Are Remote Employees Value Killers?

Remote employees can have a dramatic impact on the value of your business. If your exit strategy is to sell to a third party, take some time to think about the areas where offsite workers could have an impact.

Curb Appeal

One of the first things any good business broker will look at is your curb appeal. Your business needs to look good, just like a house that’s for sale. (OK, maybe right now a house doesn’t even need to look good, but you know what I mean.)

When I brokered Main Street businesses, I was always surprised at how much we had to tell owners. Clean up the piles of files in the office. Clean and sweep the parking area. Remove the pile of broken pallets next to the dumpster.

What message does your office space send?  Is it better to downsize, and just describe the employees who are no longer on the premises? Or would a buyer prefer to see a room full of empty desks, so that he knows he could bring them back if he so desired? (But he would also be calculating the wasted rent in his mental cash flow.)

Equating Dollar Value

What are your productivity measurements or KPIs for remote workers? Can you prove that they are worth what you are paying them? How? What level of confidence can a new owner have that he is acquiring a productive team? A recent survey in the U.K showed that almost 30% of remote employees were working a side gig on company time.

remote employeesHow is their remote presentation? Unless they are in a job that is strictly production-based, most will interact with customers, vendors or other employees. Do you have standards for their workspace and their appearance on video?

Can you give a buyer confidence in their compensation structure? New ownership can be a great time to ask for a raise. What assurances are there that it won’t happen? As I wrote a few weeks ago, how do you integrate them into your culture?

Confidentiality and Human Resources

Confidentiality about the transaction is more difficult. Does the buyer interview remote employees one by one? You can be sure they are talking to each other, whether on Teams or Slack or just texting each others’ cell phones.

On the other hand, a group video call raises new issues. A buyer could come out of it with a poor impression because one individual is obnoxious or inattentive. Someone might press for inappropriate information. (“Will all of us keep our jobs?”)

Remote Employees Increase  Risk

I am not campaigning against remote employees. They are a fact of life, now and likely for the foreseeable future. I’m just pointing out that handling their management, controlling the information flow to them, and anticipating their potential impact have all become part of exit planning.

The best surprise is no surprise. Part of your planning process when listing your company for sale should be how you will handle these questions.

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The Downside of Remote Work

I came in this morning planning to write about the downside of remote work. It isn’t for everyone. In fact, it creates new long-term problems for businesses and will continue to do so. (For a related topic, see my previous column on returning to work.)

Coincidentally, this morning the Wall Street Journal posted an interview with Jamie Dimon, the CEO of JP Morgan. He said about remote work in part, “It doesn’t work for those who want to hustle. It doesn’t work for spontaneous idea generation. It doesn’t work for culture.

He is right, and remote work is a lot more threatening for Main Street businesses than it is for large corporations like the one he leads.

I have preached for decades that culture is the secret weapon of smaller companies. They can’t fight on the same financial terms as big corporations. There is a reason so many regulations regarding issues like family leave are limited to employers of a minimum size. Small businesses can’t afford to just “do without” an employee for weeks or months when that person is the only one who handles a particular area of responsibility.

The Main Street owner’s secret weapon

In a Main Street company talent is quickly identified and (usually) rewarded. Those who, in Dimon’s terms  “want to hustle” can move up more quickly. Real ability and ambition are too scarce a resource to ignore.

Smart business owners extend the culture of the business by their individual efforts. Knowing about their employees, their families, and their pastimes goes a long way to making them feel that they belong in the company. It’s hard to have those casual “discovery” conversations on Zoom, and almost impossible if there are multiple participants in a video call.

Our own business is built on collaboration. Almost everything gets passed around for comment, and we frequently meet via video to discuss things. It is often a difficult process, and clearly takes more time than if we could sit around a table.

We have employed remote workers for over a decade, but each one worked in our offices at some point. Our newest hire is in 2 days each week, and I am certain that she would not have melded so well with the rest of the team if she was entirely remote.

The biggest downside of remote work

When you erase the cultural advantage of a small business, what do you have left? In the harshest terms, money. That’s a battle we are guaranteed to lose. If the only differentiator to the remote employee is the amount on his or her automatic payroll deposit, we are well and truly screwed.

When we interview new clients, one of our questions is “Why do customers buy from you?” If the answer is “strictly on price,” it had better be a commercial bid contractor or an Internet-based retailer. In any other type of business, it indicates a problem.

Think of a remote workforce as an Internet-based human resource pool. If you can’t get noticed for your effort, if no one will know you as an individual, then the only differentiation between employers is price.

