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Tag: Business Structures

  • How Switching to a C Corp Could Save Your Business Thousands | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    I own a firm dedicated to business optimization. Since the passage of the “One Big Beautiful Bill Act,” or OBBBA, I’m now more inclined than ever to advise my larger and more growth-focused clients to consider the C corporation over other popular entity types such as LLCs and S corporations. That said, for smaller businesses and owners who rely year-by-year on their business profits for personal living expenses, the LLC or S corporation may still be the right fit for maximum tax savings.

    A refresher on pass-through income

    In order to understand the impact of the new law and what it means for your business, it’s important to understand “pass-through income.” If you have an LLC, sole proprietorship, partnership or an S corporation that makes money this year, you can rest assured you will be taxed on that income. Your profits pass through from your business and are taxed as individual income. The C corporation, however, presents a different dynamic. Your business profits don’t automatically pass through to you individually but are taxed at the corporate level.

    Now, if your C corporation issues a dividend or you sell your shares, then the money you receive counts as individual income and is taxed as such. But here’s the thing, no one can force you to issue a dividend or sell shares in your company. Plenty of C corporation owners reinvest most or all of their profits back into their business. And why shouldn’t they? Especially now, given that the OBBBA incentivizes you to do just that.

    Related: Why New Tax Rules Could Be a Game Changer for Your Business

    Corporate tax is way less expensive than individual income tax

    To reiterate, C corporations must pay corporate tax on profits. Corporate tax is always less costly than individual income tax. Prior to 2018, the corporate tax rate could go as high as 35%, similar to the highest income tax bracket. This is no longer the case. Corporations have enjoyed a flat 21% tax rate for the past several years, “flat” meaning that regardless of whether your business profits $50,000 this year or $50 million, you pay 21%. The new law makes this 21% flat rate permanent.

    C corporations are the only business entity type that, when profitable, doesn’t automatically trigger individual income tax at the end of the year. So, a good strategy for a business owner with a C corporation is to maximize the amount of profits taxed at 21%, and only 21%.

    The OBBBA makes it easier than ever to defer individual income tax

    The trick is to retain as much of your earnings as possible within the corporation. The new law provides ample means for doing just that. There’s a kind of cascade of incentives in place in the OBBBA that encourages higher levels of corporate earnings retention. Consider, for instance, the bill’s making legal the immediate expensing of Research and Experimentation costs. In the past, it was required that such costs be expensed in accordance with a specific schedule over several years.

    Research and Experimentation costs can now be deducted in full in the same year they’re incurred. If you were looking for a reason to retain more of your business’s earnings and benefit from the ensuing tax savings, then deploying more R&E funds to quickly reduce your overall tax liability may be a brilliant move.

    Pass-through entities still benefit

    Don’t get the wrong idea. The OBBBA is by no means hostile towards pass-through entity types. In fact, the bill provides pass-throughs with a nice and exclusive perk in the form of the now permanent 20% QBI (Qualified Business Income) deduction. C corporations don’t get this.

    Here are the specs: Though subject to income limits and other restrictions, for most businesses, the QBI deduction flat out erases the tax liability for 20% of your pass-through entity’s taxable income. The benefit begins to phase out at $165,000 for single status tax filers, and $330,000 for married filing jointly.

    How should I weigh the QBI deduction for pass-throughs against C corp benefits?

    For starters, if your income is lower than the aforementioned thresholds ($165,000 for single, $330,000 for married) then the 20% QBI deduction afforded by your pass-through entity will be hard to pass up. Once your business earns above these thresholds, a pass-through can end up costing more in taxes than a C corporation, since C corps can retain profits without immediately triggering personal income tax.

    Related: Here’s What the ‘One, Big, Beautiful Bill’ Means for the Franchise Industry

    What else should I know about the OBBBA?

    The new law extends other existing business perks that can benefit C corporations and pass-throughs alike. The 100% Bonus Depreciation provision will no longer phase out but is now made permanent. This allows businesses to immediately deduct the full costs of qualified tangible property rather than deduct those same costs incrementally year after year.

    Similarly, the bill’s increased expensing cap provides tax savings — particularly for small- and medium-sized businesses — by increasing the maximum amount a business owner is able to write off in Section 179 expenses (machines, equipment, office furniture, computers, etc.) The bill’s $2.5 million expensing cap is time and a half more than the previous cap of $1 million.

