To Vaccinate or Not to Vaccinate, that is the Question

To Vaccinate or Not to Vaccinate, that is the Question

In my Vistage meetings this week, we had an interesting discussion on whether or not my members would make their employees get a COVID vaccine. While there was a brief discussion on whether or not you could legally make your employees get vaccinated, we primarily discussed what each person would do. (Apparently, you can with two exceptions, medical conditions make it dangerous and religious objections. For more see, Can I Be Required To Get Vaccinated Against Covid-19?). The results were diverse and ranged from:

  • “No!” “I would take it myself but would not force my employees to do so because they may leave.”
  • “I have many conspiracy theorists among a section of my workforce, and they will object.”
  • “No, I don’t want to be sued.”
  • “If they want to travel, they have to.”
  • “If they want to work in the office, they have to as we have health comprised people in the office.”

However, what stood out in the discussion was that none of the CEOs framed their response within their Core Values. Again, as Jim Collins says, Core Values are so important that we would be willing to lose profit rather than breach them. Thus, if our Core Values are that important, indeed, they should frame our response to the vaccination question. If we don’t, then once more, our Core Values are only words on a wall or a pad but have no impact on the organization and behavior in it. In that case, they are worthless, and your employees lose trust in your words and statements because they are just that – words, and not beliefs.

Regardless of whether your Core Values are just words on a wall or actively known by every employee, a complex issue like vaccination stresses them and how they are understood within the organization. Those of you who read my blogs know that I have said that Core Values provide employees a framework for making decisions within an organization. However, if your Core Value is “Respect,” what does that mean, especially in the COVID vaccine world? Does it mean:

  • Out of RESPECT for our fellow workers, we will all vaccinate.
  • Out of RESPECT for you, your opinion, and your decision making, we will allow you to do what you think is best.
  • Out of RESPECT for you, we will enable you to determine what you put in your body.
  • Out of RESPECT for our clients, we will vaccinate those that are client-facing.
  • Out of RESPECT for our employees’ health and decision making, we will allow those that don’t want to be vaccinated to work from home so they can’t infect anyone in the office.
  • Out of RESPECT for our fellow citizens, we will all vaccinate to get to herd immunity quicker.
  • Out of RESPECT for your health-compromised family, we will allow you to work from home until it is safe to return to the office, whether that be one month or five years.

As you can see, a single word like RESPECT can have many different interpretations, and this is where things get complicated. For example, if you determine that your version of RESPECT is the second one, “Out of RESPECT for you, your opinion, and your decision making, we will allow you to do what you think is best.” You apply that to COVID, then surely it applies to all decisions they make within the organization. While we all like to push decision-making down, the leadership team has to be able to override decisions and impose its desires in certain instances. So what are those situations, and where is the line?

Core Values are more than just words or statements. They have meaning, and the organization can only succeed if the intention is understood equally by everyone in the organization. To see how you are doing, ask your employees if they know what the organization’s Core Values are, and how they should be understood. Your employees may often find it hard to define them, so offer them situations and ask, “what should someone in the organization do?”

Here you might find a great deal of diversity of opinion. To overcome this and teach your Core Values, I think the best way is to rely on corporate folklore. Your company needs stories of the founder, the CEOs, the great people in its history, and how they behaved in situations that reflect the company’s Core Values. Having corporate folklore and ensuring that employees learn the stories and their meaning as part of the onboarding process will create greater belief in, and understanding of, your Core Values. Furthermore, make sure to repeat the folklore stories whenever a situation arises where they are relevant. Repeating them drives home learning until everyone knows your Core Values and how they should be interpreted.

Returning to the COVID vaccinations decision. Well, regardless of your Core Values, the decision of whether or not to require employees to be vaccinated will be hard. However, I would recommend that, first of all, you be a leader in your decision and state it with leadership in mind. If you want them vaccinated, be at the front of the line. Second, figure out how your decision fits with your Core Values and explain that way. Of course, it has to work; if it is a stretch or plain contradictory, then maybe you need to re-examine your Core Values.

Good luck, and may you stay safe in the meantime.

 

Copyright (c) 2020, Marc A. Borrelli

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As we have all struggled through 2020 and the difficulties of lockdowns and WFH, our core values are guiding decision making and holding us together as organizations. Talking to a senior executive recently, he said that COVID had destroyed his organization’s comradery, and no one felt connected. However, on further investigation, it appeared that the company has no core values, as they thought them irrelevant.

I find companies without clearly articulated core values can rarely define, “Why do you exist?” If you have no core values, no guiding mission, and everyone is now working from home, what bonds the team together? The only thing is the paycheck. However, we know that money is a terrible motivator. Scholars at the London School of Economics looked at 51 studies on pay-for-performance schemes and concluded:

“We find that financial incentives may indeed reduce intrinsic motivation and diminish ethical or other reasons for complying with workplace social norms such as fairness. As a consequence, the provision of incentives can result in a negative impact on overall performance.”

