4Ms of Business Foundation series – Part 2: Managing Start-ups today

by EnyOsung

31st January 2016

in Advice, Entrepreneurs, Small Business

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Managing startups and small businesses in digital age

Welcome to the second instalment of the 4M series on business foundations for small business and start-ups today. The series kicked off with the post that examined Business Models (structure) for Today’s Start-ups, last month. You can see that part 1 post HERE. We ended part 1 recommending that today’s start-ups and small businesses should adopt lean/flat business structures.

Anyone can be a good manager, right? After all, we have all had managers, right? Wrong. This post examines the right approach and qualities for managing modern small businesses in the digital age (the conditions apply equally to big companies as well). I give you eight characteristics that every manager must have

Importance of good managers

Larry Alton sums up the importance of having good management in every part of businesses as follows: “Businesses demand consistent, high-quality leadership from beginning to end. They need a strong CEO at the top, well-informed executives and talented managers working together to establish direction, make decisions and inspire the team to stay aligned.

One gap in this network is all it takes to create a rupture in an otherwise stable organization. For example, one manager that dissents from the prime directive can veer the business away from its course — and of course, a strange or alienating direction from the CEO can ruin the impression of hundreds of otherwise loyal brand followers.”

As a marketer, the effect of managers on customers (brand followers) and the service they receive from a business is my primary concern here. Great managers display appropriate behaviour, qualities and interpersonal skills that enable staff to focus on customers above all else. Great managers lay the foundation for many of the necessary ingredients required to ‘market’ a brand – they facilitate the development of high-quality products and services as well as exceptional customer service which brings positive brand reputation, glowing reviews and feedback, customer advocacy and employee advocacy.

It is infinitely easier to get people to buy from businesses with these elements than those without them!

State of management approaches

Ben Lobel reports that a damning “analysis of UK-wide data on small and medium-sized enterprises (SMEs) that reveals that nearly half (44 percent) of businesses founded in the UK in 2011 had failed by 2014, with incompetence and bad management to blame for 56 percent of these business failures. The lack of professional management skills is also holding back UK productivity and employment growth, with only 16 percent of all new SMEs found to be fast-growing. Just two-fifths (42 percent) of small businesses were found to have provided management training in the previous 12 months, compared with 89 percent of firms with 250+ staff”.

These findings highlight the misconception that we instinctively know how to be good managers. An extension of this mistake is the common practice of promoting people to management roles based on good performance in their specialism. For example, it is not uncommon for a high-achieving accountant to suddenly find himself or herself managing the Finance Team.

I have used the example of the Accountant deliberately (It could apply equally to any profession) because it is not uncommon for people in this business to be absolute ‘number-nuts’. Many dislike social situations, in fact. So it should come as little surprise that thrusting them into management roles ends in failure. Management roles demand excellent communication and social interaction skills to get team members to work together to achieve shared goals.

Like any work role, good managers must have the right skills to perform the role well. Management training, development and support can be highly beneficial, even for owner/managers because the skills take some time to learn. How can modern entrepreneurs implement the right management structures for small businesses and start-ups? Read on to find out approaches and qualities that are fit for businesses in today’s digital age.

Management approaches

management style for small business an startups

Management style for small business and modern startups

Most businesses have managers and people with authority (simply because we humans like to feel a sense of power). However, the modern manager is no longer the expert, all-knowing authoritarian God, who incessantly barks orders at the team. In fact, good managers now surround themselves with smarter and more able people than themselves.

That said we have all seen industries where the know-it-all manager persona prevails. Admittedly, the sight of Gordon Ramsey, swearing and aggressively criticising participants on Hell’s Kitchen can be entertaining for viewers.

The building trade in which I was a Labourer a few years ago is also another obvious example. In the construction sector, the ‘trades’ (for example, bricklayers, plumbers and electricians) still feel it acceptable to act like ‘Duracell bunnies on acid’ when an apprentice or labourer does anything that is not to exact specification. The transgressions could include, cement or plaster that is not to the right consistency, wood sawed to the wrong size, wiring done incorrectly and leaking water or gas piping.

Many of us are guilty of believing the trade’s reaction is understandable because they may be working on our property and these errors could potentially lead to a loss of our life. At the very least they could be very costly to put right later on.

My recent experience in a Local Authority sadly also proves the point. In that case, this local Council was placed on Special Measures having just failed an Ofsted inspection. The management team was almost immediately replaced by Department for Education-appointed trouble-shooters.

The new Chief Executive regularly displayed Napoleon syndrome, which resulted in him openly embarrassing and abusing anyone who dared to disagree with him, fail to live up to his expectations or have an alternative point of view. Staff morale plummeted unsurprisingly and many people left their jobs.

