What do I do when my company outgrows my managerial abilities?

Monday, June 8th, 2009

Dear Norm,
I’ve been in executive recruiting for fifteen years. Two years ago, I formed an alliance with one of my clients, and it’s working out great. I’ve had to hire two new recruiters to keep up with the demand. My annual revenues have already gone from $150,000 to $800,000, and we’re barely scraping the surface. I see only one thing that can stop us from building a substantial organization: me. I’ve come to realize that I don’t have the ability, the patience, or the know-how to manage and grow this franchise. What should I do?

Dear Bruce,
First, don’t be too hard on yourself. You’re lucky you came to this realization before getting your company in trouble. It took some tough experiences to teach me that I didn’t have the qualities required to manage a business, patience being perhaps the most important one. I eventually learned that I can take a company only so far and don’t enjoy running it beyond that point. I need to bring in real managers—patient, detail-oriented people. They aren’t good at starting businesses, and I’m not good at managing them. We get along just fine. Just remember that you’ll need to have a good working relationship with the person you bring in. That means both of you have to be open to learning from each other.
Yours truly, Norm

Permalink  |  Posted in Business Success, Growth, Management

An employee’s position has outgrown them. What do I do?

Monday, April 6th, 2009

Dear Norm,
About two and a half years ago, I hired someone to be the operations manager of my company. He was the perfect fit for my business at the time. Now, however, the company has outgrown his ability to handle the job. He is still an asset to the team but not in his current position. I would like to keep him on the bus and move him to a different seat. It’s a tough situation. He is thirty-three years old and has a family. But I feel I must do something. Any suggestions?

Dear Eric,
We all wind up in your situation sooner or later, and I agree—it’s tough. You feel guilty because it’s your fault for putting him there in the first place. I used to try doing what you’re suggesting, but things seldom worked out well. The issue was compensation. If I cut a guy’s salary, he would be resentful. If I didn’t cut his salary, I would become resentful. You need to think clearly and unemotionally about this situation. If you have another job on the same pay level that the guy is suited for, by all means, move him over. But don’t do it if his new responsibilities won’t justify paying him what he’s been getting up to now. It’s better to let him go. If your conscience bothers you, give him a big severance package.
Yours truly, Norm

Permalink  |  Posted in Employees, Growth

Do I have the resources to take these opportunities?

Monday, March 30th, 2009

Dear Norm,
My sisters and I started a bath-and-body company on a shoestring three years ago. This year we’re on target to hit $4 million in sales. We have great distribution, sell to every major department store in the country, and have been approached by Disney, Warner Bros., and others to create private-label products. We’ll soon be entering the mass market under a different name. The problem is that our opportunities are outstripping our resources. What do you advise?

Dear Sara,
I’ll give you the advice I wish someone had given me before I took my first company to $120 million—and wound up in Chapter 11. Your core business must always come first. No opportunity is worth going after if it jeopardizes your core business even one iota. It’s not just about money. You also have limited time. Ask yourself two questions about each new opportunity: Will it keep me from putting in the time required to build or maintain my core business? And, if the opportunity turns into a financial disaster, will my core business be crippled? If the answer to either question is yes, you probably should rethink whether or not this is a good opportunity.
Yours truly, Norm

Permalink  |  Posted in Business Success, Growth

What do I offer my father for his company?

Monday, March 23rd, 2009

Dear Norm,
Five years ago, my father brought me into his company so that he could spend more time doing outside sales. Lately, he seems to be working less and taking more cash out. Once I was told I’d be given the company; now it turns out I’ll have to buy it. I’m thirty years old. I want to grow the business, but I can’t unless we start reinvesting our profits. So it’s time to make an offer. I don’t want to pay too much, but I also don’t want to insult my father with a low offer. Any advice?

Dear Robert,
Before you offer anything, you need to do some soul-searching and life-planning. Where do you want to be in ten years? What kind of life do you want? Then design an offer that will allow you to attain your life goals. Do some research into the value of comparable businesses, and figure out what you can afford. Your proposal should specify how much you’d pay, when you’d start paying, over what period of time, how much salary your father could continue to draw, and so on. You can’t fault your father for wanting to sell you the company. He built it. He has a right to get something for it. But you don’t necessarily have to buy it. In fact, you may eventually decide it’s better to leave. Just make sure you can leave on good terms. Tell your father, “Here’s my plan. I think I can do it if I buy the company from you under these conditions. I love you. I love the company. I’d like to stay. But I need a plan that’s going to let me achieve my goals.”
Yours truly, Norm

Permalink  |  Posted in Ethics, Family, Growth