When Supervisors Become Managers

Any promotion means more responsibility. Few steps require as big a leap as the transition from supervisor to manager. Each step up the ladder involves a change in tasks, but an employee’s first managerial position necessitates a change in thinking; one which isn’t intuitive.

career climbingBeing named a supervisor is an adjustment, but one that can be handled largely through intuition. The likelihood is that the employee who is promoted from the ranks has already shown responsibility and initiative. He or she is a solid performer, and has shown leadership with peers, now subordinates. In most cases, the bestowing of a supervisor title is merely recognition of talent that is already in use.

When a supervisor performs well, the normal tendency is to consider him for manager. As a manager, he will have responsibility for other supervisors. His role becomes more hands-off, planning and directing teams from a tactical, rather then an operational viewpoint. Unless you take the time and effort to mentor a new manager, one of several problems are likely to arise.

  1. Staying too far from the work. New Managers sometimes avoid working side-by-side with their subordinates, in the belief that their new position raises them above all that. They risk losing touch with what is going on day-to-day.
  2. Dipping into the work. Alternatively, the manager may seize opportunities to act in a supervisor’s role, directing first-line employees personally. It’s a skill that got him promoted in the first place; and it’s easy to fall back on when efforts to work through the chain of command are frustrating.
  3. Placing too much weight on position. A title carries authority with it, but designated authority doesn’t replace leadership. As a supervisor, his subordinates did as they were told because it was clearly his job to tell them. As a manager, he is expected to lead others who have their own base of authority, and don’t follow orders blindly.
  4. Ignoring position. “I know I’m a manager now, but you can treat me just as when we were supervisors together. I’m not going to be one of those managers who acts as if he is above everyone. “ Collegiality is great, but the manager has been placed above the others, and needs to keep some distance.
  5. My way or the highway. It’s a supervisor’s job to instruct his subordinates on what to do and how to do it. A manager with competent supervisors should be focused on what needs to be done, and not so much on how to do it. A supervisor shows others how to do things just like him. A manager adjusts his style to fit different individuals or teams, so that others can do what they do best.

The shift from supervisor to manager has one more factor. As my friend and business owner Van Palmer says it, “Supervisors are in a customer facing position. Managers are in an employee facing position.” A manager’s role is to accomplish objectives through the work of others, and it is their success that defines his.

When you make your next managerial promotion, look beyond the high performance of an individual. Look also for the humility to take satisfaction in the success of others. Then take the time to teach the difference, and recognize the success of others as shared by their manager.

Posted in Customer Relations, Entrepreneurship, Incentives, Leadership, Managing Employees, Strategy and Planning | Tagged , , , , , , , , , , | Leave a comment

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Structural Tension: Is It Good or Bad for Your Business?

Logically, no one would enter into a business relationship where anything that is better for one party is worse for the other. Such a zero-sum arrangement would quickly grow tiresome. Either one party is consistently losing in every transaction, or else every little change, every new opportunity, is the subject or maneuvering to see who will come out better.

It sounds like an unpleasant way to do business, but most of us enter into such arrangements on a regular basis. Some business models are build entirely around this type of structural tension.

Imagine that you are standing between two poles, with a bungee cord around your waist attached to each one. The more you try to move in one direction, the greater the resistance from the other. That’s structural tension.

When I worked in healthcare, a popular physician management model was to form a management company, and take a specified percentage of the practice’s income to provide all administrative services. The management company had little direct control over the revenues. Contracts with health plans, government reimbursement rates and the chosen workloads of each physician each had far more influence on how much came in the door.

So a management company had two ways to improve the bottom line. One was to take a higher percentage of the revenues, something the “customer” physicians (who bore the burden of any increase on a dollar-for-dollar basis) were not inclined to embrace. The second profit-improving strategy was to maintain the percentage, but provide fewer or cheaper services. That strategy, too, was poorly received.

Franchises are similarly constructed. Franchisors have a limited market. Their profits have to come from the franchisees. The way they make more money is to deliver lower cost services, or increase overall sales. Franchisors typically control advertising, so how a franchisee manages to deliver a $5 sandwich profitably in New York or California may be less of a concern than the impact of same-store growth numbers on the executive stock options.

Similar tensions occur more directly in the insurance and stockbrokerage industries. When a benefits broker announces that the health insurance carrier has raised rates by 25%, he or she seldom mentions that commissions usually increased by the same amount.

stock brokerWhen a stockbroker recommends a trade, or switching mutual funds, it’s difficult for the customer to know whether he just needs some commissions to make the mortgage payment, whether the new mutual fund pays higher commissions, or whether his brokerage house is recommending the stock because they have an interest in its next round of funding. Of course, he could be doing it because the stock or fund is perfect for your objectives, but the fact that he earns a living by recommending trades casts everything into doubt.

