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Biting the management bullet

Wednesday, 12 December 2012 | By Marc Peskett

There’s a point on the growth path of every start-up, when the founder of the business needs to make the decision to bring management talent into the business.

 

Business owners typically bring a specific skill set to their start up business.

 

For some it might be management expertise, but for the majority it’s technical knowledge, sales capability, process engineering to deliver products and services or some other specific skill set that provides a competitive advantage the business owner plans to trade off.

 

Most business owners that sit in these latter categories lack the professional management skills and expertise to turn their start-up into a success story.

 

Having this talent gap means that even though a business might have strong growth potential, you won’t be able to realise it if you don’t have or employ management capability.

 

Realising this can be a substantial challenge for business owners, who essentially are the business and have overseen and controlled it from the get go.

 

While they have employed staff to perform specific roles within the business, implementing management talent in the form of a general manager or CEO is a substantially different proposition.

 

It involves relinquishing a degree of control and involving someone else in setting the strategy and direction of the business.

 

The management focus starts to shift from the detail of now, to the future of the business and the strategy to achieve those future goals.

 

The people employed to fulfil that skillset are typically very experienced and competent individuals, familiar with the requirements of businesses that are growing and becoming more complex and they have firm ideas of their own.

 

This period starts to signal the separation of the owner from the business, where more formalised structures are put in place and day-to-day decisions pass to management.

 

The owner’s role changes to typically become a director and member of the board. Sometimes these changes can be involuntarily enforced on a business owner, if their direction and influence is at odds with the views of investors.

 

To help you experience a smooth transition, here are my tips for business owners:

 

 

1. Know your skills

 

Recognise your skills and capabilities and plan for the day when you’ll need to relinquish some control. As you grow you won’t be able to do it all, and you have to be prepared to delegate and hand-over responsibilities you previously performed.

 

When that time comes, be realistic and honest about your expectations of others and agree targets and KPIs with your management to ensure you have common goals, measures and the ability for you both to track performance and have open discussions about it.

 

 

2. You should always be recruiting

 

While you might not be ready to hire them in the initial stages, you should be open to meeting and talking to potential employees, especially senior calibre management candidates.

 

That way you form a relationship early on and can get to know them and approach them when the time comes and you’re ready to bring someone on board.

 

 

3. Be clear about what you want

 

Be clear about the type of person you’re looking for. Don’t fall into the trap of looking for a carbon copy of you.

 

While you need someone you and others in the organisation can work with, you also want someone that brings different and complementary skills and perspectives to the business, with the right knowledge, experience, personal attributes and leadership qualities that the role demands.

 

Making sure they will be the right cultural fit for the business is also highly important, so be clear about the values and principles your business stands for and make sure you incorporate them into your decision-making process when looking for the right people.

 

 

4. Consider your options

 

Consider your options for paying management talent. Salary, bonuses, incentives and employee share schemes are all options for how you remunerate your management talent.

 

It’s important to think about what will attract and incentivise these key people, but also understand the implications of how you structure it.

 

Share schemes, for example, can be attractive to small and growing businesses that might not be able to afford the large salaries being asked for.

 

However, you need to understand the tax implications for the employee which may not end up being very attractive, as well as the rights you are granting them as a shareholder.

 

It’s worth getting some advice from your accountant about your options and what documentation should accompany these arrangements. Never underestimate the non-financial benefits you can offer, which for many senior executives are far more important than more cash.

 

 

5. Tap into employment grants

 

Tap into grants that assist with the cost of obtaining management skills and talent. Commercialisation Australia’s Experienced Executives Funding program provides up to $350,000 to assist small innovation companies and entrepreneurs employ experienced senior executive talent.

 

Marc Peskett is a partner of MPR Group a Melbourne based firm that specialises in providing business advisory, tax, outsourced accounting and grants and funding services, to fast growing technology and innovation businesses.


You can follow Marc on Twitter @mpeskett.