I am writing a mini-series of blog posts on the 5-keys to Business Success.  Here are the links to previous posts on FINANCE, MARKETING & SALES; and OPERATIONS.  This post is the last in this series and will cover STAFFING.

Why people and how you manage them matter so much in the success of any small business.

Staffing

You have probably heard famous CEO’s say it a million times, “It’s about the people!” or “Our employees are our most valuable resource.”  I believe these CEO’s actually mean this.  However, for some reason, small business owners can easily miss this point.  Many small business owners started off by themselves or with relatively few employees.  Solopreneurs often don’t anticipate hiring anyone until their workload increases and they are forced to hire people to get things done.  When they have to hire, they are in a rush to find someone.  They don’t train or orient them; and don’t manage them properly.  These same owners then complain that it is ‘hard to find good help’ when their newly found employees are grossly inefficient.

According to studies contained in the book “From Good to Great” by Jim Collins, researchers found that companies that become great have mastered the concept of putting the ‘right people’ in the ‘right places’.

Imagine a company is like an engine with all of its people like its cylinders. If you have a 100-cylinder engine, you may get some engine knock, if one cylinder is not firing properly. However, if you have a 4-cylinder engine, one poorly firing cylinder will prevent the engine from running; and may cause major damage, if it were to run. This is the nature of small business staffing decisions. One or two bad decisions on staffing can ruin your company.

Business Owner Learning Curve

Small businesses start up in all sorts of ways. Some with a single entrepreneur trying to make it all work; some with a few ambitious partners and some with a skeleton staff in place. Regardless of how they start, almost all business owners go through a similar growth process.

Entrepreneur Ladder

 

The Technician

A technician is often starting a business with a skill they possess and who is tired of lending their skill to another business owner who is making money off of their talent.  Let’s take a plumber who decides to start his own plumbing business.  Technicians often start businesses feeling like they can earn much better income on their own…. and they’re right. The problem is that technicians don’t understand most of the other roles required to run a successful business. They get surprised by the other required tasks and either ignore those tasks or work extra hours trying to do it all.

One of three things happens to Technicians:

  1. they get overwhelmed and go back to working for an employer;
  2. they manage to get things done on their own; and eke out a living working their life away;
  3. they graduate to manager.

The Manager

A manager understands that in order to grow a business he/she must have others do the work. You may notice that many successful managers in business are not technicians. They inherently rely on others and often cannot do the work themselves. Most small business owners are reluctant to manage because they believe they cannot afford the cost of a worker plus themselves. In yet, ultimately, this has to happen for any company to grow beyond one person.

Managing is a much different proposition than ‘doing’.  In order to manage well, you need to understand what needs to be done, without being so critical about exactly how something needs to be done.  Let’s take the plumber example.  As a plumber, you are concerned about getting a job done in a timely manner and with a high level of quality.  As a manager, you need to understand the time it takes to do tasks and quality control to make sure tasks are done in a quality manner; and then delegate the actual task of plumbing to the plumbers you have hired to do the work.

There are one of two ways technicians fail to become managers: 1) They micro-manage all tasks done by their workers and create animosity and lack of ownership for in their employees; or 2) They fail to lead and allow shoddy and inefficient work.  The magic of becoming a great manager is acting as a strong leader with great accountability measures; without telling your staff how to do every little thing.

The Entrepreneur

Management skills will yield moderate success for most small business owners. If they are good managers, they will be able to motivate and leverage the skills of their staff to achieve amazing results. However, in order to continue on a growth path, the manager must become an Entrepreneur. Entrepreneurs are the keepers of the vision, and strategy of a company. They understand why they exist as company and how they will achieve an amazing vision. They continually test their ideas and organize their businesses to achieve success.

Let’s go back to our plumber.  The plumbing manager can graduate to entrepreneur by looking at niches and innovative ways they can offer their plumbing services when compared with the general marketplace.  Let’s say that plumbing companies have a reputation for high prices.  You know that the reason for these high prices is because plumbers are only billing half of their time.  The customers are then paying for all of the time plumbers are not able to work.  As an entrepreneur, you decide you can reduce your costs by 25%, if you pay your plumbers by the job instead of by the hour.  You then turn your idea into a marketing campaign and guarantee that you can beat your competition by 25%.  You work with your plumbers to explain how your new payment system will attract more business; but they will only be paid for actual plumbing projects.

You see… An entrepreneur needs to ensure that all parties win and their business is positively differentiated in the process.

