Yesterday I had the displeasure of enduring multiple power outages for about 90 minutes. When the power finally stabilized and I turned on my computer nothing happened.

Nothing I tried worked, so today I dragged out a seven year old laptop and spent the time between phone calls getting enough running to be able to work—more or less. (don’t you just love technology?)

However, one of the calls was from a founder whose last three hires didn’t work out. They all had great skills, but none worked well with the team. All three fell in the category of “first outsider,” AKA, cold hire, in other words not friends or referrals.

He asked if there was a way to ensure a good fit with the current team.

I’ve been asked this a lot lately, so I think it is once again time to share the following post with you.

Don’t Hire Turkeys!
Use Your Culture as an Attraction, Screening and Retention Tool to Turkey-Proof Your Company.

Companies don’t create people—people create companies.

All companies have a culture composed of its core values and beliefs, essentially corporate MAP (mindset, attitude, philosophy™) and that culture is why people join the company and why they leave if it changes.

Generally, people don’t like bureaucracy, politics, backstabbing, etc., but when business stress goes up, or business heats up, cultural focus is often overwhelmed by other priorities.

In startups, it’s easier to hire people who are culturally compatible, because the founders first hire all their friends, and then their friend’s friends.

After that, when new positions have to be filled the only people available are strangers.

So how do you hire strangers and not lose your culture?

Since your culture is a product of your people, hire only people with matching or synergistic attitudes. The trick is to have a turkey sieve that will automatically screen out most of the misfits and turn on the candidates with the right values and attitudes.

Here is how you do it.

• Your sieve is an accurate description of your real culture.
• It must be hard copy (write it out), fully publicized (everyone needs to know, understand, believe and talk about it), and, most important of all, it must be real.
• Email it to every candidate before their interview and be sure that everyone talks about the culture during the interview and sells the company’s commitment to it.
• Everybody interviewing needs to listen carefully to what the candidate is saying and not saying; don’t expect a candidate to openly admit to behaviors that don’t fit the company MAP, since she may be unaware of them, may assume that your culture is more talk than walk or consider it something that won’t apply to her.
• Red flags must be followed up, not ignored because of skills or charm.
• Consider the various environments in which she’s worked; find out if she agreed with how things were done, and, more importantly, how she would have done them if she had been in control.
• Whether or not the candidate is a manager, you want to learn about her management MAP, approaches to managing, leadership and work function methods.
• Probing people to understand what their responses, conscious as well as intuitive, are to a variety of situations reveals how they will act, react, and contribute to your company’s culture and its success.

Finally, it is up to the hiring manager to shield the candidate from external decision pressures, e.g., friends already employed by the company, headhunters, etc.

Above all, it is necessary to give all candidates a face-saving way to withdraw their candidacy and say no to the opportunity. If they don’t have a graceful way of exiting the interview process they may pursue, receive, and accept an offer, even though they know deep down it is not a good decision.

A bad match will do major damage to the company, people’s morale, and even the candidate, so a “no” is actually a good thing.

Remember, the goal is to keep your company culture consistent and flexible as you grow. From the time you start this process, you need to consciously identify what you have, decide what you want it to be, publicize it, and use it as a sieve to be sure that everyone who joins, fits.

Use your cultural sieve uniformly at all levels all the time. If someone sneaks through, which is bound to happen occasionally, admit the error quickly and give her the opportunity to change, but if she persists then she has to go.

For more help, download the CheatSheets in the right hand frame or give me a call at 360.335.8054.

Option Sanity™ is a great screening tool because it mirrors your culture

Come visit Option Sanity for an easy-to-understand, simple-to-implement stock allocation process.  So easy a CEO can do it.

Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Fickr image credit: Kevin Spencer

I’ve worked with startups for many years, first as a headhunter and later as a coach. My company is in the process of launching Option Sanity™, an incentive stock allocation system based on founder/company values.

People join startups for many reasons and one is the possibility of substantial financial rewards; they take a sizable risk that only pays off if the company is acquired or goes public.

But what of the gigantic payouts public companies are giving execs who took no real risk and whose actions aren’t actualy responsible for the stock price.

Stock granted when the market is down, as it is in any recession, goes up no matter what management does or does not do. Yes, management skill can drive it higher, but, as the old saying goes, a rising market lifts all boats and that is whether the skipper has a clue or not.

This recession is no different; in fact the payouts are going to dwarf anything seen previously. They may not equal the obscene bonuses paid by Wall Street, but they are pretty obscene in their own right.

