The evolution of your management team

Have you given any thought to what your business might look like at two or five times its current size? It is an exercise well worth undertaking because it provides insights into how the business will need to develop as it goes through different organisational barriers.

Rather than manage by crisis, you might think about how you can evolve the business over time to meet the challenges which face a larger enterprise.

One of the biggest challenges of all is the management team. Many emerging businesses start out with friends and family participating in the business and then new recruits are often found in the personal networks of the founders.

But a business which employs five people cannot be managed in the same way as one of 30 or 100 employees. At some point, you do need to build a professional organisation and the people who manage it need the qualifications, skills and experience to do the job properly. You simply can’t afford to carry people who are not up to the task. Too many livelihoods will depend on you doing the job properly.

A task which is worth undertaking is to map out the management team at different levels of activity. There seems to be a natural span of control which governs the way in which organisations develop.

One rule of thumb suggests that no one person should supervise more than six people. Another is that you need to develop a full-time administrative management level from about a size of 30 employees.

We typically outsource specialist skills while we are small but bring them in-house once we can justify a full-time member of staff. By looking at activity levels, we can estimate the number and type of management staff we will need as we grow the business. Once we have the business structures mapped out, we should start planning for how we are going to find the right people to fill the new jobs. We also need to decide if the people we have are going to be up to the new levels of responsibility.

One of the difficulties facing emerging business owners who have not worked in larger companies is to imagine what skills and capabilities are going to be needed as the business grows.

It is always worth exploring this issue with business advisors who have had larger company experience. You should also seriously consider hiring someone at a senior level who has larger company experience. An experienced manager from a larger company will often have worked with more sophisticated internal systems and can guide you in the right direction so that you evolve an effective organisation rather than simply get there through trial and error.

Organisational changes are painful, disruptive and stressful on most of the staff. With a longer term plan in place, you can make the changes gradually and staff can be informed of the strategy which is being followed. Having a plan and thinking through the changes which you need will dramatically improve the outcome.

Tom McKaskill, the former Richard Pratt Professor of Entrepreneurship, AGSE, is a successful global serial entrepreneur, public speaker and author who is a world acknowledged authority on exit strategies and is currently a member of the Gold Coast Angel Group.