Archive for the ‘Workplace’ Category

Yet another big reveal!

17 Sep 2014 Leave a comment

And this one came as a bit of a surprise to me as well! Frankly, I’m too tired to look over my previous posts to see if I’d ever fleshed out the business idea I’ve been forming. Heck, I don’t even recall if I mentioned it!

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More detail on the community/business I’m brainstorming

01 Feb 2014 Leave a comment


Yesterday I included some ideas I’ve been thinking about regarding the community I’d like to create. Today I started to compose an email replying to a couple of questions that a family member asked in response to yesterday’s post. But it morphed into quite a bit MORE detail.

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New blog to watch about workplace issues

18 Nov 2009 1 comment

I just ran across a new FireDogLake bog titled “Work In Progress“. Based on the announcement, there may well be postings there that relate to the workplace related posts I’ve done. I’m hoping they are forthcoming.

There is an RSS feed on the blog page, but I still haven’t embraced RSS, so I simply followed @WorkProgressFDL in Twitter to get alerts on new posts.

I’m going to keep my eye on them.

Categories: Workplace

Is your employer overselling an ESOP?

02 Aug 2008 1 comment

Important Update – November 2009:

My relatively recent plunge into blogging about lots of non-workplace issues along with my recent plunge into social networking (primarily Twitter – where I’m @sjdorst) makes it far more likely that you will be able to identify my employer. Thus in fairness to the owner, I want to explicitly state that the overselling described in this post was NOT done by him, but by a now departed General Manager. The same is true about my “How much does the Boss need to know?” post – the ignorance that inspired the post was that of the same General Manager, not the owner.

We now return you to the original post:

My company stopped contributing to our 401K a few years ago and started an Employee Stock Ownership Plan (ESOP) as the receptacle for future employer contributions towards the retirement of their employees. The 401K remained available for us to contribute our own pre-tax money towards our retirement.

My company has paid money into the ESOP once. Since then, because of the decline in the construction business and other reasons, no further money has been contributed by my company.

This probably seems all too common. So why am I posting about it? Simply, my company has “sold” or “explained” the ESOP to us in ways that are, at least, highly exaggerated, and possibly crossing the line into outright falsehoods!

So, what is certainly true about ESOPs?

  • An ESOP is a retirement plan where the funds contributed BY the company are converted into shares OF the company, held in the name of the employees. From the employees’ point of view, this is all it is — until and unless the ESOP becomes the majority shareholder of the company — and perhaps not even then!

  • An ESOP is a method – and a very good method – for the owners of a closely held company to withdraw from the business by gradually selling it to the ESOP rather than closing the company, selling the company or finding other, private money (primarily venture capitalists) to invest in the company by purchasing the shares currently owned by the person who wants out.

  • An ESOP has (I’m told by people I trust) some very interesting tax advantages to the company that creates it. I can’t go into more detail because I don’t know more than what I’ve said.

OK – so what might be true about ESOPs, depending on circumstances?

  • As I alluded to above, once the ESOP is the majority stockholder of the company, it can impart a degree of employee control (not just ownership) of the company. ESOPs are required to poll their members for certain major decisions, such as buying another company, opening a new branch, closing an existing branch or closing the entire company (there may be others). However, the results of this poll direct a single ESOP Trustee on how to vote the ESOP shares, so the voice of an individual employee is NOT heard at the shareholder level if that employee is not in the majority of the employees. Further, less momentous decisions that come to a shareholder vote are voted by the ESOP Trustee with no requirement that the members of the ESOP be consulted. In many ESOPs, the Trustee simply votes as management recommends. Depending on how the ESOP is structured, the members of the ESOP might never have more control on decisions other than the required polls! Remember United Airlines? Purchased 100% by their employees through an ESOP, yet structured such that employees had no functional voice in, much less control over, critical decisions.

  • An ESOP might make a company “better”. This is certainly true, in a small way, simply by virtue of the tax advantages that an ESOP offers the company. In other ways, however, a company’s claim that an ESOP improves the health of the company is essentially false, because the ways that companies show substantial improvement have no real relation to the presence (or absence) of an ESOP.

An ESOP will not instantly give employees a sense of ownership of the company. Nor will it empower the employees. To empower, or give a true sense of ownership, employees must know how their decisions and acts affect the bottom line of the company – and this is true whether or not there is an ESOP. Since an ESOP is essentially a retirement plan, it cannot give the more immediate feedback obtainable through pay increases, bonuses, incentive plans or even honest — and regular — disclosure within the company of the financial health of the company in ways the employees will understand (unless the company is in the financial sector, most employees can’t decipher a balance sheet or P&L statement.)

