement of individual objectives, as MDs usually haven’t the infrastructure in place to make this watertight. What do l need to do first? You will presumably have a business … [Read more...]
Top tips for giving an Xmas Bonus to your team
It's that time of year, when Managing Directors are considering (or agonising over) whether to give a Xmas bonus. My start point would be to ask why you are considering a Xmas bonus. (If you are agonising over it then this suggests it is a marginal decision and you may be better off not bothering for the likely impact it is going to make) There are probably two reasons for considering a Xmas bonus As a form of recognition, a thank you for your efforts in 2018 As a retention tactic for 2019 in the face of a tight recruitment market There are 4 options available: A token gift (such as a bottle of wine) This can be tax free if all the following criteria apply: It costs less than £50 to provide and isn’t cash or a cash voucher It isn’t a reward for work or performance It isn’t in the terms of the employment contract The impact here is more on how it is done rather than the gift itself. One Senior Partner used to dress … [Read more...]
Do you have a 1st April to 31st March holiday year for your staff?
If you don’t (i.e. it is the calendar year or some other arrangement) then this is not relevant. If you do have a 1st April to 31st March holiday year in your business read on…… In the current 2017/18 holiday year you may have noticed that Easter is split over two holiday years. Good Friday is on 30th March and Easter Monday is on 2nd April. The net effect is that for the 2017/18 holiday year staff may receive an extra day’s holiday. How you handle this will depend on what is in your contracts of employment regarding holiday. Legally, staff are entitled to 5.6 weeks’ holiday annually. In 2018/19 the number of bank and public holidays amount to 7 days ie one day short of the legal minimum and therefore you would be in breach of your employee’s rights. To avoid this, and depending what your contracts say, you may need to top up leave next year by one day. If you want a complimentary review of the position for … [Read more...]
What are the latest HR legal requirements business owners need to implement in April 2018?
For the SME community, the relevant scheduled changes from April 2018 are the rates paid for statutory purposes, a change to the tax treatment of payments made in lieu of notice, and the impact of new regulations from May regarding data protection of staff records. Changes in statutory payments From 1st April: Rates for statutory maternity pay, statutory paternity pay or shared parental pay rise to £145.18/week The national minimum wage for those aged 25+ rises to £7.83/hour From 6th April: Statutory sick pay rises to £92.05/week Employer contributions into a pension auto-enrolment scheme increases to a minimum of 2% Change to tax treatment of payments made in lieu of notice introduced From 6th April, the rules are being clarified, after years of ‘depending on what my accountant says’ when it comes to the tax treatment of pay in lieu of notice on the termination of an employee’s contract. All payments in lieu of notice … [Read more...]
How to avoid failure in managing change in your business
Picture this scenario. You have grown your business to a particular point and now the numbers aren’t growing as fast as you would like. Furthermore, the relationships you have with your key people are changing – they seem more focused on what happened in the past, their focus is changing from the business to them, they are starting to question you more openly and perhaps in not an entirely constructive way. Change is needed. What is involved? There are essentially two aspects to this mirroring the two hemispheres of the brain – the rational and the emotional. The rational This is often the easier side of the brain for most MDs to relate to as this involves data and logical thinking. In the context of change, the MD knows what s/he has to achieve, the problems with the existing systems and people, and the new set of skills and capabilities needed for the future. Essentially it is a form of gap analysis. What do you as … [Read more...]
Are your ‘workers’ on the right employment status?
Contemporary talk is about the gig economy. Workers say ‘gigs’ are a less secure and more exploitative form of employment. Businesses will say that it is tapping into a trend for flexible working that allows individuals a choice and where, when and how they work. Interestingly the CIPD reports that the nature of work has not fundamentally changed in the last 20 years and, secondly, in summarising the outcomes of 5 surveys, between 14% and 33% of people in atypical work are only in these roles because they could not get regular employment suggesting that this form of working can suit people. So far, so good… In the last quarter there have been a number of legal cases that have found against high profile SMEs because there is confusion over the employment status of the worker or group of workers engaged in the business. This comes at a time when government policy is geared to protecting, or increasing, the tax take. We would suggest … [Read more...]
