As we all watch our revenues and expenses during this tight economic time it is inevitable that you will have to forecast worst case scenarios in your business and create plans to adjust if worst case becomes reality.

Please don’t misinterpret this blog post, I am still very optimistic that managed service providers can continue to grow their business at a healthy rate in 2009 I just believe in contingency planning as well.

In reading about creative alternatives to layoffs if things go south I have heard of a lot of employers offering their employees the option of layoffs or voluntarily taking an unpaid day off each month to cut down COGS.

Not surprisingly companies with good team cultures are finding that their employees vote to take the unpaid leave rather than having a few people and their families take the hit in times of trouble.

Other companies are cutting back on work weeks and doing things such as job sharing to control costs as they feel the economy out.

I think the most important thing is to involve your people in the decision making process. It may take some quick and dirty education about the P&L and how the company runs but ultimately the group will come up with some creative answers you may not think about.

Thankfully we are not in a situation where we have to employ these types of contingency plans so I cannot report on how they work. What I can tell you is that worst case projections for any IT company this year will have to factor in these types of situations or they are not truly worst case.

I am curious what creative ideas you have employed or have heard about other using to control costs during these times.

Hopefully as businesses continue to cut costs around the world it will mean a continued steady source of managed services growth for us all in 2009 as they outsource IT services.

Josh

As the MSP community grows so do the opportunities for partnerships in the industry. I was recently asked how I chose strategic partners to work with and thought the conversation was worth sharing.In choosing a strategic partner I have three criteria that must be met in order to do business together:

1. Cultural Values – If the partner organization does not share the same values as you it will be difficult to succeed long term in the relationship. You need to be clear on your cultural values and you need to identify strategic partners that share these values.
2. Understanding of the SMB marketplace – A partner can have the perfect skill set or the ultimate product but if they do not understand and have a focus on the small business to the point where they understand their needs you will have difficulty growing your business with them.
3. Sincere desire to see both businesses grow – In many situations I see strategic partners that are supposed to be helping each other’s business grow but in reality there is mistrust, hesitation to be open, and in the worst cases the feeling that the partner is a competitor. This sounds obvious but it is infrequent that I see strategic partnerships that are as open as they should be.

I was asked this questions by the folks over at channel pro for a pod cast about strategic partnerships. In the podcast I specifically talk about Everon’s strategic partnership with Zenith Infotech and give some insight into why they play a large role in our success.

Feel free to check out the early post, I believe they are releasing it tomorrow:

http://www.channelprosmb.com/podcast/Josh_Clifford_1609.mp3

JC

It has long been a goal of ours to be the number one choice of employees in our industry and I have to say we have done a great job creating a culture and enviorment that people like to come to work in each day. Our emplyees often say they “Love” coming to work.

But once you have your culture and environment figured out the next challenge you run into when you are a business that is growing quickly is that everyone wants to be promoted and everyone wants to make more money. As I am sure you know there is a financial reality to what you can pay a person in a certain position and still have a healthy business. And there is also the reality that not everyone can be promoted after their first year – you need your front line people for the business to run. So how do you compensate and motivate the person that says the “Love” coming to work before they start to no longer feel that way?

As we continually evolve our roles, responsibilities, and comp plans I thought I would share some key factors we use to attempt this challenge and get the opinion of the group on other ideas that you all are successfully employing:

• Pay for performance -  People that want increased pay with no performance requirements or growth in responsibilities will eventually leave the company weather you help them do so or they do it on their own. It is always interesting when someone decides they should receive a 20% raise because they do a good job or a year has passed.
• Create a compensation program that rewards top performers more than everyone else. – Why should your top people not receive better compensation. Create a pay grade that everyone wants to achieve and outline clear steps and time frame to get there. Make it so attractive that once someone is there they won’t want to leave.
• Pay tied to basic job responsibilities – This is something we have been thinking about lately. The idea could be something like should a hundred bucks a week of your pay or a couple hundred bucks a month depend on you showing up on time? Sure seems like it would fix that problem once and for all.
• Compensation tied to the financial health of the company – One of the most powerful things we have implemented, and we are just in the very beginning stages, is open book management. It sure does create a whole different conversation when someone wants a significant pay increase and you can say “you know the business, show me where the money is gong to come from in your group to pay for that increase.” Amazing things start to happen in your business and with your people when you do this. Ideally they start to create new efficiencies and even products that increase profitability which is what we are starting to see.
• Create clear growth paths – It is important that your employees can see what their future can look like if they apply themselves. It is just as important that the criteria for getting there is on paper and clear to everyone.
• Make it clear that you invest in the development of your people but that it is their ongoing responsibility – Purchase the study and lab materials for the certs that make sense for your employees and your company and then make it each individuals responsibility to receive them in a certain time period. Create tests about your company, culture, and products that have to be completed successfully in order to continue on to another level in the organization.
• Bonus plans – I have to put it here because someone would call me out if I did not but in a fast growth company cash bonus plans can seem insignificant or become expected causing challenges. This is not to say I don’t think they can work, we just have not made them work to date. We have on the other hand successfully implemented Annual Themes with mini games and rewards that work wonders. The ides is to put a goal up on the wall and tell the team to go get it – the power of reaching the goal and the pride they take in doing so is all they need, although we also compensate the success with a celebration, team outing, or cash when appropriate.

