By Ken Keller

Dear Ken Keller,

I’m a business owner in my mid 50s, working long, hard hours to grow my business.

While I know every aspect of my business, technically, my weak spot is financial management.

I’m just not a “debit and credit” kind of guy and I never have been.

My issue is that my Controller isn’t doing the job I want done or the job I now know needs to be done.

This came to light recently when I attended a conference and learned what kind of reports and analysis other company owners in my industry were receiving from their finance department.

My fellow owners were surprised to learn that I was not getting anything close to what they use to make more informed decisions.

I was told that it only takes a few days for their monthly financial reports to be completed; mine are always several months behind (late).

The other owners explained about separation of duties within accounting and finance to prevent temptation and the likelihood of playing with the numbers.

My Controller has been with me for years and by all accounts, is loyal and hard-working. I have no reason to suspect anything but his total honesty.

I thought he was smart enough and willing to take the initiative to learn new things as the company has grown and expanded but he has not.

What are your thoughts on how to deal with this situation?

Sincerely,

Fred R.

Answer

Dear Fred,

I’d say you have a very serious issue on your hands.

If I did not know better, this employee is out smarting you by playing dumb. But he is playing with your money and maybe he has been doing it for years.

And, since you have admitted that finances aren’t your strong suit, it wouldn’t take much to stay ahead of what you know and are learning to continue to keep you in the dark.

You didn’t say who you use to do your taxes but it is probably past due to bring them in for a “top to bottom” review of everything that is going on in the financial area of your company.

I would recommend a simple exercise to “follow the dollars” to find out what the current process is in your company to make sure every dollar is accounted for.

If you suspect fraud, you can bring in a Certified Fraud Examiner to perform an audit that focuses specifically on theft or opportunities for theft.

If you decide to do either action, I recommend you put your Controller on a paid vacation for at least one week, or longer, until you gain a better understanding of what has been and what has not been going on with your company’s money.

Assuming that this is merely a case of lack of ability, a longer term solution to your dilemma is to hire someone from the outside who has “been there and done that” as your Chief Financial Officer and have your current Controller report to him or her. With someone new at the helm, your frustration should soon disappear and your decision making will likely improve once you start receiving the information you need.

If financial irregularities surface in your company as a result of outside review by competent professionals, they can advise you what the next steps should be to address both personnel and processes.

By Ken Keller

Dear KK:

My company has not performed formal performance appraisals for our employees for several years. Prior to the recession, we used to give raises along with the evaluations.

Because of the poor economic conditions we have not been able to provide raises because we did not have the money. We did not lay anyone off, but we did not hire new people either; if someone left we moved around the workload as best we could.

Maybe our industry recovered later than others, I am not sure. But in the meantime, we have recently lost some good employees to competitors and morale among the remaining employees is not where I want it to be. I believe that happy employees make happy clients.

Things are getting better and we will now be able to give some people increases. But not everyone has earned a raise. How to I deal with this?

Signed, Bill V.

Answer

Many companies are right where you are; they are just now starting to see daylight on profitability.

Don’t think you went through the Great Recession by yourself. I admire that you want to reward those employees who have stuck with you and taken on the extra work to help the company get through the challenging times.

It’s a great thing to share your profits with others who have worked hard to help create them with you.

You need to proceed with caution and understand before you get started, not everyone is going to be happy with the outcome. You will not be able to please everyone and that is just how it is. You may have some sleepless nights and you may even lose some employees before this is over.

The biggest mistake you can make is announcing that the company is giving raises. Everyone will assume they will be getting a large increase after receiving no raise at all for more than a few years.

If you want to provide raises based on seniority (tenure) understand that thinking is outdated. It is also dangerous because it telegraphs to your employees (current and future) that you value tenure over contribution.

Tenure is not loyalty. For some employees, staying with a company for many years means loyalty but only because of the steady paycheck and benefits.

I’ve known employees who contributed more to a company in three years than others did in twenty.

And don’t assume your managers are more deserving of a raise than other employees. Do your best to take into consideration not just the recent past when thinking about whom gets raises, think about the time period since you last were able to give pay increases.

