Provide advice to an entrepreneur about being more innovative When Neil Franklin began offering round-the-clock telephone customer service in 1998, customers loved it. The offering fit the strategic direction Franklin had in mind for Dataworkforce, his Dallas-based telecommunications - engineer staffing agency, so he invested in a phone system to route after hours calls to his 10 employees' home and mobile phones. Today, Franklin, 38, has nearly 50 employees and continues to explore ways to improve Dataworkforce's service. Twenty-four-hour phone service has stayed, but other trials have not. One failure was developing individual Web sites for each customer. \"We took it too far and spent $30,000 then abandoned it,\" Franklin recalls. A try at globally extending the brand by advertising in major world cities was also dropped. \"It worked pretty well,\" Franklin says, \"until you added up the cost.\" Franklin's efforts are similar to an approach called \"portfolios of initiatives\" strategy. The idea, according to Lowell Bryan, a principal in McKinney & Co., the NYC consulting firm that developed it, is to always have a number of efforts underway to offer new products and services, attack new markets or otherwise implement strategies, and to actively manage these experiments so you don't miss an opportunity or over commit to an unproven idea. The portfolio of initiatives approach addresses a weakness of conventional business plans-that they make assumptions about uncertain future developments, such as market and technological trends, customer responses, sales and competitor reactions. Bryan compares the portfolio of initiatives strategy to the ship convoys used in World War II to get supplies across oceans. By assembling groups of military and transport vessels and sending them in a mutually supportive group, planners could rely on at least some reaching their destination. In the same way, entrepreneurs with a portfolio of initiatives can expect some of them to pan out. Making a Plan Three steps define the portfolio of initiatives approach. First, you search for initiatives in which you have or can readily acquire a familiarity advantage - meaning you know more than competitors about a business. You can gain familiarity advantage using low-cost pilot programs and experiments, or by partnering with more knowledgeable allies. Avoid business in which you can't acquire a familiarity advantage, Bryan says. After you identify familiarity-advantaged initiatives, began investing in them using a disciplined, dynamic management approach. Pay attention to how initiatives relate to each other. They should be diverse enough that the failure of one wont endanger the others, but should also all fit into your overall strategic direction. Investments, represented by product development efforts, pilot programs, market tests and the like, should start small and increase only as they prove themselves. Avoid over investing before initiatives have proved themselves. The third step is to pull the plug on initiatives that aren't working out, and step up investment in others. A portfolio of initiatives will work in any size company. Franklin pursues 20 to 30 at any time, knowing 90 percent wont pan out, \"The main idea is to keep those initiatives running,\" he says. \"If you don't, you're slowing down.\" Advice to an entrepreneur An entrepreneur, who wants his firm to be more innovative, has read the above article and come to you for advice: 1. This whole idea of experimentation seems to make sense, but all those little failures can add up, and if there enough of them, then this could lead to one big failure-the business going down the drain. How can I best get the advantages of experimentation in terms of innovation while also reduction the costs so that I don't run the risk of losing my business? 2. My employees, buyers, and suppliers like working for my company because we have a lot of wins. I am not sure how they will take it when our company begins to have a lot more failures (even if those failures are small)- it is a psychological thing. How can I handle this trade-off? 3. Even if everyone else accepts it, I am not sure how I will cope. When projects fail it hits me pretty hard emotionally. Is it just that I am not cut out for this type of approach? CASE STUDY PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT NONTRADITIONAL FINANCING When Lissa D'Aquanni created a gourmet chocolate business in her Albany, New York, basement in 1998, she had not only a passion for candy-making, but also a knack for spurring citizen involvement. The former nonprofit executive had worked for women's advocacy groups, most recently promoting breast cancer awareness. If there was one thing she knew, it was how to rally community support. Her ability to leverage local resources would be invaluable as she made her business a fixture of her Albany neighborhood. And in no area were those skills as critical as in financing last year, D'Aquanni wanted to move her business, the chocolate Gecko, to an abandoned building three blocks away, she needed $25,000.