I have often addressed entrepreneurs who have been in business for 10-20 years.
I have often addressed entrepreneurs who have been in business for 10-20 years. Their businesses often reach turnovers of well over a million dollars (Rs. 6 crores), and they have healthy profit margins. In addition, their employee strength commonly crosses 100 people, usually based at more than one location. But there is a serious problem: despite having many employees, for all practical purposes their organizations are one-person shows. All processes tend to originate, and be driven, by the entrepreneur.
The Genesis of the Problem
In the early stages of the venture, the entrepreneur often has no choice but to truly be a one-person show. There is hardly any money, and there are few employees. And those few employees have process-oriented roles. Decision-making and strategy rests with the entrepreneur. Most entrepreneurs are unable to change this style of functioning over the years. They make a couple of abortive attempts at delegating authority. This leads them to think that employee insincerity and ineptitude are widespread, and they reconcile to performing all major management functions themselves.
The SME Entrepreneur Sorely Craves to Delegate Authority
The entrepreneur notices that several organizations seem to have achieved management nirvana, i.e., the ownership and management of those organizations are separated. They observe hotels, banks, airlines, and other large corporations. The owner is nowhere in the picture, but the corporations seem to be doing fine. Hence the constant niggling feeling that they too could hire senior management, and free up their time. There is the additional factor of personal demands on time. As entrepreneurs fulfill their basic material needs, they feel the need to have some time for themselves, family, community, society, travel, and the like. If only they could find one or more people to take care of their business, they would lead a more fulfilling life!
Solution: Hire From Multinationals
It has to be more than a mere coincidence that many SME entrepreneurs look up to their multinational competitors, and decide to poach a little. Don't let the heading of this paragraph mislead you into believing that I am advocating hiring from multinationals as a panacea. Actually I am being a little tongue in cheek, as I have seen many cases of hiring from multinationals ending badly.
The Problem With Small Businesses Hiring From Multinationals
Despite the entrepreneur's apparent decision to make his organization start behaving more like a multinational, there are many reasons why things do not work out. Here are some of them:
> MNCs Are Far More Process Oriented:
In MNC corporations there tend to be far more systems and processes in place than in small businesses. Though SME entrepreneurs tend to crave for a process-driven organization, they are often not willing to spend the resources (time and money) that are required to establish, monitor, implement, and evolve such systems. As a result the MNC manager is seen as being low on productivity compared to other employees in the small business.
> In Small Businesses Everything Tends to Be Tightly Coupled With Sales or Profitability
Though there is some specialization in small businesses too, there tends to be a high RoI (return on investment) orientation for all activities. Hence many valid business processes that the MNC manager wants to introduce may seem wasteful to the entrepreneur.
> There Is an Expectation That the MNC Hire Will Wave a Magic Wand: Given the resume, pedigree, academic qualifications, and cost-to-company of the MNC hire, there tends to be gross over expectation from this person. Sometimes, as the weeks pass by, and nothing outstanding happens, the entrepreneur starts doubting the sanity of the decision to hire from an MNC. In other cases, the MNC hire sees herself / himself as the messiah, and starts rapidly carrying out big-ticket changes. Naturally some of these initiatives bomb, and the small business is not able to withstand the outcome.
> Personal Relationships of Existing Employees Undermine the New Hire: Although the entrepreneur puts her / his weight behind the new hire, the inter-relationship among existing employees is too strong to allow an "outsider" to enter.
> Often the MNC Hire Is a Fresh Retiree: Small businesses do not find it easy to recruit from multinationals. Some take the route of hiring recent retirees from MNCs. Given that these people come with about 35 years of work experience, their resume is breathtaking. The common problem in these hiring situations is that the recruit's motivations in life, ability to adapt to new situations, and speed of execution, may not match the entrepreneur's expectations.
Small businesses hiring from MNCs can be a good idea. But you need to be smart enough to stay away from the common pitfalls mentioned in this article.
~ The author of this article, Ajeet Khurana, mentors start-ups. An angel investor, trainer, author, entrepreneur and digital marketer, he is a member of the screening committee of Mumbai Angels, one of India's oldest angel networks. In addition, he is a trainer for new angel investors with NEN (National Entrepreneurship Network). He sits on the boards of Carve Niche Technologies and Rolocule Games. You can reach him on LinkedIn and Twitter.