The reactions of first-entrepreneurs range from,

• “Great! I need all the help I can get,” to
• “What’s a board and what does it do?” to
• “I don’t need anybody looking over my shoulder and second guessing all of my decisions.”

The first time you do this you’ll probably have a bit of each running through your head.

Your Board of Directors

Your board should be a tremendous asset to you and your company. Let’s be honest, you’re probably doing a lot of “business things” for the first time. For high growth rate companies, the cost of tuition for on-the-job training is likely to be extremely high. The company can’t wait for you to learn your job as CEO by trial and error. Decisions need to be made. Strategies need to be formulated. Key management additions need to be recruited. The next round of capital needs to be raised. Oh, yeah, you’ve got a business to run and you may be doing that for the first time, too.

Corporate governance

The legal role of the board is to look out for the interests of ALL shareholders. Even if you own a majority of the stock, your board cannot and will not just rubber-stamp your requests. Each board member has a fiduciary responsibility, and liability, for assuming this role.

Among other things, the board does hire and fire key management, including (or especially) the CEO.

Strategic discussions

Your company is going to come to lots of intersections on the road to its success. Sometimes the path you choose will be irreversible, and if it’s the wrong one, your company will falter, and perhaps fail.

If selected and used properly, your board members, drawing upon their expertise, contacts, and experience, can help you avoid fatal steps and make the appropriate decisions.

Your board meetings will provide forums to review these issues, share experiences, discuss and evaluate the alternatives, and come to conclusions.

Anticipating & preparing for future issues

Another key role for the board is to anticipate future issues and prepare for them. As noted in the opening of this article, you are probably doing this for the first time. You’re having enough of a challenge dealing with the here and now. You have neither the experience nor time to give a whole lot of thought to future issues.

That’s where your board comes in. They can anticipate the type of financing you are likely to need in the future and begin the process of introducing appropriate investors to the company. They can see the trajectory of the company’s progress in product development, sales, business development, and anticipate the areas that do, or will, need bolstering.

What A Board Meeting Is NOT for

One of things that continues to surprise me is that many board meetings that I have participated in or observed have wasted a lot of time and have not accomplished very much.

Information exchange

Board meeting are not for information exchange. You need to prepare and distribute a board pack (a collection of reports, charts, graphs, narratives that informs and educates the board members on what the company has done since the last meeting).

YOU SHOULD NOT REHASH THE CONTENTS OF THE BOARD PACK AT THE BOARD MEETING. If you got it to the board members with sufficient time for them to review it, assume that they have done so. Treat them with the respect that reflects your regard for their professionalism (by being prepared), and sensitivity to the importance of their valuable time. [Note: if one board member is not prepared, the others are, and the lack of preparation is obvious, it won’t happen a second time.]

Surprises

Board meetings should not contain surprises. In my experience, first-time entrepreneurs often assume an “ostrich posture” with regard to problems: they bury their heads and hope the problem will go away. It won’t.

If there’s a possibility that a problem of board significance may arise, tell your board members as soon as you get any inkling that it may actually happen. Whenever there’s a significant surprise, good or bad, anticipated or not, tell your board.

“I can’t do that,” you may be thinking. “The board will question my ability as CEO.” No, they won’t. They will think that you are a sophisticated CEO, confident in your own abilities, and that you are wise to keep them informed about important issues, and to seek their counsel when appropriate.

Common Mistakes

Board meetings should be important forums in which critical issues for the company are discussed and decisions made. They often aren’t. Here are a few of the common mistakes, I’ve seen and, on rare occasions, contributed to.

“Get the little things out of the way”

I can’t count the number of times that board meetings start off with a series of trivial subjects, so that “we can get them out of the way.” More often than not, these “little things” consume the bulk of the meeting’s time, and important things aren’t addressed, or at least not adequately.

This is not to say that important “housekeeping” items shouldn’t be dispensed with at the beginning of a board meeting. Assuming that you have distributed the material in advance, calling for the approval of the prior meeting’s minutes; approval of corporate resolutions that had been discussed previously, and put into legal form between meetings; approval of stock option grants that the board authorized you to offer to a prospective employee; and other similar things do need to be taken care of and can be dispensed with in a matter of a few minutes.