Some of the “disruptors” in these industries are among the highest-valued startups in the world. Zenefits offers payroll and HR services for “free,” subsidized by their commissions on health plans. They are likely to reach $100 million in revenue this year, and are valued at $4.5 billion.

Wealthfront, the current leader in Robo-advisors, will manage your portfolio with automated trades according to your chosen profile. It’s fees start at .25%,  cheaper then even the flat-fee trading available with online brokers. Wealthfront has over $2.5 billion in assets under management in its third year in business.

Even Uber, currently valued around $50 billion, is part of the transparency revolution against structural tension. Quoted pricing before pick-up and no tipping reduce rider concern about being overcharged, or a driver taking longer routes to pad the fare.

“But every business increases profits at the expense of its customers.”

To some extent that is true, but an open, competitive market limits how far you can pull in one direction without being snapped back in the other. In the healthcare example, raising management fees came with the risk that the customer would find another vendor. In franchising, hammering the profits of the franchisees makes selling new units more difficult.

In industries that work under protective regulation, like stockbrokerage or employee benefits; change is slower, but it is happening.

Posted in Business Perspectives, John's Opinions, Politics and Regulation, Strategy and Planning, Technology | Tagged , , , , , , , , , , | Leave a comment

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Technology and Bunker Hill Tactics

In a small business, underused technology could be considered a “Bunker Hill” error in using your competitive capabilities.

Last Wednesday, June 17th, marked the 240th anniversary of the Battle of Bunker Hill. Ranked as the 6th most costly battle of the Revolution in terms of lives, most Americans forget that it was actually fought over a year before we declared independence. (on 4/4/76) It was far larger than the skirmishes at Lexington and Concord two months before, involving about 1,500 Colonial Militia and 2,500 British Regulars.

Bunker HillWhat has always fascinated me about the battle is the Americans’ poor use of superior technology. Prior to the first British attack, Colonel John Stark drove a stake 100 feet in front of the fortifications, with orders to hold fire until the British soldiers passed that point. This tactic was further reinforced by the command (attributed variously to William Prescott and several other officers) “Don’t fire until you see the whites of their eyes.”

That command shows up in documentation of previous wars, since it was the common tactic of musket-equipped armies. Smooth-bore military muskets had limited range or accuracy, and were most effective when fired en masse at close range.

The problem with those tactics on the American side is simple. Their troops didn’t have smooth-bore muskets. As militia, the Colonial soldiers provided their own weapons, hunting pieces that were designed to be accurate at a far greater range than the military weapons. They had rifled barrels, allowing effective aiming at 300 feet, and over 500 feet for an especially well-made gun.

The American superiority in targeting ability is also borne out by the casualty statistics. Of the nearly 1,000 British soldiers killed and wounded in the battle, 100 were officers. The typical British unit had about a 30:1 enlisted to officer ratio in the field, which would indicate there should have been about 35 officer casualties from random hits in mass volleys.

How did the Americans inflict triple the expected number of casualties on officers? Because they could aim. Using their superior technology, they crippled the entire British officer corps for months to come. Unfortunately, the American officers managed the bigger battle around the traditional limitations of lesser technology, and lost when the British swarmed the breastworks with bayonets.

Is your business managing around outdated technology? I’m not suggesting that you run out and buy all new computers. However, like the Continental Army, many small businesses use only a fraction of the technology they already own.

“We file paper copies of customer statements, because it is easier to put our hands on them.” “We started a blog, but I don’t think we’ve looked at it in months.” We don’t use cloud-based software, because we wouldn’t know where our stuff was.” We installed a CRM, but no one really updates it.” “We don’t collect email addresses from our customers, because they say that they get too much email already.” “We bought the comprehensive enterprise software, but we’ve only implemented the basic functions.”

Your technology is an asset, and the role of any business leader is to maximize the return on assets. Hanging onto the way you’ve always done something when you already possess the technology to do better is a waste of the investment.

How would the Revolution have changed if the Americans had repelled the British attack at Bunker Hill, and still held artillery positions above Boston when George Washington arrived to assume command a couple of weeks later? Instead, they ignored the advantages of technology they already possessed…and lost.

Posted in Entrepreneurship, Leadership, Managing Employees, Strategy and Planning, Technology | Tagged , , , , , , , , | 1 Comment

One Response to Technology and Bunker Hill Tactics

  1. Mike Havel says:

    Thanks, I love reading history and getting the story behind the story.

    Usually a new hire will bring to our attention features and options we were not aware we had. I have encouged out of office one day tech class, and they have always paid off.

    One of the best ideas we set up a few years ago was a “sales” email address, with all emails received in that email address forwarded to a sales2 email address. The sales2 address is viewed by the managers and myself. We can view customer communication, but the responsibility is still with order entry.

    Allows management to review, be aware, and get involved when needed.

