Going Outside – The Runaway Manager

“Before we knew it, we learned that we were having a Grand Opening for our new Manhattan retail store later that week. And we weren’t even a retailer“

To help with the growth our family business, our family hired a key non-family manager for the first time.  Attracting an outside manager into a family business is especially challenging with regards to compensation.  Like many closely-held firms, we weren’t willing to give up equity in the business, so we created a compensation package built around a performance bonus.  We selected an outside executive who came from a larger company, who brought proven expertise to grow our company rapidly. Coupled with their high ambition, it seemed like a good idea to tie their compensation into sales growth. More…

Too Important to Fire

We brought in our first non-family senior executive to help professionalize and grow the business.  The senior manager performed his job well and was eager to take on more responsibility. Eager to keep him satisfied, and retain him, we continued to give him increased responsibility across other functional areas.

In a few years, we realized that he wasn’t as competent in the newer areas, as he was in his core responsibility for which he had been hired.  It’s easy to fall into the thinking that someone who comes from a larger scale business is an expert in all areas. This proved wrong for us and we found the newer areas under his responsibility were hurting the business.  We stopped adding responsibility and discussed ways to move him back to his core strength expertise area. This caused him to threaten leaving with his management staff, unless he continued to receive increased responsibility and compensation.

We decided to terminate the employee.  But it was too late. This senior manager had assumed so much increased control and responsibility that they had become too important to fire. More…