DATE: March 22, 2006
AUTHOR: Chuck Rauenhorst
COMPANY: Rauenhorst Recruiting Company
WEB SITE: www.rauenhorst.com

A lot has been made of the success of companies such as Google and Yahoo, high-tech companies built by truly gifted and successful founders who created major brands and record sales.

Few people realize, however, that perhaps the key reason for their success had nothing to do with technology or their ability to gain significant market share.

The case can be made that the driving force behind their success was that these company founders were savvy enough to build well-rounded management teams around them.  And to then delegate authority and responsibility, not just workload.  They understood that they needed to let professional management personnel run things after they had brought their companies to a certain level of growth.

Many CEOS, business owners and entrepreneurs have mistakenly blended the delegation of responsibility into delegation of workload, creating a negative atmosphere where senior managers start making decisions but then can be undermined by the very person who hired them.

Take the case of one retail company I knew very well. The founder had built a profitable $5 million business with three locations. He felt he had reached the point where it was time to bring in a CEO to take on the responsibility of day-to-day management.  But the owner quickly reversed direction after making his hire, not allowing his new CEO to make decisions.  Because the owner wanted complete control, the CEO left within a year.

A few years later he came back to me saying “I learned my lesson. I know I have to let go”.  His dream, he said, was to see the company grow to be a major regional player in its market, a $20 million business, and he would truly build a management structure where the senior team would be allowed to take responsibility for growing the business.

Within six months, the next CEO resigned as the founder went back to his old behavior patterns of controlling the organization and micro-managing. Eventually, the founder died without every having fulfilled his dream.

A sad story, and yet one that did not have to happen. Not knowing how to delegate true responsibility vs. workload is a primary reason that so many small and mid-sized businesses fail. Entrepreneurs -- and I am one of them -- have many gifts that create and drive a business. We are great at sales; can build a business; hold a terrific vision; and then make the mistake of anointing ourselves President and CEO.  But CEOs usually don’t have the skill sets of effective managers. 

A leader is defined as someone who encourages all those around him to be leaders in their own right.  As the saying goes, all boats rise together.  Many entrepreneurs have a difficult time embracing this philosophy.

Business owners are in the position of hiring people and training them, but still find themselves caught up in daily departmental activities and still want to make all executive decisions.

The results are stagnated growth (or no growth at all).  And while all along it may appear that they are delegating, they are still doing all the managing. Frustrated managers become ineffective; they lose respect for the founder; and there is frequent turnover at the senior level.

There is a solution.

Entrepreneurs who realize they simply cannot be great at all aspects of running a business find that delegating their weaknesses and playing to their strengths is the optimal way to drive revenue.

Understanding that the goal should be to hire people with complementary skill sets and that there is no need for multiple ‘vision-makers’ within their organization is a critical first step to fostering growth.

Focusing on developing a winning management team definitely pays big dividends.  One brief example:

     A family-owned electrical contracting company was caught up in family management disputes and started to decline. They initiated an ESOP and brought in a professional manager.  The family slowly took a less dominant role in the company and the business flourished.

When building a management team, or hiring a senior manager or general manager, the first step is to look at one’s own strengths and weaknesses. Ask yourself the following critical questions:

What am I good at?

• What do I do best?
• How did I get this place built?

Or

• How did I get into trouble?
• Why do I need help?
• How is my vision not being implemented?

The next step to decide what specific functions do you want to fill in the company.  What it is that you enjoy that will enhance the bottom line?  Focus on what you love and where you add value.

This is where the business owner, entrepreneur, or founder makes the fatal mistake. By taking on duties they do not do well, they literally raise themselves to a level of incompetence that stifles the overall company culture.

The final step is to see if there is anyone in the organization who is qualified to be promoted to management.  If not, begin the process of looking outside for well-fitting candidates.

From an executive recruiter’s seasoned perspective, the biggest key in building effective management teams or hiring a General Manager/CEO is not just finding the right candidate for the job.  It’s having the self-awareness as an entrepreneur or company owner to know what you are good at and what you love to do – or not to do.  Then you are in a position to more comfortably delegate authority and responsibility and thereby propel real company growth.

Chuck Rauenhorst is Chief Executive Officer of Rauenhorst Recruiting Company, an Edina-based executive search firm specializing in Chief Executive to Middle Management placements.  Chuck can be reached at chuckr@rauenhorst.com.