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Topics relating to managing people and relationships

SRBobcat

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I own a 15 year old small business with approximately 4MM in revenue (formerly $5MM just two years ago). We are in the home services and construction subcontracting business. We have approx 25 employees including the two owner partners. We have been in hopes of selling the business in the next 5 years (likely, but not definitely, into and ESOP). In the last year, one of our main revenue generating markets (though lowest margin, difficult to profit) has almost dried up. We're likely to finish this fiscal year a fair bit under $4MM in revenue. Our main problem is not the slowing of our one market... it's actually a few bigger problems:
1. Failure of management: My business partner and I have been almost absentee from a business management standpoint. We both focus much more on sales and are almost never in our office.
2. High overhead: We have 14 people in non income producing overhead positions (2 are parttime)... We are management and administration heavy, yet we have no one driving the ship. Very micro task involved, very little macro level management.
3. High Prices: Directly related to Problem #2, we have very high prices which makes sales and profitability difficult. This should be easy to fix, except for Problem #1.
4. Poor employee performance: See Problem #1. Also, it's very difficult to hire employees at all, much less quality employees. We pay much better than industry average with better than normal benefits, yet still can't hire. We have a full time HR person, though she is not great at hiring/finding employees... Full time HR translates more to "someone who posts job ads when I tell her to". She's very helpful as an assistant, and as with most employees she wears multiple hats... but having a dedicated person does not translate into being good at finding new employees unfortunately. Many of our employees (both field based and management) are simply comfortable in their jobs, not self motivated, not fearful of being replaced and not motivated to improve themselves or the business..."the paychecks just keep coming so why make more effort?" is the general demeanor. This seems a simple thing to fix with some firing and replacement of employees...but the reality of hiring makes it not so simple.

My plans for fixing all of this begins at the top. We need to do one of two things:
1. Owner's re-engage in day to day business management: We both hate it...and are not business managers...but we're better than no-one (which is who we have now). I'm willing to do this, I seriously doubt my partner will be. I can do it without him...but I can't make solo decisions as we don't have a CEO position for either of us...it's been 15 years of joint decisions. I can't make him come in to the office, and it makes me resentful if I have to do it all by myself while we get equal pay. He also is not going to agree to unequal pay. This is the downside to equal partnerships (we're 50/50 of an S-corp).
2. I'm going to propose that we hire a General Manager or CEO from outside. There are multiple difficulties with this...but it may still be the better decision. And... this possibility is the reason for my post here. I know NOTHING about hiring a competent person to take over running this business, nor what it would cost. We are a small business, so we don't have large money (especially right now) to pay a CEO role... if the two owners would take a 50k paycut (we make 150 plus), we could probably pay $125k and then have some incentives (possibly future ownership stake also...though that makes the hopes of ESOP more difficult). The "low" pay for someone capable is why I used both titles, "General Manager" and "CEO"... one title (in my opinion) simply comes with a higher price tag for essentially the same role. We would need someone who can manage all the overhead positions in the company and make the changes/improvements we need.

Does anyone with real experience in this have any thoughts on how (if we choose this route) we would go about hiring someone for this role, where we look, what the realist cost would be in a mid-market area (not an expensive city...but still a city)... or if this is even a reasonable / doable approach to fixing the business.
 
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@Kak @Antifragile are probably two of the better guys here for management/leadership/employee issues.


My business partner and I have been almost absentee from a business management standpoint. We both focus much more on sales and are almost never in our office.

This is where I see the problem.

Leading by example is not a possibility because you are not there.

As I like to say, if you want things done right, do it yourself.

And then train those people to do it like yourself.
 

Kevin88660

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4. Poor employee performance: See Problem #1. Also, it's very difficult to hire employees at all, much less quality employees. We pay much better than industry average with better than normal benefits, yet still can't hire. We have a full time HR person, though she is not great at hiring/finding employees... Full time HR translates more to "someone who posts job ads when I tell her to". She's very helpful as an assistant, and as with most employees she wears multiple hats... but having a dedicated person does not translate into being good at finding new employees unfortunately. Many of our employees (both field based and management) are simply comfortable in their jobs, not self motivated, not fearful of being replaced and not motivated to improve themselves or the business..."the paychecks just keep coming so why make more effort?" is the general demeanor. This seems a simple thing to fix with some firing and replacement of employees...but the reality of hiring makes it not so simple.
What do you mean by poor employee performance?

Do they accomplish task in time or not?

Employees do not generally brainstorm ways to improve the business. It’s not quite expected.

Do your employee work overtime?