\" Volunteers also helped renovate the building, cutting project costs form an estimated $3,00,000. Check out D'Aquanni's unorthodox and creative financing plan: An economic development group, the Albany Local Development Corp., loaned her $95,000 to buy the building. D'Aquanni obtained a $1,00,000 government guaranteed loan from a local credit union to renovate the structure. Faade improvements were funded through a matching grant program to encourage commercial development in Albany. A local community development financial institution used a state program to fund energy-efficient upgrades, including new windows, light fixtures, furnaces and siding. Says D'Aquanni, \" There were lots of different pieces of the puzzle to identify and figure out how to access.\" Conventional financing wasn't an option. \"I was looking at a business that did about $44,000 in sales doing a $260,000 project, and the traditional funders were apprehensive,\" explains D'Aquanni, 37. They urged her to rent a storefront rather than buy the rundown building. Undeterred, D'Aquanni met with a neighborhood group to develop her expansion plan. It wasn't the first time the community had helped out. In 1999, the cashstrapped chocolatier needed molds and a temperer for the Christmas rush. Recalling a strategy she had seen in a magazine, she sold discounted gift certificates to raise capital. D'Aquanni offered customers $25 in free chocolates for every $100 in gift certificates purchase. \"A lot of folks mailed them as gifts to friends, family and co-workers,\" D'Aquanni says. \" And most of those people ordered chocolates. My customer base expanded.\" Indeed, many entrepreneurs successfully launch a business only to encounter funding hardships as they attempt to grow. The ability to think outside the box, experts say, is critical for firms short on funding. \"There are pockets of money out there, whether it be municipalities, counties, chambers of commerce,\" says Bill Brigham, Director of the Small Business Development Center in Albany. \"Those are the loan programs that no one seems to have information about. A lot of these programs will not require the collateral and cash that is typical of traditional [loans]. They may be a little more lenient as far as credit history goes. That's one of the key roles we can play-what entrepreneur is going to think [he or she] can qualify for HUD money? Advice to an entrepreneur An entrepreneur, who is looking to expand but has limited access to traditional financing, has read the above article and comes to you for advice: 1. I want to find a little pot of gold like Lissa D'Aquanni. Where should I look? 2. I like the gift certificate idea to raise money and build my business. What other types of products do you think that approach will work for? 3. Over the years I have paid a lot of taxes. Should I feel guilty for accessing government - subsidized monies to build my business, or should I feel justified? Case Study HELPAGE INDIA The developments in medical sciencesthe lowering of mortality rates and the increase in life expectancyhave ironically led to a situation where there are increasingly, a larger number of aged people in the society. The situation in most countries of the world is that the number of ageing people is increasing. India too, like other developing countries, experiences a rapid ageing of the population, with estimated 80 million aged people. Almost eight out of ten of these aged people live in rural areas. The challenges that the elderly people in society face are many. For instance, a report in the Indian context indicates the following challenges: 90% of senior citizens receive no social security or medical care. 73% of senior citizens are illiterate and can only earn a livelihood through physical labour, which is possible only if they are healthy in their old age. 80% of senior citizens live in rural areas with inadequate or inaccessible medical facilities; many are unable to access the medical facilities because of reduced mobility in the old age. 55% of women over the age of 60 are widows with no means of support The elderly people, or senior citizens, are the fastest growing segment of the Indian society. By 2025, the population of the elderly is expected to reach 177 million. Unlike many developed countries, India does not have an effective security net for the elderly people. There have been sporadic attempts by governments at the central and state levels to pay old age pensions, but like most government schemes, there is a lot of leakage of funds and inefficiency. There is also a lack of post-retirement avenues for reemployment. Socio-economic developments such as urbanization modernisation and globalisation have impacted the economic structure and led to an erosion of societal values and the weakening of social institutions such as the joint family. The changing mores of society have created a chasm between generations. The intergenerational differences have created a situation where the younger people are involved in education, career building and establishing themselves in life, ending up ignoring the needs of the elderly among them. The older generation is caught between a society which cares little for them and the absence of social security, leading them to a situation where they are left to fend for themselves. It is in this context that institutions such as HelpAge India play a positive role in society. HelpAge India, established in 1978, is a secular, not-for-profit, non-governmental organisation, registered