    While these incentives benefit both corporations and pass-throughs by reducing overall taxable income, they also uniquely expand opportunities for C corporations to retain earnings, fueling reinvestment and long-term growth.

    The effects of the OBBBA will be felt for decades to come, a wave of growth and tax savings for businesses of all types and sizes. If you’re looking to reinvest your earnings in growth, innovation and expansion, talk to your attorney about the benefits of moving into a C corporation or contact a business formation services provider for more information.

    I own a firm dedicated to business optimization. Since the passage of the “One Big Beautiful Bill Act,” or OBBBA, I’m now more inclined than ever to advise my larger and more growth-focused clients to consider the C corporation over other popular entity types such as LLCs and S corporations. That said, for smaller businesses and owners who rely year-by-year on their business profits for personal living expenses, the LLC or S corporation may still be the right fit for maximum tax savings.

    A refresher on pass-through income

    In order to understand the impact of the new law and what it means for your business, it’s important to understand “pass-through income.” If you have an LLC, sole proprietorship, partnership or an S corporation that makes money this year, you can rest assured you will be taxed on that income. Your profits pass through from your business and are taxed as individual income. The C corporation, however, presents a different dynamic. Your business profits don’t automatically pass through to you individually but are taxed at the corporate level.

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    Nellie Akalp

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  • How You Structure Your Business to the IRS Matters. Here’s Why. | Entrepreneur

    How You Structure Your Business to the IRS Matters. Here’s Why. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    The business formation structure you chose at startup may no longer be the best one for your business. As you grow, your company’s legal entity can affect your tax bill, personal assets and ability to attract investors, raise money and expand your business.

    Those are many variables, so let’s explore your options.

    Related: Which Business Structure Is Right for You?

    Sole proprietorships

    Most startups in the U.S. start — and stay — as sole proprietorships. Of 33 million U.S. small businesses, the Internal Revenue Service (IRS) says 28.3 million are nonfarm sole proprietorships.

    Sole proprietorships are the simplest form of legal business entity. The setup process is easy. While sole proprietorships without employees don’t need an Employer Identification Number (EIN), it’s recommended since many banks won’t let you open a business account without one.

    There is a downside, however. There is no legal separation between a sole proprietor and the business. So, you are personally liable for any debts, obligations and lawsuits against your company. If your company is sued, your personal assets (property, bank accounts, etc.) can be at risk.

    For tax purposes, sole proprietors report their profits and losses on their individual tax returns (IRS Forms 1040) and attach a Schedule C Profit or Loss From Business, showing income, expenses and allowable tax deductions. In addition to income taxes, sole proprietors pay self-employment taxes of 12.4% for social security and 2.9% for Medicare. Taxes are due April 15.

    Partnerships

    Many entrepreneurs start businesses with family or friends or look for partners when their businesses grow. Like sole proprietorships, there is no legal separation between the partners and the company, so the partners’ personal assets are at risk if something goes wrong.

    Unless specified differently in the partnership agreement, all partners are equally responsible for paying taxes. Partnerships use IRS Form 1065, Schedule K, to list partners and the business’s revenues and expenses. Plus, all partners must pay self-employment and estimated taxes. Partnership tax returns are due March 15.

    Related: 5 Tips for Structuring Your New Business Like a Pro

    LLCs offer liability protection

    As their businesses grow, many entrepreneurs become uncomfortable with their personal assets being at risk and explore incorporating their companies.

    There are two ways to incorporate: forming a Limited Liability Company (LLC) or a C Corporation. Both structures are considered separate legal entities and protect business owners from the company’s liabilities, shielding their personal assets.

    Owners of LLCs are called members. Single-member LLCs are taxed like sole proprietorships using tax form 1040 and Schedule C. Multi-member LLCs are taxed like partnerships and use partnership forms 1065 and Schedule K and K-1. LLC members must still pay self-employment taxes. You can also opt for an S Corp election (see below).

    You must file Articles of Organization with your state to form an LLC. And while not required, it’s recommended that you create an operating agreement. An operating agreement defines the roles and responsibilities of a multi-member LLC.

    LLCs are becoming increasingly popular due to their relatively simple management structure, fewer compliance requirements and flexible tax treatment. They’re essentially a “have your cake and eat it too” option. For instance, multi-member LLCs can allocate percentages of the company’s profits and losses to the members as they see fit.

