Leadership

Why Owners Shouldn't Manage

When business is booming, it's time to trust others with the day-to-day

Written by Dave Zimmel

Anyone running a successful, growing business knows there are serious challenges involved. Maybe you can’t find the right people. Maybe turnover is high. Maybe an economic slowdown is affecting your cash flow. Whatever the case, you can’t seem to make any progress implementing solutions.

The problem might be that you’re too involved as owner. Just because you own the company doesn’t mean you should be managing it—especially as it’s growing. Owning and managing involve different skills sets, and problems tend to arise when there is no separation between church and state.

The role of ownership is to invest in the company, and to provide strategic advice, direction and clear guidelines for implementing these plans, all with a clear view to achieve maximum return on their investment. Management’s job is to plan and execute that strategy, ensuring it generates the ROI ownership is looking for.

They’re separate jobs, and when a company is in growth mode, it’s very hard for one person to do both. This is a tough concept to swallow for entrepreneurs that have grown their businesses from ground zero. But without separation of these two jobs, the lines get blurred, inefficiencies and redundancies occur and stress builds from continued sub-standard performance.

This tends to become a problem when a company is at the threshold of moving to the next level, growth-wise. At level one—when a company is establishing itself, perhaps from startup—it’s relatively easy for ownership to have a handle on everything that is going on. But when it comes time to graduate to level two—aggressive growth and expansion—the company usually outgrows its owners’ ability to manage each and every detail. That means it’s time to employ managers to help develop the structures, systems and processes that will support further growth.

Related: 5 ways to delegate more effectively

We recently worked with the owners of a very successful company that had became riddled with problems. The owners were all professionals who had formed the firm together; they all sat on its board of directors. They were able to happily keep on top of everything until the company’s growth began to accelerate. Suddenly, they found their business marred by cash flow, recruitment and retention problems.

Looking at the company, it was easy to see what was going on. The owners hadn’t learned to delegate management tasks as they grew. Because they were so busy with high-level duties involved with the ownership of the business, they were all but relegating its management to a side task. They dealt with operational tasks in the rare moments when they weren’t tied up with other things. With no formal management structure in place, many critical functions were not getting done. As a result, preventable irritants became big problems.

If you recognize that your business is moving into level two, it’s important to consider separating ownership roles from management. How? Focus your energy on addressing the following questions, and install managers to deal with the everyday tasks that obscure the bigger picture.

1. Why does your business exist? As owner, your “why” is extremely important. Make sure you’re continually focused on the customer problem your company solves, along with the value you add and the people you serve in doing so.

2. What is your strategic plan? In other words, how can you best fulfill your purpose? You may not need to know the granular details, but you should spend much of your time developing and maintaining a blueprint of how your company will meet its goals, be it by retaining customers, improving productivity and quality and/or developing top talent.

3. What roles and responsibilities are necessary for success? This involves careful consideration of who will be manning the shop. What types of manager do you need in place to help fulfill your purpose? Do you have them in place? If not, how will you recruit or develop them? What skills are lacking in the organization and how will you get them? Furthermore, who will be responsible for what, and how will you make them accountable?

Related: Have you hired a manager from hell?

When your business is booming, you simply can’t do it all. By accepting that you, as owner, should back away from day-to-day management, you’ll create a solution that may take a bit of time to implement but is guaranteed to deliver results.

Dave Zimmel is a partner and the vice-president of Private Enterprise for MNP in Calgary. He focuses on providing assurance, accounting and business advisory services to private enterprise clients in the oilfield services, construction and real estate sectors.

More columns by Dave Zimmel

Originally appeared on PROFITguide.com