Building your dream team
Article Date: Mar 23 2005
Trust in your management
Businesses that have raised venture capital, or recently floated companies may find that new additions to their management team, such as a chairman, finance director or non-executive director, will need to be appointed – and quickly. In certain instances, external advisers or fund managers will help make these decisions for them.
'Often when you bring a chairman on board, others in the company may see this person as a spy, checking up on them. This doesn't create the best working atmosphere.
One way to manage this process is to educate firms about the qualities that a chairman could bring to the business, and allow them to have a say in the selection. In one case we dealt with, the company was involved in the short-listing process so that by the time the appointment was made, the existing team had bought into the concept of (an outside) chairman,' explains Nigel Guy, deputy managing director at private equity outfit Granville Baird.
Other tensions can arise when the person who holds the biggest shareholding believes they have the sole right to make decisions.
'Boardrooms should be for management issues – not a place for shareholders to throw their weight around,’ believes Guy.
If senior board appointments such as non-executives have not worked out, Alex Borelli, director of corporate finance at Shore Capital, recommends several routes you can try to source the right non-executive.
'Speak to companies that have generated board appointments and find out where these have come from. People may have come across as very good candidates, but not right for their business, but they could be right for yours. There are specialist headhunters too and your advisers should also be able to open doors.'
Case Study – Share and share alike
'It's an old cliché – Chelsea are a team of top players, but in order to win, they need to learn to play as a team, and not individuals. Building your management team – and ensuring that it's a successful one, is a delicate balancing act. I've lost a few people on the way, but ultimately that's been good for my business,' proclaims Paul Stead, who founded his third company, product design business The Brewery, last year.
His first one, PSD (Paul Stead Design), taught him a few hard truths about building management teams; namely that a leader's ability to trust and delegate is crucial, and that you, as a leader, have to recognise your own limitations. Despite hiring a finance director with 'fantastic business knowledge', Stead ended up firing him.
'We moved to new offices as we were expanding – but the weekend this happened, the FD who I brought in decided his mother-in-law's birthday was more important, so he didn't turn up. He'd taken his eye off the ball in other ways too, and as I owned 100 per cent of the business, I had to put my life on the line. I fired him. I gave him too much rope and he ended up hanging himself. A lot of his work was driven by personal greed and his desire to get as many shares as possible,' reflects Stead.
Not wanting to bear total responsibilty anymore as the business went forward, Stead decided to give his existing management team 24 per cent of the business – on the condition that they found the cash to buy their stakes.
It's a model he has taken forward into his current business, where he owns 60 per cent with the other 40 per cent split between five directors. Even though the shareholdings are different, all the partners earn the same, and will also share future profits.
'My philosophy is that anyone who comes into my organisation should be better than me, and bring something to the whole. I now employ people who know what to do and I empower them to do it. But it's important to monitor them on a regular basis, and ensure they are not cruising. If people are as good as they say they are, they will succeed,' believes Stead.
Need to know: How to spot a dysfunctional management team
- Your meetings over-run
- People don't turn up
- No decisions are made or they are postponed
- Managers are bad-tempered
- The minute the meeting ends, everyone is out
- Friction between Chair and CEO
- People are disparaging about the client group or stakeholders
- No-one has read the papers, not even the Chair
- Body language suggests disengagement or boredom
- Meetings are quiet
Source: Common Purpose
