Dispersing responsibility, dispelling fear, divesting yourself of weaklings and deepening trust are the keys to building the perfect management team.

Last year, Charlie Hoult had to build a management team from scratch, recruiting for IT, finance, HR and marketing divisions, after merging his business, Wilson Harvey, with brand communications group Loewy. Having made mistakes in the past, Hoult, as chief executive of the business, was determined to make a better fist of the fight this time around.

From the outset he was keen to get gifted people in every position, although he was equally determined not to deploy the laissez-faire, ‘Sven Goran Eriksson’ management approach (which he characterises as “oh, let’s just let the star players perform”). He wanted an element of democracy – after all, everyone needs to have a voice – but within a structure that optimised overall performance and which placed an emphasis on planning.

‘The new management team here has had to learn what authority is really about,’ says Hoult. ‘It has been difficult but very useful. Over the last year, there have not been many clashes because we have gradually realised that we have a lot in common.

‘One of the areas I have been emphasising is for my team to focus not on where the company is now, but where it could be one, two or three years down the line.’

Part of this has involved priming existing staff for more senior positions – ‘you must think about how to re-invent and empower people,’ he explains – but it has also involved cutting out very quickly those people who don’t work, to ensure that ‘you cause minimum disruption’ to the enterprise.

Having a team united to a single purpose was crucial because in February this year he added three more agencies to his business, increasing annualised turnover to £10 million and the head-count to 100.

This has thrown up many problems, not least his own role within the organisation. ‘I’ve had to constantly redefine myself as my team has grown. I used to be a jack-of-all-trades, getting involved with clients, ideas, training and recruiting. I now do fewer of those things, or do them at a different level. It’s a challenge though – sometimes I have less to do on my desk and then I have to take stock of what my priorities are,’ he acknowledges.

Strengthen, not stifle

According to Dominic Wright from leadership development specialists The Leadership Trust, one of the problems an expanding business encounters on the team-building front is the tendency for the CEO to tighten control as the team grows.

‘One of the fundamental growing pains around teams in SMEs is how a company refines and consolidates its processes. In many instances, it requires a change in leadership style away from a transactional approach to one that is more transformational. It can be a precarious time and so leaders tend to tighten control, because that is what is comfortable for them. But this ends up stifling staff potential.’

Banish control freakery

Control is an area Julia Middleton, chief executive officer and founder of educational organisation Common Purpose, believes is familiar ground when it comes to team-building.

‘In my view, people who strive for high-performance are very determined not to have a team at all. In some of the programmes we run, there is a deliberate attempt from CEOs not to team-build, because then they feel they are no longer in control if they do.’

‘There is also a tendency to forget some of the basics, such as apologising when you get something wrong. Unless you re-learn these things, your team will never perform,’ advises Middleton.

Another area that can generate inertia is the fear of making the wrong choices when picking and building management. But there are ways you can monitor your potential choices without committing yourself. Companies such as Asda and Vodafone have placed good-performing middle managers onto the board as non-executives, to expose potential candidates to board level experience.

However, ‘it can be much harder to do in a small business, but if you as a leader can separate your emotional attachment from the business and your ego, then you are much more likely to make the right choices,’ believes Judith Clegg, associate director of consultancy Egremont.

Don’t get off the learning curve

The key to building a successful and high-performing team, is for the leader to remain on a ‘constant learning curve’ says Adrian Moorhouse, the former Olympic gold medallist who now heads leadership consultancy Lane 4.

‘Be prepared to be open-minded – just because you are the CEO, you must not get stuck into thinking you are the expert. Requesting feedback, and the ability to take it, is crucial. This is often an element that is difficult to swallow.

As a leader, you have to bind the company. People are rewarded for the job they do, but as they get to senior level, it needs to be less about rewards and more about the value they are bringing to the company – this needs disclosure and honesty. Unfortunately, there is not enough of this in senior teams. Great leaders put their business first – self-interest doesn’t work at a high level,’ believes Moorhouse.

He recalls that back in his sporting days, he worked well with three out of the four people in his team.

‘Getting results is not down to being aggressive, but to the way you get on with your “club”. In sport, as in business, you get an atmosphere of healthy competition. One person in my team would not engage – but the rest of us worked together and thus challenged each other. Sharing our ideas had the knock-on effect of driving us further,’ adds Moorhouse.

Don’t get cosy

But there is one serious downside to a team that gets on famously, says Tony Bond, of Results Business Consulting. ‘Teams that have been together a long time get comfortable with each other and start to defer to each other. Issues don’t get aired properly, and the chance to pool resources never arises. You often find these sorts of vulnerable teams in businesses that are stagnating.’

Diversity is key

Yuval Yashiv, chief executive officer of AIM-listed digital photography software specialist Pixology, joined the business in 2000 and has been responsible for building most of the current management team, from sales director through to finance director. He believes that bringing a mix of skills to the table, rather than relying on a person’s previous experience, is crucial.