Impending Employment Law Changes for 2017
As MDs think about the New Year or start planning for the next financial year there are a number of forthcoming employment law changes that may affect you and your business. Gender Pay Gap True this applies only to large employers (employing over 250 employees) but it is likely to be cascaded down to the SME sector in coming years. So why do something about this now? Gender pay gap reporting applies both to bonuses and pay. If there are discrepancies between male and female workers on either score when employees are doing the same job, there are likely to be fines, the cost of immediate remedial action and potential claims for back pay equalisation going back 7 years. The reporting requirement for large employers will be to publish: the difference in mean pay between male and female employees; the difference in median pay between male and female employees; the difference in mean bonus pay between male and female employees; the difference … [Read more...]
Resolving Directors’ disputes
As business advisers working with MDs we are used to solving business problems and recommending courses of action across the range of business disciplines. Recently we have been involved in a number of cases where we have sought to resolve disputes between Directors and/or shareholders across a range of issues, markets and company size. The purpose of this blog is to show how these disputes have arisen, the process we have followed to resolve them and to give reassurance to readers that you are not alone if you are faced with a potential disagreement and that help could be at hand. How have these disputes arisen? The businesses we have been working in have all been operating for at least 2 years, and in some cases, considerably longer. The theme has been a change in circumstances. From the heady days of starting up, with grand plans, a desire to work with business colleagues without a boss, the reality of running a business has caused cracks to … [Read more...]
Case Study: Leadership Succession Coaching in Action
Gordon is MD of a £24m turnover business. He is aware that in the next few years there will be a number of retirements at senior levels and there is an experience gap between Board members and the next tier down. He has identified Richard as possibly having the potential to step into a broader role over the next few years. Gordon’s challenge Gordon faced five immediate challenges: Is Richard the right person? Is he capable of stepping up? When is the right time to start the process? When are the other Directors going to retire? How do l sell the process? How do l manage the expectations of both Richard and others? Dealing with these challenges Answering these questions took a number of meetings over around 3 months. One of the solutions was to adopt the leadership profile developed by leading assessment company SHL, which could be used as a proxy benchmark of capability against a senior manager group. We also did a mapping … [Read more...]
How coaching can support leadership change in a small business
Coaching might be seen as the new buzzword of the age. It has come to cover a multitude of interventions – consulting, training, educating, advising, mentoring, therapy, counselling and so on. For me coaching is about engaging with the whole person to achieve the outcomes the business is looking for in a sustainable way. This first blog is to unpick that last sentence and explore how that fits in to succession planning in an SME environment. “Engaging with the whole person” means working with the rational and emotional sides of the brain. My client may or may not know what to do. Any knowledge gaps can be identified through coaching and a plan developed for further training and education outside the coaching relationship. That is relatively straightforward particularly if the person is motivated to succeed. The emotional aspect is just as important. I would be asking such questions as: How does the person really feel about the new opportunity (in the context of succession)? What … [Read more...]
Getting maternity leave right with your key employees
Over the last 12 months l have worked with client MDs on 6 cases of maternity leave and on two of these cases, because they have become contentious, I have reflected on the causes of these disputes. Looking at this dispassionately one might say that this reflects a normal distribution – most situations of maternity leave will be managed perfectly well by both employer and employee. However, occasionally, there will be situations where the maternity will cause a rethink in the nature of the employment relationship leading to a dispute. In some cases the maternity accelerates the amicable ending of the employment relationship. I offer these thoughts to better manage the maternity leave process to do the best you can to avoid disputes. As the MD who knows the employee’s situation, you are probably best placed to predict any risks that may emerge. Whether you want to admit to the risks is another matter. If there is any likelihood of a breakdown in the employment relationship, ensure … [Read more...]
Dealing with an under-performing family member
This is one of those predictable problems which takes on additional angst because it involves a family member. As a predictable problem, its’ resolution can be proceduralised by specifically mentioning this situation in a family constitution so that there are no surprises if and when a situation like this occurs. But first things first. Why do people underperform? There are 4 reasons, 3 of which are the responsibility of family business management. The person cannot meet expectations The person does not know what is expected of them The person does not know that they are not meeting expectations The person will not meet expectations The first 3 reasons are management issues. Identifying the reason is the start point for the discussion. Are expectations too high? Are expectations too vague? Is the person’s role clear? Are the objectives set SMART? Are there regular reviews of the person’s performance? Is training or coaching provided to help the person … [Read more...]
