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NZ businesses

Business owner doesn't always = people leader (and that's okay)

With New Zealand largely made up of small businesses (530,000 by the most recent MBIE count), we have thousands of business owners across the country working with their teams every day, encountering the typical challenges associated with managing staff. In our work advising businesses around their operations, growth and success, we know first hand how hard it can be when a business owner feels the need to do all the ‘people’ stuff, too.

RightWay

Sep 20, 2021

The reality is that for most small business owners in New Zealand, the reason they got into business for themselves was due to a great idea, or a particular skill (e.g. building houses). Rarely do those who start a business for the work itself, find a natural fit in people management. While we support business owners to develop their people management and leadership skills, we’re also advocates for hiring in talent to manage people when it makes more sense for the business to do so. 

Hopefully by the end of reading this, you’ll be able to cut yourself a bit of slack, and have some new ideas to move forward with as you grow your business.

Be honest with your motivations in running a business

It’s all too often a neglected consideration; what makes you happy and fulfilled in your work?
Does your business exist to change the industry, empower others to do great work, or set up your family’s future? There are no wrong answers here, but business owners need to keep asking this question. Without a clear core purpose of the business’ existence, it’s easy to become directionless with the next decision around growth. We’ve witnessed many a business almost feel obliged to hire staff as it’s simply ‘the thing to do’ when going through growth. 

Hiring is certainly key for significant growth as we individually have limited hours in the day. But bringing on staff shouldn’t be seen as simply a revenue increase for the business after wages. The peripheral costs associated with hiring someone extends far beyond their pay, especially if hired at the junior or apprentice level. Overheads such as equipment, transport, premises (if applicable) are just the start - training and quality control for an employee needs to be considered carefully early on. Remember any time you spend away from the work and on your employee, should be part of the equation around short term ROI. 

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If your ultimate goal is to grow a business that becomes self-sustaining and primed for sale eventually, people will be critical. If you’re a sole operator looking to increase revenue in the smartest way possible, it’s time to slow down and think about more than simply human resources:

  • Are your current rates or prices equitable in the market (i.e. are you undercharging)?
  • Are there inefficiencies in the way you deliver your product or service to customers with clear causes? 
  • Are you engaging with the right type of customer (i.e. could you focus less on low value customers and more on acquiring high value ones).
  • Are the costs associated with running your business being reviewed and refined to reduce overheads?

These are just some of the questions business owners can ask themselves before moving forward with a hire. In fact, getting these right prior to hiring can help lift the return generated by a new member of the team.

Are you energised by managing people?

Regardless of whether you’ve reached the conclusion to hire or not, you’ll need to establish what sort of business owner you want to be. Do you get energised by training and supporting a team to do better in their work? Can you imagine a work day where you are helping and guiding others to do the work vs doing it yourself? If you’ve answered no, then your business growth plan might need to include a pathway towards having a capable people manager sooner than later. 

Most business owners will be required to draw upon any management abilities they have in order to give their staff a stable work environment. Provided you’ve got a plan to up-skill or hire in management and perhaps some outside support (more on this later), then we’re confident you’ll be able to get through the early stages of people management.

All business owners should be leaders, but not all should be managers

A common misconception is the role of a leader being synonymous with the role of a manager. In fact, many leaders have no direct ‘reports’ to manage on a day-to-day basis. This is why many growing businesses will have a CEO/MD function (themselves) and a General Manager. A leader’s job is to lead the organisation towards its goals and through challenges. A manager’s job is to support the people within a company or team, including their personal career development. There are a lot of times where a small business’ leader will also be the manager, especially in businesses of 5-10 people. 

A business that separates out the overall leadership of the company direction, and the support of the employees can often enjoy more stable growth in the medium-long term. A founder or managing director will be thinking about business strategy, annual financials, customer relationships, and dozens of other things. If supporting individual employees is also thrown into the mix the risk is that any one of these jobs will be carried out less effectively.

The decision around whether you should be a manager of people along with being the owner of the business is going to be made differently at certain times of the business’ life. Early on, you might see more sense in managing 1-2 people yourself, and the time demand could still make sense when considering the overall revenue growth of the business. As the team grows, however, the decision may change where it makes more sense to have a senior team member that takes the load off you for day-to-day team support. 

Don’t feel pressure to be a superstar people manager if your natural fit lies in the work itself. Delegation and knowledge of our strengths and shortcomings are key traits of a successful business owner.

Consider the first few hires very carefully

As you embark on hiring staff, our best advice is to take your time. Business owners taking the first step into building a team often do so with little management experience. For this reason, it’s important to make a hire based upon more than just the ability to do the job. Look for team members who are good communicators, clear on their motivations, and come with good character references. Upskilling a good character is infinitely easier than trying to teach soft skills to a talented yet challenging personality. Culture fit is a concept often thought of as applicable to large companies and organisations. Rather, company culture starts with you and continues to grow with every new recruitment decision. 

As businesses grow larger, they become more resilient to challenging personnel. In the 5-10 employee range, a poor hire can be hugely damaging to your growth plans. 

Choose wisely, and don’t be afraid to have more than one round of interviews.

Do you need HR advice or support?

Include people management time in your budget

Once you’ve got someone aboard, you’ll find that part of your day is spent thinking not about the product or service you sell, but that team member’s performance and wellbeing. As such, all business owners taking on staff need to forecast some of this management time and reflect it in the financial forecast. If you work 8 hours a day currently of billable time, bringing on a team member does not mean the business is generating 16 hours worth of revenue a day - expect your productivity to drop, and your new hire’s to gradually ramp up to the desired ROI (to expect otherwise is probably a bit unfair). 

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Each business is different, as are the people business owners hire. We’d suggest being conservative in your budget; in other words, expect at least a few hours a day to move away from the customer and towards your people.

Making the call on hiring a people manager

With the team growing, business owners need to understand where the tipping point is between their willingness to lead people and their desire to keep doing hands-on or strategic work. For some of our clients, this realisation comes very early, and owners may even bring in a business partner who is more suited towards people management. 

In other cases, particularly the ‘startup’, we’ve observed the threshold of team size to get between 5-10 people before owners start to engage the help of a natural people manager. Sometimes this management layer will emerge from the team itself, with staff adding in people management to their role. If this is the model you’re looking to run for your business, we’d strongly suggest providing those staff with additional management training, support, and resources to do the job well. 

Beyond 10-15 people, many Kiwi businesses start to encounter challenges that necessitate a General Manager or ‘Head of’ role. These roles don’t just look after people but help to put in management and personal development frameworks to help the organisation run better. At this stage of a business’ growth, owners can often delegate not simply the management of people, but the responsibility for management as a function. Of course, any leader should always stay connected to all parts of their business - people being a key component.

Seek expert business advice around hiring and managing staff

Navigating people management shouldn't be left for business owners to muddle through on their own. RightWay’s nationwide team of advisers can help equip you with expert knowledge and direction to ensure you make smart decisions about people. We’ll challenge you to properly understand your goals then support you through a plan to get there.

Outsource the admin

When you’d rather be focusing on the things you add the most value to - such as the customers or sales, it can pay to have various business functions taken care of by highly experienced people. We offer HR support, payroll and of course accounting services to our clients. We even have specialist Agribusiness advisers to help farmers reduce their admin time. 

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You don’t have to hire these functions internally - simply chat to us about your needs and we can help build a plan that works for you. 

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