Ladder

To become a valuable entity in its own right, a company needs to be weaned off dependency on its owner, says David Molian is a Visiting Fellow at Cranfield School of ManagementIn my last article, I referred to the steps which owner-managers/entrepreneurs can take to build value in their businesses, thus closing the gap between the enterprise value they aspire to and the price a purchaser is willing to pay. In most cases that gap exists because the business is overly dependent on the owner. To become a valuable entity in its own right it needs to be weaned off that dependency.

This feature is the first in a series that discusses how to do this. Let’s start with the commonest issue that I’ve come across in some twenty years of working with businesses aspiring to grow. Their founders routinely find themselves trapped in the role of a performing seal. That is to say employees bring to them any and every problem requiring a decision, no matter how minor. The boss then finds most of their day is taken up with trivia, giving them little or no time to think about planning the development of the business. This problem tends to feed on itself: the more the boss shows himself or herself willing to provide the answers, the more decisions they are faced with. Every time they’re thrown a fish, they catch it.

Unfortunately, this kind of addictive behaviour is a two-way street. When challenged, owner-managers will usually admit they rather enjoy the sense of being the company hero. But they also acknowledge that this repetitive cycle isn’t helping them to grow the business. Changing our behaviour is one of the most difficult things to do, as anyone who has given up smoking can testify. Here are two approaches which I’ve seen help the process of behavioural change along.

The first is to clarify roles and responsibilities. A frequent root cause of the queue outside the boss’s door is the series of changes that have happened since the business was founded: changes in the customer base, in the supplier base, in the wider environment and in the company’s personnel. Just because these changes are gradual doesn’t lessen their cumulative impact. Many businesses lag behind and systems and processes which were once fit for purpose no longer do the job. Sitting down periodically with your staff to talk through roles and responsibilities brings to light confusions, ambiguities and misunderstandings. When these are clarified and agreed, write them down and check that everyone is on the same page. The process is in itself an empowering one and staff performance often measurably improves once employees are clear what is and is not within their discretion.

Second, acknowledge the power of four little words: what would you do? If staff continue to bring routine problems to be solved, respond by asking them what they think the answer should be. Nine times out of ten the action they would take is exactly what you would do. The tenth time is usually an issue which is not in fact routine but requires some input from you. Fair enough. But over time staff will get the message that everyday problems are theirs to resolve - and you will have more of that most precious commodity: time to think.

In the next feature we’ll examine more ways in which ambitious owners can build value in their businesses.

David Molian is a Visiting Fellow at Cranfield School of Management and former Director of Cranfield’s renowned Business Growth Programme.

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