A small company cannot afford a 9-6 culture. That’s a luxury of the giant companies.
 

realbillperry

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As for the part about hiring an outside CEO, I recommend chapter 17 from Perry Marshall's book "80/20 Sales and Marketing."

That chapter outlines his hiring process, or for finding contractors/consultants. He doesn't interview people, he "auditions" them.

He'll assign them tasks to do which are in line with the position they're wanting. He pays them, of course. He said that's a great way to eliminate window shoppers.

His example in the chapter was seeking out what he described as an "Affiliate Manager and Content Czar".

He also had a $25 application fee to filter out people who weren't serious enough, but I can see how doing that might not sit well with some.

I'm sure something similar could be set up for finding someone who'd be a good match as your CEO.
 
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SRBobcat

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This is where I see the problem.

Leading by example is not a possibility because you are not there.

As I like to say, if you want things done right, do it yourself.

And then train those people to do it like yourself.
Absolutely, I agree with you, that is where our problem is.... I fully recognize that. It's a mangement (failure of) issue all the way. All of the problems I listed point right back to the failure of management that I'm discussing. I'm definitely not a finger pointer... The problem starts (and can only be ended by) my partner and me. However, I also recognize that, while we built the business and have done well in it, we are at a point where we may need someone better than us to take it forward. So, yes... we can go backwards and re-install ourselves into the business (our goal has always been to develop the business to be self sufficient so we can be "owners", not operators) and if we're willing to do it, I know we can improve where we're at and get back to being healthy...but we are not experienced at training an HR coordinator, or a safety coordinator, or a production manager, or a customer service rep (okay... we can actually do that one fairly easy), or a bookkeeper, or a asset manager, or a finance manager.... we know the trade - we aren't necessarily well equipped at training employees on tasks we don't know ourselves.
Regardless, I'm still with you that we should be in the office and until we find someone better we should be doing more to steer the ship... I just think at $5MM in sales we've reached the point where we may be better served to look at hiring someone who has been there before.
 

SRBobcat

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What do you mean by poor employee performance?

Do they accomplish task in time or not?

Employees do not generally brainstorm ways to improve the business. It’s not quite expected.

Do your employee work overtime?

A small company cannot afford a 9-6 culture. That’s a luxury of the giant companies.
Thanks Kevin,
Poor employee performance... salaried employees who do their job then go home, absolute refusal to find other ways to be helpful. Sometimes that means 10hrs/wk, sometimes 35...never 50. But... the one who has this issue is really good at the one thing that is his primary responsibility. I know the fix to this... it's just been a fight. I need to make him work more or replace him...but he's hard to replace. Overall, employees are just not motivated to do "extra" or to drive improvement...they will get most tasks done in reasonable time, but the majority are disorganized (also a problem that should be fixed by better upper management) and need to be micromanaged on much of their duties to keep on track.
Brainstorm expectations....In a labor position, we don't necessarily expect them to be idea people and self motivated...but in management positions we do. We're not a 5 person company where the improvements have to be driven by the owner...we're large enough that our management team needs to be able to manage and work on company health & growth.
Overtime... our better employees do, our less impressive don't. The hourly people work their hourly total, the salaried employees are a mix. My best employee will work 60-80 hours when he needs to, always 50+ (and is well compensated accordingly), most top out at 40 hours, many less.
 

Ajbuck68

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Based on the posts here imo you need a GM or COO type more than an outside CEO. GM or COO typically are better at training and running those various roles you pointed out earlier. But that may just be nitpicking.

I think the best thing for the team problems is setting the culture. Instead of running in and chopping heads, maybe try first being present (as you’ve noted) and setting a new culture standard. At my current company, a startup, the culture is incredible. We have unbelievably hard working people on every single team. And that doesn’t come from the individuals, but rather from the overall culture. We’re in it together. I know for a fact my CEO has my back if one of my clients starts going off the rails. And that motivates me to replicate that to other team members and the company as a whole.
 
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Kevin88660

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Thanks Kevin,
Poor employee performance... salaried employees who do their job then go home, absolute refusal to find other ways to be helpful. Sometimes that means 10hrs/wk, sometimes 35...never 50. But... the one who has this issue is really good at the one thing that is his primary responsibility. I know the fix to this... it's just been a fight. I need to make him work more or replace him...but he's hard to replace. Overall, employees are just not motivated to do "extra" or to drive improvement...they will get most tasks done in reasonable time, but the majority are disorganized (also a problem that should be fixed by better upper management) and need to be micromanaged on much of their duties to keep on track.
Brainstorm expectations....In a labor position, we don't necessarily expect them to be idea people and self motivated...but in management positions we do. We're not a 5 person company where the improvements have to be driven by the owner...we're large enough that our management team needs to be able to manage and work on company health & growth.
Overtime... our better employees do, our less impressive don't. The hourly people work their hourly total, the salaried employees are a mix. My best employee will work 60-80 hours when he needs to, always 50+ (and is well compensated accordingly), most top out at 40 hours, many less.
10 hours per week?