    LLCs have fewer and less complex compliance responsibilities than C Corps. They don’t have to elect officers or a board of directors. There are some ongoing compliance requirements — check with your state to learn more.

    The biggest disadvantage of owning an LLC is that you can’t issue company stock, making it more challenging to raise money.

    C Corps offer robust liability protection

    As your business grows, you may want stronger liability protection and opt to form a C Corporation. While C Corps are more complex to form and operate, they provide the most robust liability protection for the company’s shareholders. C Corps must file Articles of Incorporation in the state where you operate.

    A C Corp is a separate business entity and files a tax return on its profits and losses using IRS Form 1120. But the owners/shareholders are considered corporation employees, receive W-2s and are taxed as individual taxpayers, often called “double taxation.”

    However, C Corps can deduct employee-related costs, like wages, health care, retirement plans, operational expenses and fringe benefits like company cars. Ultimately, the current C Corp flat tax rate of 21% may be lower than what sole proprietorships and partnerships pay,

    In C Corps, the company and its employees each contribute 6.2% of the employee’s wages to Social Security and 1.45% to Medicare. Plus, employers contribute to their state-run unemployment insurance funds (SUI).

    It’s easier to raise money and attract investors since C Corps can offer unlimited numbers of shares and multiple classes of stock.

    C Corps typically have higher registration costs and more compliance requirements, including adopting bylaws, submitting annual reports, holding shareholder and board of director meetings and more.

    Related: The 5 Biggest Tax Differences Between an LLC and Corporation

    The S Corp tax election

    LLCs and C Corps can elect to be taxed as S Corporations, allowing them to divide profits into wages and dividends. While dividend distributions aren’t subject to employment taxes, shareholders must be paid reasonable compensation as defined by the IRS. Electing to be taxed as an S Corp can lower your overall tax bill while maintaining liability protection. S Corps use IRS Form 1120-S, and tax returns are due on March 15. To elect S Corp status, you must file IRS Form 2553 no later than March 15 of the tax year the election is to take effect.

    However, only American citizens and residents can be S Corp shareholders, and only 100 shares can be issued, so check with your accountant before choosing this path.

    Get advice

    It’s crucial to weigh the advantages and disadvantages of the different business structures. For many entrepreneurs, the liability protection and possible tax savings outweigh the added costs and complexity of incorporation.

    With so much at stake, it’s recommended that you consult with your accountant or attorney to help determine which structure is best for your business today and for future growth.

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    Nellie Akalp

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  • 5 Reasons Your Team Keeps Making Mistakes & What to Do | Entrepreneur

    5 Reasons Your Team Keeps Making Mistakes & What to Do | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Muhammad Ali, Tom Brady, Babe Ruth and Michael Jordan are some of the greatest professional athletes the world has ever known, but even these legends occasionally dropped the ball (as it were). It’s only natural, then, that your team members will occasionally do the same.

    Even the best employees will occasionally miss out on an opportunity to deliver, but, of course, it’s especially concerning for management when they keep dropping the ball and impact organizational growth in the process.

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    John Boitnott

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  • Subscription Fatigue: Overwhelmed Consumers Push Back Against Monthly Fees | Entrepreneur

    Subscription Fatigue: Overwhelmed Consumers Push Back Against Monthly Fees | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Streaming services have become essential and have yet to lose their luster in the “gotta have” category of entertainment essentials. People increasingly stay home with overworked exhaustion and the ever-popular working-from-home options. The resulting popularity of streaming services has led to a significant increase in subscription costs and usage of many streaming services.

    Related: Hustle Culture ‘Sucks’ — But One Entrepreneur’s ‘Laziness Principle’ Can Make You More Money With Less Work

    The trends in great programming and high demand for these streaming services catapult its popularity — but, as with all things, there is another side to the coin. For example, there is growing concern that the sheer number of such services could cause consumer fatigue and rejection. But is that true? We’ll look in-depth at subscription fatigue, how it affects the media industry, and what mistakes companies make that could end their sweet ride.

    The Secret of Subscriptions

    The concept of subscriptions goes beyond regular payments. It becomes essential to understand how it differs from other recurring revenue models like leases, rentals, and memberships. A subscription is a payment for the future delivery of a product or service that includes some variation.

