CEO Notebook

Various CEOs share questions and answers on a host of issues ranging from hiring and firing to marketing.

CEO'S NOTEBOOK

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

Benchmark
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.

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.

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