Another way to empower employees is to consult with them and heed what they have to say! They need to feel that their opinions and expertise are valuable to the company. Simply consulting them, without incorporating their responses visibly in management actions is a good way to DISempower them! Not consulting them at all is even worse.

If management cannot lead the company through hard times without an ESOP, there is little chance that an ESOP will save the company.

So I leave you with this warning: If your company emphasizes the things that are certainly true about an ESOP, then they are probably on the up-and-up. However, if the try to “sell” you on an ESOP based on it’s making the company “better” or based on the ESOP making the employees into owners of the company – without detailing exactly how that ownership translates into control of the company – be wary! Be VERY wary!

Postscript: Our 401K has recently been closed, for what I believe to be good reasons (as long as the company restarts it as a vehicle for employee contributions in a timely manner as they have promised.) This post isn’t about the 401K, so I haven’t included details. A further post MIGHT be made with the details, but I have to ponder whether or not the details I’m aware of should be made public. In all honestly, I’m currently leaning towards NOT expounding the details, I’m just not fully decided.

Categories: Workplace

How much does the boss need to know?

28 Feb 2006 1 comment

November 2009 update:

Rather than repeat it here, see my post on Overselling a 401K – especially the update at the top!

We now return you to the original blog post:

No, I’m not talking about keeping secrets from the boss. The issue is how well does the boss, or her boss and on up the chain NEED to know about the challenges, duties, responsibilities, distractions and conflicting priorities of the people below them?

I think it’s indisputable that a person needs to understand the challenges (et al) of the people who directly report to her. Without that understanding, the boss cannot resolve problems brought to her by an immediate underling. This I feel to be true regardless of the size of the organization.

On the other end of the spectrum, when the boss is the CEO of a multi-layered company employing thousands of people, it is unreasonable to expect her to be familiar with the challenges presented to every employee who is 5 or 6 levels down the chain. That’s what the chain is for! (Assuming the business HAS a chain of command, but that’s a future post!)

The ideal is certainly somewhere between the extremes I’ve described above, but I’m not sure WHERE the ideal lies. My gut reaction should be that a boss be intimately familiar with the challenges of her direct report, somewhat familiar with the challenges presented to employees one level below that, and have at least a nodding acquaintance 1 level further down. I also think it’s important that the boss be somewhat familiar with the challenges of at least 1 job function at every level of the heap. Note that I don’t think this needs to happen for ALL job functions, just that it should be true for 1 at each level, just so the boss can better keep her hand on the pulse of the business. Breadth AND some depth. But this gut reaction is just that, my first thoughts, I’m certainly open and ready for persuasion towards a different viewpoint!

Whaddya think?

Categories: Workplace

B2B Credit aka Why should a business also be a bank?

27 Feb 2006 Leave a comment

From the 1 person consulting business that doesn’t demand payment at time of service to the multinational corporation with very diversified products and services, most businesses extend credit. Oftentimes, this is quite informal, as the 1 person business that invoices, expects payment, and has no need to continue to offer their services or wares to a client that doesn’t pay promptly. In other cases, it’s quite formal: Witness GE Capital, a business apart from GE whose initial reason for existing was to be responsible for GE’s receivables. About the only exception to businesses offering credit of some sort is a purely retail business.

Receivables end up killing far too many of these businesses. For another large percentage, receivables represent an accumulation of capital that can be put to far better use elsewhere.

So why do it? In all honesty, I’d rather not extend credit, but that would pare down the available products/services for my (still hypothetical) business to actually do because in far too many sectors of our economy, B2B credit is an assumed norm. If you don’t offer it, customers will go elsewhere. In some sectors (and I’m thinking specifically of construction) it simply cannot be avoided. The person ultimately paying the bill (aka the end user) does not expect to pay in full, up front, simply so that the person providing them a product or service can pay their suppliers up front, in turn so the distributors can pay THEIR suppliers up front, etc., etc., etc.

So how do you protect against deadbeat customers?

First, by getting references from OTHER suppliers to you customer before extending credit to a new customer. Unfortunately, our litigious society has caused existing business to be extremely wary in giving BAD reports on a credit check, even if it is fully justified and completely factual. The suppliers believe that they simply can’t afford the possible costs of defending themselves should they be sued. This has greatly diminished the value of “trade references.”

So how to get around this? Give good information yourself. Don’t let your receivables person/department/staff be intimidated by lawyers. Make sure the information you give is factual, only give the information requested, and keep a record of the references you have given, including unimpeachable documentation. Keep track of the references you receive, and when you DO have a deadbeat customer, go back to the references and note where they came from and trust that source LESS in the future.