In a real business today, everyone in the team is an expert in their own right because even the 16 year-old Apprentice can teach the older team members something. They know first-hand young people’s preferences/trends, use of new technology, language use, fashion, etc.

Management models

The Authoritarian management style has had its day. As I have alluded to above, it is essentially used in search of maintaining specific standards. A laisser-faire management style is equally outdated and has no place in the modern economy unless you are leading a team of subject experts. The laisser-faire manager essentially abdicates their responsibilities, which often results in a chaotic, free-for-all-anything-goes company. The team has no point of contact, structure or guidance to achieve the business’ objectives. Lean organisations are by definition flat, with horizontal lines of authority and working relationships. A lean structure enables members of the team to talk to anyone else in the company to get things done. A flat business structure is most likely to work for small firms and start-ups especially as “A flat structure results in better project quality and faster turnaround times”. A collaborative and participative management style is required to build on individual insights, foster commitment and motivation that will ensure everyone is working towards the same goal. It is worth emphasising here that the goal is not necessarily profits for the business. The real goal of successful businesses today is to exceed the needs and expectations of customers – this ultimately leads to more sales and profits. I will examine the components of this style of management in the digital economy later on.

Alternative management structures

Businesses have been experimenting with different management approaches over history to be as efficient as possible. Innovation has been the driver of the evolution of management styles, structures and systems you see in literature as well as management development courses.

Admittedly some of ‘new’ approaches turn out to be nothing more than fads while others that have lasted the test of time become the features we recognise in businesses.

The evolution of management structures continues apace today with modern businesses experimenting with alternative management structures. Belle Beth Cooper describes three modern implementations of control with initiatives that range from a different approach to 1:1 meetings to a full restructuring of a company. Let’s look at these now.

Holacracy

The idea of Holacracy is to distribute power and decision-making throughout the organization and empower employees to act with more autonomy (For example, Medium). According to Holacracy.org, “The work is actually more structured than in a conventional company, just differently so”.

Each team is made up of a “hierarchy of circles”. Circles of people focus on different areas and are nested within each other. Each circle is made up of roles determined and assigned by The “Lead Link” determines and assigns the roles in each circle. Employees can take more than one role depending on what they can handle. This approach lets employees work in different, though related areas, as required by the overall goals their circle has, rather than being pigeonholed by a single job title.

This approach also allows for organic expansion: if a role becomes too big for one person to handle, it can evolve into a circle of its own.

Product teams

The Product team structure splits the company into various product groups (For example, Buffer). Each team sets its own goals and schedule, and makes its decisions based on four important questions:

Growth: What are our intriguing numbers we can pursue to grow the business?
Research: What are our customers’ biggest problems (in the area of our intriguing numbers)?
Product: How can we solve this problem in the most efficient and useful way?
Technology: How can we implement this solution efficiently and successfully for our customers?

While just one person makes the final decision in each of these four areas, the entire process to bring a product improvement or new feature to life is a group effort. A product team approach places particular emphasis on asking for advice when making decisions, to ensure this autonomy for decision-makers doesn’t endanger the quality of decisions made. Simply put, the bigger the decision you are making, the more advice you are required to seek out. This is radically different to the past where your word as a manager might have been the sure way to go; it is now only one piece of the decision-making framework.

3. Non-hierarchical (flat) approach

A company structure that operates without managers (For example, Basecamp). When groups require structure, they manage themselves. A team can take turns being the chief each week. This way there is structure and leadership without a hierarchy. Each week, a new leader sketches out the agenda, writes up the notes about problems and performance and steps up to handle any customer experience issues. This approach lets everyone feel what it is like to be both managers and managed. Everyone is more empathetic toward one another as management duties are rotated weekly.

Another benefit is that when you know you will be management soon, you respect management more. The rotating management approach also means the company focuses on promoting employees horizontally, rather than vertically, facilitating everyone working together in an environment in which everyone has a chance to move proudly and thoroughly sideways.

4. Internal recruitment approach

Another company structure with no managers (For example, Treehouse). The process for getting things done involves projects, which team members propose that are completed by recruiting other employees to help get them done.

Anyone can have an idea and propose a Project. Projects do not have to relate to the core expertise for which you were hired. Example: A Designer could submit a plan to teach a course. The project proposal is abandoned if there is insufficient interest to get a full team together.

Team members can work on various projects at the same time. However, each individual is responsible for ensuring they are not over-committing themselves and letting project teams down.