under the Societies Registration Act of 1860. Its mission is stated as 'to work for the cause and care of the disadvantaged older persons and to improve their quality of life'. The three core values that guide HelpAge India's work are rights, relief and resources. HelpAge India is one of the founder members of HelpAge International, a body of 51 nations representing the cause of the elderly at the United Nations. It is also a member of the International Federation on Ageing. The organisation of HelpAge India consists of a head office at New Delhi, with four regional and thirty-three area offices situated all over India. The governing body of the organisation consists of ten distinguished people from different walks of life. Besides the governing body, there are three committees: the operations committee, the business development committee, and the audit committee. The CEO, Mr Mathew Cherian oversees the planning and implementation of policies and programmes, with the support of five electors. The regional directors are responsible for their own regions. The program division at the head office chooses the partner agencies to provide the services to the elderly people. HelpAge India raises resources to perform three types of functions: Advocacy about policies for the elderly persons with the national and local governments Creating awareness in society about the concerns of the aged and promote better understanding of ageing issues Help the elderly persons become aware of their own rights so that they get their due and are able to play an active role in society The major programmes undertaken by HelpAge India include mobile medicare units, ophthalmic care for performing cataract surgeries, Adopt-a-Gran, support to old-age homes, day care centres, income generation and disaster relief. The business model of HelpAge India is based on revenue generation through grants and donations from international and national source. Nearly half of the donations come from international donors. About a fifth of the donors are individuals. The sources of contributions come from fundraising activities that include direct mail, school fundraising corporate fundraising, sale of greeting cards, acting as corporate agent for insurance, organizing event and establishing a shop-for-a-cause that sells gift made by disadvantaged people. A review report on the activities of HelpAge India enumerates its strong points as below: Wide Reach and Impact HelpAge India has been able to impact the lives of a large number of elderly people and their families by adopting a holistic approach that provide immediate relief as well as long-tern sustainable improvement. Effective Partnerships in Development HelpAge India has evolved as a development support agency through creating partner agencies, that is funded to implement the projects. High Degree of Charitable Commitment Typically non-profit organisations spend a loft; on overhead and administrative costs. But HelpAge India is able to put nearly eighty-five, per cent of the funds towards actual project implementation. Focus on Efficiency and Transparency The partner agencies are chosen carefully and monitored thoroughly. This results in increased efficiency and low overheads. Project implementation through partnerships increases efficiency and cuts down on 3overhead costs. Quality of Management The management; quality of HelpAge India is good and there are a lot of committed people. New employees are also trained to be sensitive to the mission of the organisation. With a wide spread of activities and being a non-governmental organisation having limited funding, HelpAge India has adopted modern means of information technology and networking. Most of the HelpAge executives work in the field and have no direct access to the office network. They have to use e-mail in order to maintain contact with their regional or area offices. They use cyber-cafes or handheld devices for sending and receiving e-mails. HelpAge has installed a secure connection at an initial cost of Rs. 4 lakh and annual upgradation cost of Rs. 75,000 to access e-mail from anywhere, with a high level of security and protection of data and contents. The nature of non-profit organisations demands certain requirements. Among these, transparency of operations and funds management is a major one. There are many NGOs that are accused or suspected of misappropriating funds for personal benefit. HelpAge India is conscious of this fact and gives high priority to information disclosure. The audited financial statements and the annual report are available on its website. The financial statements give a detailed account of the expenditure on individual projects. The expenses on travel and salaries of its employees and CEO are also mentioned. The individual donors are provided information regarding the use of the funds donated by them. The functional approach at HelpAge India consists of developing projects based on the assessment of the needs of its target community rather than on implementing them directly. The implementation takes place through the partner agencies. Rather than outright grants, it supports income generation projects for the elderly people. The success of implementation critically depends on the identification and appointment of partner