Start by taking a list of all your employees then take each name and place them into one of two columns. The first is the list of those deserving of a raise and the second is the list of those who do not. How do you decide whom goes in which column?

Some employees have made minimal contributions. Those are the employees that have just done enough to keep their job. You may have even considered letting these people go if you were going to reduce your headcount.

Others have contributed more than others, and those names go in the first column.

Go back to the first column and resort it, from highest contributor to lowest. Why? Some people deserve a larger raise in pay than others. Take your budget and allocate it until you feel comfortable that the money has been divided properly based on contributions to your company.

I hope this gives you a good start on the path of providing raises to deserving employees.

By Ken Keller

I don’t recall anyone getting into trouble when I was in elementary school. About the worst thing that could happen to you was the principal calling your home and letting your parents deal with whatever you had done.

In high school there were more serious ramifications for misbehavior. For minor offenses, there was detention, a mind numbing experience.

Transgressions escalated to calls home, a physical paddling by the assistant principal (“swats”), suspension and finally being expelled to another high school.

In the school environment, any adult could call you out for bad behavior with swift judgment and punishment.

These things were part of the “stick” that motivated students to stay on course and obtain the stated objectives; good on-campus behavior, solid attendance and academic achievement.

Most students could see the “carrot” at home, living in a nice house, with utilities, food to eat and a warm, safe place to sleep at night.

The unspoken, ultimate carrot was the hope of realizing an even better life as an adult than your parents enjoyed. That path was revealed as you grew older by role models, living and fictional.

How one achieved the carrot was through study and work on school assignments outside of the academic day, also known as homework.

Progress was measured by your grades. If you were motivated enough, you could address any number of variables impacting your report card. If you were satisfied, you could simply continue doing what you had done.

Post school you went for more schooling or you went directly into the workforce, hopefully having learned the requirements and lessons of success.

These days, there are few sticks in schools as there were before and the carrot(s) don’t seem to be as strong of an influence. No one is to blame for any of this; it is simply how it is.

But if you ask the owner of a business what makes it hard to succeed these days it is when your employees aren’t happy. Unhappy employees don’t serve clients as well as happy employees do.

Unhappy employees are no where near as productive as unhappy employees. Why aren’t your employees happy? They haven’t seen a raise in a long time.

Carrots are missing; in some cases appear to have vanished. Raises are very hard to come by and bonuses are rare. That will not stop employees from asking for a pay increase. They’ll always be asking.

Owners need to be able to explain why a raise isn’t an option. Larger forces may be at work that the employee needs to be educated about, c9mpetition, inflation, mature business conditions, uncertainty, rising costs of being in business.

By Ken Keller

Economist Milton Friedman divided spending into four categories, each one impacting owners, employees, vendors, and organizational culture:

-You spend money on yourself and in doing so you’re interested in buying whatever you want most at the best price.

-You spend your money on other people, and because someone else will be the recipient, you are less invested or interested in pleasing them.

-You spend other peoples’ money on yourself and price is no longer an objection.

-You spend other people’s money on other people, and no one really notices or cares.

Steve owns a business. Even when he struggled in the early days to get his business off the ground, his attitude was that he always deserved the best.

He acquired debt with what others believed to be over-the-top spending, but Steve had always believed he was ultimately the one who should get full credit because it was only due to his efforts that his business was successful.

Even though he said he treasured his clients, in reality he only valued the revenue they generated. Despite his professed love, Steve was always negotiating for higher prices and didn’t cut any deals.

Steve fell into the first category of spending. Not only could he never distinguish between a want and a need, negotiating is how Steve chose live his life. In his mind, everything was negotiable.

Steve wasn’t impacted by the second category, spending his money on others, until the business grew and he was forced to hire employees. These were people that Steve brought on board to take care of ‘His Clients’ (emphasis added).

Steve never had any interest or desire to splurge on his employees. His attitude was that people were replaceable and loyalty was something you bought.

Annual raises were non-existent. Given his tendency to negotiate, Steve waited for employees to approach him about getting a raise and even then, he stalled.

