The pitfalls when hiring senior managers – and how to avoid them
How to avoid the pitfalls and acquire the people who can help fast-track your firm
Designating the key players to run your business alongside you involves some of the most important hiring decisions you will ever make. How can you ensure your senior appointments are a catalyst to growth and not a costly mistake?
Running a start-up and a 100-strong team require different leadership skills. While some entrepreneurs will master the two with ease, not everyone is cut out for both. Even if you are, managing a large team may not be what gets your blood pumping.
However, whether you plan to stay hands-on or adopt a more strategic role as your company grows, serial entrepreneur Mike Harris insists one universal truth applies: once a business reaches a certain size, it needs to be managed by a team rather than an individual if it is to realise its full potential.
The right leader
“I think an entrepreneur can take a business to a certain size by pure energy, drive and enthusiasm alone,” says Ross Williams, founder and chief executive of Global Personals Ltd, which runs white-label dating sites for brands such as FHM, Maxim and Cosmopolitan. “But when you reach 60 to 80 staff, then it’s about getting the right processes in place, as things like HR issues start cropping up,” he continues.
While many entrepreneurs will have successfully juggled sales, marketing, accounts, recruitment, product development and everything else in the early days, as your team grows, managing it can become a full-time job in itself. Monitoring performance, motivating staff and meeting employment regulations will require formal processes to ensure nothing gets missed. Unless you let go of some of the decision-making, you’ll limit the speed of growth to the scope of your own abilities and resources, which could prevent new opportunities from being pursued.
Colin Mills, who set up The FD Centre to provide part-time finance directors to businesses, found himself in this very position. “I didn’t want to be one of those entrepreneurs where the business is what it is because of them, but also never got to where it could be,” he says.
As management issues began taking up more and more of his time, he saw the opportunity to split his role into two: MD and CEO. “In our type of business, which is professional services, you need fairly tight, hands-on management because you’ve got a lot of people to manage, keep happy and motivate,” he says.
Mills had been struck by the strong relationship skills possessed by one of his FDs, Sara Daw, over the three years she had been working for the firm, and subsequently promoted her to the role of managing director. Daw now focuses on where the business is today, enabling Mills to turn his attention to the future, ensuring they are focusing on the right priorities and “coaching rather than playing”. The business has since gone from strength to strength and acquired a major rival, FDUK.
Plugging the gaps
“Don’t jump to the conclusion that it has to be an MD”, adds Mike Harris, who has founded and grown a number of highly successful businesses, including First Direct, One to One and Egg. He is currently executive chairman of Garlik, a technology company that protects against identity fraud, and a partner in The Difference Engine, an incubator for small firms.
As the founder, Harris says there is one key question to ask yourself. “When I’m talking to entrepreneurs, I ask them: Do you want to lead the team, or would you rather manage the idea?” he says. In other words, are you an ideas person who would rather focus on the overall growth strategy than day-to-day responsibilities, or are you a detail-driven type who would prefer to lead the team?
When hiring senior managers you want to complement, rather than duplicate, your expertise. What are your objectives for your business, and what skills do you need to get you there? “It’s about bringing in the right balance of skills at the right time,” says Harris.
This involves an honest assessment of your own strengths and weaknesses. Admitting your shortcomings is never easy, but this will enable you to play to your strengths. It will also identify what type of senior roles or specialist knowledge would be most useful to your firm, whether that’s in finance, IT, marketing, operations, or something else altogether. Then it’s time to look at your existing employees. Do you have this expertise within your team or will you need to bring it in from elsewhere?
Knowing your limits
After growing and running his first business himself, Philip Wilkinson realised that managing a large team required meticulous attention to detail, which wasn’t his core interest or strength. “One thing that struck me was the massive time investment needed to get a company to that stage. It took about five or six years, a lot of work, admin and stress. Then you’ve got to start again from scratch with your next venture, he says.”
In his subsequent endeavours (he’s now on his fourth business) he has brought in an MD after a certain point, adopting a more strategic role himself. “I’m great at starting businesses, coming up with the planning, getting the team together and taking all the risks,” he says.
“Once it gets bigger and you start getting more professional, and you’ve suddenly got 20 people, which requires real organisation, that to me is always a perfect time to get a good MD on board, who’s more operational or experienced at managing bigger teams, because there are different skills involved. An MD isn’t necessarily the best person at the very beginning, but it gets to the point where you’re not the best person to run a business when it gets to a certain size.”
Wilkinson is currently the founder and chief executive of Genie Ventures, which runs price-comparison website Broadband Genie and spare desk rental operation Desk Space Genie. With this business, he was looking for someone who could lead the team and prioritise and sanity check his constant stream of ideas. “It’s kind of a counterbalance to you,” he says. “A good MD won’t be as adventurous or into risk-taking, but to be honest, you don’t want them to be. You need a safe pair of hands.”
Where to find them
There are a number of options for hiring senior managers, including promoting internally, executive agencies (headhunters), and business networks such as LinkedIn. Wilkinson has always relied on his own contacts for managing directors. “External recruitment is a bit risky, purely because you won’t really know the person and it’s such an important decision,” he says. “You want to find the right person who you can trust to get on with it. What are the odds that six months down the line you’ve handed over the reins and they just become a bit of a pain, or you don’t feel they’re running the company very well?”
That said, there are entrepreneurs who swear by headhunters, and you may well find that you don’t have the relevant expertise within your business or your extended network. There are things you can do to minimise the risk of external appointments. For a start, look for an agency that takes the time to visit your business and understands your needs and objectives.
Making it work
A significant transition period is also advisable. For Mills, it’s been a two to three year process, while Wilkinson likes to work with a new MD for at least a year before backing away, focusing on growth while they manage the operations, with a view to that person eventually becoming the chief executive too. He believes he was “quite lucky” with his MD at Genie Ventures. A year and a half after setting up the business, just as he began thinking about recruiting for the position, a friend of his, Ciaron Dunne, left a senior management role at a large firm.
“I brought him on for a few days a week to start with, to see how he got on,” he recalls. “It worked out really well and I gave him a big share of the company. I’ve always had the mentality that most of the key people in the business need some kind of equity stake in order to be emotionally invested in it. You want to incentivise them to grow it as well.”
According to Gerard Burke of the Cranfield School of Management Business Growth and Development Programme, almost two thirds of senior staff in small firms leave within two years of joining, often due to frustrations with the owner-manager. “You’re going to spend more time with this person than you spend with your husband or wife, so make sure you’re going to have a good time,” notes Harris.
Performance monitoring can sometimes be a sticking point, and pitching this at the right level will encourage a harmonious relationship. Essentially, you want to keep an eye on key indicators without meddling. “You don’t want to know every little action that’s being taken, but you do need to know certain figures on a weekly or monthly basis, such as revenue and costs, against the business plan,” Harris says.
Similarly, if you bring someone in to lead your team, you must resist the urge to get involved with management issues. “Make sure the team’s aware of who’s the real boss,” says Wilkinson. “It would be confusing if I suddenly turned up and started giving orders to people. It’s quite hard to do, because sometimes I do feel like I want to. But if it goes through Ciaron, there’s no confusion.”
Ultimately, it comes down to remembering each other’s strengths, he adds. “I will send lots of ideas to Ciaron. He has the ability to decide which ones to act upon. His strengths might not be in the business development or creative side of things, which is where I fit in. It’s identifying that, setting the goals and acting as a partnership – then making sure the team understands that there’s only one boss.”