An Associated Press analysis of companies in the Standard & Poor’s 500 index shows that 85 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some the value jumped by a factor of 10 or more. An Associated Press analysis of companies in the Standard & Poor’s 500 index shows that 85 percent of the stock options given to CEOs last year are now worth more than they were on the day they were granted. For some the value jumped by a factor of 10 or more.

I’ve never met workers who thought they should earn what their bosses earned, but they do what they hear in the news to make sense when measured against the company’s success.

I doubt anyone inside or outside of Apple has ever questioned Steve Jobs’ value when they hear about his compensation.

Carol Bartz received $47.2 million in 2009, 90% from stock options that went up primarily because the market did.

I wonder how motivated Yahoo employees are knowing that.

How motivated would you be?

Flickr photo credit to: Svadilfari on flickr

I’m no happier about the AIG and other bonuses paid to screwed up Wall Street banks, but I’m not sure why any of us are surprised.

“In the largest 25 corporate bankruptcies between 1999 and 2002, while hundreds of billions of dollars of investor wealth and over 100,000 jobs disappeared, the Financial Times found the “barons of bankruptcy” made off with $3.3 billion.”

Giant compensation packages, guaranteed bonuses and platinum parachutes are excused by Boards and executives as necessary to attract the “best and brightest,” but here’s what’s really going on.

The ‘names’ demands outsize compensation/stock options/guaranteed bonus/etc. in order to validate their ‘brand’.

Those responsible for hiring not only meet the demands, but even exceed them in an effort to attain or sustain the company’s reputation as a better home for ‘stars’—the more stars you have the greater the bragging rights— mine’s bigger than yours in high school locker room talk.

Now let’s consider the folly of this attitude.

Those hiring often seek a name brand in the mistaken belief that the brand comes with a warranty that guarantees good results.

But no matter who you hire you’re actually paying for their past performance, which is always influenced by

• circumstances—boss and company positioning in its market and industry
• environment—culture and colleagues;

and let us not forget that minor factor

• the economy.

The hiring mindset is that everything the brand accomplished was done in a total vacuum and dependant only on the brand’s own actions, therefore changing every single surrounding factor will have no impact on performance.

Put like that it sounds pretty stupid, doesn’t it.

This is one of the prime reasons that so many CEOs bring their ‘own team’ over when they move, as do managers all the way down the food chain—they know they didn’t do it alone.

CEOs aren’t like movie and rock stars whose very names draw consumers into spending money—nobody ever bought a product from GE because Jack Welch was CEO, nor do they carry Jobs iPods—so why pay them that way?

Moreover, assuming that performance occurring during an expansion is a valid yardstick for performance in general, let alone a downturn, is sheer idiocy.

You have only to remember the difficulties faced by people whose management skills were honed between 1991 and 2000, the longest expansion in our history. When the recession hit in March of 2001 they had no experience whatsoever of how to drive revenue or manage in a down economy.

That recession and the previous one in 1990 lasted only 8 months each. The longest recession we’ve had was 2 years, January-July 1980 and July 1981-November 1982, and that one had a 12 month break in it. This means there are a very small number of managers with any actual experience managing in anything even close to what’s happening now.

The current recession officially started in December 2007, so it’s already 15 months old and the end isn’t in sight.

What experience makes these folks the ‘best and brightest’ for today’s world?

Just what the hell are companies still guaranteeing oversized compensation and exorbitant exit packages when now is definitely the time to pay for future performance—no guarantees.

Image credit: flickr

What a joke. Bloomberg offers up information on which bankers are foregoing salaries and how bonuses are being set up.

For example, Steve Black and William Winters, who head up JPMorgan Chase’s investment banking unit, will forgo cash and stock bonuses in 2008, accepting only 700,000 stock options each.

“The stock will be awarded based on future company performance and must be held for five years, the bank said. The JPMorgan stock appreciation awards were priced at $19.49, the average of the high and low price of trading on Jan. 20, according to Bloomberg data. Shares of JPMorgan fell 21 percent that day and have since climbed to $24.28.”

I love the ‘only’. I just checked and the stock is up another 22 cents.

That means that even if the stock is no higher in 5 years they would still reap a little more than 3.5 million dollars.

Let’s not all cry at once.

There’s a reason that all those hotshot MBAs want to work on Wall Street. It’s because they believe, with reason, that they’ll make low seven figures within a year, two if they’re slow.

The attitude is blamed on Wall Street culture, but it goes further than that.

It goes back to their individual MAP and the deeply seated belief that they deserve it—they are entitled to that compensation; and that MAP certainly isn’t reserved for the new grads, it permeates all levels.

It’s not that they call themselves ‘Masters of the Universe’—it’s that they believe it.