He actually held off doing anything until an employee generated enough courage to ask him a second time about a pay increase.

Steve believed his people were weak because they did not engage to negotiate with him. The raises he did give, he gave grudgingly.

The third category of spending is a rare occurrence, but when there was a windfall of money, such as a rebate from a vendor (something Steve had negotiated), or an unexpected tax refund, he splurged. That largesse, however, never extended to his employees.

Steve took that “found money” and used it for things he would never have spent his own money on. He traveled the world, staying at the finest hotels and eating at the best restaurants, going first-class all the way.

Because Steve was seen as a successful owner, he was approached to run for his local city council and won. At this point, spending category four kicked in, and Steve had no issue at all voting to spend money that wasn’t his for people he didn’t know.

Does Steve’s business make money? Yes. The business is profitable. But this success comes at a price.

Only a few of Steve’s clients like his approach of constant bartering. Vendors like the volume that Steve’s company purchases but they do not enjoy dealing with Steve. When Steve calls or pays a visit, people dread it because the only reason he is there is because he wants something.

As a result, the loyalty, work ethic and care of clients by Steve’s employees extended only to their paycheck and not beyond it.

Employees were disengaged and saw no reason to change their mindset.

The employees that could actually have made Steve’s business better left and those who remained were those who wouldn’t be hired anywhere else.

Steve is not about “win-win” but “Steve must always win.” What a legacy.

By Ken Keller

Harvey Mackay is successful author, speaker and business owner. In his book “Dig Your Well Before You Are Thirsty” he describes in detail how he earned promotions from his first employer.

His first job was managing a broom, and he was assigned the task of sweeping both the production floor and warehouse.

Harvey thought about what it would take to distinguish himself from all of the other employees at the company. He not only wanted to do the right things, he wanted to do things right.

The first thing he did was make sure that he arrived early to work. Harvey knew that by being early he was setting himself apart from others who were competing for a promotion.

Second, he demonstrated a sense of professional and personal responsibility. How did he do this? In his mind he “owned” the cleanliness of the floor that he was assigned.

Because Harvey accepted responsibility for doing a good job, every day, his immediate supervisor didn’t need to micromanage him to make sure that the job was getting done.

That freed up the supervisor to spend time dealing with those who did not have the same work ethic, those who did not understand the concept of “owning the job they were paid to do.”

The third thing he did was to demonstrate enthusiasm for his work. Harvey did this with a strong performance day in and day out, regardless of what else was happening in his life. He did not bring his troubles from home to his job. He did not get caught up in anyone else’s drama. Harvey stayed focused.

Fourth, he learned to become a team player. People have to work together to achieve common goals. Part of being on a team means having to possess, and use, talent, skills and abilities to work with diverse individuals.

Fifth, Harvey understood that forces inside and outside the company would influence change and he would need to adapt or be left behind.

Harvey kept an open mind about how things could be done, avoiding the trap of believing that “this is the way we have always done it.

At one point his supervisor asked him to take on additional responsibilities. Harvey was asked to learn new tasks, to cross train so that when people went on vacation, he could substitute for them. His attitude was that he could never hide behind a job description; his job was what his boss needed him to do.

While having solid communication skills were essential, one skill was paramount: the ability to anticipate what the boss wanted.

Harvey asked his boss what the department’s concerns and issues were. He then presented to his boss solutions to problems that had not been addressed. This ability to think ahead and “look around the corner” for his boss set Harvey apart from just about every employee.

In many organizations, this ability might threaten the supervisor. But that was not the case with Harvey’s boss, who recognized the potential that Harvey had and developed it.

Finally, Harvey understood from that his first day on the job that he could either help his employer make, or save money. He decided that did not want to be a cost, a burden to his employer. He found ways to contribute so that the company could grow even though he was in a low level job that literally anyone could perform.

Why is this important? Within Harvey’s story are many potential questions you can ask prospective employees who seeking employment with your company. Hopefully, you might be able to identify individuals with potential, initiative and a willingness to contribute. Or, perhaps you can use Harvey’s lessons to weed out candidates that may well be a burden on your company before you add them to your payroll.