    Related: How to Identify and Launch a Subscription Model in Your Existing Business

    While many businesses may use the term “subscription” to describe their model, it’s vital to distinguish it from other types of recurring income. For example, loans, leases, and monthly payments provide people access to a predictable product or service that doesn’t qualify as a subscription. A true subscription model can only garner success depending on the habit strength and usage pattern it creates in its customers.

    Nir Eyal, a writer who has studied habit-forming products, has identified four key steps that successful companies incorporate into their customer experience, which he calls the “hooked model.”

    • Trigger: encourages people to use the service
    • Action: habitual behavior
    • Variable reward: satisfies the users’ need for the service
    • Investment: makes the service more helpful when used.

    Mistakes of Companies

    Upon closer examination of the “hooked model,” it becomes clear that many companies make common mistakes when launching subscription services.

    1. Too many steps

    A subscription service that is more complicated than other solutions is likely to fail. For instance, people are often deterred from such platforms and apps because it can take time to find a suitable movie. Sometimes, the time it takes to search for a film exceeds the time it takes to watch it. Netflix, for example, has a vast selection of options, which is quite different from the DVD rental service that initially brought the company success.

    In the early days, customers had to open the red envelope, remove the disc, and insert it into the player. There was no need for decision-making or choice since you watched what you had already selected. Netflix has since capitalized on ease of use as a competitive benefit and is now experimenting with a “Play Something” feature that allows users to start watching something quickly. The service also allows you to line up shows in a queue saving valuable thought processes.

    Related: Man Sues Netflix For $1 Million After Seeing His Photo in a Documentary Describing a ‘Stone Cold Killer’

    However, Netflix differs from offering a curated selection that meets the viewer’s preferences. Ultimately, consumers want to watch content that appeals to them, and anything that makes it difficult will negatively impact the subscription service’s success. That’s why they should combine quality content with maximum ease of use to avoid provoking user fatigue from subscriptions, which we’ll discuss later.

    # 2 Reduced variability and lack of novelty

    The primary reason people discontinue subscription services is a reduction in variability. When the number of exciting offerings declines and mundane options increase, customers lose interest and seek alternative services, often cheaper ones.

    The good news is that a solution exists to maintain interest in a subscription service and increase the variability ratio. It can be achieved by encouraging users to enhance the service through their usage, which brings us to the investment phase.

    # 3 No accumulated value

    Although many companies neglect this step, it remains crucial to the subscription service success. During this phase, users add something to the product that enhances it. This increases the likelihood of returning to the platform repeatedly. This principle is known as retained value and can manifest in various forms, depending on the nature of the service.

    Examples of how subscribers can add value to a product over time include providing data, publishing content, attracting new users, building connections, and establishing a reputation. In addition, many platforms and apps leverage the “hooked model” to ensure that their subscription service continues to improve as users engage with it.

    What is subscription fatigue

    Subscription fatigue is when consumers become overwhelmed by the number of platforms they subscribe to. As a result, it becomes difficult for people to track them all. Plus, the constant stream of monthly payments can adversely affect their finances.

    In some cases, such fatigue can lead to what’s known as customer churn, where users unsubscribe and switch to other services. It can be especially problematic for subscription-only companies, as it can lead to a loss of revenue and customer loyalty.

    Subscription fatigue in the media industry

    While subscription fatigue is a problem for all companies operating on this principle, it is especially true in the media industry. In addition to the sheer number of entertaining platforms, you can also encounter the problem of content fragmentation. It means that users must subscribe to multiple services if they want access to all the shows and movies they are interested in.

    For example, you must subscribe to Netflix to watch shows like Stranger Things, The Crown, and Orange is the New Black. If you want to watch shows like The Handmaid’s Tale, subscribe to Hulu. And if you’re going to watch The Boys, you need to subscribe to Amazon Prime Video. And this doesn’t even cover the problematic issues when a person is watching a series on Netflix and the continuation of the additional series’ shows (after years) is now on Hulu. What??

    Combined, this can lead to high monthly costs, especially if the user wants access to multiple streaming services, as mentioned above. As a result, subscription fatigue has led to several new trends in the media industry. For example, some streaming services now offer packages where consumers can subscribe to multiple services at a discount.

    Others are experimenting with ad-supported models, where people get free access to content in exchange for watching ads to ensure a better customer experience. This may eventually serve as a great solution to the current problem. But what more can companies and consumers do to improve this situation?

