How do I put my business under management?

Have you ever thought of putting your business in the hands of a manager and stepping back? Over the years we’ve been asked to assist a number of business owners who wanted to do exactly this. It’s a process which is expensive, fraught with difficulties and which can take quite some time to achieve.

Usually the reason we get approached for help is the business owners concerned are getting tired and are feeling ‘burnt out’. Some hospitality businesses are a trap — sometimes you can’t sell them when you want to get out and the only choice you have other than staying and going mental is to consider putting someone else in charge.

What are you replacing?

Don't expect a cheap manager to sort out your business

Don’t expect a cheap manager to sort out your business

The first difficulty we have to consider is the reason you’re feeling burnt out is also the reason why a manager is unlikely to be able to replace you. If you’re working 90 hours a week, haven’t had two days off in quite a while, haven’t had a holiday for several years and to cap this all off you are the sole creative genius driving the whole shebang, don’t expect a manager to replace you for $60,000 per year. You do it for the status of ownership, the hope of eventually selling the business and an income above a good wage. Your manager is probably not going to get any of these.

We believe that if you really need a manager, you’re not ready for one. It’s like the principle the banks work on — prove to us you don’t need the money and we’ll lend you as much as you want. To have a good chance of success with a manager, you need to work your way out of a job before you hand your business over. Your business has to be systemised and developed to the point where it is relatively easy to run and maintain.

If you achieve this you overcome the next difficulty automatically. Who are you going to get to manage your business? If you have worked on your business rather than in it, you will probably have some eager soul available below you who can take over from you with minimal trauma. Going outside your business for a manager places two problems one on top of the other — first you have to find a person who is capable, then you have to train them to run it.

Recruiting from outside is risky

Recruiting from outside is always a risk. We’ve been recruiting for years and in spite of all the careful interviewing, aptitude testing and diligent reference checking we go through, we still get the odd dud. Training a manager to run your business is even more difficult. Like driving your car, you probably don’t even know how you do it. It’s become instinctive. Before you can get a manager to run it, you have to work out how you do it yourself.

Once you’ve got a manager the next trick is to give them the right amount of supervision. Almost all managers need to be supervised carefully. If they don’t, they are worth $200,000 a year and you can’t afford them. We’ve learned to classify managers into two groups: they are either a No.1 or a No.2 manager to us. As the name suggests a No.1 can function at the top of a pyramid without supervision and should probably be in business for themselves. These people are relatively rare.

Most managers are No. 2’s. They need direction and can’t function in a vacuum. This doesn’t mean they can’t lead effectively and can’t be very effective managers — they can do both quite well if they’re given appropriate supervision.

Don’t micro-manage a manager

The business owners we’ve dealt with seem to behave from one extreme to another. They either flee the business the day a manager moves in, leaving the new manager to flounder in a new environment, or they hang around in a state of foaming paranoia and overrule every serious decision the new manager makes. One of our clients even said to a new manager: “We want you run the business, but we don’t want you to change anything.” This was despite the fact that the way they were running it resulted in 90 hour working weeks and no days off.

In two recent cases the owners shifted the goalposts so frequently and overrode important decisions to the point where managers with a strong track record became demoralised and gave up.

You have to draw a distinction between supervision and interference to lead a manager properly, and you have to be prepared to accept quite different management styles to your own.

To supervise a manager properly, you need to set up objective management control systems so you know what is going on in your absence. We normally try to teach owners to monitor their business income and labour costs on a weekly basis, and food and beverage and overhead costs on a monthly basis. We would also monitor customer perceptions, complaints and staff turnover continually.

You need to know what is happening when you withdraw

You need to know what is happening when you withdraw

It can be a real battle to get an owner to stop ‘knee jerk’ reactions to things and get them to look at things in a more objective way — for example, instead of them coming in and flipping out because ‘there are too many staff on the floor’, we have to teach them to bite their tongue and wait to see if the weekly figures show a labour problem. This can be very difficult for a business owner who has been a reactionary dictator for many years.

So if you’re a business owner who’s tempted to go down this path in the future . . . be warned. It’s not as easy as you may think. It’s harder than getting your business up and running in the first place.