Do You Know Who Your Stakeholders Are?

Recently, I was asked to conduct some interviews of “stakeholders” for a non-profit organization. When I began to make the list of people to speak with, it grew well beyond the usual suspects.

I began to think…in the for-profit world, do we really know who all of the “stakeholders” are?

What exactly is a stakeholder, anyway? 

BusinessDictionary.com defines stakeholder as "a person or group who has an interest or concern in an organization."

If we accept this definition, then stakeholders are definitely more than just the owners and/or investors. Think about it. You have a number of other important groups who may well be considered stakeholders, such as:

• Employees - Are employee interests truly a focus of your business operations? Treat employees as your most valued assets, by promoting a safe and nondiscriminatory work environment, and encouraging their participation in the business’ direction. In return, you get quality work and purposeful customer service.
• Customers – Are customers a primary influence for your company? Long-term relationships with satisfied customers are key to building sustainable financial success over time. Most organizations collect data on customers, in order to focus on more targeted and efficient marketing and sales efforts.
• Suppliers/Vendors - Supply Chain Management involves close collaboration between suppliers and business buyers, working together to deliver value to end customers. These relationships are essential, especially in logistics and distribution, as companies look to trim costs, increase customer value, conserve energy and natural resources, etc.
• Bankers – Does your business use some form of debt in its capital structure? If so, your company benefits its creditor by giving it a means to earn a return on the financing it provides. On the other hand, companies going through financial difficulties can negatively impact creditors through delaying interest or principal payments, or in worst cases, defaulting on the loan.
• Neighbors/Community - Many businesses view all those around them - locally or globally - as primary stakeholders, because important corporate decisions/actions can have either a positive or negative impact on many people, regardless of whether they ever engage in business with your company.
• Your Local Municipality - How significant is your business' location? Are the taxes you pay to local and state governments substantiated by the quality of infrastructure serving your business and your customers?
• Politicians – If your business is large, having a visible politician on your side can be helpful in getting some of your business concerns addressed. If your business is small, knowing which of your local and state representatives support small and medium-sized businesses can be helpful can be helpful in the same way. And the business success of their constituents is something that politicians can always use to reflect positively on their own leadership!

As you can see, there are a number of possible stakeholders for any business – and I’m sure there are others that are relevant to specific industries. It is imperative to consider your business’ impact on all of them when creating your business strategy and your strategic plan.

Adjustment Agent, Not a Change Agent

In my experience, when beginning a new assignment I see a lot of fear and uncertainty in the eyes of the employees.

On my first day of an assignment, I am being introduced by the “Organization's Stakeholder(s)” as a Consultant/Advisor who will “assist in making adjustments in the way we do business to set the stage for the growth we all know we can accomplish, but are not quite sure how to get there.”


UH-OH.

With that introduction, I must start my assignment by convincing the employee population that I am not here to “clean house,” take anyone’s place, or turn the place upside down. This - in and of itself - is not an easy task!


I begin by interviewing every manager in the organization individually, from the COO on down, asking each to share their thoughts as to how the company can be adjusted to run better and more profitably. In a small business or a family business, this question may not have ever been asked of them before.  Some are hesitant to answer, uncertain of how it would be received. I assure them that all responses are held in the strictest of confidence, with no attribution at any time.

This is how I gain their confidence, so that the management group will speak their minds. For the most part, the interview is very enlightening for them. Once that word gets out, the entire process to get the information I need for the future becomes much easier. 

From these interviews emerge “themes” concerning what people think the organization needs to remedy, in order to sustain future success. These themes can be:

• Lack of communications both up and down
• No Vision Statement or Mission Statement
• No Organization Chart or Job Descriptions 
• “I am not sure to whom I report!!” is never a good thing.
• Reliable and timely financial statement
• Budgeting “we never know how well are project is doing”
• Recognizing both the Strengths and Weaknesses of the company

After the interviewing process has been completed and an interim report has been made, it’s amazing how much the staff has bought into the process!
The operative word is “ADJUSTMENT,” not change.

It works. Give me a call to discuss.

Hiring a CFO

Do You Need to Hire a CFO?

In most successful small businesses, there comes a time when circumstances dictate a necessary change in the Finance department. The tell-tale signs include:

• The realization that your bookkeeper is not growing and developing as your company continues to grow and develop
• The financial reporting is inconsistent, concerning accuracy and/or timeliness
• The size of your company (revenue, number of employees, complexity of organization) will determine your need for a CFO
• When a company, especially a small to mid-sized company, has grown large enough to require accounting, treasury, and tax functions, as well as when strategic planning is needed for an organization
• When your top-line revenue grows quickly - hitting more than $5 million in revenue -  you start to have more complexity in your financial management
• When you have more than 30 employees. The larger your business, the more complex your financial operation.
• When you need a formal audit
• Whether to satisfy your business' stakeholders or a third party, such as a taxing authority or bank or venture capital investors, if you need to undertake a financial audit it's best to have a CFO in place
• Audits are required by regulators and exchanges if a company wants to hold an initial public offering (IPOs), or be involved in a mergers or acquisitions

OK, So Who Do I Hire?

Determine which qualifications you believe to be most important to that role. Traditionally, a CFO was simply the senior financial manager, the person responsible for preparing the financial statements, dealing with banks and investors, planning corporate tax strategy, and developing budget forecasts.

But nowadays, business is more complex. A CFO must be a strategic thinker, an excellent communicator, an organized manager, have a strong business sense, and have exceptional finance skills. He or she must be able to lead the Finance Department, but also the wherewithal to speak frankly and convincingly to the CEO, especially when aggressive or radical change clashes with fiscal responsibility.

