How can we improve our bonus system?

When incentive systems fall flat, poor communication is sometimes the culprit. So when brothers Jim and Tony Mazzella, of Mazzella Wire Rope & Sling Co., created a bonus linked to improved cash flow and on-time delivery, they spelled out how employees directly affected those areas. At the Cleveland-based company, which projected sales of $17 million in 1996, huge boards in both the main office and the lunchroom list all kinds of employee actions that throw off cash flow and on-time delivery. One example: the boards explain that employees can slow down accounts receivable--and thus cash flow--by entering information on order forms inaccurately. That's because customers often won't pay bills until a mistake is corrected. "If employees don't see themselves as being able to effect change, they won't do anything different," says Jim Mazzella. "We're trying to help them draw those connections." One payoff: three years into the Mazzella bonus program, the company's on-time delivery rate has improved substantially. --Stephanie Gruner

The Challenge of Recruiting

Having trouble finding good employees? You're not alone. According to an October 1996 survey by George S. May International Co., finding and training new employees is one of the biggest management challenges that the owners of U.S. and Canadian small and midsize businesses face. A study done earlier in the year by the same company revealed that finding top-notch people is even harder than it used to be. That July 1996 survey of 838 company owners found that 56% believe it's more difficult today to find qualified employees than it was five years ago. Worst off were manufacturers, who complained about the high cost of turnover. The big expenses? Recruitment fees, training costs, and lost productivity.

* Numbers have been rounded.
Source: Survey of 1,846 businesses by George S. May International Co., Park Ridge, Ill., October 1996.

The Biggest Management Challenges Company Owners Face*
Finding and training new employees: 22%
Growing competition: 21.5%
Finding new customers: 19.3%
Financing growth: 17.6%
Dealing with regulatory compliance: 15.3%
Other factors: 4.4%

Help! Our electricity bill is outrageous!

Ed Laflamme of Laflamme Services, a $7.2-million contractor in Bridgeport, Conn., cut energy costs by installing motion detectors in every office. Instead of relying on employees to turn off lights, Laflamme installed devices that shut off lights automatically when no motion is detected. At $50 each, the devices replace standard light switches and, claims Laflamme, were simple to install. He estimates that the change has cut the company's electricity use by a dramatic 30%. --S.G.

I have to borrow capital from a relative. Any tips?

Krista Conley Lincoln, the chief executive of Cambridge Translation Resources, a Boston-based translation and publishing company with sales of $2 million, recommends putting everything related to family loans in writing. When Lincoln started her company, in 1992, she borrowed $6,000 from her father. However, she knew that family loans can cause permanent damage to important relationships. So she and her father drew up a formal letter that spelled out both of their terms in detail. "I agreed to pay him back within 18 months, and he promised to never mention the loan, especially not at family dinners or Christmas holidays," Lincoln recalls. "And we both lived up to our promises!" --Jill Andresky Fraser

I wish I could compare notes with other CEOs in my industry.

If you can't find a networking group in your industry, why not create your own? To benchmark his own business practices against the best ones in his industry, David Luse of $8.2-million Minneapolis-based Arteka, a landscaping company, created his own small networking group. Since Luse doesn't sell his services nationwide, he was able to round up a dozen noncompeting fellow landscapers from around the country for a two-day conference. The group talked about issues such as customer service and staffing. According to Luse, the landscapers now plan to meet twice a year. --S.G.

How can I increase sales?

Are you following up with former customers to ask for more business? Clifford's Flowers, in Quincy, Mass., uses sales records to generate letters to past customers, reminding them that they may want to order flowers again for upcoming birthdays or anniversaries. Sound too obvious to be effective? On the contrary, says James Clifford, owner of the $5-million florist. He has found that 75% to 85% of customers who get the letter reorder--a figure that shocks him. "I never dreamt that three out of four customers would say, 'Yes, send my mother roses again," he says. --S.G.


When department heads at Harborside Graphics Sportswear, in Belfast, Maine, tried to get honest feedback from team leaders at monthly meetings, the result was often awkward silence. Apparently, none of the team leaders, who report to the department heads at the $12-million T-shirt business, wanted to speak first about what wasn't working at the company. Finally, the top managers asked team leaders to meet together ahead of time to discuss concerns among themselves. Now, after the team leaders have decided how to present their agenda, the department heads join the meeting--and get the candid feedback they need. Team leader Shelly Alex says it's comforting to know that other departments have similar concerns, and it's been easier to make suggestions with peer support. --S.G.

CEO Sound-off

What entrepreneurs are telling Inc. about hiring and firing

"Hiring our first salesperson was a disaster. We let him stay for nine months, though he hadn't made a sale. It was hard to let him go. We wanted it to work out. We let our emotions override our business sense." --Founder, New York City graphic-design company

"I've learned never to hire anyone quickly. Last year we got into interactive multimedia and hired an entire department full of people. None of them are here this year." --Founder, Missouri communications agency

"Firing is the hardest thing I've had to do. The first time it took me four to five months. The employee was a friend and had been with me from the beginning. I met with her every month and explained what I expected and what had to change. But she was too inefficient, and the situation created turmoil with other employees. Finally, I didn't have a choice." --President, $2-million California manufacturer

I need marketing advice. To whom can I turn?

Try the independent sales reps who represent your company in the marketplace. Instead of wasting time touting his company's products at meetings with his manufacturer's representatives, Ed Muldoon, chairman of Bivar, a $7.5-million electronics manufacturer in Irvine, Calif., tries to benefit from the reps' field experience. Recently, five longtime manufacturer's representatives attended a two-day Bivar conference at a hotel. Prior to the meeting all five sent surveys to other Bivar representatives asking for input such as product ideas and market analysis. At the conference, the group came up with new product ideas, mapped out the market, and critiqued Bivar's sales-and-service support. Then the conference participants created a plan to put their ideas to work. Though the meeting was not cheap for Bivar, Muldoon claims it was worth it, since the feedback was applied immediately--and will result in new products and marketing strategies. --S.G.


ARTEKA, David Luse, 15195 Martin Dr., Eden Prairie, MN 55344; 612-934-2000

BIVAR, Ed Muldoon, 4 Thomas, Irvine, CA 92618; 714-951-8808

CAMBRIDGE TRANSLATION RESOURCES, Krista Conley Lincoln, 186 South St., Boston, MA 02111; 617-451-1233

CLIFFORD'S FLOWERS, James Clifford, 1229 Hancock St., Quincy, MA 02169; 800-441-8884

HARBORSIDE GRAPHICS SPORTSWEAR, Gregor and Susan Davens, P.O. Box 346, Belfast, ME 04915; 207-338-4509

LAFLAMME SERVICES, Ed Laflamme, P.O. Box 6377, Bridgeport, CT 06606; 203-333-1912

MAZZELLA WIRE ROPE & SLING CO., Jim and Tony Mazzella, 14600 Brookpark Rd., Cleveland, OH 44135; 216-362-4600