Starting with detailed financial statements

It is important to share the cash position of the company and how the company is performing against plan with the board. These can often be handled with two summary graphs or charts. If things are generally, “OK,” move on.

Too often the detailed financial statements are the focus of this discussion, and all of a sudden 30 minutes have gone by talking about things like, “Gee, your phone expense looks high. What carrier are you using? … Well, we’re using ABC Phone Company and we got such a deal! You should check it out.”

That’s not what a board should be doing.

No time discipline

If you’ve selected the right board members, they are very busy people with many demands placed upon their time. If your board meeting is scheduled to last two hours, that’s what they have allotted for it. They will need to leave at that time, and you are showing disrespect if you don’t cover everything that you need to and/or try to get them to stay longer.

Set an agenda, including time benchmarks, and stick to it.

No call to action

The reason that the members of your board have joined is because they want to help your business and believe that they can make contributions to it. Yet, many board meetings end with everyone having had a pleasant time, lots of information and experiences exchanged, but nothing substantive has occurred.

You should always have one or two substantive topics on your agenda for the board to dig into and help to advance the company’s development.

Advice to entrepreneurs

• Use your board as an asset.
• Schedule board meetings well in advance and etch those dates and times in stone.
• Communicate frequently and within a timely manner with your board members.
  • Get the board pack to them at least a week in advance.
  • Include YOUR transmittal letter (don’t let the finance person write it) that summarizes the progress of the company, and frames the upcoming board meeting by introducing the topics you believe are most important to discuss, and include an agenda that reflects the relative importance of the topics.
  • Talk to each of your board members, by phone, at least twice between board meetings.
    • One time within a week after the board meeting to debrief the board member.
    • One time after you’ve drafted your transmittal letter and agenda, but before you have distributed the board pack, to solicit each board member’s recommendations.
    • As often and as quickly as possible when “surprises” are imminent, or have occurred.
• Treat your board members with the respect that they deserve and they will respond in kind.

The post Working with Your Board of Directors first appeared on Innovation Works.

The post Working with Your Board of Directors appeared first on Innovation Works.

Prepare for the Appraisal

Give yourself adequate time to review an employee’s file, complete an evaluation of his or her performance, and outline topics for the session. It is also a good idea to note some talking points and do a mental walk-through of the meeting.

The employee also needs to prepare in advance. Notify the employee one to two weeks prior to the review and give him or her an evaluation form to use to assess his or her performance. Ask the employee to jot down concerns, questions, and opinions regarding his or her work and suggestions for improving it.

Prior to the review session, you and the employee should exchange and read the other’s evaluation so that you can come to the meeting prepared to talk about each other’s comments. This kind of preparation for the evaluation encourages active participation and facilitates discussion.

Explain the Reason for the Meeting

When you begin the review session, state the purpose of the meeting in straightforward terms. No matter how often employees have been through appraisals, they may not understand how their work is being judged, why it is being evaluated, or what the performance appraisal is for. Reassure the employee that your role as manager is to help the employee succeed in his or her job and to identify areas of strength and areas that need improvement.

Remain Positive

Avoid using judgmental phrases and words like “poor performance” or “weakness.” You are there, however, to suggest ways in which an employee can improve his or her work and discuss causes of below-average performance. Express your concerns in concrete terms and use detailed examples.

Watch your Body Language

Effective face-to-face communication is critical during a performance appraisal. Pay attention to your manner and posture. Sit in a relaxed but forward-leaning position, maintain eye contact, and speak in a steady tone.

Ask Questions

Your discussion should be guided by open and closed questioning techniques. Closed questions, which tend to elicit a “yes” or “no” response, require specific answers. Open questions encourage a general discussion and usually begin with “could,” “would,” “how,” “what,” or “why.” Use open questions at the beginning of the appraisal to stimulate discussion and closed questions at the end to summarize.

Foster Productive and Open Communication

Paraphrasing and concisely restating what the employee has said leads to more in-depth exploration. In general, when you reflect the employee’s thoughts, he or she feels understood and acknowledged.

