In many businesses, management functions as the hub of the company’s “wheel.” Without the hub holding together the spokes — the suppliers, employees, and customers — the wheel can’t turn.
As a business owner, it’s easy to think that by micromanaging, you’re setting your company up for a successful sale someday. But, really, you might be enabling operational problems without realizing it.
Think of it this way: If you were to go on vacation for two weeks, would your company survive? Sure, it’s nice to feel needed, but the answer should be “yes.” Your company should be able to run independently enough that it doesn’t need you in the weeds on every decision. That independence is what will make it attractive to a buyer someday.
Your Company Is Only Worth as Much as Your Culture
Buyers won’t necessarily expect to see people walking around the office whistling “Dixie,” but they will dive into employee turnover and satisfaction metrics. How do employees feel about their jobs? Are there written job descriptions and standard operating procedures? Is there a clear and defined management structure? How well are employees paid?
My company is working on selling a company right now that has no turnover; employees are paid fairly and receive bonuses when the company does well. This is the ideal setup, as the current owner is absolutely confident all the employees will stay after the sale, which also puts the buyer’s mind at ease.
Skeletons in the Closet?
To give you a “bad” culture example, my partner and I once bought a business that looked perfect on the surface. We were told everything was great from a culture perspective and even interviewed the chief operating officer, who was staying on. All the employees had worked for this person for several years and said they really liked him.
However, after we bought the business, the truth came out. Nobody had been given a raise in years, and some employees were not pulling their weight. The onus was left on my partner and me to straighten out these issues. It was expensive and not fun.
Unfortunately, this type of situation is more common than you’d think. I’ve seen it all: employee theft, yelling and screaming in the office, a revolving door of employees. In these toxic environments, it’s no wonder workplace turnover hit an all-time high in 2018. The hospitality, healthcare, and manufacturing and distribution industries saw the highest turnover rates. Utilities, insurance, and banking and finance had the lowest.
Independent Employees Are Worth Their Weight in Gold
The more you can foster independence in your employees, the better. For example, my partner and I sold a highly profitable drilling company a couple of years ago. The husband-and-wife owner team did a great job training two key employees — one in the office and one in the field running rigs — who could manage the place. The husband and wife would often leave for two-week vacations without worrying.
We found another husband-and-wife couple to buy the business. About two weeks before closing, they decided on the contingency that if the two key employees didn’t stay, they wouldn’t buy.
There was a lot of money spent on attorneys on how to handle this. Do we ask the employees to sign an employment agreement with a noncompete? Do we pay them each $10,000 for that, or do we simply approach them and say we are implementing a profit-sharing plan they can share in?
In the end, the employees agreed to stay without a contract, and the sale went through successfully. It’s a great example of how a nonfinancial matter can not only affect a company’s value, but also make it unsellable.
Hands-Off Management Makes Your Company More Marketable
We all learned about laissez-faire economics in school. This hands-off approach — which literally translates to “let them do” or “let it go” — is the type of management that ultimately adds the most value to your business.
In the early years of my company, I can remember calling the office while on vacation, early in the morning, at noon, and right before closing: “How’re things going? Who’s doing what? Did everything go OK? What’s going on tomorrow?” (I would have failed the test.) But toward the end, before I sold it, I’d leave for vacation for a couple of weeks with nothing more than a “Call me if you need anything.”
That said, letting go is more easily said than done. Try these tips to help you loosen the reins:
- Have the humility to step aside.
I had a customer who dispatched nearly all of his 50 trucks by himself. You couldn’t carry on a conversation with him about important things because he was answering phone calls and radio calls left and right. When I told him he needed a dispatcher, he looked me straight in the eyes and said, “I’m the only one who can do this!” That was a problem.
As a recent MIT study shows, when companies create a culture that expects employees to think of themselves as leaders, it’s much easier to pass the reins from one set of hands to another. Had that customer invested in training for a dispatcher, he would have been much more set up for success, but he just couldn’t let go.
- Bring in help when you need it.
From business coaches to coaching-as-a-service providers, outside help can be an invaluable resource. Not only can it help you make hard decisions, but it can also streamline your internal processes.
For example, Citizens Financial Group recently started working with IBM to offer a virtual career coach, “MyCa,” to staff, using a chatbot that suggests internal job opportunities based on employee skill sets.
- Stop returning calls.
In a way, this is a Pavlovian dog situation. If you keep answering customers’ calls, they’ll keep calling you instead of your manager.
Instead of rewarding bad behavior, have the manager call them back. Next time they call you? The manager returns the call again. By the third time, they’ll be calling the manager directly.
- Follow the chain of command.
Training employee behavior is similar. I used to say, “Ask the question to the right person, not me!” Have an accounting question? Ask Julie or Karen. Equipment issue? That’s Tommy — he can fix anything. Fuel, that’s Tony’s department. Lubes, that’s Rob.
Bottom line is you have to teach your customers and employees. It’s like free stuff; if you’re willing to give it away, people will take it. Stop giving it away, and make them go to the right person the first time — but make sure you have already loosened your grip on the reins when you do.
This article was originally published on CEOWorld.biz on 10/5/19: https://ceoworld.biz/2019/10/05/how-a-laissez-faire-approach-to-management-increases-the-value-of-your-business/