Very few owners would answer no to the question, “Do you want the value of your business to grow?” Yet many owners find that, at some point, growth plateaus. Stagnation is frustrating because all the things that successfully grew a business in the past are no longer doing the trick. It’s especially frustrating when owners suspect that there’s a direct link between stagnation and their longtime managers.
In this article, we’ll look at a touchy subject; namely, what to do about management teams that no longer generate the business growth necessary to support your (the owner’s) personal and financial objectives.
Life on the Plateau
Consider a fictional company, Innovative Streaming Services. Over five years, one of the original co-founders and then-CEO, Charles Wiley, had grown Innovative significantly. When the growth rate slowed, however, Wiley realized that the existing management team, himself included, simply lacked the experience and skills to take the company to the next level. Wiley wanted an alternative to firing the loyal management team who had made it possible for the company to reach its current plateau.
It's not surprising that demoting or terminating long-time employees can be both problematic and unpalatable as owners frequently feel a sense of loyalty to them. Sometimes, however, change is necessary, and that may mean an injection of new, more fitting talent. We call that talent “next-level management.”
Next-level managers have an established track record of growing business value, often with larger companies in the same market as yours.
Next-Level Managers
As the Wiley example illustrates, processes and actions that worked in the past, often lose their effectiveness. Existing management may need to change if the business is to grow.
Fortunately, loyalty and change are not mutually exclusive. There are two alternatives to replacing current managers: reassign and retrain.
Leave the Plateau by Reassigning Managers
In the Innovative example, Wiley hired a new CEO to replace him so his business could grow to a value that would yield financial independence for Wally post-exit. With help from a consultant recommended by his Owner-Based Planning Advisor, Wiley decided to hire a salesperson who had experience managing large in-house and external sales teams and reassigned Jerry, his sales manager, to a new role. Jerry was great at managing five salespeople but managing ten more in-house salespeople and twenty manufacturer’s reps wasn’t something Jerry wanted or could do.
By reassigning Jerry and hiring a new person to fill his prior role, Wiley took a big step toward growing the business and giving Jerry the best chance to succeed. One positive byproduct of reassigning managers is it can help maintain the loyalty of other staff members.
Leave the Plateau by Retraining Managers
Instead of simply replacing existing management consider providing management access to training, education, and coaching to build the new skills needed to grow your business at the pace needed to achieve your goals.
Before you decide to retrain managers, consider that you cannot simply tell current managers to “do more.” Instead, we suggest that you define and communicate your expectations for business growth. It’s essential to make these expectations ambitious yet achievable and reward managers for achieving and surpassing them. We help owners design and implement written incentive plans that reward management and key employees for achieving specific growth targets.
We are here to Help!
We strive to help business owners identify and prioritize their objectives with respect to their business, their employees, and their families. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Business Enterprise Institute, Inc. is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
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Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
