Adding management muscle

While experienced corporate types can be a benefit, they can equally be like fish out of water in an entrepreneurial business.

While experienced corporate types can be a benefit, they can equally be like fish out of water in an entrepreneurial business.

Experienced corporate types can scale a company quickly, open doors to new business, and act as invaluable sounding boards. Equally, they can be like fish out of water in a fast-moving, entrepreneurial business. Growth Business finds out how adding heavyweight management can help with business expansion.

As an owner-manager, Jamie Waller was used to making big decisions, but few were as critical as this. The founder and MD of debt collection company JBW Group had been offered £6 million for his business, which had sales of £5 million at the time.

For a 31-year-old for whom the novelty of running a company was just beginning to wear off, it was tempting.

‘The business was a one-man band with a lot of “yes” people,’ he says. ‘I was running round answering everyone’s questions and after one and a half years it had actually become a chore.’

But Waller had always wanted to sell JBW for £20 million. After reflection, he turned down the offer from his competitor and enrolled on a business school course that convinced him of the importance of bringing in higher-level talent to help him take the company to the next stage.

‘It boils down to making sure everyone sitting around your board table is better than you are,’ he states.

Hiring a corporate titan

The new hires began with Graham Coxell, ex-managing director of Capita Financial Services, who joined as non-executive chairman. Coxell helped Waller complete the team with former executives of Experian, Welcome Finance and Ticketmaster.

This was only last year, yet it’s had an immediate effect. Sales are up 42 per cent to £12.8 million and profits have quadrupled.

Whatever stage of growth you’re at, you can still raise your game by hiring the right person. Glen Manchester is founder and CEO of customer engagement specialist Thunderhead, which has sales of $40 million (£25 million). Last year he recruited John McGee as president and COO, who in his former role as vice president at Adobe Systems was responsible for delivering sales of $1.5 billion.

‘My aspiration is to grow Thunderhead in the next few years to sales of over $100 million,’ states Manchester. ‘For that, we needed someone with a global perspective and experience.’

Bringing in a heavyweight like McGee was not taken lightly. Manchester says it is part of a plan to ‘operationalise’ the business: in other words, put in the right processes and people to enable the company to scale rapidly, and reduce the dependence on its founder.

But it’s not simply a matter of offering an attractive salary and share scheme. ‘You’ve got to be very open, both about your vision and the challenges you might have, because they’ll perform extensive due diligence on you,’ adds Manchester.

Jumping ship

Charles Hunt, CEO of Duvet and Pillow Warehouse, says that talented executives from larger companies often see a job in an SME as a risk. He started his search for two senior executives in the middle of last year but has not yet made a hire, and is now focusing on developing internal talent at the £5 million turnover company.

‘Smaller companies don’t carry the same prestige in the early days as bigger organisations do,’ says Hunt. ‘It’s totally alien to [candidates] to risk their CV profile with a company they don’t know about, even though the job they’d be taking on is far more autonomous.’

Hunt, who once worked in shipping group P&O, also believes that many large-company types aren’t cut out for success in growing businesses. ‘I know it’s a generalisation, but I’d say larger companies instil routine and process, while smaller companies encourage risk-taking and change.’

Phil Clarke, owner of HR consultancy Independent, agrees that there’s a cultural gap that needs to be bridged between corporates and growing businesses. He hired former British Nuclear Group HR director Rob Meakin as a non-executive chairman in 2009, and says Meakin’s technical knowledge, connections and capacity as a mentor have all benefited the business.

But he adds that expectations have had to be adjusted on both sides, which Meakin himself confirms: ‘When the two founders and I get together, we can make decisions without referring everything to a committee, which is often beneficial. However, the structures are not there [in a smaller company], which can be frustrating when you are trying to get things done.’

Adapting to a more entrepreneurial environment

The paradox is that while you want a certain degree of larger-company professionalism to permeate your business, it’s precisely that preference for structure and stability that can make it hard for corporate types to adapt to a more entrepreneurial environment. Waller of JBW Group is well aware of the problem.

‘The business is your baby, and you’ll always be two steps ahead, even if you bring in the chief executive of Serco,’ he says. ‘If you’re not careful you’ll end up getting rid of everyone who challenges you and going back to your comfort zone of being the one source of knowledge in the business.’

The risk of a culture clash was behind Waller’s decision only to consider candidates who had some form of entrepreneurial experience, or who had at least experienced life at the sharp end before being handed the keys to the executive washroom.

Graham Coxell, for example, started life in the RAF, then became the youngest CEO of a FTSE 250 company at the age of 32. He was instrumental in building up software business Marlborough Stirling, which was later sold to Capita.

This blend of entrepreneurial verve and corporate panache is, of course, the holy grail, but for most it is likely to come in the form of an experienced non-executive accustomed to working in smaller companies, as opposed to a full-time hire. Paul Morris, founder of chemicals company Addmaster, brought in David Goff five years ago as a part-time finance director.

Goff, a former Ernst & Young executive who also built up his own accountancy business, is on the board of seven companies which he assists to varying degrees; at Addmaster he chairs board meetings, reviews the company’s accounts, takes direct responsibility for credit control, and more informally, acts as a sounding board for Morris to ‘bounce ideas off’.

According to Morris, ‘He spots business opportunities that have really boosted the company, such as developing our export business and helping to substantially reduce the number of late payments.’

Few start-ups are sufficiently forward-thinking (or well-funded) to employ a big hitter from day one. Faiza Seth, a former investment banker and founder of interior design business Casa Forma, was lucky in this respect. She met Ralph Lauren’s head of interior design, Luigi Esposito, when he was working on her flat, and decided he was the missing ingredient she needed for her start-up.

‘We just clicked,’ she says. ‘The property market was booming and our business idea was to buy properties, which Luigi would redecorate, then we’d sell them on for a profit.’

Business learning curve

This was January 2007. Needless to say, things didn’t go to plan. The property market crashed and Seth was forced to rent out the five properties she’d bought rather than sell them on. In response, the business changed from a property investment firm to a design business taking on projects for other clients.

‘In a larger company, you are a bit more insulated from these things,’ says Seth. ‘Here, everything affects you; the business changed and I really had to cut costs to survive. [For Esposito], it was probably a steep and challenging learning curve.’

Nevertheless, the pair are still working together. Seth admits that Esposito’s involvement brings instant credibility and gravitas to the company, which makes up for not having a recognised brand. To attract him, she had to offer a ‘competitive’ salary and a stake in the business ‘to align our incentives’.

No-one knows better than Jamie Waller the cost of bringing in big hitting, heavyweight managers for business expansion. In order to attract the four experienced directors he added last year, he had to put 25 per cent of his shareholding in JBW into an incentive scheme.

‘It was a big decision to make,’ he says. ‘I had been offered £6 million for the business, so it felt a bit like giving away £1.5 million overnight. But ultimately it was the best thing I could have done.’

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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