By Ken Keller

Graduates, faculty members, parents, invited guests:

I am honored and humbled to speak to you. Your graduation is certainly worthy of a celebration and some words of thought-provoking advice, encouragement and inspiration.

You have much to be thankful for. You have studied, grown mentally, physically and emotionally, and are now eligible to join those folks out in the “real world of work.”

My goal today is to share five lessons with you.

The first lesson is you will end up working a majority of your life, either for yourself or someone else.

The good news is that you have developed a good work ethic. Employers like to have people on the payroll who see things through to the end.

The bad news is that you will hear about people who inherited money or got a lucky break somehow and in both cases, have plenty of money, toys and time to play than you could imagine.

Life is not fair, get over it.

The second lesson is you will not always know what the score is or where you stand at work. Chances are you’ll end up working at a place that won’t tell you what the score really is, how your performance measures up or what you need to do to improve.

You need to establish your own internal instruments to gauge how your company is doing, what your relationship is with your boss is, how your industry is doing and how the economy is doing.

When you do this, you’ll be more tuned in to reality and can make key life decisions proactively.

Third, the more you make, the more taxes you pay. That is just how it is, no one likes it but you get used to it.

The fourth lesson is that what you studied or majored in is not necessarily going to be your career. Don’t get pigeon holed into thinking that your coursework is all you are. You’re a lot more than that.

Find out what you enjoy doing before you attempt to make a career out of anything.

If you find a job and attempt to make it fit you, you will be miserable. You’ll always be in search of happiness. Your constant unhappiness will make everyone around you unhappy, including those you work with and those you live with.

Take time to write down what you enjoy doing and then try to find a job engaging those interests. When your passion clicks it will energize you.

The final lesson is that time flies. It was just yesterday I was sitting right where you are, waiting for the speaker to finish. I wanted my diploma and to go … somewhere. You know, get on with my life. Get a job; make money; travel.

I did get on with my life and it has been great. But, it has gone by too quickly. You really do need to stop and smell the roses.

Get up early and watch the sunrise and the sunset, walk in the rain, tell people if you love them, call your friends, send birthday cards, sit and watch the birds, watch water flow by, enjoy the silence of a cool night.

These are small things yet they remind us there are great pleasures all around us, everyday, if we only take the time to experience them. Don’t spend all your time at work, take time to enjoy the world you live in, and enjoy it. It was created for you.

No one ever said on their deathbed, “I wish I had stayed later at work.”

Thank you and best of luck in your life.

PS: These same lessons apply to business owners.

By Ken Keller

Right after I joined the company, I realized the owner was doing some strange things. Which made me believe he was, in fact, strange.

Monday through Thursday the dress code for men was suit and tie, and Fridays were “casual day.”

What did this guy do? Monday through Thursday he dressed casually; Fridays he wore a suit and tie. He later told someone he did this simply because he could.

Once he walked into hallway of the office, stopped so everyone could see him and then began loudly sniffing the air. He did this several times, gaining attention, and then announced, to all those watching, “Smell the overhead around here! Smell the overhead!” Then he returned to his office. No explanation was given; this was one of his preferred methods of communicating.

When this owner got mad at someone, he refused to look into the eyes of that employee. I was clued in on this the first time I did something that upset him. It was up to me to guess what I had not done, or done, that got him angry.

He never directly confronted anyone. Instead, he stored up his frustrations and let loose in front of a group. Even in that setting, he never specifically called out those with whom he was angry. People heard about their so-called offenses through the grapevine. The owner preferred to avoid direction confrontation.

Apparently he never forgot or forgave any of these alleged transgressions, and he spent time getting “even” in some very small and petty ways. This gave him the feeling of superiority.

After witnessing these odd behaviors, I nicknamed him “Psycho.” I refer to my tenure at his company as “my time at the asylum.” I’ve since heard from people who work there who want me to explain his behaviors and I respond by simply saying, “I think he is nuts.”

Now, when I meet with owners for an initial meeting, I identify possible passive aggressive behavior by assessing how the owner interacts with his or her employees.

