In the last issue, I discussed the D.A.D. (delegate and disappear) principle and the first three of five levels that a green industry entrepreneur passes through on the way to achieving $5 million in annual revenue. Now, I’ll explain the fourth and fifth levels.
How it works.
A client doing $2.5 to $3 million a year had trouble growing his company beyond that level. Part of his problem was intellectual. He didn’t understand the systems and the team members that needed to be in place to propel him and his company to the next level. However, some of his challenge was his corporate DNA, so to speak.
My client was similar to someone like Babe Ruth who was a great baseball player but could never evolve into being a great manager. The combination of all that he was (his corporate DNA) lacked something that would not allow him to reach the next level in his career.
Figuring out the right intellectual combination is the easy part. It’s changing one’s corporate DNA that presents the biggest challenge. Fortunately, changing one’s corporate DNA is not impossible.
The fourth level.
For an entrepreneur to get from the third to the fourth level (approximately $1 to $3.5 million) you need strong divisional managers. You also need financials broken down to the division level for direct costs (materials, field labor, labor burden, equipment, rental equipment and subcontractor costs). This provides the division manager and the CEO with a report card for that division. It’s at the fourth level that you might hire a general manager and/or an operations manager.
The fifth level.
To reach the fifth level ($3.5 to $5 million-plus), an entrepreneur needs to make a very important hire: the controller. You could also call this position that of a chief financial officer or a comptroller. This person is much more than just an accountant or a bookkeeper.
Often this person is a certified public accountant, and has to be very organized, excellent with numbers and able to manage the accounting system and a staff.
This position quite often oversees all of the information technology and human resource functions of the company. It’s very important that this person not be a static thinker.
Static thinkers tend to put the business, its people and its functions into a straightjacket of sorts. Because they cannot adapt and keep up with the fluid demands of the enterprise, they often compensate by placing unrealistic demands upon others.
In addition, the person holding this position should be able to master the company’s accounting system to provide the data and reports needed by the division managers. These reports should be produced on a timely and accurate basis.
In order for an entrepreneur to build his or her company beyond the $1-million mark, he or she needs to transition from being very hands-on to building a team of high-performance division managers who handle all of the details.
However, the entrepreneur needs to ensure that these division managers have the right scoreboards (report cards) that provide accurate and timely performance information.
This is where my client mentioned earlier went wrong. He had weak division managers and an information system that did not provide timely accurate feedback.
Finally, in regards to the direct operational needs of the company is the need to hire a controller. The primary responsibility of the person filling this position is to provide timely, accurate feedback (scoreboards and report cards) to division managers and owners.
They need to be able to slice and dice all of the data (in other words; bend, spindle and mutilate the bureaucracy) in the company and condense it into meaningful reports for everyone.
Peter Drucker frames it best, I think, in his timeless best seller, “The Effective Executive.” The purpose of managers is to ensure that things get done right. The purpose of leaders is to ensure that the right things get done. It’s all about perspective.