    Solution of the Problem

    To fight subscription fatigue, companies can offer bundles and other discounts to make access to several of their products more accessible to interested users. They should likely take time to experiment with several different business models and test these. The business model could include ad-supported models or pay-per-view options to give users more flexibility in accessing content. And if you’re one of those users, it’s essential to be mindful of the subscriptions you sign up for and regularly review whether they’re worth the monthly fee.

    Consider which options to subscribe to and prioritize those that benefit you the most — and consider dropping those you use infrequently. However — you’ve already found this out — getting rid of a subscription can be challenging. If you are no longer interested in BET Plus or another streaming service, you can find out how to cancel your BET+ subscription on the Howly consulting service website.

    Subscription fatigue is a growing problem for consumers and companies alike. While subscriptions offer many benefits, their sheer number can be overwhelming — leading to decreased customer loyalty.

    Subscription fatigue is particularly relevant in the media industry, as content fragmentation across multiple streaming services can frustrate many users. However, by working together, businesses and consumers can find ways to make subscriptions more manageable and sustainable over the long term.

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    ReadWrite.com

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  • Why You Should Treat Team Members as People, Not Employees | Entrepreneur

    Why You Should Treat Team Members as People, Not Employees | Entrepreneur

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    For Subscribers

    The days of a top-down, one-size-fits all approach to managing a staff are over: Today’s workers are looking for personalization, and the better you meet their needs, the more successful your business will be.

    Opinions expressed by Entrepreneur contributors are their own.

    I frequently write on the Red Rocket Blog about employee experience and recruiting topics like how to manage a virtual team, the possible benefits of an unlimited vacation day policy and swapping “I” for “we” in corporate communications. After a look at these posts, you might notice a consistent theme: All are employee-friendly policies intended to let staff members cultivate their own identities on the job. Why is this important? Because recruiting and retaining staff is harder than ever, and the more things you do to nurture long-term loyalty, the more your company will thrive and your employees prosper. At the core of this message is learning to treat staff as the people they are, not simply employees.

    What is an “employee?”

    Merriam-Webster defines this word as “one employed by another, usually for wages or salary and in a position below the executive level” and to me, the key words are “employed” and “below.” The latter conveys a feeling that one simply works for the company as a cog in the wheel, and not with the company — on more of an even footing with other colleagues. It’s a definition that speaks to hierarchy with employees working “below” layers of management. From the vantage point of a job applicant, that doesn’t sound very enticing.

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    George Deeb

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  • Why CEOs Need ‘Love’ In Order for Organizations to Survive | Entrepreneur

    Why CEOs Need ‘Love’ In Order for Organizations to Survive | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    I saw Cirque du Soleil’s “Love” in Las Vegas recently — a show that combines the troupe’s famed dance and performance athleticism with reinventions of various Beatles hits — and two messages came through that I thought leaders needed to remember.

    First is the song title, “All You Need Is Love,” and the second is a famed Lennon lyric from “Strawberry Fields Forever,” which goes, “Living is easy with eyes closed.”

    Why bring these up?

    My job is to strategize with leaders so that they can adapt to necessary organizational, environmental and societal shifts toward the UN’s 2030 “Countdown” environmental agenda. Now, you may have already switched to “living with your eyes closed” just reading that, considered moving on to a topic less confronting instead, yet the takeaway messages remain: Love, denial and avoidance.

    Put simply: To survive, we need to start anew

    Many people are struggling with work. Polycrises, seemingly never-ending stop-start change, return-to-office fears, injustice, new market forces, impending layoffs and reliably depressing climate reports have resulted in too many of us living in a “survival mode,” and that’s not good for business. But, in truth, love is all we need if we want to thrive in the world of work. When we fall “in love” with a tangible, aligned company that’s mission is connected to our reality, we all come together — and the result feels a lot like, well… love. We commit, we grow, fight for what’s right, and generate a feeling that we can accomplish anything, whatever the weather. Add an organizational environment of psychological safety, and you have geometrically enhanced the ability to collaborate and innovate in their very best forms.

    Related: 10 Billionaires Stepping Up to Fight Climate Change

    How eyes are opened

    My job is to help leaders move from “eyes closed” to “invigorated.” Executive coaches like myself (with a career of navigating economic shifts since the ’90s) naturally turn to a tactic of providing leadership “stem cells” (aka a renewed sense of energy) to organizations ready to reinvent themselves.

