Do you ever find yourself so frustrated with your employees it causes you to step in and do their jobs?
You realize that it will take much longer to train them to do something than it would for you to do it yourself, so you ask them to step aside and take over.
Just about every founder has felt that frustration before. Still, the more you step in, the less valuable your company will be. At The Value Builder System™, we evaluate businesses across eight dimensions that are important to acquirers. One of the areas where most owners underperform is called “Hub & Spoke,” which measures your company’s dependence on you. One way to reduce dependence is by recording your Standard Operating Procedures (SOPs).
One of the reasons you may end up with employees that cannot work independently is that you’re treating them the way you would like to be treated. In other words, you are trying to turn them into entrepreneurs. Many first-time founders assume employees want to be treated like owners. They give employees broad decision-making authority, reasoning they want to “empower” their team to “act like owners.” They may even propose an incentive-based pay package to align their effort and ingenuity with their compensation.
The problem is, most employees are not entrepreneurs. The kind of chaos you thrive in is debilitating for them. The decisions you make with imperfect information paralyze them.
Instead of getting frustrated that your employees are not more like you, focus on building a role more suited to their temperament. For example, when it comes to a set of tasks, less is more. Employees want to feel like they can achieve mastery in their jobs by being good at what they do and creating happy customers. The more tasks you give them, the harder that is to do.
Pay people fairly. Most do not want the majority of their pay at risk in some performance-based incentive plan. They want to know that if they do the work, they will be paid fairly. A bonus should be a pleasant “thank you” for a job well done, not the basis of their pay.
How Storage Squad Tripled Profit (and Built a More Valuable Company)
Nick Huber was a track star at Cornell when he fielded a call from a parent that would change his life. A fellow student needed to store their stuff over the summer, and Huber was paid to pick up his classmate’s things and keep them until the fall. Huber realized that other students who lived out of state might need a similar service, and Storage Squad was born.
Along with his partner, Dan Hagberg, Huber built Storage Squad to around $750,000 in annual revenue when the chaos of running a business dependent on student labor blew up. The partners were burned out and couldn’t understand why their drivers did not think like founders.
Huber and Hagberg experimented with incentive-based pay for location managers. Still, they quickly realized students would prefer to be paid a flat $20-an-hour rate rather than participate in a convoluted incentive scheme.
The partners also provided each location manager with a tablet that featured a checklist of 28 things that employees needed to do. The list was long and required the employee to be responsible for all aspects of running a location, from billing to scheduling to moving boxes. The partners realized they were asking their drivers to think like entrepreneurs when they were not.
Huber and Hagberg slashed the number of tasks drivers were responsible for from 28 down to just five. They hired specialists in the areas of billing and scheduling so all of the location managers could rely on a centralized specialist.
Revenue quadrupled over the next few years to more than $2 million, while profit tripled to more than $400,000. In the end, Huber and Hagberg sold Storage Squad for “low seven figures.”
Huber and Hagberg had learned that all things being equal, employees are not entrepreneurs. The more you expect them to be like you, the more frustrated you will become. Instead, streamline an employee’s job. Make them specialists, and allow them to master a few critical tasks rather than troubleshooting dozens. Your employees will be happier, and you’ll build a more valuable business over time.