How else? Be up front and in your face with other businesses and individuals applying for ongoing credit. Post it in your office, or your sales counter, or on your website or all three!

We extend credit because our industry demands it, not because we want to be a bank. Once we issue you credit, we will hold you to your credit terms and not sell to you/provide you services if you are late paying. We will be quick on the draw to involve a collection agency. If you have a circumstance where you temporarily need more credit than we are willing to offer on an ongoing basis, then come meet with us and we’ll try to work something out so that we can supply you.

One time only credit? Forget about it! We are in the business of <fill in this blank>, not financing your cash flow problem. We are NOT a bank.

Is that up front enough?

Some follow through is necessary. Be proactive. When a customer reaches 1/2 their credit limit, let them know. If you are supplying products, don’t take orders for non-stock items that will cause your customer to exceed their limit. Require a written (or faxed or emailed) purchase order for items which will cost you if you have to return them because the customer cancels. Impose cancellation fees. Contact your customer again at 75% of their limit. If you have advised your customer at the 50% and 75% levels, your customer will have no valid complaint when you refuse to sell over their limit. If they do complain, do you really want them as a customer?

Where I work, while I don’t know the exact numbers, I think that our receivables are running somewhere upwards of 10% of our gross sales. Do the math. If your business does 10 million in sales, how many things can YOU think of doing with a million dollars other than leaving it in the hands of your customers. On a smaller scale, what if you only do 50K in a one person service business. Surely you have better things to do with $5,000. Pay the rent? Take a vacation? Hire a web designer to get you an online presence?

In short, keep a very very tight leash on your receivables. Don’t tie up your working capital with credit extended to customers (beyond which is required for you to reasonably compete in your chosen line of business.)

Categories: Workplace

A very simplified Example

26 Feb 2006 1 comment

WARNING!!! – This post is meant to be an example for the Pay Equity post. If you don’t read that FIRST (and read this when directed), then this post will seem totally SCREWY!!! I tried to publish this first, then the more important post which uses this example, but it appears that posts appear on in the order they were created (drafted) and NOT in the order they are actually published, so this post shows on the screen before the Pay Equity post.

Here’s a vastly oversimplified example of a dictation service:
Base pay: $20,000, 4 employees = $80,000 base payroll
Incentive pool: 3 times payroll = $240,000

Sally has the following points:
Typing Speed(net): 60-75 wpm = 4 points
Create/mail accurate invoices = 4 points
Answer phones = 2 points
Proofread drafts = 4 points
3 years service = 6 points
Sally’s total: 20 points

John has the following points:
Typing Speed(net) 30-45 wpm = 2 points
Answer phones = 2 points
Apply customer payments (AR) = 4 points
Keeps office supplied with necessary consumables = 1 pint
1 year service = 2 points
John’s total: 11 points

Marcia has the following points:
40% closing rate on new customer leads = 6 points
Answer phones = 2 points
Typing Speed(net): 75-90 wpm = 5 points BUT this is HALVED as she is in a position (Sales) where this is less important! Net: 2.5 points.
Finding new qualified leads: 3-6/week = 2 points
Proofread drafts = 4 points, but HALVED for same reason as above. Net: 2 points.
5 years service = 10 points
Marcia’s total: 24-1/2
Andrew (the founder) has the following points:
Typing speed (net) 45-60 wpm = 3 points
Answer phones = 2 points
Create/Mail accurate invoices = 4 points
Apply Customer Payments (AR) = 4 points
Subtotal so far: 13 points – will be HALVED since these skills are needed rarely in his position. Net 6-1/2 points
30% closing rate on new customer leads = 4 points
Finding new qualified leads:12-15/week = 5 points
Payroll = 4 points
7 years service = 14 points
Andrew’s total: 33-1/2

Total points in company: 89

Sally’s pay = $20,000 + 20/89($240,000) = $20,000 + $53,932 = $73,932
John’s pay = $20,000 + 11/89($240,000) = $20,000 + $29,663 = $59,663
Marcia’s pay = $20,000 + 24.5/89($240,000) = $20,000 + $66,067 = $86,067
Andrew’s pay = $20,000 + 33.5/89($240,000) = $20,000 + $90,337 = $110,337

OK, so the totals I arrived at are probably completely unrealistic for the example business, but the point is not the totals, it’s the process. And since I’d rather deal with the process (for now) I’m NOT going to take the time to tweak the example so that it results in more realistic metrics or final results!!!

Categories: Workplace