    We only view sales2 and delete. Deleting from sales 2 does not delete from the orginal sales email address.

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You Can Go This Far, but No Further

When someone starts their first company (especially a technician as defined in my book Hunting in a Farmer’s World) he or she is usually the sole key employee. She (I’ll use one pronoun for readability) does the hands-on work of the business, along with the marketing, sales, administrative and executive functions.

Sometimes that is all the business is — a mechanism for one person to earn a living. That is a job. If, however, the founder is smart and ambitious, she begins adding employees to assume some of those functions on a daily basis. The job becomes a company.

The first leap in a company’s growth comes when the founder finds a key employee; someone who can make decisions and who follows through on tasks without being supervised. That employee frees the owner to concentrate on fewer things, whether they involve development or execution. The owner brings in more business, or manages the delivery of its products and services to more customers.

The relief of having someone who shoulders a part of the load is huge. The key employee is advanced, paid more, and given more responsibility. In some cases, the owner decides that she can’t run the business without this help, and bestows partnership or other equity upon the individual who made this success possible.

But not everyone can sustain growth forever. An owner has (or should have) a vision for where the company is going. The key employee may understand the vision, and may even share it, but that doesn’t mean he can execute it.

What do you do when a key employee has reached his ceiling of capability? As the owner, you want to keep expanding, but the employee is at his limit of performance. He may become comfortable with his income. He may not have the managerial skills to handle more responsibility. You might have graduated to a customer base that is beyond his experience. He might be protective of his status in the company, and sabotage or handcuff others who wish to rise.

Perhaps you have a new, enlarged vision of what your company can do, but he doesn’t share it. Sometimes the pressure of responsibility wears thin, and the key employee begins unilaterally narrowing his job description. He may express his disagreement with your focus on growth. The business is manageable at its current level, and he delays or ignores your initiatives to take it further. When there is ownership involved, he may remind you of his “partner” status, and expect that to encompass shared decision-making regarding the company’s direction.

Dead end roadNo employee has the right to tell you that you can only go this far, and no further. Whether it’s by word or action, the key employee is now a hindrance. As an owner, your frustration is not only about performance, but includes the realization that your control over your own business has been curtailed.

You are loyal to the employee, and still have gratitude for the early days when he enabled your growth. Demotion seldom works well. Bringing in a higher level of talent to take over is fraught with dangers of unrest and negative attitude. There is no easy solution, and it is usually made worse by your refusal to address the situation until it has become unbearable.

Parting ways will make you feel like an ingrate. It may be expensive if a buy out is involved. It probably requires that you assume additional responsibilities for a time. Filling the position with another, more skilled manager will probably necessitate a lucrative compensation package. It’s easier to hope the employee will make the leap to the next level, so you wait. And wait. And wait.

There is emotional and economic cost to ending your relationship with a key employee who has gone as far as he can go, but it is nothing compared to the cost of hobbling your company.

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Selling Your Business in a Buyer’s Market

For almost ten years I’ve been writing and speaking about the issues facing Baby Boomer business owners as they begin a flood of small business sales. This recent article was syndicated in 16 trade and professional magazines. I reprint it here so readers of “Awake” can share it with their over-50 owner colleagues.

More than 50% of US business owners are over 50 years old, and many of them are looking toward retirement and the process of attracting and vetting potential buyers to take the reins. The differences in yesterday’s and today’s business landscapes are stark—as Boomers were raised in a highly competitive environment, many face the problem of having built companies that won’t attract a new generation of buyers. Three major trends impact the salability of a business. Understanding these trends can help owners transition successfully in a challenging market, and ultimately identify the buyer who will carry their company’s torch going forward.

Why Do Boomers Work So Hard?

Baby Boomers are 2 ½ times more likely to own a business than the generations before or following. Between 1975 (when the first Boomers turned 30), and 1986 the formation of new businesses in America jumped from 300,000 to 700,000 annually. Faced with fierce competition on the pathway to success, many Boomers chose to chase the brass ring by going into business for themselves. New business start-ups have never again reached that level. The result is that nearly two-thirds of all businesses with fewer than 500 employees are in the hands of people who are preparing to retire.

The impact of the Baby Boomers at each stage of life created a one-time surge in many statistics. They tripled the number of college graduates, and brought over 50 million women into the workforce. Between 1970 and 1980 the population of the United States increased by 11%, but the employment base grew by an astonishing 29%. Replacing such a massive segment of the population in the business sector is no easy feat.

The Perfect Storm

BtBB_CoverThere are three major trends that challenge a small business owner preparing to exit. Like the movie “The Perfect Storm,” these three trends; demographic, psychographic and sociographic, are combining to create a Tsunami that will change the entire landscape of independent business ownership.