Be Prepared for Negative Reactions

When you talk with an employee about poor performance or inappropriate behavior, he or she may deny, blame, fall silent, respond abusively, or have an emotional outburst, such as crying. If the appraisal session deteriorates, terminate it and reschedule the meeting.

Suggest Improvements

During the appraisal, discuss any areas that are in need of improvement, and offer specific, realistic, and concrete suggestions and solutions. Be prepared to sell your improvement suggestions to the employee—he or she may not be receptive to your ideas. Together you and the employee should develop a plan to correct any problems.

Close the Interview

Summarize the major points and be sure to end on a positive, encouraging, and upbeat note, even when the employee is very troubled or deficient. If you cannot provide the employee with immediate feedback, follow up as soon as you can and finalize the appraisal in a timely fashion. The final appraisal becomes the official document that gets placed in the employee’s personnel file.

The post Tips for Conducting Performance Appraisals first appeared on Innovation Works.

The post Tips for Conducting Performance Appraisals appeared first on Innovation Works.

The law does not require employers to develop an employee handbook. (One exception: California law requires all employers to adopt a written policy prohibiting sexual harassment.) But your policies will not be as clearly communicated if you don’t develop an employee handbook. And if your company doesn’t have a handbook, managers and employees will need to rely on the company’s “institutional memory” to ensure that policies are consistently applied.

Work policies and expectations also take on more importance and are more likely to be followed when you codify them in an official handbook. Verbal communication of company policies provides no proof that you made your employees aware of the rules in the first place. This leaves you open to enforcement and even legal problems later.

Companies typically publish HR manuals or employee handbooks when they grow to 50 to 100 employees. That figure is shrinking, though, as new tools make publishing a manual easier than ever before. In a small workforce, it is relatively easy to apply personnel policies consistently, because the number of managers making decisions about them is limited. In a larger workforce, there is a greater need to have the company’s personnel policies in written form.

Handbooks as Unintentional Contracts

In most states, an employer may generally discharge an employee for practically any reason, or for no reason at all. This employment relationship is known as employment at will. Besides allowing you to terminate employees “at will,” the employment-at-will doctrine allows you to change benefits or employment practices whenever you deem it appropriate.

Your freedom to end an employee’s employment and to modify benefits and employment practices “at will” is limited, however, when a contract exists that imposes a limit. And if you’re not careful in how you word your employee handbook, the handbook may be found to be a binding contract.

Increasingly, employees are suing their employers under a breach of contract theory when the employers fail to follow the procedures outlined in their employee handbooks. Many courts will find an implied employment contract in the handbook for employees who prove that they relied on the handbook and its promises. In other words, employees expect it to be followed—just as they would if they had an express employment contract. These courts are unwilling to allow employers to set out policies and procedures and then disregard them when the time comes for action.

Example: An employer who states in a handbook that an employee will be terminated only for “just cause” limited its own ability to terminate an employee unless it could prove that “just cause” existed. The court basically said that it was reasonable for the employee to expect the employer to live up to the statements it made in the handbook, and therefore, the handbook became part of the employment contract.

In this next situation, it wasn’t the reason for the termination that got the employer hung up, but the procedure for terminating an employee.

Example. An employer gave out a handbook that detailed a specific process for terminating an employee. But when the employer terminated an employee, it did not use the procedure in the handbook. In that situation, the court found that the employee had been improperly discharged.

• Avoiding Breach of Contract Claims. You can minimize the likelihood of being faced with breach of contract claims based on your employee handbook (and increase your chances of prevailing against any such claims) by:
• Clearly stating in writing that the handbooks are guides, not employment contracts
• Making sure that the handbooks are carefully worded to avoid binding language
• Ensuring that handbooks do not contain provisions that promise—directly or indirectly—permanent, lifetime, or a fixed term of employment
• Retaining sufficient discretion as to the terms and conditions of employment by explicitly reserving the right to change the rules, benefits, pay structure, and other elements at any time
• Using a disclaimer

Disclaimers in Handbooks

One way to keep your handbook from becoming an implied employment contract is to include a conspicuous piece of language that clearly says that your handbook is not an employment contract. That piece of language is commonly referred to as a disclaimer. Just having a disclaimer, however, will not ensure that your handbook won’t be considered a contract—it must be very carefully worded.

