S-Trip was the quintessential family business.
Alexandre Handa and two business partners spun off Toronto-based Handa Travel Student Trip Ltd. (S-Trip) from his father’s travel company, Handa Travel Group, in 2006. All its employees were equals.
“We shunned traditional titles. We wanted everyone to be involved in everything,” Mr. Handa recalls.
That worked well when there was just a handful of staff. But as the business grew, the daily workload piled up and the strain was showing. “We were working 90 hours a week. We had tons of ideas for improving the business that ended up on to-do lists and never got implemented, because we were all so busy all the time.”
Mr. Handa personally reviewed every manifest for the thousands of spring break, adventure and other trips they were selling each year to youths, and he kept the books with an off-the-shelf computer spreadsheet program. The staff had grown to about 40 people who reported directly to him or his partners.
Five years in, “the business was booming, but it had become extremely stressful for the staff and partners bearing the load,” Mr. Handa recalls. The fast growth was stalling because of inefficiency and widening communication gaps.
It was make or break time. The partners considered whether they should sell the business or link with another company. The advice they got from consultants and investors was that a business needs to have more structure than just the founders, he says. “They were saying if we disappeared, the business would disappear.”
The partners agreed they had two choices: “Move backward to be a smaller company with less staff and clients, or build a management team to push forward with aggressive growth,” Mr. Handa says.
It’s a common predicament for entrepreneurial companies, says Douglas Cumming, professor of finance and entrepreneurship at York University’s Schulich School of Business in Toronto.
“It’s very common that entrepreneur-run companies grow so quickly that the founders can’t keep track of everything, no matter how many hours they’re working every day.” But there’s really no formula for determining when they reach a stage where there are so many responsibilities they need to delegate some, he says.
“Every company is different. You can have an industry that is highly research-intensive, where people are doing their own work without much direct supervision, and it can work well even as a company grows,” Prof. Cumming says. It’s more problematic in organizations where people need to be monitored more closely and approvals have to come from the top.
“There’s no question that the partners of a super-fast-growing company should review their strategic plans regularly – perhaps every three months.” That will identify problems before they become untenable.
But, “just having folks in the middle for the sake of having folks in the middle is not necessarily going to work well.”
It’s more a case of having people doing work that best matches their expertise, Prof. Cumming says. “The senior partners need to decide what part of their job is not worth spending their time on and delegating what isn’t.”
And, “while it’s great to say everyone is equal and people don’t have traditional titles, employees still need to know what they are responsible for” and be encouraged to pursue ways to do their jobs better, advises Cori Maedel, founder of Vancouver-based Jouta Performance Group Inc.
“When the owners take all the work on themselves, the staff won’t take initiative because they will assume it’s someone else’s job.”
The advice she gives startups is to think big from the beginning. “Don’t make decisions based on today, but on three to five years from now,” she suggests.
“Ask yourself: ‘What happens if this really takes off?’ Wouldn’t you rather be worried about how you’re going to gear up to handle more business, rather than worrying about how you’re going to keep up with existing commitments?”
In training workshops she does for entrepreneurs, “I invariably see the majority of people have focused on immediate tasks and haven’t stepped back to look at what they are good at and what gaps there are in their expertise,” Ms. Maedel says.
“If you find yourself working 90 hours a week, chances are some of the most important opportunities are being missed,” she says.
Even if you just sit down and draw a chart that lays out who does the marketing, the accounting, who plans sales growth and and who creates a presence on the Web, you can often see where you need to delegate more or hire a new person, she says.
That doesn’t have to mean big additional expenses, Ms. Maedel advises. “It could be people you already have on staff, contractors or retirees who would be thrilled to work part-time.”
“People are afraid of structure, but it doesn’t have to be a bureaucracy like you’d find in a bank,” she says. “You can be an organizational structure and still have a family feel.”
For Mr. Handa, formalizing a management structure at S-Trip has been an eye-opening experience and a relief.
Aside from concerns about costs involved in hiring managers, “Our biggest fear at the time was a cultural backlash against having to report to people in the middle. Would employees still be as enthusiastic?” Mr. Handa says.
So it was important to find leaders and managers who would be accepted as part of the company family. And the partners recognized that they had a large part of the answer already at hand.
“We had people on the staff who were well-admired by their colleagues and were showing leadership, but had never been given opportunities.”
The first positions they created were customer service and marketing managers. Staff people identified for the positions were told they could still come to the partners for advice, but they would be trusted to make their own decisions. “You have to let people know that you trust them to do their best and that you understand that they might make mistakes. I know I made a lot of mistakes, and my partners did, too, over the years,” Mr. Handa says.
He credits the shift to management teams with a phenomenal growth of the company in the past three years. It allowed the original partners to implement new programs, and the company now has five offices across the country selling more than 35,000 trips a year, up from 15,000 before the change. The staff has more than doubled, to more than 100. There are 14 middle managers, 10 of them hired from within the company.
“For all we used to shun the organizational structure, lo and behold we now have the organizational structure that exists in 90 per cent of companies,” Mr. Handa realizes.
But he believes the company has retained the feel of a big family.
“We like to say that we are friends first. If you are just with other co-workers, employees and bosses, there is not the same team spirit,” Mr. Handa says. “When you are working with friends it is easy to come together and overcome anything that comes your way. In fact it can be fun.”
Take the pains out of growing
Advice for planning growth, from Cori Maedel of Jouta Performance Group in Vancouver:
Think aspirationally: Ask yourself what you want your business to look like five years from now. Plan as though it has already happened – you will make bigger, better decisions.
Create structure: If you don’t define an organizational structure, it will define itself in ways you might not have imagined or intended. Structure does not have to mean bureaucracy, but defining responsibilities will encourage initiative and teamwork.
Seek out expertise: Recognize what you don’t know and hire subject matter experts early, even if only part-time or as consultants. You are not giving up control – a good person with experience in areas where you don’t have expertise will allow you to focus on the activities that are your strengths and make the decision-making easier.