agencies. The officers of HelpAge India physically inspect the proposed agencies and check on their management to ensure that they are not family-run set-ups established for personal gains. HelpAge India works presently, with nearly 400 partner agencies. These include, for instance, about 150 charitable eye hospitals that act as partner agencies for the ophthalmic care programme. HelpAge India with its slogan of 'fighting isolation, poverty and neglect' moves on its mission of providing 'equal rights, dignity for elders'. It foresees its future activities in the area of rights based advocacy for a better life for the elderly people by bringing them into the mainstream of society rather than being marginalised to the fringes. Questions 1. In your opinion, what is the distinctive competence of HelpAge India? 2. Prepare a strategic advantage profile for HelpAge India. Case Study CORPORATE RESTRUCTURING OF THE INDIAN REAILWAYS On 16 April 1853, a locomotive pulling 14 carriages and 400 people left what was then Bombay, to a 21-gun salute, and shuttled to Thane, 34 km away. The journey took about 75 minutes. That was the way Indian Railways was born. Some estimates consider the Indian Railways as the world's largest commercial enterprise in terms of the number of employees. Indian Railways is a departmental undertaking of the Government of India. The Central Ministry of Railways oversees the policy making for the Indian Railways and is headed by a union minister. There are some ministers of state holding specific responsibilities. The administration of Indian Railways is done through the Railway Board headed by a chairman and having six members. There are 16 railway zones, each headed by a General Manager who reports to the Railway Board. The zones are divided into divisions under the control of divisional railway managers. There are 44 functional departments, including those of engineering, mechanical, electrical, signal and telecommunications, accounts, personnel and operating, commercial and safety branches. At the operational levels, there are station superintendents and station masters who control individual railway stations. Apart from the Indian Railways, the Ministry also has a number of public sector enterprises under its administrative control. There is an autonomous organization called the Centre for Railway information System, dedicated to developing specialized application software for the railways. The financial matters of the Indian Railways are dealt with through an elaborate system involving the parliament of India down to the accounts departments at the divisional headquarters. The Railway budget is presented every year and passed by both houses of the parliament. The budget is based on the expected traffic and the projected tariff and capital and revenue expenditure. Dividends are paid to the Central government on the capital invested. Indian Railways is subjected to the same audit control as other government ministries and departments. The Indian Railways is Asia's largest and the world's second largest rail network under a single management. It is a multi-gauge, multi-traction system covering over 60,000 route kilometers, with 300 railways yards and 700 repair shops and covers most of the country's vast geographical spread. The rolling stock fleet of the Indian Railways comprises 7,566 locomotives, 37,840 coaches and 222 million freight wagons. With a workforce of around 1.4 million, it runs more than 11,000 trains daily. The Indian Railways has evolved into a vertically integrated organization. Various units are engaged in designing, manufacturing and maintaining the rolling stock, running institutions such as hospitals, schools, housing estates and hotels and catering. It issues licenses to a large number of uniformed porters and authorized hawkers. These are only some of the major activities that the Indian Railways perform. There are many problems facing the Indian Railways. Among these, the major ones are: Cross-subsidisation of passenger and freight tariff High energy and fuel costs High accident rate Antiquated communication, safety and signaling equipment. Ageing infrastructure including rail tracks and bridges. High establishment and personnel costs. Emerging competition from low-cost airlines. Many areas of the Indian Railways are in need of improvement. Several actions have been taken over the years that include: Upgrading technology, especially the application of IT Improving the quality of railway services Production of better quality locomotives and Introduction of fast long-distance trains Addition of value-added services such as introducing banking facilities on trains. A Status Paper on the Indian Railways was issued May 1998, followed by another in 2002. These status papers underlined issues confronting the Indian Railways and possible options. The Status Paper- 1998, for instance, focused on the strategies related to honing the marketing capability for bulk and non- bulk freight and passenger services, reducing operating costs, evolving a financial strategy, bringing about cultural change and addressed issues of concern in areas such as research and development and IT. Similarly, the status paper of 2002 presented several issues and posed several questions related to its functioning. A report