These are the types of things we keep in mind when figuring out how to compensate and motivate our people.

What are you doing in your business? What have you seen work?

JC

“Hire slow, fire fast.”

I don’t know how many times I’ve heard and personally repeated that phrase, but it’s a big number.

And yet for anyone in a managerial position that doesn’t have a heart of stone, this can be a really tough one to execute on as effectively as you should. It’s not fun to let people know that they no longer have a job, aren’t meeting your expectations, or aren’t fitting into your culture.

Not fun, but necessary.

We’ve been reminded of this recently at Everon. I think we’ve almost always done a very good job with our hiring, but occasionally you get someone that makes it through the interview process looking like good, but doesn’t live up to their potential once they are on board.

Or maybe something changes over time. Maybe they don’t grow with the company. Maybe they lose their positive attitude over time. Whatever it is, the response is the same.

They have to go. Fast.

Now, I’m not talking about the employees that do something really stupid like steal from you or bad mouth a customer. Those are the easy ones! You’ll fire them immediately and feel pretty darn good about it.

I’m talking about the tough ones.

The employee that does her job pretty well, and has a decent attitude, and comes to work every day like you need her to. But she isn’t growing, and she isn’t a positive influence in the office, and she isn’t loved by your clients. These are the tough ones.

But this is where you earn your management pay.

If you want your company to continue to grow and excel, your employees must continue to grow and excel. There is no way around this, and you have to be absolutely committed to proactively trimming the bottom 10% of your talent pool to make room for the next new hire that is going to dazzle you and your customers.

Jack Welch became famous for his execution of this philosophy. Many people thought he was a ruthless bastard, labeling him “Neutron Jack” for the destruction he left in his wake. But imagine the balls it took for him to do what he thought was right. To get rid of literally hundreds of thousands of people in order to ensure the survival of the business and the remaining jobs.

Do you have the same balls?

There are all kinds of reasons to not do it. It’s bad timing. The person plays a really important role. You’re too busy. You like them. Whatever. All of these are just excuses and rationalization.

As I said, we were reminded of this recently, and I’m proud of the fact that our management team go its act together and made the tough decisions that needed to be made. The company is already better off because of it.

MRC

We spend a lot of time talking about our culture at Everon. We have created a service culture, one where service skills and customer feedback are rewarded ahead of tech skills.

We have spent five years “getting the right people on the bus and the wrong people off the bus” which committing to is not as easy as one might think on the surface. We have been very successful over the years creating a place where everyone likes coming to work the majority of days – we all have the occasional I would rather not be at work moment. So why in the last handful of months (we opened our second operations office in Colorado about 8 months ago) has our culture become one of discontent for some employees?

This is a question I have found myself asking and I believe it was best captured by one of our senior employees that I was talking to: “when things are perceived as fair they become more than that to people, they become good.”

On the surface this did not seem like a particularly important insight, having studied psychology I was familiar with the concept, but it got me to thinking that for the first time in our five year run at Everon things were out of balance.

In our case it was the perception that the Colorado folks did not work as hard as the Boston folks. Now I can tell you that this is not true in anyway especially since I spend most my time in this office, but we were able to figure out where the perception was stemming from by talking to our people and listening to what they had to say. It is always amazing to me what one can learn when they enter a situation with an open mind and from this situation we realize that there are a few things out of wack and we need to make some adjustment to make sure we don’t have people jumping from the bus.

So why am I sharing this experience you may be asking and that is a great question. Partially because it is what’s on my mind today as a wrap up and get ready to hit the sack and partially because we all spend a great deal of time thinking about our people and our culture as we grow our businesses. For those of use focused on a culture of excellence it is important to remember that “fair is good” in the eyes of our employees.

There is almost nothing Mike or I would not do for our people but if we are not constantly listening and keeping thing fair in their eyes we will eventually lose good people and that is something we don’t want to happen if we can avoid it.

JC