Small Business

Hire People Better than You


What's the difference between an entrepreneur who handles success gracefully and one whose company crumbles under the pressure of growth? Frank Muehleman, now a senior vice-president and the general manager of Dell Computer's (DELL) small and midsize business division, had seen growth management on both sides of the fence. Prior to his tenure at Dell, he ran the North American division of a family-owned computer company based in Britain.

Smart Answers columnist Karen E. Klein recently spoke with Muehleman about how entrepreneurs can move their egos out of the way and make objective decisions about what's best for their companies. Edited excerpts of their conversation follow:

Q: When a company's growing fast, what's the one thing you would advise the founder to do?

A: Form an advisory group, made up of people who are executives or successful entrepreneurs or even local business professors, who could act like a board of directors. Or hire people who've done what you're trying to do before, have experience and knowledge, and can expand the expertise on your management team. Or even bring in a third-party consulting firm with the level of expertise that can help advise you. Getting that outside advice is invaluable.

Q: Why is it so crucial to get an outside perspective on success?

A: A solid board of directors or advisory group can tell you when you need new talent in-house, when you should seek outside advice, and when you should think about reevaluating some aspect of your company. The trick is to accept that advice.

A lot of small-business failures, even at promising companies, can be laid down to ego. I think there are more people who can't make the transition from startup to successful company than those who can. Those who can navigate that transition and go with it are kind of a rare group. And they don't typically do it alone. It's more likely that they rely on advice and help from people whose egos aren't tied up in the company.

Q: What happens to the entrepreneurs who can't make the transition to success?

A: Some of them sell, or they reduce their involvement and bring in a new management group. Certainly, a number of folks are serial entrepreneurs. They're temperamentally suited more to working on startups than to managing successful, established companies.

Others migrate right along with the company. They've got very strong entrepreneurial instincts, but they can evolve and change into great CEOs of large companies.

Q: How do they make that transition?

A: Primarily, I think, they must become students of strategy. They get strategic-planning advice, and they learn how to gain strategic advantage with their firms. They need to break their success down into its core elements and map out a value chain that shows where their competitive advantages are. Once they do that, they can start to frame up an idea of what their company needs to do to continue to be successful and what it shouldn't get into.

Q: Once they achieve that initial success, many entrepreneurs aren't sure which direction to take their companies. How do they determine the best path to continued growth?

A: A lot of times, the knee-jerk reaction is to branch out into new product lines or acquire competitors. But this isn't necessarily smart.

A lot of times, when a company is in a turnaround, they bring in a new CEO who divests the company of all those noncore businesses that the company acquired over time. Immediately, the company is successful again, and you just wonder how they got into all those sidelines in the first place.

Q: How does a successful entrepreneur know whether a new product line is going to enhance or distract from their core business?

A: They look at their existing product portfolio. Is there a high degree of customer sharing amongst their existing products and their anticipated new product line?

How about cost-sharing: Does the new product line exist within the same set of costs? Can you use the same manufacturing principles and factories? Can the marketing be leveraged? When there's a high degree of overlap, there will usually be a good opportunity to form an adjacency or move into a new product category.

Q: How much does the right personnel play in a company's success?

A: Entrepreneurs who are successful hire people who are better than they are. They bring talent on board that's smarter than they are in certain areas. This can be threatening, but getting over that is very important. If you hire people who are fine at taking direction, but have no ideas of their own, they don't enhance the company much.

You must get top-caliber talent who can easily back fill for you and have better skills than you. Yes, you'll have to deal with some conflict because this kind of person will dissent if they don't agree with you, but in the end you'll have a much stronger company for it.


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