published in 2001 by a government appointed group chaired by Rakesh Mohan, now the deputy governor of Reserve Bank of India, called for a radical restructuring of the Indian Railways. The main thrust of its recommendations was on shedding the non-core activities such as catering and manufacturing not related to its main activities of passenger and freight transportation and becoming a focussed organisation. Freight has been the key revenue earner for Indian Railways. The target for 2007-08 is at 785 million tonnes. The market share of freight traffic had been on the decline over the last few decades, owing to improvements in road infrastructure. To arrest this decline, it became imperative to: enhance customer responsiveness through cargo visibility and information dissemination, reduce operating expenses and improve asset utilisation. In order to achieve these aims, the Indian Railways installed a computerised Freight Operations Information System, with the assistance of CMC Limited. There is much hype around the financial turnaround of the Indian Railways. Here, the major achievements have been in the areas of improved freight and passenger earnings, gross traffic revenue, higher cash surplus, higher net revenue, better operating ratio and return on capital. For instance, the Indian Railways is proud of its achievements in terms of an above 78 per cent operating ratio and a 20 per cent return on capital in 2006- 2007. Overall, the Indian Railways have benefited from several managerial initiatives taken over the recent past, such as corporatisation of many of its activities and hiving off, separate companies to perform functions performed in-house earlier. For example, the Indian Railways Catering and Tourism Corporation took over the non-core activities of catering while Rail Tel Corporation was formed to create the optic fibre network for communications. Another subtle manner of change seems to be the creeping nature of privatisation of non-core services and adoption of modern business methods of marketing and human resource management to improve operational efficiency. These seem to be working though critics say that the increase in the general economic activity and overloading of wagons is the cause of this improved short-term performance. Certain inherent issues have become a part of the Indian Railways heritage. Among these are: overdependence on freight business, much of freight business arising from a select few commodities, passenger traffic being concentrated in low-yield suburban traffic and high density of traffic in the certain areas coupled with under-utilised assets and facilities in others. The fundamental issues of the dilemma whether Indian Railways is an organisation in the nature of a public utility, designed to obligations, or is it a commercial organization for which financial performance and operational efficiency are imperative still remain. Questions 1. Comment on the steps taken to reduce the extent of vertical integration at the Indian Railways. Suggest a few more measures that could be taken. 2. Discuss the measures taken for corporate restructuring of the Indian Railways, in your opinion, are these adequate for dealing with the problems faced? Why? 3. Propose the basic elements of a corporate turnaround for the Indian Railways. BHARAT HEAVY ELECTRICALS LIMITED CONCENTRATES ON THE EQUIPMENT INDUSTRY Bharat Heavy Electricals Limited (BHEL) is India's largest engineering and manufacturing enterprise, operating in the energy sector, employing more than 42000 people. Established in 1956, it has established its presence in the heavy electrical equipments industry nationally as well as globally. BHEL is one of the navaratnas (lit. nine gems) among the public sector enterprises in India. Its vision is to be 'a world class enterprise committed to enhancing stakeholder value'. Its mission statement is: 'to be an Indian multinational engineering enterprise providing total business solutions through quality products, systems, and services in the fields of energy, industry, transportation, infrastructure, and other potential areas'. BHEL is a huge organisation, manufacturing over 180 products categorised into 30 major product groups, catering to the core sectors of power generation and transmission, industry, transportation, telecommunications and renewable energy. It has 14 manufacturing divisions, four power sector regional centres, over 100 project sites, eight service centres and 18 regional offices. It acquires technology from abroad and develops its own technology at its research and development centres. The operations of BHEL are organised into three business sectors of power, industry and overseas business. Besides the business sector departments, there are the corporate functional departments of engineering and R&D, human resource development, finance and corporate planning and development. BHEL's turnover hit an all-time high of Rs. 18,739 crore, registering a growth of 29 per cent, while net profit increased by 44 per cent to touch Rs. 2,415 crore in 2006-07. The company has a comfortable order book position of Rs. 55,000 crore for 2007-8 and beyond. The company booked ex port orders worth Rs. 1,903 crore in 2006-07. It is looking toward to US$10 billion exports by 2012 from the present US$ 4 