The Problem
Every successful company reaches an important turning point—the point where it has outgrown its entrepreneurial stage and the ability of its owner to be involved in every aspect of the company. In addition, the owner may wish to spend more time on other pursuits, retire, or turn over control of the daily operations to others in order to have more time for family or heath issues.
Whatever the reasons, the company must now transition from an entrepreneur-run to a professionally-managed company. This transition is one of the most difficult for most companies and owners, and is the point at which many companies lose momentum. The time and energy an owner has available is a limiting factor to a growing business, so the development of a professional management team and the delegation of authority to that team is critical to future success.
Three Steps to Delegation and Control
An owner who wishes to develop a management team capable of running the company independent of the owner must take three majors steps:
- The owner must relinquish daily control and follow the same rules and professional practices as the rest of the management team (don’t worry–owner perks and other benefits can continue!).
- The owner must assess the abilities of potential managers, and hire or train people capable of becoming professional managers. The owner should encourage learning from mistakes. At any given time, a potential manager may be at one of four skills levels:
- Direct – complete directions and close supervision are required
- Coach – suggestions for how to manage a project, regular reporting, and feedback are necessary
- Support – minimal direction and supervision are needed; reports and feedback are exchanged on a weekly or monthly basis.
- Delegate – the potential manager takes both authority and responsibility for the project, and reports to the owner when the project is completed.
To successfully make a transition to professional management, key managers must be operating at a “delegate” level in most areas.
- The owner must make sure control systems are in place. Defining the roles of managers and employees, and providing boundaries they must work within are the keys to maintaining control and monitoring activity while empowering managers to operate. There are several key systems that establish and maintain control.
Why, What, How
An owner leads a professional management team by establishing the why. The why is the reason the company is in business, why we are all working here, why we care. The why is the mission of the company, the owner’s vision for the company, and its goals.
The management team is responsible for the what. The what is the business we are in, the products or services we sell, the markets and customers we serve, and the strategic plan to achieve the why. The owner may also be involved in the what.
The how is how the plan is carried out on a day-to-day basis. Both managers and employees are responsible for deciding how their work is done.
Empowered managers and employees learn the why, contribute to deciding what, and are expected to determine and carry out the how.
Values
Another control system is values. An owner who has defined and communicated the values of the company, models the values of the company, and rewards people who operate within the values of the company has built a strong barrier. A clear set of values is a control system that will help keep managers and employees from taking actions contrary to the wishes of the owner.
Performance standards
Minimum performance standards, tied to employee reviews and compensation, help assure that the company is being operated to the owner’s expectations. Standards can be financial, customer satisfaction, on-time delivery, etc. Performance standards should be measurable and clearly communicated. Actions to be taken when performance standards are not met should also be clear, and consistently applied.
Constraints
Specific timelines, budgets, and other constraints give managers and employees additional operating boundaries to work within.
Reporting Systems
Financial reports, progress reports, regular management meetings, and other feedback systems help keep the owner “in the loop” when management has been delegated.
Other Information
A wide variety of choices are available for tracking, reporting, feedback, assessment, training, and other tools that make development of your management team and control of your company easier. There are several books, seminars, and articles that can be recommended to the owner interested in pursuing more information on this topic.