Here are some traits, characteristics, and experience that CEOs should carefully consider in hiring (or promoting) a CFO. The priority of these traits will vary from company to company, but all of them should be weighted significantly when making this very important hiring decision.

• Accounting and Financial Competence: This is a no-brainer, in terms of the first priority. Many CFOs are certified public accountants (CPAs) and/or MBAs. The ability to put numbers accurately in a business context is absolutely essential to what every business needs to be successful.
• Integrity and Ethical Standards: Again, another no-brainer. While these traits are important for any member of senior management, it is absolutely imperative for the CFO. The proper handling of an organization’s finances can make or break the business.
• Financial Vision and Foresight: A CFO must be in tune with the business’ market, enabling him or her to create and implement business plans, and to anticipate financial management issues.
• Deep Understanding of Business: This may be important to your business, although a CEO may want to broaden these criteria to include hiring someone in a similar, yet different industry. In Finance, best practices can often transcend industry lines, but a fundamental knowledge of business is always necessary for the CFO.
• Excellent Communication Skills: The CFO needs to be able to communicate the financial health of the company to all stakeholders, and present complex information in a way that can be understood by non-financial people. This becomes even more crucial if your business is going public, as the CFO will be presenting information to analysts, potential investors, and the public.
• Confidence: A CFO needs the ability to make decisions on behalf of the company with confidence and assertiveness. People can sense fear and trepidation. As much as the CEO, the CFO needs to be able to “walk the talk.”
• Leadership: It is all well and good for CFOs to have confidence in themselves, but they must also inspire that confidence in others. This requires demonstrating emotional intelligence, self-awareness, self-regulation, motivation, empathy, and social skills. This executive will lead teams and manage people, not just be immersed in numbers.
• Perspective on Risk: The CFO should show a willingness to try new things and take calculated risks to grow the business and improve the financial position of the company.
• Results- Driven: The CFO needs to set goals that are specific, measurable, achievable, relevant, and logical.

Now, if you find a candidate with all of the traits listed above, my suggestion is to hire him or her immediately! But most candidates will have some, several, many, but maybe not all of these traits. As the hiring manager for this position, you need to assign a weight to each of the traits, and decide which are imperative for your business now, and which can be coached over time. As a CEO and business owner, this is one of the most important hires you will make. So take your time, and do it right!  If you're unsure about anything, let's talk.

The Importance of Job Descriptions and Organization Charts

Organizations must be flexible to be competitive. Many times employees are expected to do more than one task in a smaller company.  Having a multitude of responsibilities thrown at him can be overwhelming for a person who was hired to handle one specific job.  But on the other hand, multi-tasking is part of the fun for someone hired for a position that carries a variety of responsibilities. 

The important thing to understand is that, typically, the problem is not in the asking of an employee or group of employees to take on some additional tasks.  Most people do want to help, within reason.  The problem is that quite often, these extra tasks are for “when you get a minute,” or to do “on a slow day.”  And so these tasks get absorbed into an existing job that someone is already getting paid to do.  And let’s be honest, the assignment of additional job tasks may have more to do with the individuals involved than the jobs themselves.

This is where the water can get muddy.  What you need is to clearly and transparently document the responsibilities of each position within the company - not the people right now, just the positions that they fill.  Then chart how these positions are, or should be, grouped and stacked within the organization.

This type of graphic illustration can assist management and employees in understanding their roles and how they impact one another. 

Job Descriptions

Job Descriptions are the bricks that are used to build an organization’s structure.  Each full-time position should have one, and frankly, part-time positions and internships should have them, too. A thorough Job Description should:

• Clearly and factually state the functions and objectives of each position within the organization
• Include the boundaries of the position’s responsibilities and authority, including the job title, department, tasks, required experience and skill level 
• Be permanent enough for inclusion in an Organization Chart, but must be reviewed and updated regularly to ensure its relevance
• Provide an overall understanding of the position for the job holder and the immediate superior
• Provide a basis for the hiring manager to match an applicant to the job requirements
• Provide a basis for performance evaluation, improvement, potential promotion
• List the salary range or job grade level for the position

Organization Chart

Once Job Descriptions have been completed, the Organization Chart may be created or re-worked. The chart provides a visual map of all of the employees in a particular business, and clearly identifies direct reporting lines within a department as well as an entire organization.

The Org Chart is typically arranged in a pyramid shape -- hierarchically -- with the head of the organization at the top, and lines connecting each position to the one above him to whom he reports, and to any below him that he directly supervises.  Keep in mind that an Org Chart is a graphic illustration of the jobs that make up your company, not of the people who work at your company.  Not to sound cold or impersonal, but you are trying to build an organizational structure that will have a longer shelf life than any individual employee. Therefore, the Org Chart must be practical for any qualified individual, not just the person currently holding down the job.

That said, a clear Org Chart will

• Identify roles and design an organization structure to meet the business' long term objectives
• Clarify the chain of command, and functions, of each department
• Identify organizational imbalances and overloads
• Provide appropriate level of contact information
• Orient new employees as to who does what within the organization

Oftentimes in business, we get too busy with the day-to-day challenges of running a smooth operation and addressing customer matters that we lose sight of the importance of building a sound structure for our own company.  Let me tell you, this is a serious oversight.  Don’t wait for things to get too loose and disconnected before you document and organize your company.  Do it now, and then maybe things don’t get too loose and disconnected.  I have had first-hand experience with the benefits that clarity in job and organizational structure can bring.   Sometimes, it’s the one ingredient that pulls the whole thing together.