Once I get the CNN sound bite about the company, I inquire about human resources. It’s a fair issue; salaries and burden are usually the single largest business expense category. In a business, employees can be the largest asset or its greatest bane. Which category it falls into is usually a direct result of the owner’s behavior.

First, I ask about the management structure. If there is no published org chart, I assume that, essentially, everyone reports to the owner, which negates the role of all the managers on the payroll.

Second, I inquire about the performance review system. If no such system exists, I determine that the owner decides who gets paid what, who gets bonuses and how much, who gets additional time off, who can leave early and so forth, all based on whether or not he or she likes an employee. Yes, affection, not effectiveness, seems to matter more to some owners.

Third, I verify the actual management authority levels. I ask who has authorization to spend company money, to what limit and for what purpose. I sit quietly until the owner shares that there is only one person in the company permitted to spend “my money.”

No team exists with this kind of employer; it is a group of individuals sharing a single purpose: to get a paycheck. Nothing else matters and employees will do whatever it takes to maintain this income stream, to the extent that employees will fight each other to keep the money and to be in the good graces of the owner.

As you read this, you may think that this column does not apply to you, and it might not. I am willing to bet that “Psycho” believes he is still the best owner on the planet because no one has ever had the courage to tell him differently.

The owner who trusts no one will discover that their employees do not trust them. The owner who shows no loyalty will reap that in return. The owner who pits employees against each other for favors can expect disengagement, low productivity and anger. Do you want this to be your legacy?

By Ken Keller

One magazine article I have read many times for the valuable insight it provides and have passed to prospects and clients is from Inc. Magazine. “Marcus Buckingham Thinks Your Boss Has An Attitude Problem” was published in the summer of 2001.

It’s a crash course in leading people and I believe the article should be required reading for anyone in a position of leadership.

One “ah hah” I had was that within any organization, the employee population can be divided into three categories; people that are engaged (loyal and productive), those not engaged (just putting in time) and those that are actively disengaged (unhappy and spreading discontent). The term “employee” refers to every level of worker, including leaders.

As the leader, assuming you are not disengaged yourself, is to improve the ratio of engaged to actively disengaged, and reduce the number of employees who are not engaged.

It’s a tough challenge, and the work will never be completed. The key is that as the process begins and picks up momentum, the company will see benefits. The engaged people on the payroll are the company’s greatest asset. Unfortunately, those not engaged and those actively disengaged are the company’s largest liability.

How can this be accomplished? How can improvements be made in productivity, focus and business results? It can be done through a system of formal, yet simple, accountability.

It’s a basic system; each person in the company, with their manager, develops a list of not more than five key result areas (KRA) they are responsible for. Each KRA has a numeric or pass/fail monthly goal and at the end of the month, progress is measured towards monthly and annual achievement.

At month end the manager has a one on one session with each subordinate and holds a discussion to review both efforts and results. During this meeting, coaching takes place to determine what help is needed for the employee going forward. Sometimes it is “self help” and sometimes it may be “tough love.”

This type of meeting usually already takes place at a macro level, where the owner reviews actual results to plan for volume, revenue, expenses, costs and other business metrics of significance.

In companies with sales personnel, this system is probably already in use to determine who is achieving goals and who is not.

There are additional benefits to accrue with once this system is in place. The first and most important is that every employee will know what they are responsible for.

No employee will be able to hide behind the excuse that they did not know how they were to spend their time while on the clock.

The second benefit is that this process forces people to either step up, or to step out. It becomes quickly become apparent who is not doing what they need to be doing.

The third benefit is that ownership will quickly realize where there is conflict between key result areas (individual and departments).

Fourth, employees will grow as individuals to achieve KRA. Someone in Accounts Payable may be called on to take new responsibilities in Accounts Receivable. Not having done this work before, they will have to learn new skills and not just take on more tasks.

The most significant benefit is to the company, which is likely to grow as a result of improved internal alignment and focus. The company will also grow because employees are growing and learning and many may become more engaged.

What gets measured gets done. To be sure it gets done, every employee needs to understand that what they are expected to do will be regularly inspected to insure that what is expected, gets done.