Do you mean they finish their jobs in the morning, pack their bag, and leave in 2 hours?

That's outrageous.

I don't care if this is down period. They have to stick their butt on the chair and pretend to work until 5, even if they are surfing the net. They are employees, not contractors.

Don't let them climb over your head.

If you are not being feared then things will get out of control. People see no consequence in violating basic rules.

Choose the most rebellious kid, F*ck him verbally in front of everyone. Mass email everyone afterward. Kill the chicken to scare the monkey - Wikipedia

Firing and replacing doesn't work if it's just a different batch of people taking advantage of you. What you need to do now is to install a climate of fear through one small incident quickly. It will give you three months to find time to hire a Sergeant major.
 
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SRBobcat

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Based on the posts here imo you need a GM or COO type more than an outside CEO. GM or COO typically are better at training and running those various roles you pointed out earlier. But that may just be nitpicking.

I think the best thing for the team problems is setting the culture. Instead of running in and chopping heads, maybe try first being present (as you’ve noted) and setting a new culture standard. At my current company, a startup, the culture is incredible. We have unbelievably hard working people on every single team. And that doesn’t come from the individuals, but rather from the overall culture. We’re in it together. I know for a fact my CEO has my back if one of my clients starts going off the rails. And that motivates me to replicate that to other team members and the company as a whole.
I agree on both points you're making here...
Honestly, the "being present" is huge...and a big part of that is a spiteful stubbornness to not do all the work and let my partner work from home every day. For years we had conflict because I wanted him to work harder than he is willing to work, and eventually I just backed off to even out our contributions (which is not all bad... I had no life and was going to work myself to death - literal worry for a while). At this point in life, with middle school kids it was nice to work a more normal week (not 8-4....just normal amount of hours), but the way we've done it is having a bad effect. I need to work out with my partner that we either both get into the office every day, or we end equal pay between partners and I'll do it myself. He's not going to agree with either option, and I really have no ability to force him...but it's the right answer.
A GM or COO is the correct position. We also need a CFO, which for financial limits I'd need to find someone who can fill the CFO/COO dual role - which won't be easy. The interim answer is I need to get in the management game and do my best.
 

SRBobcat

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10 hours per week?

Do you mean they finish their jobs in the morning, pack their bag, and leave in 2 hours?

That's outrageous.

I don't care if this is down period. They have to stick their butt on the chair and pretend to work until 5, even if they are surfing the net. They are employees, not contractors.

Don't let them climb over your head.

If you are not being feared then things will get out of control. People see no consequence in violating basic rules.

Choose the most rebellious kid, F*ck him verbally in front of everyone. Mass email everyone afterward. Kill the chicken to scare the monkey - Wikipedia

Firing and replacing doesn't work if it's just a different batch of people taking advantage of you. What you need to do now is to install a climate of fear through one small incident quickly. It will give you three months to find time to hire a Sergeant major.
More of a go in the field at 10, work (sales calls) until 1, and take fridays off type of thing. Claims "follow up calls" make up the difference.
Otherwise... yeah, I agree with this too... I need to lay down the law and let it be clear that we either do things the right way or people will be replaced.
 
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I own a 15 year old small business with approximately 4MM in revenue (formerly $5MM just two years ago). We are in the home services and construction subcontracting business. We have approx 25 employees including the two owner partners. We have been in hopes of selling the business in the next 5 years (likely, but not definitely, into and ESOP). In the last year, one of our main revenue generating markets (though lowest margin, difficult to profit) has almost dried up. We're likely to finish this fiscal year a fair bit under $4MM in revenue. Our main problem is not the slowing of our one market... it's actually a few bigger problems:
1. Failure of management: My business partner and I have been almost absentee from a business management standpoint. We both focus much more on sales and are almost never in our office.
2. High overhead: We have 14 people in non income producing overhead positions (2 are parttime)... We are management and administration heavy, yet we have no one driving the ship. Very micro task involved, very little macro level management.
3. High Prices: Directly related to Problem #2, we have very high prices which makes sales and profitability difficult. This should be easy to fix, except for Problem #1.
4. Poor employee performance: See Problem #1. Also, it's very difficult to hire employees at all, much less quality employees. We pay much better than industry average with better than normal benefits, yet still can't hire. We have a full time HR person, though she is not great at hiring/finding employees... Full time HR translates more to "someone who posts job ads when I tell her to". She's very helpful as an assistant, and as with most employees she wears multiple hats... but having a dedicated person does not translate into being good at finding new employees unfortunately. Many of our employees (both field based and management) are simply comfortable in their jobs, not self motivated, not fearful of being replaced and not motivated to improve themselves or the business..."the paychecks just keep coming so why make more effort?" is the general demeanor. This seems a simple thing to fix with some firing and replacement of employees...but the reality of hiring makes it not so simple.

