The Ultimate Test of Loyalty: Part 1
In the fall of 2003, I was interviewing an insulation installer to do some work on one of my restoration projects. As I asked him questions about his business, he proudly told me about his second generation company and how his father had grown it to over 30 employees and 20 service vehicles. When I asked him how big they were at that time, he humbly replied, “Two - myself and my son.” Too young to know any better, I asked “What happened?” He proceeded to tell me how his father had hired a General Manager to help him run the business. That individual embezzled most of the profits, costing his father his life’s savings. He closed with a comment that sticks with me to this day: “My father spent a lifetime creating customer loyalty but absolutely no time creating employee loyalty.”
That was my first insight into issues with a General Manager (GM) in a small business setting. The role of the GM in privately owned and operated small businesses is largely misunderstood. Perhaps this is due to the ambiguity of the title, misunderstanding of the job duties, or even skepticism toward the position’s value. Regardless of the reason, this very important executive-level position remains almost mythical in the minds of many entrepreneurs.
In larger corporate structures, this position is more visibly identified as the Chief Operations Officer (COO) or Vice President. With full responsibility for the operations, this position often oversees the production, sales and marketing, and administrative functions of the business or business unit. In the world of small business, the General Manager essentially runs the business in place of or in conjunction with the owner. With complete budgetary authority, the GM is responsible for making day-to-day operational as well as long-term strategic decisions that support the owner’s vision.
Despite the General Manager’s obvious importance, I believe a small business owner’s struggles with the position center around three key elements. The first is defining the role and responsibilities of the position itself. The second is identifying the need for the position. And the third is finding the right person for the job. In this three-part series we will explore all three facets, so entrepreneurs can gain a better understanding of how the GM position can take their businesses to the next level, the right reasons for the position, and how to identify and find the ideal candidate.
The Role and Responsibilities
The primary responsibility of the GM is to support the owner’s vision and make it a reality. While this venture might seem self-evident, its execution is slightly more complex. A successful GM must play an active role in the development and refinement of the organization’s strategic plan. This includes the establishment of the company’s long-term goals and yearly objectives. The GM must ensure that departmental targets for sales, cost of sale, gross/net profitability, cash flow, quality control, and customer satisfaction are all in alignment.
The planning facet of the GM’s role often involves a great deal of research and analysis. This is necessary to provide adequate support for the decisions he/she makes. Often, this involves countless hours combing through reports, monitoring key performance indicators (KPIs), and researching industry and market trends. The cooperation and support of department-level managers is also critical to the integrity of this function.
Personnel development and leadership also play an important part in the role of a GM. A sharp GM knows that adequate attention must be given to putting the right people in the right seats. Through active involvement in recruiting and professional development, he/she takes great care in building a team that fosters a culture consistent with the company’s core values. Working hand-in-hand with the Human Resources Manager or outside professionals, the GM is responsible for ensuring the company’s recruiting, training, compensation, and health and safety policies, practices, and procedures are all in compliance with federal, state, and local employment laws.
While the GM is not typically involved in making project or service-level decisions, it is not uncommon for the position to have a dual purpose or be titled as the Operations Manager as well. Day-to-day oversight of service delivery and quality control is facilitated through proper resource allocation and development by the company’s project and department managers. Process evaluation and improvement plays a large part in this. Operational performance standards are consistently reinforced by the GM. This enables the company to have adequate capacity and accurate revenue projections to support the established plan.
Companies large enough to support a GM often have a Controller or Finance and Accounting Director on staff. If not, they most likely employ the services of an external CPA to provide guidance for the financial management of the business. While the GM does not typically have direct authority over this area of the business, adequate attention must be given to how financial decisions impact other departments. A savvy GM will spend just as much time working with the company’s controller as he/she does with any other position in the company. Because of this, decisions pertaining to financing, cash flow, and budgeting are often made jointly to protect the owner and the company’s best interests.
The business development responsibilities of the GM are largely supportive of the sales and marketing team. With a heavy emphasis on relationship building and maintenance, the GM actively participates in trade association, company-sponsored, community, and charity events. It is not often that the GM is seen as the face of the organization; this role is typically reserved for the owner. However, ample attention toward key accounts and strategic relationships is necessary and involves networking with decision makers of parallel positions within those organizations.
In part two of this series, we will explore the reasons for having a General Manager. Although they may be very different depending on the company and circumstances, there are a few key reasons businesses may be in the right position to hire a GM. In the meantime, I will leave you with a question that I have been asking myself since my conversation with that insulation installer: is loyalty created by a business, or is it a virtue innate in those worthy of running a business for the owner?