Tag Archives: small business management

3 Questions Business Owners Need to Ask About Employee Expenses

Do you own a business? Do you run a business? Then I recommend you follow me through this simple math and some reasonable conclusions.

Assume you have a person making a $50,000 gross salary. Assume their true cost — including health insurance, overhead, work space, computers, Internet, electric power, payroll taxes, etc. — is $80,000. That person costs your company about $40 per hour.

For that calculation, I divide the $80,000 by 49 to calculate the weekly cost of $1,633 (I take off two of the 52 weeks in a year for vacation and another for national holidays). I divide that weekly cost by 40 to get $40.82 per hour.  And then for convenience I round that to $40 per hour.

So, with that hourly cost in mind, I’d ask myself these questions:

  1. Thinking about computers and Internet connections: Do I really cut costs by having employees working with old technology?
  2. Books and magazines: I’m betting $15-20 per business book, or annual magazine subscription, on saving my people some time, generating good ideas, helping them work better. So the marketing books for the marketing team, programming magazines, business magazines, how expensive are they, really? How much do they have to help to pay for themselves?
  3. Meeting expenses: how much does it cost me to start a meeting 10 or 15 minutes late? Is it worth it to bring lunch into a meeting to save my team members the time of going out to lunch?

My conclusion: spend the money. Keep your technology up to date, encourage employees to get whatever books and magazines or website subscriptions help them, and combine meetings with meals a lot.

What do you think?

5 Questions About Power vs. Control vs. Results

Have you ever looked at the difference between power and control in leadership and management? Here’s what I’m guessing. Power and control are quite different and sometimes in conflict. The more control you have, the less power. Does that make sense? I’m just guessing here, not studying the literature.

The powerful leader creates and empowers powerful teams and lieutenants, inspires them with values, collaborates with them on goals, and then sets them loose to operate within general ranges and directions. 

The controlling leader, in contrast, keeps teams and lieutenants on a tight leash. They check back constantly. They move much more slowly because they can’t make a significant decision without their leader.

The powerful leader sets goals and metrics. The controlling leader reviews to-do lists, tasks, and details.

Which brings me to some follow-on questions:

  1. Are you a leader? Do you set your teams loose or keep them under control?
  2. What happens when the would-be powerful leader fails to inspire and set goals and ranges and directions?
  3. What happens when the would-be powerful leader doesn’t have the right teams and lieutenants?
  4. How much of this power vs. control range is a matter of the leader either trusting the teams and lieutenants’ ability and judgment, or fearing their incompetence?
  5. Which style is more likely to get good results? Which is more likely to defend against bad results?

I’m just asking. I don’t know.

True Story: A Fast Growing Company Gets Organized

This is a true story.

Once upon a time, I had an interesting problem, the kind most small business owners want to have, but nonetheless, still a problem. We were growing too fast. Our sales tripled one year, and doubled the next.

We didn’t want to stunt our growth. But we were having trouble getting everything done. We’d outgrown the management style of a dozen or so people doing what needed done, pretty much like mice gathered around a piece of cheese, eating away where they could. Not that we didn’t have jobs and functions; we did. We divided ourselves into web programming, customer service, admin, marketing, and product development. But even so, lines kept crossing and the mice-and-cheese style wasn’t working.

We took half a day. First, we brainstormed a list of tasks. These were the things that had to get done. We mixed different time frames, long term and short term, and different functions. Phones had to be answered, books had to be kept, and so on.

Then we organized the tasks into logical groups. We came up with tracking and measurement for most of the main tasks, and, more important, we agreed on who was responsible. We discovered some overlaps, like the customer service people were just a short step away from entering customer data during a call. And the sales people were close to completing a regular customer survey. We put it all up on a white board and talked about commitment and responsibility, compared to involvement. In the classic bacon and egg breakfast, the chicken is involved, but the pig is committed. We wanted commitment. We ended up with teams, and committed team leaders.

That half-day reorganization became a new component of our ongoing business plan. It took us past the first big management hump, around 15 people, and got us all the way to the next one, which was about 30 people.

Not all problems were solved. Metrics, accountability, and tracking were critical components of ongoing management. Still, by the end of the day, we were way more organized than we’d been.

I Don’t Sell Insurance, I Tell Business Stories

Ugh, this might seem like a sales pitch. No, I don’t sell insurance. I tell stories. This one, about insurance, might be helpful for other people building their own businesses.

It was about 10 or 12 years ago. Palo Alto Software was a small but rapidly growing company with 15 (or so) employees. My wife and I worked shoulder to shoulder with the others in a small office. It was a happy and hard-working group, with a lot of shared values. Those times produced a lot of good memories. We had no outside investors, though, which means no deep pockets. The money we spent was our own.

surgeryOne day, one of our employees had a serious health problem requiring four to six weeks in the hospital. We were very worried about him. So one of the first things we did was make sure he knew we’d be paying him his salary until he got better.

Just about a month later, another of our employees had a heath problem requiring several weeks out of the office. She was a great person, a friend, great in her job, tireless, and loyal to the company and all its values. So we told her not to worry, and paid her salary while she was out.

Shortly after that, somebody pointed out that if we were going to provide de-facto disability for our employees — which is exactly what we were doing — then it would be smart to buy disability insurance. As in a cartoon, you could see the light bulb appearing over our heads. Buying disability for our employees was the same as buying it for ourselves.

And so we did. And to this day, many years later, we still provide disability insurance for our employees.