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Challenges of Personnel Motivation

The study of human motivation is one that is as old as humankind and as old as recorded history itself.  It has been said that the motivation of human beings ranks as a major delineation of human beings from the other animals. Certainly all animals seek to avoid the painful realities of the environment (the attainment of food and shelter), and to satisfy the perpetuation of the species.  These characteristics are strictly relegated to the category of basic biological drives.  Subsequent to these basic biological needs are the unique human characteristics of the ability to achieve and, through achievement, to experience psychological growth.

“What motivates people… you or me… and all the rest?”   “How do I get an employee to do what I want?”  The answer to these simple questions involves, in most instances, a highly complex system of thought, i.e.,  the psychology of motivation. It is not our purpose herein to indulge in such philosophical exercises, but to relegate our efforts to the prime areas of How to Motivate Employees… and the Practical Application/ Implementation Thereof.

Put simply, Gitman Marketing advocates a system of Participatory Management.  This is a system of management which elicits creative and practical ideas from all personnel… and rewards them for the successful application of  such.  As in all internal/external marketing efforts, this discipline of personnel rewards must be tailored for your specific business.  Therefore, you should consider programs to enhance job enrichment, employee accountability and overall personnel motivation:

  • Productivity Incentive Program
  • Participative Management System
  • Programs of Defined Compensation
  • Formalized & Objective Personnel Evaluation System
  • Programs to Create “Golden Handcuffs” for Employee Tenure

What is the value of a business plan?

Your business plan is the blueprint for you and your key personnel to follow and a working document to measure your progress.  No matter how small your business… it needs a written plan of action.  If you plan to be successful, you need the stability and direction that a sound business plan offers. Talk to a dozen colleagues, and you’ll come up with a dozen different ways to structure a business plan.  The following outline will give you some concept of the components of a strategic business plan:

  1. The Company… describe your business, expectations, overall objectives for the business and any other factors that will contribute to your success.
  2. The Market… this is the longest section of the business plan and the most critical.  Define your market, spell out the marketing goals that you want to achieve for yourself personally and for the business within a specified period of time and discuss the particular strategies and tactics you’ll use to obtain your objectives.
  3. The Management Team… briefly describe each management position in the business, along with the names of the people filling each position and a summary of their qualifications. Discuss the skills and experience of your management team and how they will relate to the success of your company.
  4. Organization and Personnel… list the key staff people critical to the company.  If you’re in the process of recruiting personnel, discuss the requirements of the vacant positions and explain how you intend to fill them.  Finally, include an overall organizational chart for your company so everyone knows where they fit in and who is responsible for what area.
  5. Financial Data… spell out realistic financial projections for the next three to five years (monthly for the first two years and annually and/or quarterly thereafter).  Most accounting software programs have financial projection programs associated with them or you can employ a host of spreadsheet programs to accomplish the same goal.  As a word of caution, if you are doing these projections in house, always have your CPA firm review your projections for accuracy.

Moreover, it is important to remember that your successful business plan is valid today.  There is no guarantee that it will continue to be successful given the changing business environment.  Therefore, continually reviewing, modifying and re-conceptualizing your business plan is essential to your companies’ future success.

How can I position my company to make it attractive for sale in the future?

Since the acquisition process itself is a lengthy process, positioning for a sale that might be several years in the future should already be in the works. While no two companies would undergo an identical process, there are some general guidelines that apply in order to maximize the value of a company. They involve the following considerations:

1. Management succession… a portion of a company’s value is directly related to its management. The question of what happens to that management team – and its value when the owner departs is of vital concern to a buyer. Buyers look for a strong management team that will stay in place. In fact, some buyers will be interested in having management take a minority equity interest in addition to offering management incentives to remain and support the trasition to new ownership.

2. Owner-related costs… while valuation formulas can be quite complex, the selling price will likely be calculated as some multiple of earnings or of cash flow. This value will be higher if certain “owner perquisites” that will disappear when the owner departs are segregated so that they do not influence the application of a valuation formula i.e., excessive compensation or rents on owner’s properties, travel, etc. Segregating such costs allows you to paint a more accurate picture of the post-acquisition earning power of the business.

3. One-time costs… the performance record of your business can be seriously distorted by one-time costs unless you isolate them and identify such to a potential buyer. The costs include any write-offs, settlement of litigation, environmental cleanup, fines and penalties, severance payments, etc. If these costs are isolated, they will not negatively influence the valuation calculations.

4. Pending litigation… the chief nemesis of accurate valuation is uncertainty. There is probably no greater source of uncertainty in business than unresolved legal disputes. Therefore, pending litigation should be resolved to remove this uncertainty. If that is not possible, it will be necessary to call in appropriate expertise to quantify the probable outcome. Unresolved or unquantifiable legal disputes can erode market value and, in most cases, will make the business entirely unmarketable until the dispute is resolved.

5. Transferable contracts… the maintenance of existing contracts, leases, vendor agreements, employment contracts, product or technique licenses, etc. can be an attractive selling point. It’s advisable to make all such contracts transferable. This provides additional continuity of operations for the buyer.

6. Unnecessary assets… assets which are not essential to the post-acquisition operation of the business should be identified and evaluated for possible transfer or disposal in the most cost effective way possible. Such assets can be sticking points in negotiations with a buyer e.g., real estate and family automobiles.

7. FDA, OSHA and Right-to-Know, EPA compliance… today, every business is under the scrutiny of compliance issues to some extent. It is prudent to retain an independent consulting firm to conduct an audit to ascertain the company’s level of compliance and possible exposure. Such an audit will either provide assurances to the potential buyer that compliance has been adequately achieved… or it will specifically delineate the potential liabilities so that you can take action to relieve your exposure and the buyer’s.

8. Business plan… a business plan is a benchmark against which a buyer can compare actual performance. It is also the sign of a credible and well-run business and a tool by which managers who will stay with the new owner can be evaluated.

Perhaps the best advice for positioning a business for acquisition is simply to adopt the mind-set of a buyer:

  • Acquisition-oriented firms maintain a network of contacts to identify companies for acquisition. Don’t assume you are on an acquisition list… instead develop a list of potential buyers with who you feel comfortable.
  • Develop solid market intelligence about these potential buyers i.e., the potential buyer’s needs and preferences, how these people negotiate, what companies have they acquired in the past, etc.
  • Ask yourself some pointed questions… If you were interested in acquiring a company of your size what would make a company attractive to you? What would make the company unattractive?

If you answer those questions honestly and accurately, and then manage your business accordingly, you can position yourself for eventual acquisition on your own best terms.