Each project team decides how they want to work. They can elect a leader if they want to, or allow a leader to emerge naturally, or work collaboratively without any leader. Together, project team members are in charge of ensuring their work is up to standards before it is sold/delivered, and for maintaining their project once it starts.

This new approach improves the efficiency of work as a direct result of people owning the projects they create.

“The common thread throughout the alternative setups of these companies is their willingness to experiment. Although experimenting with new structures or processes can be nerve-racking, each of these companies is a great example of why it’s worth trying new things…finding out what doesn’t work for your company may be the only way to know what does” (Belle Beth Cooper).

Modern Management skills and qualities

I cannot cover even a fraction of the knowledge and skills every manager should have in one post. However, I will aim to emphasise the eight most important qualities managers must have for today’s small businesses and start-ups.

Much of a team’s success lies in the pattern of connection manager has with direct reports, and the way he or she empowers them to extend that model to his or her direct reports, and so on.

Good managers display patterns of good technical and organisational qualities, so they understand the tasks to be done and have some knowledge of how to organise people as you will see in this top 8 list of managers’ qualities:

Soft skills

Today’s managers must also have ‘soft skills’ as highlighted in the following quote: “To be an effective leader, and help your teams thrive–you should regularly show your appreciation to others …… Writing a heartfelt note to an employee can be significant–but it isn’t the only way. Celebrating “small wins,” a few sincere words in the hallway, taking an employee for lunch or a “call out” to express gratitude before a team meeting can also be meaningful.” – Murali Doraiswamy

You would be seriously mistaken for believing that Doraiswamy’s quote above, cited in The Wall Street Journal, is woolly. The contrary is true as scientific research shows that this simple management behaviour leads to more optimistic and goal-directed team members, better financial decision–making and problem-solving skills and increased productivity.

More studies show displaying soft skills like gratefulness also result in better sleep, mood and alertness. Perhaps surprisingly, showing gratitude may also improve overall health as well as being physical risk markers for future disease.

Risk-taking

A major problem for businesses today is most managers are not close to the customer. Consequently, they do not understand customer needs or the pace of the market as well as they used to. Reading closes the gap a bit but does not solve the problem. I especially like Shannon Marks’ recommended solution:

“The trick is creating an organization focused on listening more than talking. Use “show; don’t tell” as the core motivator. It encourages a culture of making, trying, adapting, and exploring…this, more than anything, will translate into authentic ideas and well-informed executives who can actively contribute to the formation of strategic marketing plans — not pepper their teams with immediate needs in a reactive posture”.

The risk-taking element in this recommendation is empowering staff to make decisions to resolve any issues customers have to their satisfaction. Not surprisingly, many fear that empowering personnel in this way could expose the business to higher costs and losses – partly the reason many businesses layer themselves with scripts, policies and decisions made by managers. The problem with these companies is that they will often run into issues for which there is no prescribed solution or for which the prescribed answers do not resolve the issue.

It is worth bearing in mind that an inadequate outcome for the customer can be very costly because satisfied customers can become your ambassadors and spread positive word of mouth, which makes attracting new customers easier. Conversely, dissatisfied customers can start a negative campaign and hurt your brand’s reputation – an excellent reason empowering your team to take risks is an essential management behaviour.

Communication

91% of employees say communication issues can make managers less efficient (Interact/Harris Poll). The following graph outlines the ways that managers often communicate inadequately with staff.

Communication isues in digital business - HBR

Communication issues in digital business – HBR

Employees called out the kind of communication-related management offences that point to a striking lack of emotional intelligence among business leaders, including micromanaging, bullying, narcissism, indecisiveness, and more.

The data also shows that the vast majority of managers are not engaging in crucial moments that could help employees see them as trustworthy. Managers who do things like withholding critical information from employees, gazumping employees out of agreed entitlements, and making decisions without consultation could breed irreversible resentment.

Good managers know that healthy communication requires the energy of connection, with inclusion, recognition, clear directions, meaningful interaction and feedback as the nerve-centre of the company.

They understand the explicit link between productivity and communication. They actively build a sense of connectedness with their teams and appreciation of their employees.

Communication is two ways, so it is also important to listen to workers’ ideas and feedback, considered them and provide responses to the team about which suggestions you will take forward and act upon as well as the reasons why you will not implement the others. Such a process provides a safe environment in which people have the opportunity to express themselves and get recognition for their ideas.

4. Performance management

Performance reviews in small businesses

Performance Management (PM) is a key management task in all businesses. Most of us experience performance management in the annual Performance Review that typically involves the manager and employee meeting to discuss the employee’s performance in the preceding period systematically and set goals for the coming months.