Here is an example of an effective disclaimer:

This Employee Handbook does not represent contractual terms of employment. It is, rather, an explanation of employment policies, which are subject to change by ABC Company. No change in employment policy will be effective unless an authorized representative of ABC Company executes it in writing. Employment at ABC Company is at will. That is, either you or ABC Company may terminate the employment relationship at any time, with or without cause. The at-will relationship remains in full force and effect notwithstanding any statements to the contrary made by company employees or set forth in any documents.

Here’s another example. Notice that it not only addresses the issue of an employment contract, but also reserves the right to changes policies at any time.

This handbook does not constitute a contract for employment with ABC Company, either express or implied, and ABC Company reserves the right at any time to change, delete, or add to any of the provisions at its sole discretion. Furthermore, the provisions of this handbook are designed by ABC Company to serve as guidelines rather than absolute rules, and exceptions may be made from time to time on the basis of particular circumstances.

Disclaimers do not always have the desired effect. Even in situations where employers have included a disclaimer specifically stating that the handbook was not a contract, courts have decided that an employment contract was created. So make every effort to follow the rules set out in your handbook, and be sure to have the handbook reviewed by legal counsel.

Avoiding Disclaimer Problems. Here are a few tips to avoid having a disclaimer that doesn’t do its job:

• Do not bury the disclaimer in a hard-to-find place.
• Make sure that the disclaimer is worded clearly.
• Make sure that the disclaimer is not in conflict with any other provision of the handbook.

Example: Don’t state in your disclaimer that employment is at will and that you reserve the right to terminate an employee at any time when your termination policy says that employees will be terminated only for just cause.

• Do not make promises in the handbook that you do not intend to keep. Examine your policies and make sure that none of them guarantees or otherwise promises any terms of employment. Be on the lookout for words like “permanent” or “lifetime”—they spell trouble.
• Avoid saying “always” and “never.” Avoid stating that no exceptions will be made to your procedures. If you don’t follow them yourself, you could be sued.
• Do not make your disclaimer so harsh that you alienate employees. You don’t want employees to feel that they have no job security. Be tactful.

What Should Go in the Handbook

Ideally, your handbook should be more than a compilation of rules and regulations that your employees must live by in the workplace. That’s not to say that your policies aren’t appropriate to put in a handbook—they most definitely are. But there are other things that you may want to put in your handbook as well. Here’s a list of the types of information that can be put in a handbook. Although most of these items are optional, and many of them may not apply to your particular business, federal or state law may require you to provide written notice of some of these policies:

• Welcome and introduction
• Purpose of the handbook
• Company mission statement
• Statement emphasizing the importance of good customer service
• Background information about the company
• The business’s position on unions, if the makeup of the workforce suggests that union activity is possible
• Suggestion and complaint procedures
• Work rules and policies
• Introductory or probationary period
• Employee’s role and responsibilities
• Hours of work
• Lunch periods and breaks
• Overtime policy
• Attendance and punctuality
• Time cards
• Personnel records
• Shift premium
• Payday
• Payroll deductions
• Garnishments
• Wage and performance reviews
• Promotions
• Layoffs and recalls
• Resignation or termination
• Bulletin boards
• Telephone usage
• Benefits
  • Holidays
  • Vacations
  • Hospital and medical insurance
  • Life insurance
  • Disability benefits
  • Pension and profit-sharing plans
  • Call-in or report-in pay
  • Training
  • School or educational assistance program
  • Service awards
• Workers’ compensation
• Unemployment insurance
• Sale of company products
• Sick leave
• Disability leave
• Personal leave
• Funeral leave
• Jury duty leave
• Military leave
• Safety
  • Emergency procedures
  • Medical services
  • Personal protective equipment
  • Safety rules
  • How to report accidents
  • Standards of conduct
  • Corrective discipline procedure
  • Summary and acknowledgment disclaimers reviewed by your lawyer

The post Employee Handbooks first appeared on Innovation Works.

The post Employee Handbooks appeared first on Innovation Works.