So, core values are fundamental. I hope you have some, and they are clearly articulated in your organization. Remember, as Jim Collins says, core values are those things we would rather lose profit over than breach. If you are undermining them, your team loses commitment to the values, and it becomes a Lord of the Flies environment with finger-pointing, denouncements, and everyone for themselves.

However, even if you do have core values, there may be three ways you are undermining them.

You Breach Them

The first possibility: you breach your core values! If one of your core values is, “We treat everyone with respect” (which I often see in companies) and you do something disrespectful to an employee, customer, or just someone outside the organization, it causes issues. The perception among your employees is that:

  • The CEO lacks personal commitment to the core values;
  • The CEO is a hypocrite; and
  • All corporate statements around behavior, mission, and values are only words and not taken seriously.

Therefore, you and your leadership team must live your core values at all times. If one of you cannot, then either they have to leave the organization, or you have to change your core values. Pat Lencioni talks of a company where once they had defined their core values, one of the leadership team resigned, saying, “I cannot live that value, and if that is the value of the organization, then I should go.” It can be hard to enforce them, but it is better for the organization in the long term.

You Allow Others to Breach Them

As mentioned above, the CEO and leadership team must live the company’s core values. However, if you allow others within the organization to breach them, it leads to the issues described above. I have often seen that the leadership team provides a pass for some employees because they are high performers, e.g., top salesperson or IT person. The rationale is that we cannot survive without them, and so we will tolerate their failing to behave because it is more important to keep them than maintain our core values. However, as Jim Collins points out, you should be prepared to take a loss to live up to them, so you should be prepared to lose these employees to keep your core values.

I often have CEOs and leadership teams struggle with what to do about such “toxic” people, and at the end of the day, after much pushing, they let that individual go. What usually happens is that company morale improves, core values become believed in, and productivity increase above the levels that were there when the toxic person roamed the organization.

Your Employees Are Confused as To What They Mean

Of the three reasons, this is probably the most common, because it is the easiest to do. I have said the worst two inventions for the corporate world were Excel and PowerPoint. The former encourages accuracy without precision, and the latter because we have lots of presentations where everyone has their interpretation of what the meaning was. This lack of definition is pervasive with core value statements.

You need to explain the meaning of core values. Reinforce them by recognizing examples of the team’s correct behavior, and explaining why specific actions are not core values even if they appear to fall within the definition. If you don’t, employees will weave their interpretations and ideologies into them. The employees’ ideologies and interpretations may take the core values further or in a different direction than the CEO intended. However, once the employees have taken them there, the CEO and leadership team’s opportunity to breach them increases dramatically.

If a core value is “employee growth and belonging,” without being clear as to what this means, it may be interpreted as:

  • Employee empowerment to do more than they should.
  • A family environment where the growth is limited to ensure that family feeling
  • Communication is equal, and everyone has a voice at all levels.

If that is not what the CEO intends, but it is what the employees now believe, it becomes only a matter of time before the CEO crosses the line and breaches the core values in the employees’ minds.

The problem that most often happens is that the employees don’t consider if their interpretation of the core values was wrong; instead, they assume that the CEO is a hypocrite and doesn’t care about the core values. Employees are unlikely to raise the issue that they think the CEO and leadership team have breached the company’s core values because the values of “Open Door” and “Bring me the bad news” are now just considered words rather than values. Thus, the negative spiral starts.

To prevent this, leaders must spend time asking employees what they are thinking and feeling, as well as sharing their own thoughts so that the employees will feel comfortable expressing their concerns.

To ensure that the understanding is correct, the leadership team needs to reinforce examples of behavior that supports their definition of the core values. When they see actions that don’t mean the intent, call them out and explain why it doesn’t fit the core values. Also, recognizing individuals’ living core values within the organization reinforces the organization’s commitment to the core values. Finally, the CEO and leadership team need to be aware of when they breach the values, admit their failures, and commit to living to those standards in the future.

I hope as we end the year, you CEOs and business leaders will take time to recognize those in your organization that has lived your corporate values during the struggles of 2020 in your one-on-one meetings. It will provide a great deal of goodwill and encourage the behavior far more than the usual “Rally around the flag” speech at the end of the year.

 

Copyright (c) 2020 Marc A Borrelli

 

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Are You Prepared for 2021 With Enough Cash?

Well, 2020 is just about done, and as we move in 2021, are you and your business prepared? Regardless of how COVID has impacted you, the economy is slowing, so you can expect cash to get tighter as suppliers expect payment sooner and customers pay later.

