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Primed for Growth

FastTrac, Kauffman Foundation

Many new businesses resemble a one-man band: the entrepreneur is playing all the parts but is fairly limited in what can be accomplished. Entrepreneurs who want to grow their business will instead want to think of themselves as a band leader: they bring in people with the right expertise who will work together and follow the direction of their leader. They know their part, the theme, and the rhythmic framework and realize some improvisation may be needed to make the performance a masterpiece.

Every company reaches a point when the entrepreneur needs to take a hard look at the roles and responsibilities within the business and the best persons to perform them. One of the greatest challenges is to make the transition from being a hands-on manager to turning over some of the decision-making authority to others. This transition allows you to focus on coordinating efforts and leading the company.

You may find it difficult to know where to focus your efforts. Even when entrepreneurs know what to do, they sometimes have trouble getting it done while fighting daily fires in other areas of the business. Successful entrepreneurs often describe how they worked longer and longer hours running their companies before they started sharing the decision making.

Growing Pains

Many businesses fail to reach their potential because their leaders get stuck in old ways of doing things. They waste time on unproductive activities. They underutilize the talents of their employees and outside professionals and advisers.

If you answered all the questions with a resounding Yes, then you’re probably doing a lot of things right. If you answered with more Needs Improvements, then you’re probably looking at a need to make some changes in your leadership style or your management structure.

Lead More; Manage Less

“One of my biggest mistakes was having everyone in the company report to me for the first six years,” says Andy Schwartz, president of A.J. Adhesives in St. Louis, as well as two other companies that provide industrial adhesives, packaging equipment, and applications engineering to manufacturers.

Schwartz launched his business in 1992, and by 1998 he realized its growth was stymied because he was consumed with management issues. “It was maddening,” says Schwartz. “I was always working on systems, processes, or problems and couldn’t focus on new revenue-seeking opportunities—I was just too tired.”

To correct the problem, Schwartz reorganized the company and created a level of middle management, a move that reduced his number of direct reports from fourteen to six. That approach worked well for a couple of years, but in 2000 Schwartz bought a company in Spring, Texas, and moved there to oversee operations. With the acquisition and relocation, six direct reports soon became overwhelming, so Schwartz cut back to two—his chief financial officer and his operations manager.

Schwartz admits letting go was difficult: “Doing busy work and putting out fires all day is much easier than establishing a vision and plotting strategy to get there. But to grow the business, it was important for me to become a better decision maker.”

About the same time, Schwartz formed a board of directors with three outside members. “Because they all come from different backgrounds and have different experiences, they’re a great sounding board for me,” he says.

Since Schwartz began working on his business rather than in it, he’s been achieving annual revenue increases of 12 to 19 percent.

Scaling back on direct reports doesn’t mean Schwartz lacks direct contact with his staff. “I spend a lot of time with my employees,” says Schwartz, who likes to join them for lunch or long walks. “I want to know what their stories are…how they grew up, what their favorite vacations are. When I know what makes them tick, it helps me be a better leader.”

Over the years, Schwartz has learned to hire slower and fire faster. “That sounds harsh, but I’ve come to view our staff as a baseball team,” he explains. “And on that team, everyone has to play their positions strong. As soon as you identify someone no longer fits on the team, you’ve got to let them go.”

An important quality that Schwartz looks for in employees is curiosity. “That leads to good thinkers—people who don’t just accept things but are always looking for ways to improve the status quo,” he explains. “Today I can honestly say that I would rehire everyone in my organization, which makes me feel really good about the future. We may encounter a process problem, but we never have a people problem.”

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

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