billion. The capital investment plan of BHEL for the 11th National Plan period envisages an investment of Rs 3,200 crore, mainly to enhance its manufacturing capacity from 10000 MW to 15000 MW. BHEL has formulated a five-year strategic plan with the aim of achieving a sustainable profitable growth, targeting at a turnover of Rs. 45,000 crore by 2012. The strategy is driven by a combination of organic and inorganic growth. Organic growth is planned through capacity and capability enhancement, designed to leverage the company's core are s of power, supported by the industry, transmission, exports and spares and services businesses. For the purpose of inorganic growth, BHEL plans to pursue mergers and acquisition and joint ventures and grow operations both in domestic and export markets. BHEL is involved in several strategic business initiatives at present for internationalisation. These include targeting the export markets, positioning itself as a reputed engineering, procurement and construction (EPC) contractor globally, and looking for opportunities for overseas joint ventures. An example of a concentration strategy of BHEL in the power sector is the joint venture with another public Enterprise, National Thermal Power Corporation, to perform EPC activities in the power sector. It is to be noted that NTPC as a power generation utility and BHEL as an EPC contractor have worked together on several domestic projects earlier, but without a forma partnership. BHEL also has joint ventures with GE of the US and Siemens AG of Germany. Other strategic initiatives include management contract for Bharat Pumps and Compressors Ltd. and a proposed takeover of Bharat Heavy Plates and Vessels, both being sister publics enterprises. Despite its impressive performance, BHEL is unable to fulfil the requirements for power equipment in the country. The demand for power has been exceeding the growth and availability. There are serious concerns about energy shortages owing to inadequate generation and transmission, as well as inefficiencies in the power sector. Since this sector is a major part of the national infrastructure, problems in the fibwer sector affect the overall economic growth the country as well as its attractiveness as a destination for foreign investments. BHEL also faces stiff competition from international players in the power equipment sector, mainly of Korean; and Chinese origin. There seems to be an undercurrent of conflict between the two governmental ministries of power and heavy industries. BHEL operates administratively under the Ministry of Heavy Industries, but supplies mainly to the power sector that is under the Ministry of Power. There has been talk of establishing another power equipment company as a part of the NTPC for some time, with the purpose of lessening the burden on BHEL. Questions 1. BHEL is mainly formulating and implementing concentration strategies nationally as well as globally, in the power equipment sector. Do you think it should broaden the scope of its strategies to include integration or diversification? Why? 2. Suppose BHEL plans to diversify its business. What areas should it diversify into? Give reasons to justify your choice. Case study Provide advice to an entrepreneur about firing employees Firing an employee is a messy business. Just the thought of having to recruit, train and manage a new sales soul is enough to keep some sales managers from following through with the task. But holding on to a salesperson who's not performing or who's disruptive to the team is guaranteed to exacerbate matters down the road. But how do you know when it's time to say \"you've gotta go\"? It's simple, according to Tricia Timkin: \"Lack of production, lack of production, lack of production,\" says the president of Padigent, a Carol Stream, Illinois, human resources consulting firm for emerging companies. Dave Anderson, president of Dave Anderson's Learn to Lead, concurs that performance is one criterion for firing. Anderson, whose Los Altos, California, company offers sales, management and leadership consulting, thinks reps who are \"dishonest, selfish or disrespectful\" should face the axe. You may fear firing a rep will cause a morale dip in the troops. After all, someone's buddy is getting shown the door. But making a tough choice can bolster the spirits of your sales squad. Says Tamkin: \"Firing can positively affect morale [because] it sends a message that the company will take strong measures to ensure the success of the organization. Poor performers lower the morale of the team, and they continually break momentum and diminish the credibility of the sales manager.\" Before firing, however, steps must be taken to legally protect your business. It's crucial that the employee has been warned in advance in writing. Coaching sessions with failing sales people will help protect you when it comes time to separate. Tamkin advises that documentation must be developed in advance of the firing, and that when it comes time for the employee to go, the manger should conduct an exit interview. Though firing will never be a savory part of a manager's job description, it's short - term pain for long - term gain. \"Managers have to realize that when they keep the wrong person,\" Anderson says, \"there's more damage to the company than just lack of production.