For the past decade, market conditions have strongly suggested that a company’s future success must be based on innovative thinking, innovative ideas and innovative strategic plans. This subject has been written about in books and college business journals for years. The resounding message is innovate or perish.
Because the alternative to being an innovative company is watching a company start down the path of bankruptcy to their eventual demise, there is an enormous incentive to make innovation an integral part of a company. Management has been trained that everything is about results, and that concept is still very valid today.
Management is held accountable for continuously improved earnings and the overall success of the company. The challenge is getting innovative ideas so that the company begins to generate better and better results.
To begin becoming an innovative company, management should hire the perfect candidates who can create innovative ideas, translate the ideas into a plan, and then implement the plan. Unfortunately, this pool of candidates is very, very small.
There is another solution to becoming an innovative company. This solution works when management better understand the weaknesses and strengths of their current staff. For example, you may already have an innovative thinker on your staff. This is the person who has good ideas but never seems to get them implemented. This person often cannot stay focused long enough to complete a project, and they never seem to consistently produce results. On the other hand, you may have a person who never seems to have any ideas of their own, but when they are given a project, they perform well. Your company may already have the resources to become an innovative company. You just need to become more effective at utilizing the resources you have.
After you have assessed your staff, you may find that you need an innovative thinker. To find the innovative thinker, a change will be needed in your hiring practices. There is an entirely different process used when looking for innovative thinkers because of their unusual abilities. The innovative thinker may have moved around more, they are looking for a company which wants new and fresh ideas, they are looking for a company where there is an environment of change, and they may have worked for younger companies.
When hiring a candidate, ask questions which require the candidate to find a solution to a challenge. This means asking questions that have a set of conditions, so the candidate can explain how they would solve the problem. Other questions should be conversational and open-ended, so candidates can explain what they mean. Based on the candidate’s answers, you can decide if the candidate is an innovative thinker by whether their emphasis is on generating ideas or if their emphasis is about implementing a plan to get results. The questions need not even have relevance to the position they are applying for. The intent of the questions is to see how they respond.
Remember, the mantra is innovate or die.
Monday, December 8, 2008
Thursday, December 4, 2008
SELECTING A BUSINESS ENTITY
One of the first steps when starting a business is selecting a business entity. Generally the main issues are business control, liability and taxes. The following is a summary of the business entity types. I always recommend consulting with an attorney about liability issues or CPA about tax issues if you have any questions related to the business entity selection. It is much easier and cheaper to select the correct business entity than to undo a mistake.
Control
Owner has complete control over the business entity and is responsible for all decisions related to the business.
Liability
Owner is solely liable. His or her personal assets and any business assets are open to attachment in any legal case.
Tax
Owner reports all business incomes and expenses on personal income tax return.
Continuity
Business terminates upon the owner's death or withdrawal. Owner can sell the business but will no longer remain the sole proprietor.
Control
Each partner has the authority to enter into contracts and make business decisions in accordance with the partnership agreement.
Liability
Each partner is personally liable for all business debts.
Tax
Each partner reports partnership income on their individual income tax returns. The partnership business entity does not pay any taxes but is required to file an informational tax return.
Continuity
Unless the partnership agreement stipulates otherwise, a partnership business entity dissolves upon the death or withdrawal of a partner.
Control
General partners control the business and are responsible for all business decisions.
Liability
General partners are personally responsible for partnership liabilities. Limited partners are only liable for the amount of their investment.
Tax
The partnership business entity is required to file an informational tax return, but does not pay income taxes. Each limited and general partner reports their share of partnership income or loss on their individual income tax returns.
Continuity
Death of a limited partner does not dissolve business, but death of the general partner might. The partnership agreement generally contains provisions about the dissolution of the limited partnership.
Control
The owner or partners have control and authority over all the business decisions.
Liability
Partners are not liable for business debts.
Tax
The owner or partners report LLC income on their individual tax returns. The Limited liability company business entity is required to file an informational tax return, but does not pay income taxes.
Continuity
Different states have different laws regarding the continuity of LLC's.
Control
Shareholders appoint the board of directors, who in turn appoints officers. The officers hold the highest authority. Officers and the board of directors are responsible for the decisions of the corporation.
Liability
Offers liability protection. A corporation's debt is not considered that of its owners. Owners can be liable for the business debt when they do not follow the laws about making and approving business decisions. This is know as piercing the corporate veil.
Tax
The corporation files and pays income taxes. Shareholders only pay taxes on the dividends they received from the corporation.
Continuity
The corporation is its own legal entity and can survive the deaths of owners, partners and shareholders.
Control
Shareholders appoint the board of directors, who in turn appoints officers. The officers hold the highest authority. Officers and the board of directors are responsible for the decisions of the corporation.
Liability
Offers liability protection. A corporation's debt is not considered that of its owners. Owners can be liable for the business debt when they do not follow the laws about making and approving business decisions. This is know as piercing the corporate veil.
Tax
Shareholders report their share of corporate profit or loss on their individual income tax returns. The S Corporation business entity is required to file an informational tax return, but does not pay income taxes.
Continuity
The corporation is its own legal entity and can survive the deaths of owners, partners and shareholders.
Sole Proprietorship
Control
Liability
Tax
Continuity
General Partnership
Control
Liability
Tax
Continuity
Limited Partnership
Control
Liability
Tax
Continuity
Limited Liability Company
Control
Liability
Tax
Continuity
Corporations
Control
Liability
Tax
Continuity
S Corporations
Control
Liability
Tax
Continuity
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