Neil Lewis - Innovative Entrepreneur

Solving problems by growing profitable businesses @neil_lewis

Entrepreneurs – are you ready to fire half your staff?

Shocking! Perhaps!

Honest? Yes!

Wise? Well, is a US$250m company in 7 years enough proof?

Why, and what do entrepreneurs need to do?

Last week I had the pleasure of listening to Gil Mandelzis at the Entrepreneur Country winter forum – and here is what he said

“if you don’t tear up your business plan and fire half your staff every two years, then you are doing something wrong”

Now, Gil built a big business in a short amount of time. It was a game changing business that shifted the way that the foreign exchange business worked.

However, the lesson can be applied to all fast growth businesses – and that is, if you want to grow fast, then be prepared to tear up your business plan every two or so years.

And, people are the most important asset for the business – but you must be willing to fire half of them too.

Why?

Well, the answer is that businesses need different people at different phases. This can be understood in terms of growth – ie. a back bedroom business has different needs from a 250 employee business. Someone who is a Director of a back bedroom business is not the same as a Director of a 250 employee business.

Equally, a business may start out as a software business (selling software), then become an online marketing business (selling leads for instance) and then become a consultancy business (selling time) before becoming an investment business (ie buying and exiting from new businesses).

Would the person you choose to run your software business be the same as the person who runs the marketing business or, later on, the investment business?

No, clearly not.

Does this mean a great Chief Technology Officer isn’t any good any more because your business is no longer about software but about marketing? Clear no either.

Simply, what staff skills a business needs in one phase it won’t need in another. Equally, not only do businesses change (and fast growing businesses change fast) but people also change.

Take this quote from Shakespeare

“And all the men and women merely players:
They have their exits and their entrances;
And one man in his time plays many parts”

So, during our working life, we will play different roles – we may begin life as an entrepreneur and end up as the Chief Inventor or Chief Technology Officer. We may hand the reigns to a CEO and we may take them back later on (look how the founders of Yahoo and Google both stepped back only to later step back in again).

The truth is, that the business is changing and the people are changing too, all at the same time.

So how do you manage this?

Well, imagine holding an old fashioned telescope to your eye whilst standing on the deck of a big square rigger with the deck falling and rising beneath your feet in response to the wind and the sea.

Can you imagine that you will constantly need to adjust the instrument to keep focus? And might you begin to feel a bit dizzy?

Well, running a business is the same.

Of course, the faster you want to grow, the rougher the sees and the greater the dizziness.

Okay, this means that you must expect to constantly replace people in your organisation.

And, there will come a time too, when you should replace yourself! Just because you are the entrepreneur or founder does not mean you are exempt.

How do you prepare your business for rapid staff change?

Firstly ask, do you want to grow fast? If so, prepare to change your teams frequently – and tear up your business plan every two years.

Hence, you might as well begin with freelance and contractors – because you know that their role will change – radicially, especially in the early years.

You also know that if you start with contractors, then when the shift comes, you can part company on good terms and in the years ahead, re-hire them.

Once you enter the fixed employment market and hand out ‘director of this…’ and ‘director of that…’ you simply set yourself (and the business) to falter and disappoint. I have seen this happen in my first business and I’ve seen it happen in many other ‘once’ promising businesses too.

It is, of course, twice as painful to take away as it is to not give – so, don’t give out the big job titles or fixed roles; instead, hire people for what they can do now – and then be prepared to change direction and remix your team.

Keep your relationships strong with all your team all the time by being brutally honest. I find that people don’t mind – in fact they fully understand – when you tell them how it is and you don’t mess them around.

So, hire contractors and freelancers – especially in the early stages – and even if you do take on full time employees, make clear that the role is temporary – for that is what it is.

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Written by Editor on February 7, 2011 and filed in Entrepreneurs, Featured, Freelancers, Innovative Entrepreneur, News, Opinion , , ,


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