From the author: Top Manager, 2009 ETERNAL ISSUES IN THE RELATIONSHIP OF THE DIRECTOR AND OWNERIn the 90s, the roles of owner and director were almost always performed by one person. And there was no need for separation. Now there is a situation in which there is a clear tendency to transfer management to professional top managers who are ready to work in a competitive and low-income market. And yet, many business owners sincerely believe that transferring their companies to a hired manager is like death. So, what are the main problems in the relationship between the director and the owner? CONFLICT OF GOALS In classical business literature, it is generally accepted that goals should be the same: the owners set these goals, and the director accepts and fulfills them. But life shows that this is not so. Viktor Lisitsin, owner of the Leotek company, gives the following image: “... a worker thinks in terms of the month, from paycheck to paycheck, a director in years, from company to company, and an owner in terms of eternity or centuries. Savva Morozov and Tretyakov created dynasties, and pass the business on from generation to generation, thinking about their heirs.” Strategic goals and current operational tasks form different assessments of the same events. For the sake of long-term business development, the owner is ready to endure even temporary losses. The hired director is initially focused on quick profits, on the financial indicators by which the owner evaluates him. In addition, if a quick financial result is achieved, the director receives a significant bonus. This contradiction between the director and the owner exists and will always exist. Following one of our interlocutors, the owner and director can be likened to Hamlet and Ophelia. They want to be understood, but they speak different languages, do not understand each other’s problems and suffer from loneliness in the struggle with the outside world. CRISIS OF TRUST[/url]An equally acute problem in the director-owner relationship is trust. Owners have virtually no opportunity to insure their risks. When I turn over my business to a director, I risk losing my asset. What is he risking? Your apartment? Until now, not everyone considers the contract a significant document: “We’ll draw up an agreement later, first let’s agree that no one will cheat anyone.” After all, you can count on a contract only if the top manager knows: once he acted dishonestly, it’s the end of his career. Stanislav Metelev, General Director of the Special Machines Plant, says: “if they pay a good salary, then another would-be manager can still something to talk about for six months after another dismissal. And then - bam! – people arrived to open a branch. Where to get a top manager? To headhunters. They say: “Yes, there is a great person, they specially kept it in stock for you!”, - and they give out this pretzel. We looked at the resume - yes, he worked. - Why did he leave? - Well, you know, everything is already stagnant there, this is a new business for you, and I’m just a specialist in new business. - Let’s take it! A question of trust among the owners who have recently changed tracksuits with a jacket are among the insoluble in principle. The lack of transparency of business inherited from the 90s and the criminal “skeletons in the closet” do not allow the business to be transferred to professional managers. So you have to take those you know - neighbors, classmates - fellow students. But the likelihood that you will find a professional manager among your friends is small. Some study participants predict that it will take at least another 5-10 years before a community of professional directors is formed, for whom business reputation and performance in previous jobs will be their main asset. “THE CHILD HAS GROWN UP”: HOW DOES THE OWNER ATTITUDE ABOUT HIS OWN BUSINESS?[/url]During the study, we noted that owners see much greater value in their business than the profit margin. To explain their attitude to business, company owners very often use the allegory of a child. The owner of the Leotek company, Viktor Lisitsin, says: “I once dreamed: “I wantcreate a factory!” - and brought it to life. We give birth to our own enterprise like a child. The created business is a continuation of our thoughts, it is the fruit of the last years of life. I gave birth to this child, and I have to give him to someone when he becomes an adult. It's like with your own children. I want him to have good teachers, good leaders. And the managers who come in my place must be smarter than me, more effective than me.” Director of the ORP Advertising Agency Sergei Sokolov says that for the founder of a business, the company is “like a beloved child, whether it is bad or good, it is still loved... And I very often see owners who say, “Well, just think that the business is sinking. I'll think of something, things will get better. But it’s still mine.” The owner, who believes that everything should remain unchanged, has not matured enough to transfer control. It's like wanting to keep your grown children with you. And