I have not seen a business that does not have some system in place for PM. The tragic reality, however, is that traditional performance management systems fail too many companies, managers and employees. Robert Bacal identified many reasons for the limitations of traditional performance management systems including these:

Generally, managers and employees don’t really like performance management.
Managers don’t do it regularly or accurately.
Paradoxically, many who didn’t like it or do it thought that it was a great idea in principle (but they still didn’t do it).

When performance management works, it is usually a result of highly developed management and interpersonal skills, not the system.

Managing performance effectively

Here are top strategies to avoid letting performance management in your business become a waste of time:

It is impossible to find a formula for performance management that will work each and every time. So a step-by-step, lock-stepped approach fails more often than not.
It is not necessary to wait for a performance review to tell people how they are doing. A culture of continual feedback is healthy and nimble. In particular, Millennials want more coaching and feedback than previous generations.
Use the Performance Management Master Checklist to structure and prepare your performance management. These are the sections for once yearly reviews: Overview, Preparation, Scheduling, Meeting.

5. Value others’ expertise

Successful lean organisations typically have teams made up of people with expertise in their different areas or specialisations. Active managers, therefore, must be skilled at recognising and working with these experts. Steve Job’s quote in the following graphic illustrates the point succinctly:

Steve jobs on managing experts in digital business

In this setting, great managers work on building and improving relationships, much more than giving people feedback that insults their expertise, demeans them and belittles them. Furthermore, the right management approach is to listen to ideas and suggestions from your experts and seriously considered to (or intending to) take them onboard. The key is to create an environment for collaborative working with good working relationships in which everyone can contribute.

6. Remove obstacles

John Donovan, executive vice president at AT & T, defines the role of a manager as “removing roadblocks and recognizing excellence.” (Sebastian Thrun). These are types of obstacles that great managers remove:

Excessive number of meetings to get agreement on ideas/plans
Overly complicated sign-off processes for good ideas
Limited access to resources to bring ideas to reality.
Changing plans by adding new ideas or looping in new people.

Many of us are inspired and eager to get things done. All of these barriers complicate things and slow down the process of achieving results, unnecessarily. They also increase the amount of wasted opportunities and the subsequent sense of failure that ensues.

7. Teams

Collaborative work teams

Businesses are made up of individuals who are brought together to work together toward shared goals. Whether organising people as one large group or some smaller units, you cannot expect them to achieve results by magic. Great managers understand team dynamics and are skilled at creating environments for teams to work effectively.

Belbin’s Team Roles gives a fascinating insight into the personalities of individuals in teams as well as strategies to get the best from them individually and collectively. The strategies in the Collaborative Teams image above gives useful pointers for managing highly productive teams.

8. Good knowledge of employee rights and entitlements

All managers get enquiries and questions that employees expect them to have answers to such as ‘How many days of annual leave am I entitled to? Can I have some time off for….’, etc.

Businesses must adhere to employees’ Statutory Employment Rights – it’s the law. UK rules cover everything from the National Minimum Wage to parental leave, working time Directive and minimum time off. It is also worth bearing in mind that most firms develop their policies to address various situations, which should incorporate employment laws.

The correct answers to personnel questions should be written down in the form of company policies in the Staff Handbook that each employee should get when they start work (how many of us read those handbooks?).

While there will be some questions that managers may have to take to other people in a better position to give the right responses (for example, senior managers and Human Resources Team), employees expect managers to know their rights and entitlements. Failure to understand and apply policies correctly can be costly in terms of discrimination and unfair treatment claims at Employment Tribunals.

Conclusion

We have seen that an agile business model coupled with the right management approach, skills and qualities can play a crucial role in the likelihood of success for small enterprises and start-ups. Harvard Business Review rightly tells us that most businesses fall short not because leaders don’t understand the company, but because they don’t know the people who work in them. Managers’ must understand how to get their people to bring their best effort to work. I firmly believe that great managers are developed, not born. Managers and businesses benefit from investing in their greatest assets, which includes managers, employees, systems and equipment. Unsurprisingly, most of us are sceptical, even fearful of trying new management structures and approaches because we fret that our team’s individual desires to be autonomous will lead to widespread chaos. You have seen in this post that successful companies are trying out experimental approaches to management. There is no reason you shouldn’t do the same.

What next?

As I alluded to in the introduction to this series, an entrepreneur’s decisions about their business model (structure) and consequently the management approach is usually strongly affected by the availability of money. In the next post in this 4M series, we will look at why money is significant and funding options for today’s start-up business. We will then round off the 4Ms Foundations of Business series by examining Marketing options and strategies for today’s start-up companies.