    To help in that effort, companies like McKinsey, PWC and EY provide data about new economic realities for organizations to adapt and move forward. And at least one aspect of our future is clear: The era of hypergrowth during Covid-19 has passed. We are now in an environment in which it’s vital to create a business that can sustain itself through new and harder times.

    A simple, scalable model: the OGSM

    I’m currently working with Francois (not his real name) — a senior leader in a major global energy company who is driving innovation amid significant post-pandemic global forces and through a disruptive reorganization. As I learned during my MIT program in 2022, energy is everything, so I knew only too well that his work is important to every person on the planet. In our discussions, Francois described a former boss as narcissistic and gaslighting — seemingly caught in a loop of creating disharmony in his team and organization. Critically speaking, this boss’s narcissistic behavior loop actually set the world back.

    Then along came a restructuring, including more internal staff mobility. Francois is now with a new team that uses the OGSM (for “objective, goals, strategies and measures”) framework to make critical strategic moves so that the re-formed organization can deliver across various horizontal sectors.

    With this new role, Francois feels like he belongs. He is feeling “love,” is happy to contribute and is in a psychologically safe environment that fosters competition-busting and market-leading plans. It now feels completely authentic for him to be in a “quadruple-espresso mode” of future-proofing — both for his global organization and its customers. Being free to communicate with “radical candor” and strategic rigor enables him to do what he always wanted: make a difference.

    Related: Is ‘Green Hydrogen’ the Future? This Minnesota Gas Utility Thinks So.

    How the model works

    The OGSM model is simple and scalable and in essence, is a reminder for a whole organization to rally behind the CEO. Important components include:

    • Objectives from the CEO

    • Goals from the executive leadership team

    • Strategies from that same executive leadership team, alongside directors and managers

    It’s vital to keep in mind that OGSM actions need to be interconnected, each piece feeding into the other, so an organization can move forward as one. The “O” (objective) also needs to be announced by the CEO so that every C-leader is accountable for driving this mandate. This “O” runs right through every goal, strategy and measurable outcome.

    How can leaders reboot their style?

    Leaders make a leadership style choice every day, and their behaviors indicate their style. The narcissistic leader defends legacy processes, systems, products and methodologies to stay gainfully employed, and their teams often feel disrespected and confused about the direction of the company. Authoritative, servant, transactional and empathetic leaders, meanwhile, prefer to grow and identify key objectives to be successful, while socializing it at pace and revolutionizing their organization for the environment it’s functioning in. The problem is, with so many conflicting objectives in an era of perma-crises, it’s time leaders got back to basics — and this is not a task to be scoffed at.

    Ever since my career at Sony’s PlayStation division in the ’90s, I found the most successful leaders have a sense of urgency in adapting to a new environment. They provide evidence that their goals will be correct in the coming years, and demonstrate that they are aligned with the primary objective of the CEO. Such a person drives change and will relate with every business group to evangelize and socialize — ensuring people understand both tasks and focus.

    Related: Smart Tips for Setting and Actually Achieving Your Business Goals

    The OGSM cycle is a delightfully simple yet exquisitely effective approach, the result of which is everyone being in synch to move an organization along the right trajectory.

    Key facets:

    • Understanding the prime objective of the CEO

    • Creating strategies that are aligned with (or go beyond) that objective to achieve competitive advantage and long-term sustainability

    • Being highly transparent about goals and how to measure them every quarter

    • Reviewing them with a coach and C-leader every 30 days to see if they need to be adjusted

    • Reporting market forces that will impact an organization’s “big O”

    • Repeating the above steps after the introduction of every important new idea and/or piece of data

    • Supporting other colleagues in understanding the prime objective, and a willingness to debate fearlessly to avoid defensive and derailing thoughts and behaviors (watch out for people defending old beliefs that are no longer relevant to the CEO’s objective)

    Now, get your mission, get back to loving your work and do it with eyes wide open!

    Be advised that common OGSM side-effects may include: an engaged, motivated and loyal workforce; an uptick in customer sentiment; a renewed sense of purpose; a sense of happiness (even love); and saving the planet.

    Related: 7 Tips for Loving Your Career and Working With Passion

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    Caroline Stokes

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  • 3 Ways You Can Harness The Benefits of Your Flat Organization for Growth

    3 Ways You Can Harness The Benefits of Your Flat Organization for Growth

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    Opinions expressed by Entrepreneur contributors are their own.

