Several times in my career, I have built or helped a business owner to build a management team from scratch. Looking back, I can count eight organizations that invited me to partner with them with this specialized form of team development.
In this 3-part leadership mini-series, I’ll explain how to know when this kind of work is needed, an overview of how I have done it before, and a summary of some key lessons I’ve learned.
When talking about the top-level team in an organization, I use these terms interchangeably: (senior) management team, leadership team, or executive team.
What does “from scratch” mean?
In a few cases, I have helped leaders to build a management team without using any current employees, typically in a start-up environment or new division. But when I speak of building a team “from scratch,” it usually means assembling a team from people who are already there, but who are not functioning as a management team.
Most small-to-medium organizations already have people in place to run different areas. They operate in a hub-and-spoke model where everyone reports directly and individually to the president/CEO. They do not think of themselves as a team, they do not regularly meet as a team, they have no corporate responsibilities as a team, they are not accountable to each other, and they do not regularly make major business decisions as a team.
If a leader in such an organization wanted to have an executive team, I would call that task “building a team from scratch.”
Why Build a Management Team from Scratch?
Building a management team from the ground up is a major undertaking that combines change management, organizational design, and human dynamics. When done correctly, it requires 1-3 years of consistent effort along with investment of significant time and financial resources. What would justify this level of effort and expense?
There are three major reasons why it would make sense for a business owner to invest in this kind of effort: overcoming a growth plateau, increasing business valuation, and reducing risk. (There is a fourth reason I’ll share at the end.) In all three of these scenarios, building a team is an effort to solve the same root problem: the leader’s capacity is maxed out.
3 Scenarios that Justify Building a Team
In a growth plateau scenario, the leader has built and grown the organization to a point where he or she can no longer manage anymore. It’s not just a matter of adding additional staff—the owner/leader would not physically have time to manage the new people even if they had them. Leaders in these companies may have observed growth spikes in the past but were unable to sustain that level of operation. They may also be unable to create or execute longer-term strategy because of consuming daily concerns. Building a leadership team allows the organization to grow again.
In a business valuation scenario, a prospective buyer may be turned off (or offer a lower price) because the current owner’s involvement is too extensive to be sustained or replicated by a new owner. In effect, the buyer would be purchasing an impossible job rather than a smoothly running business. I have seen real-world numbers showing the delta between current (without a management team) and future (with an effective management team) that tripled the valuation of the business. Building a management team allows the owner to access more capital or sell the business for a better price.
In a risk management scenario, the leader has concentrated a high amount of risk in a single position. If the leader were to become ill, be in an accident, experience family trauma, etc.—there is no team in place to continue managing. Often, the leader is unable to take an extended vacation because of the risk to the business during his/her absence. The leader is the “backup” for every other position, but no one can be a “backup” for the leader. Building an executive team allows the leader to reduce risk and be away from the business without fear.
Building a management team provides a solution to each of these scenarios, because a healthy team can function synergistically to achieve more than the sum of its parts.
The Fourth Reason to Build a Management Team
The fourth reason to build a management team is more personal—it’s about preserving or restoring the leader’s health and balance. In my work of executive coaching, I hear CEO’s talk about both personal and professional concerns. One that is near-universal is concern for what their work may be doing to their own physical health (particularly fitness, stress levels, and heart health) and how their work is affecting their families.
When the CEO does not have a leadership team, he or she is easily (and often) pulled down into day-to-day operations. It becomes nearly impossible to achieve any kind of work/life balance, and the CEO regularly ends up sacrificing personal needs for the sake of feeding the business. One executive lamented, “I am swimming in my work, and I can never escape.” Another said, “I can’t imagine going another 10-20 years like this.”
In this fourth scenario, leaders may find it worth the effort to build a management team so that they can reclaim control over their lives, give more attention to their health, and create a sustainable rhythm and balance to succeed with their families outside of work.
Check out Part 2, where I will explain the actual seven steps I have used to build leadership teams, and Part 3, where I will share key lessons I’ve learned along the way.
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