here some owners become jealous of hired directors. If earlier the owner was the center of attention, journalists and businessmen asked to see him, he was proud of his child, but now everyone goes to the hired director. And they don’t even remember the owner. Rejoicing at the failures of the directors and denouncing their incompetence, a number of owners are trying to prove to themselves and others that they are indispensable and exceptional. Many owners worked 14 hours a day in the 90s, their personal lives did not work out, and work for them is the foundation of self-esteem. Having retired from business, they lose the meaning of existence and come back. An interesting point of view regarding the concept of “business owner” was expressed by Vladislav Salnikov, co-owner of the Bearing-Contract company: “I have my own bicycle, my own car. But the definition of “owner” does not apply to business. It's like being the owner of an elephant. Even an elephant can go wherever he wants. And people can go wherever they want. So the concept of “company owner” is an illusion. This is a social stamp. The shareholder can be the owner of the money.” Unfortunately, it is very difficult to maintain moderation in your attachment to your business-child. Therefore, for an owner to give up management of his business is a most difficult psychological task. After all, one must admit that this child, whom he cared for and thought about around the clock, does not exist, but is simply an asset that generates profit. [/url]WHY DOES THE OWNER LEAVE? “Burnout” of the owner, emotional wear and tear are called by the owners among the main reasons for transferring management to hired directors. And yet, the owner should once again ask himself the question: don’t I just want to buy myself out of problems, get a temporary respite by buying an expensive and ambitious top manager? It can be difficult to distinguish between the desire to go on a long vacation and just take a break from the decision to transfer management of the business. A business can fall apart if the owner abruptly withdraws from business, and if the desire to “steer” appears and then disappears. Reassessment of life goals Ten to fifteen years of continuous work as a general director is a sufficient period, many of our interlocutors say. Having gone completely into business, a person may, to some extent, lose contact with the diversity of real life. The owners have a desire to engage in personal development and self-improvement. Behind the ironic expression “you manage, and I’ll follow the palm tree” often hides a much deeper motivation than banal laziness. General Director of the Leotek company Viktor Lisitsin says: “To my surprise, I recently discovered that over the past few years I have not read a single art book. Magazines, newspapers, specialized literature, trainings, industry seminars - that’s all. But in such circumstances, the personality still does not develop. A person must develop by reading fiction and all other literature. And since we are at work from 8 to 20 or more. There is no energy and time for this development.” Another of our interlocutors told a parable that resonates with many tired owners: An ordinary person, a businessman, comes to a spiritual teacher and says:Teacher, why do I need spirituality, how will spirituality help me and why should I go to it? - Of course! Spirituality will help you become even richer! - How? - It will teach you to cut off the unnecessary, it will reduce your demands and your needs. Lack of competence The business owner has no one to say: “You can’t cope anymore!” A young, growing market forgives managerial sloppiness. But in a situation of fierce competition, such a company has little chance. Not every owner is ready to internally accept the fact that he no longer has enough competence to effectively manage an expanded enterprise. As the company grows, the number of important management decisions increases. It is no longer possible to accept them individually. And there are three options for solving the problem: either sell the business, or develop yourself, or attract a professional top manager. Otherwise, a management clot inevitably occurs and the company dies. HOW IS AN OWNER DIFFERENT FROM A HARRIED DIRECTOR?[/url]A person who started from scratch, with trading in a kiosk, and grew to become a huge retail company, is fundamentally different from a person who began his career as a hired manager . These differences are noted even at the level of speech culture. The co-owner of the company Bearing-Contract notes: “When I come to my partners and say “My company...” people understand that I am the owner, not the general director. When I say “Our company...”, I am the CEO. Only the business owner decides what percentage of earned profits to spend on personal needs and how much to reinvest in the business. Alexey Zelentsov, director of the Kelly recruitment agency, knows owners who, of their own free will, did not receive any dividends for 10 years: “Despite the fact that the company had very large turnover, they lived very modestly, because