My plans for fixing all of this begins at the top. We need to do one of two things:
1. Owner's re-engage in day to day business management: We both hate it...and are not business managers...but we're better than no-one (which is who we have now). I'm willing to do this, I seriously doubt my partner will be. I can do it without him...but I can't make solo decisions as we don't have a CEO position for either of us...it's been 15 years of joint decisions. I can't make him come in to the office, and it makes me resentful if I have to do it all by myself while we get equal pay. He also is not going to agree to unequal pay. This is the downside to equal partnerships (we're 50/50 of an S-corp).
2. I'm going to propose that we hire a General Manager or CEO from outside. There are multiple difficulties with this...but it may still be the better decision. And... this possibility is the reason for my post here. I know NOTHING about hiring a competent person to take over running this business, nor what it would cost. We are a small business, so we don't have large money (especially right now) to pay a CEO role... if the two owners would take a 50k paycut (we make 150 plus), we could probably pay $125k and then have some incentives (possibly future ownership stake also...though that makes the hopes of ESOP more difficult). The "low" pay for someone capable is why I used both titles, "General Manager" and "CEO"... one title (in my opinion) simply comes with a higher price tag for essentially the same role. We would need someone who can manage all the overhead positions in the company and make the changes/improvements we need.

Does anyone with real experience in this have any thoughts on how (if we choose this route) we would go about hiring someone for this role, where we look, what the realist cost would be in a mid-market area (not an expensive city...but still a city)... or if this is even a reasonable / doable approach to fixing the business.


Thanks for the tag @MJ DeMarco

About a year ago I saw an update on LinkedIn that a friend of mine and his business partner hired a CEO. Within 9 months the company was bankrupt. Yeah… they too have been in business a while and few people could have seen that outcome coming.

Hiring a CEO when you are faced with problems isn’t the same as hiring a CEO because you’ve outgrown your own skill set.


Your company is about frictionless good decision making. Two people is one too many for a CEO role. You can only have one captain of the ship. And at your scale, I think it should be YOU. You aren’t big enough to think external CEO.

reading your post, you are clearly in White Water stage of the model I described in this thread:

Thread '8 Steps To Help You Plan for Business Success, a How-To Guide'
GOLD! - EXECUTION - 8 Steps To Help You Plan for Business Success, a How-To Guide


You’ll have to fix quite a few things. But before you even start, get your own head straight. You are blaming your partner! It’s lame! YOU are in charge. It’s YOUR life. If you don’t like his level of commitment, buy him out, agree to a pre-settlement if you sell, do something - but don’t complain. It’s like wife and husband bickering who‘s supposed to tend to the yard, F*cking do it already and don’t worry about “someone unfairly benefiting”. You chose this “marriage” in business, live with it FFS.

And if you don’t, expect none of your employees to follow either one of you. If company is about good decisions, your employees make them as part of your company culture. Culture is what happens when you aren’t watching. Oh and “being present” is not enough. It’s about setting goals, expectations and getting out of the way.

My take is that you misunderstand:
  • Where you are with your business
  • responsibility YOU hold over your own future
  • how to fix it

You are a small business owner. That’s your reality. You are in a business “marriage” with your partner. Even if you do 100% of all the work, sell you business in 3 years for $20MM and get ”only” $10MM - you get $10MM or zero, which is better? Oh and thinking “I’ll resent him if I have to cut him a $10MM cheque and I did all the work” is a complete waste of time. It’s not about him, it’s about you, your business, your future, your best decisions.

How to fix it. Accept that your role as a CEO isn’t to be at the office 24/7 time punching every employee … what a horrible way to live for you and your employees. It’s to be an effective leader. CEO is a chief decision maker, you chart the path forward, you make the hard choices. All easy decisions should be made by your staff.

Simple rule I tell my staff:
  • any reversible decision - you make it, just tell me what you did (communicate)
  • any irreversible decision - I make it. I get to live with those …
Once you set targets to all staff, let them do their jobs. And if you have weak links, fire them. Hire better.