\" Here are some firing guidelines from William Skip Miller's ProActive Sales Management (AMACOM): 1. Never in your office: if it's your office, you can't leave if the employee wants to stay and talk. 2. Short and Sweet: As you walk in the door, say, \"The reason I'm here is to tell this is your last day of employment with this company.\" Just get it out. 3. Never on a Friday: If fired on a Friday, the employee can't start the process of feeling good. All he or she can do is stew about it over the weekend. 4. Outside help: If the employee says he or she has consulted an attorney or other legal counsel, stop the conversation immediately and consult your HR department or attorney, whoever helped you draft your company policy. 5. No hanging around: Personal effects can be retrieved, but have the person leave the building. Advice to an entrepreneur: An entrepreneur, whose business has stopped growing, has read the above article and comes to you for advice: 1. Gee, these managers discussed in the article are a bit rough. Even if one particular person is not producing as expected, doesn't this person still deserve to be treated with respect? 2. It appears that the automatic assumption is that the employee is at fault for not performing and therefore should be fired. But shouldn't the responsibility fall on me as the manager and the system that I have introduced? Maybe the person is performing as well as the situation allows? 3. How am I to build team spirit within my small company when I single out one person for lack of production and fire him or her? Case study Provide advice to an entrepreneur about firing employees Firing an employee is a messy business. Just the thought of having to recruit, train and manage a new sales soul is enough to keep some sales managers from following through with the task. But holding on to a salesperson who's not performing or who's disruptive to the team is guaranteed to exacerbate matters down the road. But how do you know when it's time to say \"you've gotta go\"? It's simple, according to Tricia Timkin: \"Lack of production, lack of production, lack of production,\" says the president of Padigent, a Carol Stream, Illinois, human resources consulting firm for emerging companies. Dave Anderson, president of Dave Anderson's Learn to Lead, concurs that performance is one criterion for firing. Anderson, whose Los Altos, California, company offers sales, management and leadership consulting, thinks reps who are \"dishonest, selfish or disrespectful\" should face the axe. You may fear firing a rep will cause a morale dip in the troops. After all, someone's buddy is getting shown the door. But making a tough choice can bolster the spirits of your sales squad. Says Tamkin: \"Firing can positively affect morale [because] it sends a message that the company will take strong measures to ensure the success of the organization. Poor performers lower the morale of the team, and they continually break momentum and diminish the credibility of the sales manager.\" Before firing, however, steps must be taken to legally protect your business. It's crucial that the employee has been warned in advance in writing. Coaching sessions with failing sales people will help protect you when it comes time to separate. Tamkin advises that documentation must be developed in advance of the firing, and that when it comes time for the employee to go, the manger should conduct an exit interview. Though firing will never be a savory part of a manager's job description, it's short - term pain for long - term gain. \"Managers have to realize that when they keep the wrong person,\" Anderson says, \"there's more damage to the company than just lack of production.\" Here are some firing guidelines from William Skip Miller's ProActive Sales Management (AMACOM): 1. Never in your office: if it's your office, you can't leave if the employee wants to stay and talk. 2. Short and Sweet: As you walk in the door, say, \"The reason I'm here is to tell this is your last day of employment with this company.\" Just get it out. 3. Never on a Friday: If fired on a Friday, the employee can't start the process of feeling good. All he or she can do is stew about it over the weekend. 4. Outside help: If the employee says he or she has consulted an attorney or other legal counsel, stop the conversation immediately and consult your HR department or attorney, whoever helped you draft your company policy. 5. No hanging around: Personal effects can be retrieved, but have the person leave the building. Advice to an entrepreneur: An entrepreneur, whose business has stopped growing, has read the above article and comes to you for advice: 1. Gee, these managers discussed in the article are a bit rough. Even if one particular person is not producing as expected, doesn't this person still deserve to be treated with respect? 2. It appears that the automatic assumption is that the employee is at fault for not performing and therefore should be fired. But shouldn't the responsibility fall on me as the manager and the system that I have introduced? Maybe the person is performing as well as the situation allows? 3. How am I to build team spirit within my small company when I single out one person for lack of production and fire him or her