they understood that they had to pay salaries to its two hundred employees and ensure the development of the company.” The director does not have such a question. It is difficult for professional managers to understand people who risked their own lives developing a business during the period of wild capitalism. Almost always, Russian owners are people who have taken risks in one way or another. Those who took the risk of investing heavily in starting a business and took risks when it was necessary to develop it. And the risks here were, if not beyond the bounds, then on the very verge of a foul. I would like to join the words of Mikhail Smirnov: “Our owners are not timid guys. Honor and praise to them. They lose and win beautifully, and, in general, drink their champagne well deservedly." WHO IS THE "IDEAL DIRECTOR"?[/url]All the rules of management are known. “Today a young student completed an MBA, just ask him - he knows everything. Roughly speaking, learn, sit in the director’s chair and take the helm. But that's just how it seems. You can’t do anything with operating enterprises, each of which lives its own life, like a person, with a stencil of rules and methods. This cannot be taught. This only comes with experience,” says Valery Chernyak, General Director of NPO Katod. The owners want to see in the director’s chair a person who knows how to feel the owners, managers, and the environment. “Intuition and luck are the secret to the growth of a successful director!” says LOMO director Alexander Aronov. Well, how to teach to feel? No one knows. This only gives experience. “If you share your vision, describe the opportunities, the culture of the company and at the same time look your future potential top manager in the eyes, but they don’t sparkle - you don’t need him! If he is not able to pick up all this with fire in his eyes and take up the baton with renewed vigor, he will not cope!”, the owner of the ROSEL company Pavel Savchenko is convinced. At the same time, there are many experienced directors wandering around the labor market who have “calmed down.” And this complacency makes them strive for inaction, because they don’t need much. They want to receive, not earn. Owners also have to deal with overly ambitious directors. They are ready to take on any task, but are unable to realize their real potential. Viktor Lisitsyn urges: I want toshout loudly to people who are applying for positions of top officials: “Guys! Realistically assess your capabilities!” A hired top manager may have a different set of competencies, but in any case he must be a mature person who knows exactly what he wants. Internal maturity of character is the key to a top manager’s success. This is the conclusion drawn by the participants in our study. BY WHAT CRITERIA TO SELECT A GENERAL DIRECTOR?[/url]The owner of the Rossi company, Sergei Vasiliev, encourages candidates to ask: “What added value did you create at your previous place of work? If you are satisfied with the answer, Sergei Vasiliev asks: “Write me an essay to solve our strategic problem. How will you implement it? And then you must defend this essay in front of specialists, and if you do it successfully, this will be your plan. And you will report on it.” And many unprofessional directors refuse to write, realizing that their competence will be subjected to strict testing. At the same time, the requirement that the candidate “like” and “inspire trust” often hides the same fear of giving the business into the wrong hands: “And he knows it.” , and he knows this and seems to be suitable, but somehow I don’t want to... Well, let’s see.” Despite the importance of intuition, Alexey Zelentsov calls for specifying in as much detail as possible what kind of results the owner expects from the hired director and within what time frame. If the owner wants to see a “breakthrough in business” as a result of the director’s work, then he must clearly understand what it consists of: Is it the number of branches, is it the volume of business, is it the capture of new markets or something else? In addition to achieving planned financial indicators, the owners note such a key quality of a director as the art of finding a balance between the interests of the enterprise and the interests of the owners. On the path of finding a suitable hired director, the owner faces many dangers. For example, it is difficult to answer the question: should a hired director show better work results than the owner? As the director of the Bearing-Contract company notes, making money is easier than continuing to earn the same amount and not losing business. “I did it! Why can’t you?!” - this is the main reproach of the owner against the hired director. Mikhail Smirnov cites the owner’s symptomatic philippics against the general director: “Why does he think so small? Why does he say that this can only be done in two years? Not building a branch network?... What two years? Six months! Attack! Why is he mumbling? I went to such and such a city, and two hours after I arrived, I had already established contact with the mayor