It is happening already. I have a client in Texas who is losing his tech remote workers to Silicon Valley. The employee of another client in the Midwest was recently poached by a New York firm. The pitch is simple. “You are already working from home. Why not do it for twice the money?” (That is not an exaggeration- both cases involved a doubling of salary.)

Employers as commodities

If someone approached your remote workers with a similar offer, how would you counter? I’m guessing that you can’t. I know that many of those who leave for a remote job with a giant employer won’t be happy in the long term. It’s the epitome of being a cog in the wheel. How many, however, will be willing to halve their income to feel more appreciated?

downside of remote workMy message is simple. The downside of remote work is that it turns employers into a commodity. A remote employee’s home office looks exactly the same today as it did yesterday. It will look the same tomorrow. If you want to maintain any hope of competing with the giants, the faster you restore in-person contact with your employees, the better chance you will have.

If you don’t take advantage of your cultural superiority, the ability to run your business may be decided by someone else’s department manager a thousand miles away.

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4 Responses to The Downside of Remote Work

  1. Tracey Cheek says:

    I don’t completely disagree with you on this. Remote work is disconnected and collaboration and communication is hard. But we do it. I have been able to expand my reach for finding quality team members as well (I live in Oklahoma and talent can be limited here). But I do offer something that not many others can offer. I offer part-time flex work mainly for moms who are raising kids and want to work, but don’t want to go back to the workforce full time. There is a huge network of highly qualified women out there that fit this mold. As I’ve grown my team, I’ve learned there are more and more people out there piecing together remote part-time jobs so they can have flexible hours and flexibility of schedule. That’s the one thing the traditional companies cannot offer.

    • John F. Dini says:

      Your point is well taken, Tracey, but I can only partially agree. I recently read the new flex-work policy for one of the largest accounting firms in the country. They have options including part-time (scheduled by employee choice by days or hours), seasonal, surge, total-remote, partially remote, hot-desking as needed, sabbaticals, extended PTO, split-shift, and several others I never saw detailed before. The big-salary jobs I described are admittedly full-time, but that doesn’t mean large companies can’t match your flexibility.

  2. Christi Brendlinger says:

    I think that you missed a significant benefit for remote workers employed by Main Street companies… diversity, growth and burnout. The best thing about my job is that there are constant challenges and as a result, you get to wear a lot of hats. You get to try and solve wide-ranging problems outside of your expertise and that’s just plain fun (at least for weirdos like me). I know what it’s like to work for a large corporation. I have worked for several Fortune 500 companies and I shudder to think about going back to that world… even remotely. Don’t get me wrong, I LOVE coding but I also love all of the side projects, the unpredictability and opportunities to do something I’ve never done before. I get to move back and forth between projects at my pace so, I don’t burn out. Every day is a new adventure. Don’t forget about that when you are talking about the advantages of working for a Main Street company. For me, it’s a pretty big deal.

  3. Doug Scheiding says:

    During and now post COVID I have started to remote work two days a week, usually Tuesdays and Thursdays. This is getting me an additional 4 hours of my weekly time back to make me more productive and a better quality of life. I do agree that remote work does degrade if not eliminate culture and spontaneity of idea/collaboration. It is also not for those that aren’t goal oriented or those that need others for motivation. Thus a part time model I think is best if it can be worked out.

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Return to Work Owner’s Guide

Return to work policies are a new COVID-related minefield for business owners to negotiate. As more states make COVID control measures less restrictive or optional, the “requirements” of a safe workplace, and what we can demand of employees, are becoming even less clear than before.

The companies I work with range from essential industries, where full production has never paused, to tech companies where their office hasn’t seen a live human being in over a year. All are wrestling with return to work or relaxation of restrictions policies. After dozens of conversations, here are a few guidelines.

You Aren’t a Judge

return to workPerhaps the most important rule for staying out of trouble is to avoid making any decisions about what constitutes a “valid” employee issue or excuse. One employee’s child care challenges may seem more difficult than another’s. Some children have returned to school, others are being taught remotely. A number of daycare centers have reopened but many haven’t.

Some folks are still fearful of going out at all. Others have been socializing for months. You may have employees who fear mingling with those who haven’t been as diligent about protection. Nonetheless, returning to the workplace is a line in the sand. If you are going to demand the presence of some staff, the criteria have to be the same for everyone.