‘Build a team that has different abilities. Don’t get tempted by people with only a background in technology or marketing, for example, as they will be lacking financial skills. You need to be able to break away from the past. Many people look for “more of the same” in their senior management, but I don’t think this is necessarily right,’ he explains.

Underestimating ability is also a common mistake when it comes to team-building. As Yashiv points out, a technical director from Hewlett-Packard might sound like a good addition – but the chances are that more often than not, this won’t work in a fast-growing business.

Common Purpose’s Middleton is also a firm advocate of diversity being the key to successful team-working.

‘If you have a diverse team, it means you can’t have a lazy leader. If there aren’t enough points at your board meetings that are causing friction, then you’re in trouble.’

Don’t ignore under-performers

While it’s all well and good to identify and concentrate on the ambitious and talented performers who could help you drive your business to the next level, it can be dangerous to ignore those who appear not to be meeting their targets. HR and marketing can be two of the biggest cost drains, and it can be all too easy to overlook bad behaviour in favour of a quiet life.

Pixology’s Yashiv is refreshingly candid about the key issues. ‘Recruiting can be a game of trial and error – and I’m sorry to say that we have been firing a lot of people because they don’t fit within the business.’

Equally robust is Graham Wilson, who now works alongside Adrian Moorhouse at Lane 4 after a career in sports psychology. ‘Investing in your people as you grow is really important. And it’s not just the talent pool that you need to motivate – under-performers need attention.

Often, companies ignore these problems because they perceive them as too difficult to deal with. But, you need to communicate your expectations so they are clear. Coaching is one way of dealing with this – you want people to recognise that they are under-performing, otherwise they will not progress. Above all, address the issues early,’ he recommends.

Trust in your management

Businesses that have raised venture capital, or recently floated companies may find that new additions to their management team, such as a chairman, finance director or non-executive director, will need to be appointed – and quickly. In certain instances, external advisers or fund managers will help make these decisions for them.

‘Often when you bring a chairman on board, others in the company may see this person as a spy, checking up on them. This doesn’t create the best working atmosphere.

One way to manage this process is to educate firms about the qualities that a chairman could bring to the business, and allow them to have a say in the selection. In one case we dealt with, the company was involved in the short-listing process so that by the time the appointment was made, the existing team had bought into the concept of (an outside) chairman,’ explains Nigel Guy, deputy managing director at private equity outfit Granville Baird.

Other tensions can arise when the person who holds the biggest shareholding believes they have the sole right to make decisions.

‘Boardrooms should be for management issues – not a place for shareholders to throw their weight around,’ believes Guy.

If senior board appointments such as non-executives have not worked out, Alex Borelli, director of corporate finance at Shore Capital, recommends several routes you can try to source the right non-executive.

‘Speak to companies that have generated board appointments and find out where these have come from. People may have come across as very good candidates, but not right for their business, but they could be right for yours. There are specialist headhunters too and your advisers should also be able to open doors.’

Case Study – Share and share alike

‘It’s an old cliché – Chelsea are a team of top players, but in order to win, they need to learn to play as a team, and not individuals. Building your management team – and ensuring that it’s a successful one, is a delicate balancing act. I’ve lost a few people on the way, but ultimately that’s been good for my business,’ proclaims Paul Stead, who founded his third company, product design business The Brewery, last year.

His first one, PSD (Paul Stead Design), taught him a few hard truths about building management teams; namely that a leader’s ability to trust and delegate is crucial, and that you, as a leader, have to recognise your own limitations. Despite hiring a finance director with ‘fantastic business knowledge’, Stead ended up firing him.

‘We moved to new offices as we were expanding – but the weekend this happened, the FD who I brought in decided his mother-in-law’s birthday was more important, so he didn’t turn up. He’d taken his eye off the ball in other ways too, and as I owned 100 per cent of the business, I had to put my life on the line. I fired him. I gave him too much rope and he ended up hanging himself. A lot of his work was driven by personal greed and his desire to get as many shares as possible,’ reflects Stead.

Not wanting to bear total responsibility anymore as the business went forward, Stead decided to give his existing management team 24 per cent of the business – on the condition that they found the cash to buy their stakes.

It’s a model he has taken forward into his current business, where he owns 60 per cent with the other 40 per cent split between five directors. Even though the shareholdings are different, all the partners earn the same, and will also share future profits.

‘My philosophy is that anyone who comes into my organisation should be better than me, and bring something to the whole. I now employ people who know what to do and I empower them to do it. But it’s important to monitor them on a regular basis, and ensure they are not cruising. If people are as good as they say they are, they will succeed,’ believes Stead.

Need to know: How to spot a dysfunctional management team

• Your meetings over-run
• People don’t turn up
• No decisions are made or they are postponed
• Managers are bad-tempered
• The minute the meeting ends, everyone is out
• Friction between Chair and CEO
• People are disparaging about the client group or stakeholders
• No-one has read the papers, not even the Chair
• Body language suggests disengagement or boredom
• Meetings are quiet