and they offered me to buy out the local chain of stores! What is the problem? Why can’t my director do basic things?” The owner is used to thinking big: throwing out ideas, seeing empty spaces that a business can occupy. And here there is no need to calculate resources, there is no need for clearly formulated long-term goals. The business should be as large as possible - preferably the entire globe minus Antarctica. He will find the money - they will give it under his name, and it will be registered under some kind of collateral - after all, he has already proven that he is a wealthy being. “Just tell me how much money you need!” And from this position, he does not understand the director at all, who scrupulously calculates costs, assesses risks and delays the project deadlines. And the director criticizes the owner for his part: “He constantly has some crazy ideas, leaps and throws. He doesn't understand anything about running a company. He says in six months? Yes, I’ll just be coordinating a bank loan for more than a month, but how will I now pay for the engineering study of the site?...” If the owner treats the director as his own reflection, this will inevitably be followed by disappointment. However, not all owners understand that a decent amount in the bank and a successful business do not make you a skilled owner. A number of owners have an understanding of working only in a low-competitive and chaotic market, when a profit rate of 100% is the norm. And the newly appointed directorsI have experience working only in conditions of constant economic growth. And which of them will be more effective in preserving the business during a period of economic downturn or a surge in competition is still a big question. HOW TO TRANSFER POWERS TO A HARRIED DIRECTOR?[/url]Our interlocutors were unanimous in the opinion that the owner should not interfere in the operational management of the enterprise. The owner must control the execution of the parameters he has set, and not the specific orders of the director in operational management. Everyone seems to understand this, but when his best friend, who remained working in the company, comes running to the owner and says: “It’s terrible what he’s doing! Yes, he ruined everything! He’s destroying your business, which we’ve been building for years!” Few of the owners won’t flinch. It is very difficult to answer this: “He is now your top manager. I don’t decide.” The owner calls the director and says: “You give orders there, but don’t touch this.” This is how a whole piece falls out of business processes. Then a second, third will appear. And the director will relieve himself of responsibility for the state of affairs and leave offended, or turn into the owner’s personal secretary. And as a result, the owner will say: “Well, they hired a man for 20 thousand dollars, but he didn’t do anything, he doesn’t know how to do anything. We don’t have good top managers!” Even if the owner says: “I want to sit under a palm tree, chew a banana, receive dividends and forget about business,” you cannot immediately transfer all powers to a hired director. Pavel Savchenko compares the transfer of business management to teaching a child to swim: “First you teach him in shallow water, you are constantly together. You go through the initial stages of learning together, support him, help him learn motor skills, help him feel how it’s done, and sometimes let him go. Then you give the opportunity to swim independently in shallow water and stand nearby. Having seen the result, you suggest moving to depth so that the child is not afraid. Then you go ashore and still watch your child swim for a long time. And only after you are absolutely convinced that you have taught him everything, and are convinced that he swims correctly, can you say that you have taught him.” When transferring authority, special difficulties arise with the management team of the previous leader. As a rule, the new manager proposes a serious rotation of the company's top managers. It is significant that in the United States, when the president changes, the entire management team changes. Not because they are not professionals, they simply supported the ideas of the former president and will continue to support them in the future. In a team of like-minded people, the director will do much more than if he alone fights at windmills. You can always come up with a lot of reasons why the work is not done if the manager’s orders are rejected. To make it clear how difficult it is to allow a new director to change the old team of second-level managers, Viktor Lisitsin told us the following episode from the biography of his company: “I was just on vacation , when the August crisis of '98 happened. I arrive - and 35 pairs of eyes look into my mouth, everyone is shocked and has a silent question: how are we going to live? But we had pure imports, and I myself didn’t know how to live. I owed a huge amount to my supplier. The money is frozen and there is no way to purchase new goods. And imagine, such was the atmosphere in the company that everyone