If you will permit remote working for some employees, it should be defined by specific job descriptions. For example, if customer service people have to be present, then all customer service people need to be present. Allowing telemarketers to work from home should mean that they all can. (We will deal with remote working requirements in a moment.)

Remember, if an employee was hired for a job requiring his or her presence in the workplace, it’s legitimate to say that the job still requires that presence in the absence of a pandemic.

Remote Working Policies

Remote working is a counterforce to company culture and employee retention. Severing the social fabric of the workplace is perhaps the most damaging effect of remote work.

That said, over 90% of employers say they don’t expect to return all employees to in-person physical presence, ever. Every survey of remote workers says that they would like to go to an office two days a week, but thirty percent of them say that having to return 100% of the time would be a reason to seek another job.

If you will permit some employees to work continue working remotely, it’s time to define the parameters.

  • Can the employee demonstrate an appropriate, dedicated remote workspace? When we went home with little warning or preparation, a lot of offices were on kitchen tables. That is probably not satisfactory for long-term professionalism.
  • Are there measurements of productivity? Some employees were more productive at home, but others were far less so. What metrics will determine whether or not an employee retains the flexibility of remote work?
  • Is there any required presence at your workplace? Some companies have specific days for everyone, or for sub-groups of employees. It should be plain that required days are just that. Attendance isn’t optional.

Infection Control Policies

Thankfully, it appears that the difficulty of proving a point of contagion has scared off most of the personal injury attorneys. You still need to demonstrate appropriate caution, both for liability protection as well as for the confidence of concerned employees.

  • If employees are utilizing the same space on different days, demonstrate a commitment to sanitizing in between users.
  • Have each employee sign an absence-of-symptoms form and check temperatures upon entry every day.
  • Allow space for social distancing in meetings. If sufficient space isn’t available, use a video conference application even for internal meetings.

Here are the CDC infection guidelines.

Return to Work

Even with clear policies and procedures, coming back will be disruptive, and not “just like before.” Here are a few unrelated tips some others have used.

  • If you are reconfiguring space, think carefully about the real need (besides prestige) for private offices. One employer has told executives “If you absolutely require full-time space dedicated for your sole use, we will require that you be here full time.”
  • Many days can be wasted as employees introduce or reintroduce themselves to one another and catch up on personal news. Consider having a restart event, where each employee answers 4 or 5 questions (either together or virtually) about their time away and changes in their lives.
  • Requiring vaccination is a tricky area, but one employer is making them a prerequisite for paid quarantine time after exposure. Those who been vaccinated will be paid until they receive negative results from an immediate test. If you haven’t, your 10 to 14 days quarantine is unpaid leave.

Return to work is a far more complex issue than just naming the date. Some preparation and advance communications will save a lot of time and headaches when the day arrives.

 

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Internal Leaders Affect the Value of Your Business

Internal leaders may not be obvious. They may not even have a “leadership” title. Make no mistake, however; internal leaders are critical to value and attractiveness when it comes to selling your business.

In Super Bowl 55 we saw the impact of an internal leader. Tom Brady has the highest winning percentage of any single athlete in major professional sports. The Tampa Bay Buccaneers have (or at least did up until this season,) the worst win/loss record over their entire existence of any major professional sports team. Yet one man changed the culture of the organization almost overnight.

Remember, for all the accolades being heaped on Brady, he is an employee. He doesn’t own the Buccaneer enterprise or negotiate any contracts other than his own. He didn’t choose the team’s logo, uniforms, location, or coaches.

Tom Brady is paid to fill only one of 53 player positions in the organization. There are also 31 coaches on the team, whose jobs are to teach and give direction to those 53 players. Although every player will acknowledge that winning is a team effort, none will argue the impact of one strong internal leader on his 83 coworkers.

Internal leaders can be good or bad

When I was a very young business owner, I hired an experienced salesman. He was an alcoholic, and began inviting other employees to his house for a cocktail after work. It took me some time (too long) to realize that he was plying his coworkers with free booze while he ranted daily about how poorly the company was being run.

I couldn’t understand why there was so much resentment among my team. They seemed to resist any direction I gave them. Finally, one person was kind enough to explain to me what was happening. Because this salesman was my top producer, I was afraid of the impact on revenues if I fired him.

He didn’t want my job. In fact, he didn’t want any of the responsibility that should go with leading. He had merely discovered one of the biggest truths about leadership. It’s easier to tear something down than build it up. People love to hear that things could be better. It’s making them better that is the tough part.