The Investor

As with all things, businesses have cycles. All human beings have a finite life span and can therefore not lead a business forever. Most business owners fail to understand they eventually need to exit their company. Whether they plan for it or not is their decision. The business owner will either sell their company and retire off its proceeds or gift their company to heirs or close the business’s doors once they decide they have had enough.

In order to construct a sellable business, the entrepreneur must transition to the role of investor. Investors invest in money-making-machines, and not complicated and risky gambling operations that happened to luck into some eager customers. Creating a repeatable money-making-machine that doesn’t require your constant attention should be the goal of every small business owner.

If we revisit our plumber who has managed to make it all the way to entrepreneur, we now need to think of how he transitions to investor.  There are one of two ways this transition works: 1) Promote a reliable employee to business manager; or 2) Create documented fool-proof systems and processes.  If the plumber were to transition to investor with option #1, they would look for a responsible employee who understands the core of the business operation who demonstrates entrepreneurial traits who can graduate from manager to entrepreneur.  Option #2 requires such a level of documentation that anyone can be hired for almost any position and learn exactly how to do the job the way your company has decided to do the job.  In most cases, in order to accomplish Option #2, the company’s systems and processes must be relatively straight forward so they can be documented well.

Organization

Regardless of how large a company is; it needs to operate as if it is one single high-performing person. This is easy to say, and very hard to do. The word Corporation means a ‘body of people’. This means that in order to be a successful business owner, you have managed to collect several diverse people with diverse skills sets to make a highly functioning ‘body of people’.

In order to create the illusion of single-mindedness, a successful small business owner must create a high-performing culture and create a structure that encourages constant communication and information flow.
The organization structure of a company is the best way to describe the anatomy of a business.

Organization Chart

I have written my series of blog posts to illustrate five key areas of businesses success: 1) Finance; 2) Marketing; 3) Sales; 4) Operations; and 5) Staffing. Many companies organize their structure around these five key areas. In most small businesses, the business owner tries to perform all five functions. At some point, each one of these functions will need to be managed by someone other than the business owner.  Once the owner transitions to Investor, they will need to even replace themselves with a different leader of their business.

Culture

Company culture is a much bigger deal than most people realize.  As I stated above, Corporations are “bodies of people”.  A corporation can be a mean body of people, a greedy body, a happy body, a successful body, or one of many different body and personality types.  You can determine what type of body your company will be by being intentional about it.

This personality often starts with, “How you see your employees.”  Do you see your employees as blood-suckers who are trying to bilk you for all the money they can?  Do you see your employees as unlimited beings who can elevate your company to unlimited heights?   These are obviously two opposite views which will create reactions in your staff that will become your corporate culture.

Let me give you an example.  Let’s say that Mary has been hired to help Joe’s Plumbing business.  Mary’s job is to negotiate supply purchases of pipe, fittings and other equipment.  Now, let’s say that Mary makes a deal to purchase water heaters from ACME Supply for $800 each.  Joe sees this decision and knows that water heaters can be purchased for $650 each from a different supplier.  Here are ways that Joe could react:

Level 1: “Mary, I can’t believe you made this stupid decision.  How will our company survive with idiotic decisions like this one?”

Level 2: “Mary, you are incompetent and I will need to fire you if you keep making these bone-headed decisions!”

Level 3: “I’m going to take over equipment purchases from now on, Mary.  You stick to the simple purchase decisions.”

Level 4: “It’s okay, Mary.  Everyone makes mistakes.  I’ll show you how to purchase equipment from now on.”

Level 5: “It’s perfectly understandable you made this purchasing decision.  It would probably be a good idea to document a process to ensure we always make the best buying decisions in the future.”

These various levels are referred to as  Energy Levels in iPEC’s Core Energy Coaching ™ system.  Based on how your people act and react to situations in your company will determine your corporate culture and your overall average energy level.  Frankly, high-talent people will want to work for an organization that resonates at a higher energy level.


I hope you have learned something from this series on the 5-Keys to Business Success.  If you feel like you need help shoring up any one of these areas of your business, please complete the contact form below.

Note from the Author
My name is Jeff Schuster.  I am a certified Life and Business Coach serving small business owners, corporate executives and others who want to transition from “expert” to “entrepreneur”.  I have been a small business owner for most of my 30-years in the workplace.  I grew an energy efficiency and renewable energy engineering and construction company from nothing to over $10-million/year and sold it in 2013.  I now help other business owners make amazing progress toward their own dreams of business ownership independence and success.

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