I often reflect on the diversity of successful business operators. There may be text book ways of managing a business but in reality we see management styles that, in theory, are less than ideal producing thriving businesses.
A good example of this is Arthur the autocrat, who does not empower his managers, retains control over all aspects of the business, and seems to steep himself in the minutiae of almost every transaction. You would think that this management style would be de-motivating to his staff, that they would find his constant monitoring suffocating and intimidating. You wonder how he could think broadly and strategically when his head is so full of detail. And yet the business is highly successful. The workforce is extremely stable and loyal, because although Arthur is an autocrat he is a benevolent one. It seems people don’t mind so much being closely monitored when the monitor is paternalistic and cares for them as individuals.
When it comes to strategy, Arthur is dynamic – his intricate grasp of the detail – of products, customers and suppliers – allows him to see market opportunities and move faster than his competition to capitalise on them. And he has been able to do all this in what is now quite a large business. His staff trusts his judgement and are meticulous in implementing his strategies. Arthur is not educated in management theory and he struggles to read a balance sheet. Yet each day he knows his turnover and gross profit margin and what products were sold. He is the old style businessman – totally in control and streetsmart – and it has worked for him.
In complete contrast is Diane, the ultimate delegator. Diane had an idea for a business – she knew what she wanted to sell, she knew there was a market and where to source the products. But she knew nothing about running a business. So she set about putting her team together. She appointed a general manager and an internal accountant from day one. As the business grew she added a logistics manager and a financial controller. For the size of the business it seemed it was top heavy in management – and at first it was. But then the growth was dramatic – in a few years its turnover achieved a level that competitors had taken decades to reach.
Diane's business had systems and procedures in place to handle the growth. It had cash flow under control through well managed inventory and trade terms. Diane had made herself a genuine business – personal goodwill was minimal – with a depth and spread of management and a closely bonded management team motivated by their joint achievement and the commitment from Diane that they share in the profits and eventual sale proceeds.
Then there is Peter, who is an inventor. He is highly intelligent and skilled at product development but he is a control freak with poor people skills and unfortunate methods of communication. Not surprisingly the business barely survived for the first few years until Peter finally recruited a general manager who was strong and diplomatic enough to take management control. Although there has been a fair amount of head-butting, Peter has now conceded that the interests of the business are in him sticking to his technical strengths and letting the general manager run the business, which is now thriving.
Reflecting on these cases it becomes apparent that business success for SMEs is not necessarily dependant on the management skills of the owners but on recognition by the owners of their own strengths and limitations. When these are honestly assessed, the owners are then able to surround themselves with a team that complements them. Arthur's team, used to having leadership, could not run Diane's business, while Diane's team would be suffocated by Arthur.
Often ego prevents the business owner from acknowledging their own deficiencies and allowing other people to have a degree of control over the business - this can be fatal as Peter almost experienced. Family businesses in particular often try to slot family members into management positions they do not fit instead of determining the skills and characteristics that the business needs in a balanced team. In this regard personality can be as important as skills. Too many strong personalities can result in a confusion of vision and strategies and a workforce that does not know who to take orders from. Too many passive personalities can produce a business with no direction.
There are many systems of psychometric testing which aim to determine an individual's behavioural tendencies and preferences in a workplace setting. Such tests are used by management and HR consultants to determine an individual's suitability for a role and the balance of a team. Such testing could be used by someone like Arthur to make sure he is surrounded by dependable implementers rather than extroverted, opportunistic people who would be better suited to his own job. (However if Arthur was considering a successor he would need to look for someone with characteristics like his or else consider restructuring his entire team.)
The diversity of successful business operators belies an ideal management style. What is critical is that the business has the right balance of skills and personality/behavioural types. Often this balance is achieved through hit-and-miss, gut instinct or sheer good luck. A more reliable approach requires an SME owner to first have an honest assessment of their own traits. While this may be confronting it may also be the key step to a successful business.
MGI Melbourne is a member of MGI Australasia
Article written by Sue Prestney for 'Charter', the magazine of the Australian Chartered Accountant
Sue Prestney is a Senior Partner with MGI Melbourne.
Article reprinted with the permission of the Institute of Chartered Accountants in Australia, www.icaa.com.au