Employing family members in the business
Talking to MDs of family businesses, I am struck by how many started off working in the business during school holidays and then fell into the business after school or university and worked their way up to the top job as the company grew and they became the obvious successor to typically – but not exclusively – the founding father. Move on a generation and second generation owners have different and similar challenges. Holiday jobs are still on offer but the next generation, on graduating from university (typically), want to forge their own careers and get trained in their chosen career. Mum and/or Dads business seems less exciting and probably not an immediate career choice as the child wants to spread his/her wings. First of all that’s good news. I would recommend that any children of the owners in a family business go out and experience the world, get trained, learn about a sector or two, and perhaps get a professional qualification be it plumbing or accounting. They will … [Read more...]
Employing ‘partners’ or ‘spouses’ in the family business
Over the Christmas break l was reading an article about how relationships between married couples are likely to survive longer than relationships between partners, particularly when children are involved. If commitment is at the heart of this then l guess that it is the reason many families agonise about whether the partner of the blood line relatives should be able to access the benefits of being part of the family business – whether through employment or dividends as a result of shares held. The arguments for and against are summarised below: Of course it’s a no-brainer that a spouse should be part of the family business Not in a million years, I don’t want to dilute my legacy outside of my family · Strong message that spouse is part of the family · I have built this business for my children; the risks of marital breakdown are too high · Tax efficient way to distribute income · Buying back the shares is potentially difficult with a negative impact on cash … [Read more...]
What is involved in succession planning in a family business?
This may sound an obvious question yet my experience of family businesses is that many business leaders don’t know how to get started with succession planning or they view it as a single event rather than an on-going process. There are three main processes involved in succession planning: Identifying and appointing a successor Managing the exit of the current MD Managing change from both the family and business perspective Identifying and appointing a successor This is the first stumbling block and where the family and business systems can collide. In a family business the hope is that a family member will be sufficiently interested and qualified to take over the reins. Depending on the experience and skills the family successor has, there may be the need for coaching, mentoring and accelerated learning to equip the successor to take over the reins. This may take up to two years as responsibilities are handed over in such a way that business continuity is … [Read more...]
Why family businesses might consider putting governance structures in place
The buzzword of recent years is professionalising the management of family businesses. Not only does this mean appointing talent at the top of the organisation be it management or having a NED to advise and seek counsel from, it also means confronting the way families manage the business. Family businesses represent the merging of two systems – those of the business and the family. The drivers of the two systems are different. Business is about taking risks as opportunities present themselves. Families operate differently – often it is about maintaining harmony and so being risk averse. Problems occur when the two systems collide. This is where governance structures come in – to assist families manage the predictable problems. Some predictable problems l have come across are succession, dealing with conflict between family members, dealing with underperformance by a family member, employing family members (or not) in the business. One aspect of a governance structure is the … [Read more...]
5 things to do to ensure successful transition in the family business
In many recent surveys[1] nearly half of family businesses intend to pass on their business to their children, less than 44% have put a formal succession plan in place. In this blog we summarise the 5 things to do- following up in more depth in successive future blogs. Have family governance structures in place Transitioning management and ownership in a family business is a time of great change creating opportunity and uncertainty in equal measure. Governance structures formalise the way businesses are managed and delineate the separation between family and business. Yet family governance is one of the issues many families seem to be reluctant to address because it forces them to confront major changes in the way they manage the business. Consider a family business that has a family council, which is used to meeting twice a year to discuss how the business is doing from a family perspective. At one such meeting the father announces that he wants to retire in 5 years’ … [Read more...]
4 things to get right when having a protected conversation
In July 2013 the law was amended with the intended effect that employers and employees would be able to enter into negotiations about the proposed termination of an employee’s employment, without such conversations being admissible in any subsequent ordinary unfair dismissal proceedings. The main difference to the situation before July is that previously there had to be a dispute, grievance, disagreement or similar before an employer could have an ‘off-the-record’ conversation (or ‘without prejudice’) now an employer can start a conversation with a view to ending a person’s employment where there has been no previous dispute or issue with that employee’s conduct, capability or the viability of the role. This sounds like good news for employers. However there are 4 things to get right to ensure the intended consequences are achieved 1. Being clear on the situation the employer faces before having this conversation. These conversations are most likely to happen for … [Read more...]