With a vaccine on the horizon, companies need to be prepared to take advantage of the improving economy when we get there by weathering the current slowdown and positioning themselves for growth. As we look at the potential growth ahead with an improving economy, do you have enough cash to:

  1. To get through the winter.
  2. Invest in new technologies and systems to stay relevant or take market leadership.
  3. Hire the talent you need to take market leadership or get back to where you were before COVID.
  4. Invest in product/service development to take advantage of changes in the market due to COVID.

If your answer to 1 is negative, you are in trouble. Companies don’t go bankrupt because they lose money; rather, they run out of cash. Cash is like oxygen: if we run out of it, we die. If your answer to 1 is yes, what about 2 – 4? If you want to be in a strong market position in H2, you need to be investing now.

So, if you can’t answer 1 – 4 in the affirmative, what are you going to do? Remember, YOU CANNOT CUT YOUR WAY TO GROWTH! The easiest thing is to get bank financing. If you have a bank line or your bank will lend you the money, great! However, if not, things are a little more difficult. Please don’t take advantage of those letters, flyers you all receive offering quick financing. The interest rates are usurious and over 40% in many cases. There are other lending alternatives, and contact me if you need to discuss some.

However, what about self-funding? Have you looked at how you can generate the cash internally?

 

Cash Conversion Cycle

There are four basic cash conversion cycles in a company:

  • Sales Cycle
  • Production & Inventory Cycle
  • Delivery Cycle
  • Billings and Payment Cycle

Concerning your organization, do you know the length of your cycle for each of these? If you add them all together, you can define the full Cash Conversion Cycle for your company. Once you have done that, you have three questions:

  1. What is your Cash Conversion Cycle?
  2. Are you happy with it?
  3. Can you improve it?
  4. Where should you focus your efforts?

Regardless of which cycle you examine, there are basically three ways to improve it:

 

Eliminate mistakes

There are all sorts of mistakes that affect these cycles, from the obvious ones of production mistakes to rework, mistakes in estimates, contracts, invoices, and wrong delivery. We make them all. But do you know which ones are affecting your business the most? You need to honestly examine your business to identify where the mistakes are made and which are the largest. Focus on the biggest first as they will be the easiest to get the largest benefit from, e.g. if your inventory time is 120 days, but your billing and payments time is 30 days, it will be easier to cut five days off production than billing and payments.

 

Shorten the cycle time

Look at all the times and see where you can shorten them. While COVID has beaten up the “Just in Time” production process, you can still work at reducing production time and inventory time. What can you do on the sales cycle, the billings and payments cycle? Right now, everyone is at home dealing with COVID, so maybe it is a good time to work through these processes to see where efficiencies can be made. Consider working through Tom Wujec’s method of improving processes. It is a great way to see how improvements in your cycle time can be made.

Improve your business model

Changing the business model is an interesting one. Can you change how you do business so that you can dramatically alter your cash conversion cycle? Dell did and took its cash conversion cycle from 63 days to -39 days. Yes, that is -39 days. How? If you bought a computer from Dell, they are made to order, so you have paid for it before they start manufacturing. Thus, they have $0 receivables; they pay their suppliers probably 60 days and their employees 14 days. Since they are paid upfront, there is no delivery cycle, so the only other area is the sales cycle.

I once worked with a company that was facing bankruptcy and had to reorganize itself to survive. They looked at the Dell model and decided they need to copy it. They changed their business model and became the only company in their industry to have $0 accounts receivable. Using “Just in Time” production, they were paying their suppliers after they got paid. They did a great deal of market research and determined within a six-month period when their customers would purchase. Thus, they focused sales efforts on customers within that window, primarily reducing the sales cycle.

The hard part is changing the model because it is not an incremental improvement but a new model. Look at Costco, the first big-box retailer to introduce membership fees, providing a large part of its profit at the beginning of a relationship with the customer.

So, what can you do? Examine it; you will find it is well worth the effort.

Once you have examined your Cash Conversion Cycle, the next thing is to look at your business through the Power of One.

 

Power of One (1%)

Alan Miltz developed the Power of One and basically looks at the following financial variables and asks, “How would your cash flow improve if you increased any one of them by 1%?”

  • Price
  • Volume
  • Cost of Goods Sold
  • Accounts Receivable
  • Accounts Payable
  • Inventory
  • Overhead Expense

If you undertake this analysis, you will quickly see which of these variables most influence your cash flow. Starting with them from those that affect cash flow from largest to smallest, identify what percentage you would like to improve them this year and the impact on your annual cash flow and EBIT. Then work to figure out how to realize the improvement.

Working through your Cash Conversion Cycle improvements and the Power of One, it is useful to have a business coach who helps you and facilitates the meetings.

Call me to help you figure out how to improve your cash flow from now on.

 

Copyright (c) 2020, Marc A. Borrelli

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