who could brought their personal money, some 50 dollars, some 200. I returned this money to them with interest within a year. But then these 45 thousand dollars of real money saved the company, and we were like one family.” From here it becomes clear why the owners, when they come to a recruitment agency, say: “People have been working for me for years since the beginning, they are all my friends and relatives. I cannot fire them, although I understand that they can no longer cope with their work and are slowing down the business. I need a person who will stand up to business processes, write down the rules and hire the right people. It is he who will fire them, not me.” “The position of “good person” is not in any staffing table,” says Alexey Zelentsov. Everyone needs a good worker. ANDthe owner, aimed at business development, has to resolve this moral dilemma not in favor of long-time employees. WHAT GOALS SHOULD BE SETTED FOR A HIRE DIRECTOR?[/url]The owner of the Rossi company, Sergey Vasiliev, believes that a hired director must be asked: how will the company get ahead of its competitors ? A real leader sits on a palm tree in the jungle and says: “Guys, I see bananas there. We have to go there." The monkey competitors tell their friends: “Guys, you should go there too, they say they saw bananas there.” They create a structure, recruit people, and invest in product promotion. And when competitors come to the place where they saw bananas, there is nothing there anymore. And then they make excuses: “You know, this market is developing too dynamically, you can’t keep track of everything. Therefore, excuse me, we have done everything and reported on the costs. And you have to pay us more money, because we worked here, went out on weekends, and didn’t steal anything.” This is how successful companies go bankrupt. To avoid such situations, the owner and the top manager he hired jointly develop a strategy to achieve the goal. And the leadership qualities of the director are the key to achieving the goal. “...those strategies in which all stages of the path are described are a fairy tale. – says Sergei Vasiliev. - A fairy tale that should happen in a year. If there are no more competitors, if there is no industry crisis, if they don’t steal. This is a fairy tale that the leader tells us. The strategy must be flexible, it must transform depending on the development of the environment - competitors, clients, suppliers. This ability to change and change is one of the necessary qualities of a director-leader.” Setting tasks for a hired director is a very difficult task even for an owner who knows the business thoroughly. Denis Kotov, general director of the Bookvoed book chain, points out that if short deadlines and high goals are set for the general manager, this narrows his professional opportunities. He becomes a rescuer, starts working in the Ministry of Emergency Situations, and not in the control system. But this is the work of an anti-crisis manager, which is redundant in a steadily growing business. Owners need to expand the planning horizons and the motivation system for top managers for 5, 10 years, thereby forming a clear perspective. If a leader understands the prospects for development, he does not think only about today, even in a tense situation. He understands that he has the power to change this situation and sees the stages of development in the long term. HOW TO CONTROL A HIRE DIRECTOR?[/url]At the initial stage of working with a top manager, many owners find it useful to have their own person among the top management of the company. As a rule, the financial director. And at the same time, the owners themselves are skeptical about the ability of the security department to reduce the risks of losing business. Many owners, having learned about the obviously erroneous decision of the hired director, immediately strive to intervene. Tatyana Nikitina from Rosgosstrakh says that when hiring, a top manager often finds herself in the following situation: “Let’s imagine a hospital that is unfamiliar to the doctor. They bring in a complex patient, drag a surgeon from the side and say: “You will be personally responsible for the life and health of this patient, but you will operate here, with our staff, with our instruments and without diagnostics - there is no time. But you are responsible for the result with your own head.” Without the right to make mistakes, the director will slow down making serious decisions as much as possible, because he will not think about the success of the company, but about minimizing his own risks. HOW TO MOTIVATE A DIRECTOR?[/url]Even for a novice director, money is not always an effective motivation tool. But most owners are not ready to introduce a director into the share capital. Rarely do two people walk the entire journey of life side by side. The greater the risk of differing views on business development. That is why the practice of annual and quarterly bonuses based on the director’s achievement of planned targets is so widespread. General Director of the Advertising Agency ORP Sergey