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Why many business owners are too directly involved in their own business
Are you a Star Trek: TNG fan?
If you are, you’ll know how much Captain Jean-Luc Picard leaned on his second-in-command, the ship’s first officer, Commander Will Riker. Riker took command in Picard’s absence, was Picard’s trusted confidante, and Picard’s natural successor. It’s hard to imagine Picard being as successful without his loyal, capable Number One.
Last month, I wrote about a client who was frustrated because he couldn’t go moose hunting. Without a Number One, he couldn’t take a break. I then went on to review the hiring mistakes he had been making, mistakes that were preventing him from finding the person who could run the business in his absence.
This month, I want to double down and discuss the importance of having your very own Number One. The fact is—and it may seem counter-intuitive—many business owners are too directly involved in their businesses. When you don’t have a Number One, you:
– have no time to be strategic, and spend most of your time on tactical matters
– are not grooming anyone for eventual succession
– diminish the value of your business, which can’t be sold because of your inherent involvement.
Shift your focus from tactics to strategy
If you’ve built your own business or spent the bulk of your career in a small, entrepreneurial business, you’re probably used to doing everything yourself. You may even think you’re the best at doing some aspect of your business (and you may be right). The problem is you just don’t have the time to do that and everything else that needs to be done.
In fact, it’s a misuse of your time when you’re the CEO or owner. You need to back off from the small stuff so you can focus on the big stuff.
My ah-ha moment came when I was running a department at a company many years ago. I had a project that had to be done and knew that I was probably the best one to do it. But I had a lot of people to manage and a lot of other things going on, so it sat on the corner of my desk for quite some time.
After about three weeks, I thought this is not getting done, and not getting done anytime soon, so why don’t I just give it to somebody?
And so, I had somebody come in, and I explained as much as I could about the project and gave them a shot at it. So they went away for a few days, and when they came back with the result for review, I realized that it was better than I ever could have done myself.
Why the heck did I keep it on my desk for three weeks? I could have given it away at the beginning and saved the time, but I had this selfish or egocentric idea that I was the best person to do it, but I really wasn’t.
So, this was a lesson for me. Now, I give away as much as possible and when somebody comes back with a draft, or whatever it is, I can work with them on making it better if I need to. Often, it’s great the way it is, or even better than it would have been if I had done it myself.
Usually, this isn’t that much of a risk. You’re delegating a task, not handing over the keys. Nothing is going to blow up. I wasn’t telling them to finish the project and share it with the whole world. I was just telling them to have a go at it and show me what their results were.
Sometimes I fall into the trap of thinking it will take less time for me to do something than to delegate it or explain it to someone else. But if the task is repetitive and you can just explain it once, and they are going to do it again and again or something like that, then it’s a worthwhile investment of time to bring that person up to speed.
The biggest risk might be wasting your time, but you can give people the highlights and let them fumble around and figure it out for themselves. You don’t need to tell them every detail.
This is the important bit: you can’t micro-manage and insist on things being done in exactly a programmed way. You need to be flexible on how it’s done and focus on the final product. It’s really an investment that bears fruit when something similar comes around the next time, because it means you’ll be able to delegate the task and leave it at that.
Groom for eventual succession
One of the strategic matters you’ll be missing if you spend all your time on tactical matters is planning for succession. Because you’ll need to retire someday or perhaps sell the business (more on that later).
I talked a little about this last month in the context of hiring within. You want to always be considering who could take over when you’re gone. In fact, if you follow a military model, each role in your business will have a person who can step in if necessary, creating a natural path of succession at every level of your organization.
Of course, this depends a little on the size of your business.
If your business employs about 100 people, you’ve probably got four or five silos: finance, sales and marketing, a technical or manufacturing aspect, and human resources. Your Number One or successor is likely going to come from one of these departments.
If you have a chief operating officer, they may be the person who is going to take over when you’re away or should be handling the day-to-day while you focus on the strategic stuff. They are a possible candidate to be your successor.
Something to consider as you look for a successor is cross-training: making sure that your executive team has experience in different aspects of your business. In a large company, it’s not uncommon for somebody to transfer from head office to be a branch or plant manager and then come back.
This type of cross-fertilization experience makes for a stronger person and helps them understand the viewpoint from a branch and head office perspective. People who are candidates for succession should have that well-roundedness in understanding the other parts of the business. The key consideration is that they should have enough experience or knowledge of the other functions to manage.
For example, if you have a manufacturing manager who has no knowledge of finance, they are probably a poor choice, because at more senior levels everything ends up being about people and money.
You have to know enough to be dangerous. You don’t want to be in the position of being snowed by the CFO because you have no knowledge whatsoever of a debit or a credit. It doesn’t mean you have to do it, but you should have some knowledge.
One thing I often ask people in a role where they are going to have P&L responsibility is to identify the difference between the income statement and the balance sheet. If they mix them up, or don’t understand the concepts, it tells me that they don’t have enough finance or accounting knowledge to be in that role.
Another consideration is sales experience because for most businesses, if there are no sales, then there is no business. So, a technical or manufacturing person with no concept of sales, who hates sales, or who thinks customers are just a pain, is a very poor choice for the top job.
That’s why it often seems like it’s the salesperson who emerges as the choice for the leader, because they know how to get business. If they have a bit of knowledge about finance, and they can cope on the manufacturing side, then they may understand enough to get by.
Avoid the owner problem in valuation
If you’re too involved in your own business, you’ll never be able to sell it for what you think it’s worth. The more you’re involved, the less your business is valued.
The perfect thing is when the owner is just the owner. That means you come in once a month to say hi to everybody, have lunch, and leave. That means your business is running perfectly on its own with the team you have in place. That means it’s at its highest value.
A new owner could then just come along and carry on exactly like you did, as long as they don’t mess it up of course. The key is that it’s easily transferable.
But, if the owner is the prime salesperson, for example, when they go, there goes all the contacts. Suddenly a new owner must re-create all those relationships, which is extremely difficult. If the owner has all the technical knowledge and know-how in their head, it’s a similar problem. Those kinds of businesses have limited value because the owners are so involved.
Larry Smith is the founder and president of Kathbern Management, an executive search firm based in Toronto. Kathbern helps companies find the executives and senior managers who not only have the experience and credentials to fulfill their responsibilities, but also have the emotional and “fit” requirements that will enable them to be successful in a particular environment. Kathbern simplifies the process and, through deep research, brings more and better candidates forward than would ever be possible through a do-it-yourself passive advertising campaign.
Learn more at www.kathbern.com, or contact us today for a free consultation about your key person search. Follow us on LinkedIn, Facebook, and Twitter.