    Organizational structures have been a hot topic of debate in the business world recently, due in no small part to the events of the last few years. Many companies simply lacked the agility to respond to all the disruption. However, others were stuck in place as conflicting leadership decisions pulled them in different directions.

    These companies’ chains of command got so bogged down that decisions began to slow and communication experienced delays. According to MIT Sloan Management Review, almost 40% of workers felt that the level of bureaucracy at their companies was especially problematic during the first six months of the pandemic. Employees also noted the stability of priorities (36%) and amount of red tape (34%) as hindrances to employers’ abilities to respond to pandemic-related changes. Ironically, these impediments are the unintended consequence of successful growth.

    If you think about it, a company’s organizational structure is akin to a building without elevators. A tall structure has many floors. Information, decisions and transactions flow from one floor to the next, moving through each level until they reach the front line. Should a customer-facing employee have a suggestion or resource request or require approval, the flow must then move in the opposite direction.

    Conversely, a flat organization has very few floors — in some cases, it has only one. It doesn’t take much effort to get information from one end of the building to another. That is, a flat organizational structure simply means an organization that has few — if any — levels of management. Many startups fall under this model, relying heavily on their founders but maintaining open communication. The challenge is to be intentional about the organization’s structure as it grows.

    Related: 3 Ways That Your Actions Today Will Shape Your Company’s Legacy

    Preserving the benefits of a flat organizational structure as you grow

    Successful entrepreneurs focus on business, product or service development, sales and marketing. Most often, a founder has a clear vision and personal values. Yet, as the company grows, the organization’s structure tends to develop independently from the vision and values. Here’s how to be intentional in maintaining the culture that made the enterprise successful as it grows — without building in costly bureaucracy:

    1. Take stock of your personal trust orientation

    Many companies throw around the buzzword “flexibility” in reference to employee benefits, but few understand what team members want. Research from Harvard Business Review reveals that what employees really need is flexibility by way of autonomy. However, the study found that the flexibility they want is contingent on their ability to exercise it how they see fit. In other words, employees need to feel trusted.

    Entrepreneurs often have tunnel vision. They accurately see themselves as the brains behind the success, and the business becomes their “baby.” I’ve seen this firsthand as a consultant. It can be hard to trust others with your creation. Yet, it is absolutely essential for successful growth. So, as you build your organizational structure, assess your personal trust orientation as it relates to your leadership role. If your belief in employees’ capabilities is low, then you might encounter the cultural struggles of a large company with a tall structure. On the other hand, high trust levels result in flatter organizations.

    Related: 3 Tips to Build Trust and Drive Business Transformation

    2. Clearly understand and avoid bureaucracy

    Maintaining quick, clear and effective communication is key to nurturing a flat organizational structure. Airbnb executives had this same realization when it revamped its hiring process and general core values over the last few years. Its leadership team found that investing in trustworthy employees and removing rules instead of adding them allowed for more communication and more freedom to move inside the organization.

    The main takeaway from Airbnb’s transformation? Replace policies with principles. You have to remember that the rules and policies you create do not exist in a vacuum. New company rules interact with every other system in the organization. By replacing rule-making with principle-founding, you can move from a restrictive, bureaucratic space to one that’s open, honest and straightforward.

    3. Distribute power as the company grows

    In the post-coronavirus landscape, companies must realize the need to adapt and broaden their hierarchical structures. Imagine a multimillion-dollar organization with checks that all must be signed by the same person. That structure would lead to delays and frustrations. Hierarchical models worked well back in the Industrial Revolution, but in today’s corporate landscape, it’s vital to nurture self-management.

    This means making an intentional and purposeful shift to elevate your employees to a position where they have power and where you invite them to actively voice their ideas. In self-managing organizations, power is distributed instead of delegated. Post-pandemic, there’s no room for delays due to hierarchies. Most leaders think that they have to have all the answers, but your employees want to help with solutions. This new era calls for leveraging your entire team’s collective strengths instead of leaning solely on your own.

    Related: 7 Components for Successfully Designing Your Organization

    One of the main drivers of any organizational structure is your people. Even if the business is your baby, you must keep people at the forefront of your mind as you progress. Today, success relies more on the collective intelligence of the whole. Recognize this fact before making any organizational decisions.

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    Sue Bingham

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