Want my advice? Fire your HR person first. It’s just dead weight.

Hope this helps, and feel free to DM me if you want to jump on a call and dive deeper into anything. One could write 3 books on this topic alone…
 

Black_Dragon43

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Your company is about frictionless good decision making. Two people is one too many for a CEO role. You can only have one captain of the ship. And at your scale, I think it should be YOU. You aren’t big enough to think external CEO.
While I personally agree with you because I’m a control freak, I know one guy who started a hustle selling colored contact lenses bought from Aliexpress, scaled it to $100K revenue, brought in a CEO who used to be a division manager in the sales department for an auto dealer, and this guy took over and scaled the company for the past 9 years doubling revenue every year. Now they’re at like $59 million in revenue with physical shops across the entire country.

And from what I’ve observed the founder did basically nothing. Money rolls in, he sleepin… the dream business.

Now don’t get me wrong, I’d love to have such a powerhouse batting for my company. The trouble with all this stuff is that it’s not replicable. And as you can see, it started from a shitty business which became a real business (still a scammy one if you ask me, I wouldn’t buy what they’re selling), but they grew like crazy.
 

rory182

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Some great advice in the article above IMO.

One problem he’s seen with young CEOs: “They just think, ‘I hire a bunch of people, and then I sit back and wait for greatness.’ They have no idea that they have to relentlessly drive every second of the day, every interaction, and seek the confrontation”
 
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I feel you. Similar situation on a smaller scale over the last 12 months. Only just coming out of the other side in recent months.

Plan and prepare for an extraordinary meeting with your business partner. Sounds like they need a 'reality check' of the magnitude of your situation. You guys have a leaky boat and them holes need to be plugged stat!

Option 3. Is buying your partner out a possibility? Think a vendor finance arrangement. You take on all the risk, but you also have the control.

Go LEAN, cut costs, take a huge pay cut yourselves, can you go lower than $50k? More money in the kitty gives you options. There were weeks we drew no salary at all (*I have savings, so this didn't affect my lifestyle). Prune the dead-wood, dead-beat employees - they're anchors dragging you down. We went to one (of 6) income producing employees and cut my office assistants hours by a 1/3.

Fix the culture by replacing the employees, if possible keeping them away from any existing (poisoned) staff. I placed an employment ad with high salary, range $5/hr either side of what I actually planned to pay. That's the lure. I promised training/mentoring and lots of perks - in the future. I then interviewed, checked references and hired the most enthusiastic ones, with good attitudes - I can teach skills. I also told them in the interview that we have an excellent culture, everyone is great, hard working, great skills, supportive. I went on to say we're very careful who we let into our inner circle - because we're so protective of our culture. I FAKED good culture, it actually worked!!! All the newbies are really happy, doing their training, getting tiny incremental pay rises.

CEO, not the right time. Why - to fix your mess? It will cost you $$ you don't have. If you must, a cheaper option rather than General Manager / CEO might be to hire a 2IC that you train to take 'some' items off your plate. Again, go for a trainee, someone who hasn't had that title before and is keen for the opportunity. That's what we're doing next, with the option to promote them to General Manager before we sell.

So sorry for the long reply - I'm praying something from my experience can help you.
 

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1. Failure of management: My business partner and I have been almost absentee from a business management standpoint. We both focus much more on sales and are almost never in our office.
From someone who owned a consulting business for a couple of decades, THIS is your problem. Sounds like everyone wants to go to lunch and play golf, and nobody wants to WORK. You may be able to hire a manager with the sense of agency needed to right the ship (and easily pay them by getting rid of some of the unnecessary fluff), but it would be simpler for the partners to agree to work together to run their business.
 

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I've started consulting with bigger and bigger companies. Mostly 8-figures+

But I'm a marketer. I'm a sales guy. I sell shit.

I can double, triple, or quadruple sales of even large companies -- BUT sales is not usually their issue. It's this stuff here.

The solution I've turned to is Traction once again. The EOS system. I've also gone through Lean and Six Sigma (those are slightly more specific for manufacturing but are still valuable).

1. It doesn't sound like you have roles and responsibilities laid out properly and you're missing an integrator.
2. You need someone in that operations seat because you can't/don't want to (and neither does your partner).
3. Not a CEO. An integrator. EOS is a bit of a cult, but it's a good one.

If you want to do it yourself, read the book "How to be a great boss" by Gino Wickman 8,000 times. LMA, LMA, LMA, LMA, LMA, LMA, LMA, LMA.

(It's from the book. Leadership + Management = Accountability)
 
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