From entrepreneur to manager: managing for growth
By Erica Quin-Easter, Special to the BDN
You started your own business to be your own boss. You’re sick of managing other people’s problems. But unless you can clone yourself or completely automate your production, you need people to grow your business. So what does an entrepreneur do to become an effective manager?
First, identify opportunities to outsource. Keep the tasks that bring the greatest return on investment due to your personal involvement. Analyze your business: Does the biggest growth in revenues come from the sheer scale of production? From product design and development? Sales and marketing? For some entrepreneurs, outsourcing sales makes sense. Stepping up to the wholesale level with a seasoned sales representative can open doors to new markets. Getting professional help can help you build a stronger brand and more consistent, comprehensive marketing. For others, sales and networking are where you excel. You are the brand for your business, and you are your biggest champion.
Develop your financial plan. What costs will your business incur with full or part-time help? Don’t forget to figure in payroll taxes, worker’s compensation, and other costs if you plan to hire employees — and be careful to follow the requirements distinguishing independent contractors from employees (see IRS.gov for clear guidelines). What net increase in revenue will the additional employee enable you to earn? At what stage does it make sense for you to hire or outsource? Having clear financial goals and expectations enables you to know when you’re ready for growth — or when you need to scale back due to decreased demand.
If your prior experiences with management before starting your business left a bad taste in your mouth or if you have no experience hiring, managing and firing, seek resources for encouragement and education. Talk to other small-business owners about their most successful and challenging moments in management. Join the Society for Human Resource Management and network with professionals in your local area whose job is human resources. Find a mentor to turn to when you need support and guidance.
Hire well. Have a clear job description and pay what the work is worth after careful comparison with similar jobs in your area. Don’t just place an ad for help wanted — ask for referrals from colleagues, headhunt by reaching far and wide for the best candidates and look for references and a proven track record of success in your area of need. Hire based on ability by actually testing your candidates to the task: How quickly do they learn? How accurate are they in their work? Do they meet your qualifications? Consider a probationary period to ensure that both parties are compatible.
Reward success. As your business grows, make sure your compensation package keeps pace. Even beyond financial motivation, discover what brings out the best in your employees.
Deb Gray, founder and CEO of Life By Design, PA, started her business as a solo practitioner. Today, she has 45 employees across four locations.
“I have been searching for what motivates people. I used to believe that money is the motivator, and therefore I put in place a productivity bonus,” Gray said.
When financial incentives stopped working as effectively, she turned to inspiration from Daniel Pink. From his book “A Whole New Mind,” Gray learned that once an individual’s monetary needs are being met, money is no longer the motivator. What motivates is autonomy, mastery and purpose.
“Finding ways within the company to allow for these three drives has been an important task,” Gray said.
As a manager, don’t be afraid to delegate. No one likes to be micromanaged. Set specific tasks and goals, including the time frame, volume, and quality the job requires. Give your new hire the freedom to complete tasks and the support to exceed goals. Evaluate periodically and communicate about success and struggle. Is the employee meeting expectations? Give feedback and provide an opportunity for two-way input. Document your communication in writing, both as a record of achievements and recourse to demonstrate fair warning.
What if motivation and communication don’t work? After providing training, support, evaluation and opportunity for improvement, if your new hire still struggles, be prepared to move on. If you truly cannot support the employee in performing the responsibilities for which they were hired, you must move on. Your business cannot bear the brunt of a sour employee or pay for their time when their performance does not build the bottom line.
Your initial cost-benefit analysis will also help you if your employee is wonderful but demand drops off: If the market dips, how long do you plan to carry the cost of your employee before reducing hours or laying off?
Before re-hiring comes re-evaluation. Are the roles and responsibilities reasonable? Is the compensation sufficient? Can you improve your hiring, training, and communication process to strengthen your recruitment and retention? Have the demands of your industry and the needs of your business changed? Evaluation is always important in business, and its impact is magnified when you are managing others.
Finally, don’t be afraid of growth. Envision your business growing and prospering. Set goals and benchmarks to take your business to the next level. Plan for success. Evaluate, and plan for greater success.