Here is the dilemma. The entrepreneurial CEO of a fast growing $20+ million company hired a general manager in April last year. He fired him that October. Reckoning that the GM cost the business “a couple of million dollars” in bad decisions the CEO, who we will call Paul, is loathe to hire another GM. But Paul also knows he can’t grow a profitable business without one.
Paul had hired the general manager to alleviate some of the pressure on operations. Paul had himself become rather entrenched in the daily workings of the business because his management team (with the exception of the sales manager) were largely inexperienced.
As is common in many entrepreneurial businesses most of the ‘functional heads’ had been early hires of the company; employed because they were cheap, willing, and had just about enough knowledge to do the task at hand. Not surprisingly the needs of the business had grown more quickly than the capability of the managers, and if truth be told the ‘functional heads’ weren’t managers at all; they were technicians.
So the newly appointed, and fairly young, GM had a challenge on his hands. Expecting to orchestrate and coach he found himself instead being a player in marketing, finance, distribution and production. Then, because the only person who seemed to make any sense to him was the sales manager, the GM listened to him too acutely.
Long story short; the business massively overinvested in inventory, suffered a cashflow crisis, did a fire sale of stock to free up cash and consequently booked a big loss.
Not surprisingly Paul is fairly hostile to the prospect of hiring another GM. But the alternative – an overhaul of most of the management team – isn’t workable. So Paul is going to hire another GM but this time, to give the appointment a better chance of success, he is going to prepare the business for the GM and prepare the GM for the business.
Here are a few of the actions Paul is going to take:
- Before hiring the GM Paul is going to give greater clarity to the strategic foundations and intent of the business. This will serve both to attract a good GM and to provide him with a framework in which to make decisions.
- Paul has acknowledged that a GM of the right caliber is vital and that he needs to set his sights, and the remuneration package, higher. The GM will need to be very experienced not only because he will be making fast “gut” decisions but also because he is inheriting a weak management team.
- After many years of reporting directly to Paul on all matters, some of the management team were less than happy to be managed by the previous GM (and were delighted when he left). Paul is preparing to explain to the team why the GM role is necessary to the ongoing profitability of the business.
- Paul is also going to ensure that the team understands that it is the GM’s job to ask them many questions and that these inquisitions are not an issue of lack of trust or understanding.
- Paul is going to be transparent with the new GM and explain how he will need to coach the management team to focus on their contribution to the management team and the good of the business as a whole, rather than just their function.
- Because of the weak management team Paul will give the new GM a mandate to replace some of them, over time, with more experienced hires.
- Paul will encourage the GM to hire an engaging admin assistant to be his eyes and ears into the people aspects of the organization.
For Paul to realise his ambitious plans to grow the business, filling the GM role is vital. But he also knows that he cannot afford to keep a GM in the job if it looks like the person will fail. As Paul says “next time I will fire the ‘wrong’ GM much more quickly, the role is just way too important to stuff up”.
Julia Bickerstaff’s expertise is in helping businesses grow profitably. She runs two businesses: Butterfly Coaching, a small advisory firm with a unique approach to assisting SMEs with profitable growth; and The Business Bakery, which helps kitchen table tycoons build their best businesses. Julia is the author of “How to Bake a Business” and was previously a partner at Deloitte. She is a chartered accountant and has a degree in economics from The London School of Economics (London University).
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