  •  Demographically, the generation following the Boomers (Gen X) is much smaller. From a supply and demand perspective, there simply aren’t as many available buyers as the number of potential retirees seeking them.
  •  The psychographic profile of the buyer generation is unfavorable. What business owner hasn’t complained about the work ethic of the younger generation? Raised in a forty year period of economic growth (the longest sustained period of expansion in our history) Generation X and their successors (The Millennials) are more likely to choose family first, and perceive jobs and employers as merely the means to a personal end. They aren’t wrong. The parents of the Boomers’ understood the difference between work and personal life. One started when the other ended. In their drive for success, the Baby Boomers mixed the two and created the term “work/life balance”. Younger generations are actually returning to an older set of values.
  •  Sociographic trends favor alternative careers over business ownership. Corporate America is well aware of the issues and attitudes of the younger generations. They have already made many adjustments. Telecommuting, sabbaticals, family leave, and flex time are benefits designed to attract younger workers who have a different set of priorities. Few small businesses have the depth or breadth to allow skilled employees to come and go according to their individual priorities.

Young entrepreneurs have little interest in the service-oriented brick-and-mortar companies that dominate small business. They seek a level of freedom that doesn’t require being on call, schedules driven by customer convenience, or a 55 hour work week. Combined with the sheer lack of prospective buyers, a reduction in the number of small businesses becomes more than likely, it is inevitable.

Yet, many small business owners are depending on their company to fund a comfortable retirement. Their plan goes something like this: “I will work really hard until I am tired, and then I will find some energetic younger person just like me who is willing to commit everything for this great opportunity.”

 Beating the Odds

Fortunately, if you are a successful business owner, you’ve already proven your competitive instincts and abilities. With some planning and foresight, you can still beat the Boomer Bust and achieve your retirement objectives. There are two pathways to succeeding in a crowded sales marketplace.

Build to Sell

Your first option is to build a business that is attractive to your younger buyers. It allows for personal flexibility. It can’t require a huge down payment, since these generations were raised in a “buy-now-pay-later” world, where they are carrying substantial debt from the day they graduate college, and have little opportunity to amass liquidity.

Your technology doesn’t have to be cutting edge, but it needs to be current. Nothing turns off the tech-savvy young buyer faster than a company that is limping along on outdated software or (heaven forbid) paper. Of course, the other attributes of an attractive acquisition; growing margins, a distributed customer base and predictable revenues, are a given.

Hire Your Buyer  

The second option is to hire your buyer. The stereotypes of different generations aren’t universal. Certainly we all know Boomer slackers, as well as young people who are ambitious and hard-working. Lacking capital, many of those younger go-getters would like to own a business but have difficulty seeing how they can make it possible. Identifying such a buyer in your own organization, or even reaching outside and recruiting one, is a viable option if your target date for exiting is a few years away.

Creating your own successor requires a commitment to planning and development, but the financial aspects are fairly simple. A few years of selling equity in small amounts can let your successor build a minority stake. Then he or she can obtain third-party financing for the balance of the purchase so you can maintain control through the process, and take the proceeds with you when you leave.

Remember; “The more you work in your business, the less it is worth.” Everything you do to reduce your business’s dependence on your personal talents, to reduce the time commitment of running it, and to make it easier for any successor (whether internal or external) to take over the reins, also increases its value to any buyer.

You can’t change the factors that create the most competitive selling environment in history.  Understanding what the future looks like, and realizing that your buyer is unlikely to be someone “just like me” is a critical first step in the process.

My 48 page Ebook Beating the Boomer Bust is available as a free download in either printable or E-reader formats here.

Posted in Business Perspectives, Economic Trends, Entrepreneurship, Exit Planning, Selling a business, Strategy and Planning | Tagged , , , , , , , , , , , , | 2 Comments

2 Responses to Selling Your Business in a Buyer’s Market

  1. cathy locke says:

    Great blog of course! I am a Baby Boomer and fortunately and unfortunately I started my business 5 years ago, taught myself and like some of us “I have a unique chocolate business” that I am finding out non too soon that 1) I am my own worst enemy because I designed my company to fit only me 2) like John said, I cannot find someone interested in buying my company because they don’t want to work as hard, spend 24/7 building the business etc. I know I am not alone and for me this again is a real nightmare wake-up call. However, I still am very excited in steering the company in a different direction in the next 5 years hopefully and like a lot of business owners, I will be able to sell the company or the equipment to the highest(?) bidder. Thanks for the great blogs!!

    • John F. Dini says:

      Cathy, remember the traits of an entrepreneur (conveniently described in my book, “Hunting in a Farmer’s World”). You already know how to be a tenacious problem solver, as evidenced by the fact that you made it for five years- typically the litmus test for a viable business. You have lots of SEO exposure on Google, although I’m not sure that Etsy is your best sales outlet option. Focus on adding sales opportunities that don’t require your personal involvement. Your product is obviously well received, now its just a matter of making the top of the funnel wider.

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