Tom Brady made the Tampa Bay Buccaneers better. Like any good internal leader, he didn’t limit his contribution to his job description as Quarterback. He helped recruit and train the people around him to build a better team.

Identify your internal leaders

An army dispatches its troops under the leadership of its lieutenants, but it succeeds on the ability of its sergeants. As a business owner, you can inspire with core values and set great goals. Whether you reach them, however, will be determined by your internal leaders.

When it comes time for your transition, they are more important than ever. If you are selling to family or employees, they may not expect to be included in equity, but they will determine the acceptance of those who are.

If you are selling to a third party, his or her achievements following the sale are conditional on the support of your internal leaders. They can prop up an inexperienced owner, or sink him without a trace.

If any part of your proceeds from exiting depend on the continued success of the business, you would be wise to identify your internal leaders, and make some provision for their continued loyalty after you are gone. If they don’t buy in, you could see the value of your enterprise (and your payout) decline substantially.

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The Coaching Skill in Exit Planning

The single most important talent in your exit planning team is coaching skill. I’ve written often in this space about the need for multiple talents, from taxation to legal, financial planning, and risk management. None, however, is more important than coaching.

Let me put it this way. Your planning team can be led from any position, as long as the person leading has coaching skill. If he or she doesn’t, all the clever tax advice or ironclad documentation in the world won’t lead to your successful transition. But if the person leading the team is an experienced coach, you’ll probably be okay.

What is Coaching Skill?

coaching skillLet’s make it simple. Coaching is asking questions. An experienced coach will ask the questions that no one else does, preferably in a way that doesn’t offend.

Do you want to save money on taxes? Of course, and that should be apparent to every professional involved. Do you want to maintain control until you are paid what the company is worth? Sure. Do you want to ensure that your family is taken care of? Naturally.

These aren’t the questions that derail a transition plan. Here are a few that, left unasked, will.

Is there something more important to you than the proceeds from selling? Is there a part of your legacy that must be preserved if at all possible? Are there non-financial or non-equity stakeholders whose welfare must figure into the plan? Is your family on board with this?

These are the questions that an advisor who is focused on the technical complexities of exiting will often omit.

The Most Important Question

What will you do when you no longer own this business?

For many entrepreneurs, that’s the stumper. Unless you can answer it comfortably, your plan is very likely to fail. Most advisors will ask it in a casual way. “So what will you do next?” They may react little or not at all if your response is “I don’t know.”

When I was active as a business broker, I would decline a listing if an owner couldn’t enunciate a plan for life after the business. In my first book, 11 Things You Absolutely Need to Know about Selling Your Business, I describe a case where an owner declined two offers, each for twice his company’s estimated value. He simply didn’t know what he would do next.

I don’t know” is a signal that the owner can’t envision life without the activity of the business.

Sometimes the answer is too facile. “I’ll play a lot more golf!” Nice try, but I’ve heard many a retiring owner tell me “I never thought I could play too much golf.” Here is an exercise I use with clients to help them visualize the next phase of their lives.

Filling in the Week

Start with the time you currently spend at the business. Include that “quiet time” at the beginning or end of the day when you like to think. Add in answering emails and texts at home or reading reports and articles on the weekend. Let’s say, conservatively, that you are engaged with your business for 50 hours a week.

Now, let’s start retirement with golf every Monday, Wednesday, and Friday. That’s a lot of golf, but we have only consumed about 15 hours of your workweek. What else?

Many folks will say they want to do more community service. Unless you plan to take on the full-time responsibility of running a charitable organization, let’s try simple volunteering to start. Two half-days a week? That’s another ten hours. We are up to twenty-five.

Travel is a big goal. How do four, two-week trips a year sound? That’s an average of another 8 hours a week.

Now you have two months of traveling, 150 golf outings, and 100 days a year working for charity. That only leaves you with about 17 hours a week to fill. Sleep in, exercise more, catch up on your reading?

There are lots of ways to fill the remaining time, but remember we are starting with someone who has a lot of plans. Many business owners have none.

Unhappy Exits

According to a survey by the Exit Planning Institute, up to 75% of former business owners are unhappy with their exits one year after selling.

I don’t know of any of my clients who are unhappy with the results. Perhaps that’s just luck, but I like to think it’s at least partially due to my coaching skill. The technical and financial complexities of a successful transition are nothing to sneeze at, but helping an owner be prepared is so much more than that.

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One Response to The Coaching Skill in Exit Planning

  1. Valerie Koenig says:

    Great points, John.

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