In our years spent working with hundreds of clients in various fields, we’ve noticed a common thread that runs through the various business success stories. In order to thrive and grow, as well as be marketable to buyers now or in the future, a business needs a great management team. This means having experienced leadership at the helm in the present, as well as identifying the right individuals who can step up, if necessary, in the future. It’s all about building your bench strength.
Why Is Building Your Bench Strength So Important?
Without a strong leadership team in place, a business’s ability to grow will be stunted. Note the use of the word “team” — a company’s leadership depends on more than just great management by the founder. Skilled leadership is necessary for each of the key positions at every company. An experienced sales manager is necessary to drive a team to properly represent the company and expand sales. A great production manager will ensure the business’s ability to produce a quality product. Meanwhile, proper management of the financial side of the business is important, as well. All of the individual parts must function together for the company to successfully move forward.
Just because a company has a great management team in the present, however, doesn’t mean they shouldn’t be looking toward the future. One of the biggest mistakes companies of all sizes make is a lack of succession planning. This can create challenges for a business if something happens to one of the key leaders or if — in a worst-case scenario — the founder/owner is the only one leading things.
Succession planning is important to understanding how things will progress and who will step in should something happen to a key leader in a business. Having a full set of players on your management bench not only provides peace of mind and mitigate any potential risks should something unexpected occur; it also helps create shareholder value.
Seeking Out Effective Leaders
A common pitfall that businesses make when selecting leadership is assuming that it’s always better to promote from within. That’s ideal if you have good leadership candidates already among your ranks. Keep in mind, however, that simply because someone is an ace in their current position doesn’t make them good leadership material. A blow-‘em-out-of-the-water fantastic salesperson might excel at getting deals closed, but may be terrible at leading others.
If your pool of employees doesn’t lend itself to promotion into management positions, you’ll need to look outside to recruit talent. Whether you find your leadership within or hire outside candidates, there are three strategies that will help you line up the best.
The best leadership candidates are a combination of cultural fit and experience. If you choose to look outside your organization for leadership talent, remember that even someone with an extensive skill set and lots of experience may not fit in well with your company culture. A candidate who has spent years working with a Fortune 500 company, for example, may prove to be an awkward fit for a small, middle-market company.
Be Transparent With Your Team
The key to success in any business is that everyone is on the same page. As it pertains to leadership, this means communicating the strategic goals of your company and ensuring that everyone from the leadership on down is focused on achieving them. Everyone should be pulling on the oars in the same direction, so to speak, to move your business in the right direction.
Look for Adaptability
Whether you’re looking for leadership from within or bringing people in from somewhere else, a successful manager must be adaptable when dealing with employees. A management approach that works well for one person may not resonate with another. An effective leader must be able to adapt to different individuals to be able to motivate them to get things done in a successful and efficient manner.
MelCap Partners has had the benefit of witnessing a variety of different management strategies as we’ve worked with clients over the years. Because of this, we’ve seen what works and our experience has given us valuable insight on how management team dynamics can affect a potential sale and how to minimize risk.