Make It Legal
Asking your attorney to give your company the once-over should be
on your New Year's resolution list. January 1 is a popular date
for initiating laws. Maria Karos, a partner at the Dallas firm
Bell, Nunnally & Martin LLP, suggests three major aspects to
examine:
1.Structure: Make sure the corporate structure and format
still meet your needs. "That's the foundation of the
house," says Karos.
Five years ago, for example, you may have established your
business as a partnership. Now you've got employees--some of
whom you want to give a stake in the firm. Incorporating allows you
to do that.
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2.Contracts: Karos suggests taking a close look at your
contracts, especially for employees and independent contractors. If
you've expanded across state lines, or if your employees live
in a neighboring state, your contracts could be invalid.
3.Policies: Your employee handbook needs regular
revision. It'll be difficult to fire an employee for, say,
downloading porn at work if your handbook doesn't spell out
that this is not allowed.
"It not only helps employees know the policy," says
Karos, "but also helps the employer think about what the
policy should be."
Get What You Ax
For
Kicking yourself upstairs is usually a good move for entrepreneurs.
You bring in a chief executive to handle details, while you focus
your energy on other endeavors. But should something go wrong, be
wary about a knee-jerk reaction. Firing a CEO rarely improves
company performance, says Margarethe Wiersema, strategic management
professor at the University of California, Irvine.
Wiersema conducted a study of turnover among corporate
executives. She found that CEO dismissals now top retirement and
voluntary departures as the reason for executive change in the
Fortune 500. "The main reason is the pressure on shareholder
performance," she says. And it's not just among the
giants. Smaller firms are feeling the pressure, too.
When she sifted the numbers, Wiersema found that company
performance didn't improve after CEO firings. "That
doesn't mean you shouldn't get rid of someone who isn't
performing," she says. To get your firm back on track,
however, you need to identify the root problem before letting the
axe fall.
If you do end up firing your CEO, take plenty of time before
deciding on a new one to take the reins. Look for a candidate
who's had success in reorienting a company's work
force--not just a great salesperson or marketing whiz. Of course,
this is not as quantifiable a skill as sales growth. That's for
you to investigate, which is why no one said that giving up the top
spot would make your life easier.
Business writer Chris Sandlund works out of
Cold Spring, New York.
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