Big problem since MAP is only changeable from the inside out. MAP is also sneaky and will pretend to change and then revert to its normal pattern when no one’s looking.

That means that we, the people, and we, the politicians, better have longer memories going forward than we’ve had in the past.

(Richard is traveling and will return next week.)

Image credit: flickr

Image credit: bluegum CC license

One of the things that RampUp does for its startup clients is help implement our unique approach to awarding stock options. The original methodology was conceived by RampUp’s angel Al Negrin for his own startups and we’re currently in the process of turning the consulting service into a software program called Option Sanity™.

Among all the neat things that Option Sanity™ does is track award dates and provide an audit trail that discourages backdating.

It also provides the intelligence necessary to avoid the level of idiocy present in TeleTech Holdings’ restatement of 12 years’ worth of financials dating back to 1996.

Yup, 12 years of misdated stock options, but no misconduct!

“If we eliminate misconduct, we find ourselves in the land of cluelessness, sloppiness and ineptitude… There were other goofy mistakes, like recording option grants for folks who were no longer on the payroll…And the firm’s options accounting treated some consultants like employees.

As in many of these options messes, the compensation committee’s use of “unanimous written consents” instead of real meetings (and befuddlement over who had authority to make grants) led to massive confusion about the dates on which options were officially granted. The investigators had to reconstruct the circumstances behind every grant to figure out the “appropriate” date (and hence the real exercise price) for each one. The company admits that some dates “could not be determined with certainty.”

All of which goes to prove Hanlon’s Razor: Never attribute to malice that which can be adequately explained by stupidity.

What do you think?

Image credit: Sameen

A post on Yielding Wealth asking readers how they defined ‘wealthy’ reminded me of a post I wrote year ago about executive pay, which included having your taxes paid on various perks, and even on compensation.

But the “golden coffins” being made public due to a rule change 18 months ago really blow me away.

This isn’t about life insurance; it’s about really big bucks if they happen to die while still in office. How big?

“Eugene Isenberg, the 78-year-old chief executive of Nabors Industries Ltd… If Mr. Isenberg died tomorrow, Nabors would owe his estate a “severance” payment of at least $263.6 million, company filings show. That’s more than the first-quarter earnings at the Houston oil-service company.”

At 78 there’s a good chance he’ll collect, too.

And then there’s the death-related non-compete clause.

“The CEO of Shaw Group Inc. is in line to be paid $17 million for not competing with the engineering and construction company after he dies.”

We all know that the pay-for-performance principle often doesn’t hold true, but death benefits have to be the ultimate nose-thumbing on that subject.

Shareholders are in revolt and have forced Comcast to scrap its plan to pay the 88-year-old chairman of its executive committee his $2 million annual salary for five years after his death.

In addition to hard cash, stock options are subject to accelerated (read: immediate) vesting resulting in yet more money upon death.

Certainly sounds like a good motive for a murder mystery—unless you’re a shareholder.

Read the article and you tell me, are death benefits fair?

Image credit: dbking

Does one really have to be an accountant, lawyer, minister or whatever expert in order to recognize when something is likely illegal or, at the least, unethical?

“That’s not my area of expertise” is the excuse du jour on most of the financial games being played—especially option backdating.

I find it very amusing when I hear high-powered corporate CEOs explaining that they don’t have the financial or legal savvy to understand that backdating is a no-no.

In one high profile case dating back to 2006 involves Dr. William McGuire, former CEO of UnitedHealth Group, who “…relied on others to assess the legality and appropriateness of backdated stock options granted to top executives and new hires. As such, all allegations against him in a shareholder’s lawsuit should be dropped.”

I love this part, “Dr. McGuire has no formal training or degrees in finance, accounting or law,” the brief states. “His only professional training is as a medical doctor with a specialty in pulmonology.”

Maybe no formal training, but please! There’s no way he was hired to run one of the largest health-care companies in the country without good business knowledge and skills.

No formal training, but didn’t he read or listen to the news? The backdating went on for 12 years and there certainly were news stories of other companies that got in trouble doing it during that time. The cost? $1.56 billion downward restatement of earnings.

But it’s the Cablevision case that really cracks me up.

“Cablevision had awarded 400,000 stock options to a deceased vice chairman, while making it appear as though the options had been granted prior to his 1999 death.”

Cablevision just settled, “…terms of the settlement agreement, certain present and former Cablevision directors and execs will pay Cablevision $24.4 million, while Cablevision’s liability insurer will kick in another $10 million. Cablevision has also agreed to adopt a number of corporate governance changes relating to stock-based compensation awards.”

Who said that greed ends with death?

(To learn why I chose this picture just click it and read.)

Heard any good corporate greed stories lately?