Warren Roy saw evolution in action as the three-person company he co-founded in 1999 grew into an organization with more than 200 employees.
In its infancy, with perhaps 10 employees, a company is like a family where everyone interacts with the founding entrepreneurs, recalls Mr. Roy, chief executive officer of Global Relay Communications Inc., a Vancouver-based online messaging and search technology company.
By the time the head count reaches 25, the executive needs other managers because “at that point there’s no time to manage it all,” he says. As the payroll reaches 50, a company has developed its own culture and personality and you need a reporting hierarchy for internal communications’ sake. And at 100, “the senior team may no longer know everyone by name.”
At each stage, an organization should be assessing its needs and developing or bringing in additional managers. But too many entrepreneurs try to manage everything themselves for far too long, consultants say.
“Almost all entrepreneurs have a reluctance to delegate. But ultimately success depends on working more on the business and less on the day-to-day,” says Werner Knittel, a business adviser with Wardell Business Advisory Services in Vancouver.
“A common pitfall for entrepreneurs is a reluctance to hire someone who is actually better and smarter at a function than they are,” he says. “ They think their role as owner and boss will somehow be undermined if the other employees see them deferring to the advice of an operations or finance manager.”
While every business is different, management consultants see five areas where a growing company should consider getting help sooner rather than later.
Entrepreneurs should start thinking of bringing on a business manager once they have about 10 employees, Mr. Knittel suggests. Then, the founders and new manager should conduct a gap analysis, “starting with a mission statement of where the company wants to be three to five years in the future. Then, look at the skill levels of existing employees.”
If you don’t have the people with the capabilities to drive growth and handle the bigger operation, what strengths do you need to develop or hire to get them?
Cori Maedel, chief executive officer of Jouta Performance Group in Vancouver, advises seeking help from the start from consultants in HR and accounting to set up the legal and financial framework for building a team. Not putting systems in place for compensation, incentives and benefits at the start can create headaches as the company grows, she says.
By the time some employers bring in an HR consultant, “we may find people have been hired with 50 different promises and compensation packages.”
However, even large organizations can get along with an outside consultant for quite a while, noted Karen Fischer, partner in the consultancy R.K. Fischer & Associates in Toronto.
Once companies in growth mode total 50 employees, they need an experienced HR person working regularly on site, even if it is an outside consultant, Ms. Fischer suggests. “When you’re hiring regularly, you need someone who understands your needs to set policies and job descriptions. A professional also knows hiring practices and employment law and the compensation and benefits that will attract and retain talented people.”
Sales and marketing
Entrepreneurs tend to be the initial sales people for a business, but there comes a point where the primary owner needs to let go of either the sales or the leadership role, says Georgia Curtis, managing director of Toronto-based Backpocket HR Inc. “If it reaches a point where you can’t expand the business any more and you’re being stretched in so many directions that you can’t concentrate, it’s time to consider bringing in a director of sales,” she advises.
A marketing person might also be needed. “Sales are immediate but a full-time marketing person can make sure you’re looking beyond the immediate and what’s happening outside the organization,” Mr. Knittel says.
“You need to have eyes on the changes going on around the company. The world isn’t static, and it’s particularly important if you were a small local player and now you are a regional or national player. Competitors will start reacting to you and new players may be entering the picture,” he says.
Finance and accounting
Often a small shop starts with a part-time bookkeeeper, or it outsources its accounting to a payroll company. But a business will need some form of certified in-house accounting manager once it has 25 or more employees to keep on top of financial and regulatory requirements, advises Ms. Curtis.
“I find companies can struggle if they don’t have someone who is doing the role of controller,” she says.
Having reliable audit figures are especially important for financial firms and tech companies that manage financial data. Mr. Roy was particularly aware of that as Global Relay’s business expanded internationally. “In the tech business, when you manage financial data there are always questions about the stability of your finances and technology.”
When the company was young, it contracted with an outside audit firm known mainly in Vancouver. But as the company went global, “we had to go to the big four firms recognized internationally.” Now the company is a client of KPMG LLP.
Communications and social media
Managing external communications and social media such as Twitter and Facebook are most important for consumer-driven products, Ms. Curtis says. A communications consultant will probably do, though “you might have people on your team who are deeply into social media, so the initial expertise may already exist in-house.”
Hiring for start-ups
For cash-challenged start-ups there’s never a perfect time to hire. Jim Cooper, the chief executive officer of Maplesoft in Waterloo and a veteran of six start-ups, offers advice on when to make the decision:
Expertise: In the early life of start-ups, people volunteer to play new roles. “Quite often, that person who takes over managerial responsibility in development, sales and marketing or finance is outside their comfort zone. As the responsibilities grow, bringing in new blood with qualifications you need can be a massive catalyst to effectiveness and growth.”
Growth: If the business is rapidly growing, you risk stalling unless you invest in people with the executive skills and experience to maintain the momentum. Speed is less a factor than size. For instance, “the $10-million company that’s not growing may not need an experienced CEO, but the $1-million [company] that’s doubling every quarter might,” Mr. Cooper advises.
Tradeoffs: There’s almost never a pile of money available to create a new position. It’s more a matter of continuously reviewing what talent is needed, then weighing priorities: Is there a project that could be trimmed to make room for a hire?
Availability: Often, it isn’t a planning committee that creates an opportunity. “In my experience a person will bring talent that you didn’t even know you needed until you met them,” in a job interview or industry event, Mr. Cooper has found. If they are a good fit with what the company needs, it can pay to find a way to slot them into the management team.